I hold OZ investments in five states but not Hawaii. What does it mean for me that my home state of Hawaii has approved this new legislation?
I am not familiar with the Hawaii legislation, but it could mean that you would get the same treatment for Hawaii income tax purposes as you do for federal income tax purposes. You should consult a tax advisor familiar with the new Hawaii law for the answer to this question.
From my preliminary research it does not appear that SB 1130 is an OZ conformity act. I do not believe that Hawaii has yet adopted the federal OZ statute, so Hawaii deferral and exemption are not yet available, but keep checking. The five remaining non-conforming states may conform in the future, but not likely in California.
I apologize but I am not familiar with Hawaii approved legislation.
Update: I did locate the final bill and they do now conform for years after 2018. Subchapter 2 (sections 14002-1 to 14002-2) (with (k) respect to opportunity zones) shall be operative for purposes of this chapter; except that for purposes of this chapter, subchapter 2 shall only apply to qualified opportunity zones, as defined in section 14002-1, that are designated as such by the chief executive officer of this State.
Investors who invest in property or a business out of state generally have to file taxes in the state where the property or business is located. In addition, they typically have to include the income in their state of residence. As a result, you may have a situation where the state where the project is located recognizes the Opportunity Zone rules but the state you live in does not or vice versa. So depending on how the new Hawaii rules are drafted, typically it means that you will qualify in Hawaii for your investments and will not have to pay tax on your capital gain until 2026. However, if you have invested in a state that has not accepted the rules you will have to pay tax on the income from sale of the project in that state.
I strongly recommend you to consult your personal tax advisor. She or he is best fit to answer your questions.
Hawaii Gov. Ige signed into law SB 1130, which conforms the state tax code to the federal Internal Revenue Code, thereby allowing Opportunity Zone incentive investments to qualify for the same state tax benefits as federal benefits, only for OZ investments in Hawaii. This law does not apply to your investments.
If you make an Opportunity Zone investment in Hawaii, you will also get state tax benefits in addition to federal tax benefits. Some states don't conform, so someone might get deferral and other benefits for federal purposes but not for state purposes.
You have to ask counsel licensed in Hawaii. I won't risk commenting based on my lack of familiarity with the jurisdiction.
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