Clear Form
  INSTRUCTIONS                               STATE OF HAWAII—DEPARTMENT OF TAXATION
 FORM F-1                                   GENERAL INSTRUCTIONS FOR  
 (REV. 2023)                                 THE FILING OF FORM F-1
                    FRANCHISE TAX RETURN FOR BANKS, BUILDING AND LOAN ASSOCIATIONS, 
                    FINANCIAL SERVICES LOAN COMPANIES, OTHER FINANCIAL CORPORATIONS, 
                                            AND SMALL BUSINESS INVESTMENT COMPANIES
                                             Chapter 241, Hawaii Revised Statutes (HRS) 
                             References to sections are to Internal Revenue Code (IRC) sections, unless otherwise stated.
ATTENTION                                                                           Third and Subsequent Years Of Doing Business. Taxpayers 
                                                                                    engaged in their third and subsequent year of operations would compute the 
 A tax is imposed by chapter 241, Hawaii Revised Statutes (HRS), on                 tax in the usual manner provided in sections 241-4 and 241-5, HRS.
certain types of income of banks and other financial institutions. The tax is 
commonly referred to as the franchise tax and is in lieu of the income tax and      Consolidation Or Merger Of Banks, Building And Loan 
general excise tax.                                                                 Associations, Development Companies, Financial Cor-
 Chapter 241, HRS, incorporates some of the definitions in chapter 235,             porations, Financial Services Loan Companies, Trust 
HRS (the Hawaii Income Tax Law). While the Hawaii Income Tax Law gener-             Companies, Mortgage Loan Companies, Financial Hold-
ally conforms to subtitle A, chapter 1 of the IRC as it applies to the determi-     ing Companies And Qualifying Subsidiaries, and Small 
nation of gross income, adjusted gross income, ordinary income, and loss, 
and taxable income, Hawaii has not adopted the increased expensing de-              Business Investment Companies.
duction under section 179 (Hawaii’s limit is $25,000) or the bonus deprecia-        Whenever there is a consolidation or merger of taxpayers subject to the 
tion provisions.                                                                    franchise tax, the tax shall attach to the taxpayer thus formed and the net 
                                                                                    income  which  shall  be  used  for  measuring  the  tax  of  the  taxpayer  thus 
Changes To Note.                                                                    formed shall include the net income of the taxpayers which were consoli-
                                                                                    dated or merged.
 Act 56, Session Laws of Hawaii (SLH) 2023 — This act amends Hawaii 
Income Tax Law under chapter 235, HRS, to conform to certain provisions of          Taxpayer Terminating Business Operations. If a taxpayer 
the IRC, as amended as of December 31, 2022.                                        subject to the franchise tax, terminates business operations during the cal-
                                                                                    endar or fiscal year and other than in an acquisition by another company, or 
Where To Get Tax Forms.                                                             merger, or consolidation:
 Hawaii tax forms, instructions, and schedules may be obtained at any               (1) Before the tax return is filed as required under section 241-5, HRS, a 
taxation  district  office  or  from  the  Department  of  Taxation’s  website  at  short year return shall be filed and the tax shall apply to the actual net 
tax.hawaii.gov, or you may contact a customer service representative at:            income for the taxable year or part of the taxable year during which the 
808-587-4242 or 1-800-222-3229 (Toll-Free).                                         taxpayer conducted business operations; or
Initial Year Of Doing Business. Banks, building and loan associa-                   (2) After the return has been filed as provided in section 241-5, HRS, an 
tions,  development  companies,  financial  corporations,  financial  services      amended return shall be filed to show the actual net income for the tax-
loan companies, trust companies, mortgage loan companies, financial hold-           able year or part of the taxable year during which the taxpayer conducted 
ing companies and qualifying subsidiaries, and small business investment            business operations. Any variance between the tax computed and paid 
companies engaged in their initial year of doing business and filing a fran-        on the basis of the entire net income of the preceding calendar or fiscal 
chise tax return for the first time must file an estimated franchise tax return     year and the actual net income for the final year or part of a year of busi-
of the tax due. The tax shall be based on an estimate of the net income of          ness operations shall be adjusted by showing a credit or refund or paying 
the taxpayer for the first year of doing business or for the part of the first year the additional tax.
in which it is in business. The tax is levied at the rate of 7.92%. The esti-       The return made shall be filed and the tax shall be paid on or before the 
mated tax return shall be filed and the amount of estimated tax paid on or          20th day of the 4th month following the month business operations ceased 
before the 20th day of the third month after the first month the taxpayer be-       or the close of the taxable year, whichever is earlier. The box on Form F-1 
gan business. The payment of the tax shall accompany the return unless an           indicating “Final return” should be checked off and the “Business end date” 
extension of time for the payment has been granted in writing by the Director       should be noted.
of Taxation (Director). Any request for an extension of time for payment of 
the tax must be made in writing to the Director before the filing due date of 
the initial year estimated tax return. The box on Form F-1 indicating “First        Changing Accounting Period from Calendar Year to Fis-
year return” should be checked off on the estimated return filed.                   cal Year.
 After the close of the initial year of doing business, an amended franchise        The amount of the franchise tax which is assessed for the calendar year 
tax return shall be made to reflect the tax on the actual net income for the        and the payment schedule for the tax that is established at the beginning of 
initial year of doing business. Any variance between the estimated tax paid         the calendar year are not affected or canceled when the taxpayer changes 
and the tax on the actual net income for the initial year shall be adjusted by      its accounting period to a fiscal year.
showing a credit or refund, or payment of additional tax due on the amended         A taxpayer which changes its accounting period from a calendar to a fis-
tax return. The boxes on Form F-1 indicating “AMENDED Return” and “First            cal year is subject to the following requirements:
year return” should be checked off. Attach a completed Schedule AMD, Ex-            1.  Submit a written request for a change in the accounting period which 
planation of Changes on Amended Return, to the amended return. Also, at-            is approved by the Department of Taxation (Department).
tach all schedules, forms, and attachments required to file a complete return.
 The amended return shall be made and filed, and any tax due paid on or             2.  File Form F-1 for the new accounting period reporting the entire net 
before the 20th day of the 4th month following the close of the taxable year        income  from  all  sources  for  the  fiscal  year. The  original  Form  F-1 
in which the taxpayer commenced business.                                           reporting the entire net income from all sources for the calendar year 
                                                                                    must also be filed.
Second Year Of Doing Business. An estimated tax return is also                      3.  Offset  the  entire  net  income  from  all  sources  for  the  duplicated 
required of taxpayers in the second year of doing business.                         months. To  avoid  being  taxed  twice  for  the  duplicated  months,  an 
 The estimated net income is determined by utilizing the average monthly            offset for the entire net income from all sources for the duplicated 
net income of the first taxable year of doing business multiplied by twelve.        months will be allowed on the Form F-1 for the new accounting pe-
Both the payment of the tax as well as the filing of the return shall be made       riod.
on or before the 20th day of the 4th month following the close of the 1st tax-      4.  No carryover of excess amounts. If the entire net income from all 
able year of doing business.                                                        sources for the duplicated months on the original Form F-1 exceeds 
 An amended franchise tax return shall be filed after the close of the sec-         the entire net income from all sources for the duplicated months on 
ond year of doing business. Any variance between the estimated tax paid             the  Form  F-1  for  the  new  accounting  period,  the  excess  amounts 
and the tax on the actual net income for the second year shall be adjusted          shall not be carried over and offset against the entire net income from 
by showing a credit or refund, or payment of the additional tax due. The            all sources for the unduplicated months on the Form F-1 for the new 
amended tax return shall be filed on or before the 20th day of the 4th month        accounting period.
following the close of the 2nd taxable year. The boxes on the Form F-1 indi-
cating “AMENDED Return” and “Second year return” should be checked off.             Change of Address.
Attach a completed Schedule AMD, Explanation of Changes on Amended                  If your mailing address has changed, you must notify the Department of 
Return, to the amended return. Also, attach all schedules, forms, and attach-       the change by completing Form ITPS-COA, Change of Address Form, or log 
ments required to file a complete return.                                           in to your Hawaii Tax Online account at hitax.hawaii.gov. Failure to do so 
                                                                                    may prevent your address from being updated, any refund due to you from 
                                                                                    being delivered (the U.S. Postal Service is not permitted to forward your 

                                                                                                                                                      Page 1

State refund check), and delay important notices or correspondence to you                 items constituting “income” be included in gross income in computing 
regarding your return.                                                                    net income as the measure of the franchise tax imposed by chapter 241, 
                                                                                          HRS, even though if the tax were imposed on the net income itself the 
I.   Who Must File Form F-1 and Pay the Franchise Tax.                                    item would not be subject to taxation by the State under the Constitution 
                                                                                          and laws of the United States or would be excluded by section 235-7(a)
(a) Every national banking association located in the State of Hawaii.                    (5), HRS, relating to exempt payments made by the United States or the 
                                                                                          State, or by section 235-7(a)(7), HRS, relating to income expressly ex-
(b) Every bank organized under the laws of the State.                                     empted by laws of the State other than the Hawaii Income Tax Law itself. 
                                                                                          However, as shown by Instruction VIII, the exemption allowed by Act 241, 
(c) Every corporation doing a banking business within the State under the                 SLH 1957, does apply in computing the measure of the franchise tax 
    authority of chapter 412, HRS.                                                        imposed by chapter 241, HRS.
(d) Every foreign bank doing business in the State under the authority of              (c) While the adjustments to be made in determining the entire net income 
    chapter 412, HRS.                                                                     from all sources for the income year are explained in the instructions that 
(e) Every federal savings and loan association located in the State.                      follow, these instructions necessarily are general. They do not purport to 
                                                                                          set forth each and every adjustment that is to be made. Specific ques-
(f)  Every building and loan association subject to the provisions of chapter             tions should be submitted in writing for a ruling.
    412, HRS.
                                                                                       (d) Section 235-92, HRS, is operative for chapter 241, HRS. The filing of a 
(g) Every financial services loan company subject to the provisions of chap-              consolidated franchise tax return is allowed for a bank, building and loan 
    ter 412, HRS.                                                                         association, financial corporation, financial services loan company, small 
                                                                                          business  investment  company,  development  company,  mortgage  loan 
(h) Every  financial  holding  company  registered  under  the  Federal  Bank             company, trust company, or financial holding company and its subsidiar-
    Holding Act of 1956, or registered as a savings and loan holding com-                 ies, as defined in section 241-1, HRS.
    pany under the Home Owners’ Loan Act of 1933.
(i)  Every mortgage loan originator company licensed under chapter 454F,               V. Sources Within and Without the State.
    HRS.                                                                                  Pursuant to sections 235-7(e)(2), 235-21 to 235-39, and 241-4(b)(2), HRS:
(j)  Every subsidiary corporation doing business in Hawaii engaged in ac-              (1) Any financial institution having income from business activity which is 
    tivities set forth in Title 12 of the Code of Federal Regulations, sections           taxable both within and without this State shall allocate and apportion its 
    225.22 and 225.25 or sections 584.2-1 and 584.2-2, and whose voting                   net income by the use of the apportionment of business income alloca-
    stock is more than eighty percent owned by a financial holding company,               tion provisions of the Uniform Division of Income for Tax Purposes Act 
    bank, building and loan association, financial services loan company, fi-             (UDITPA). Nonbusiness income shall be allocated pursuant to the provi-
    nancial corporation, or trust company.                                                sions of part II of chapter 235, HRS. Business income shall be appor-
                                                                                          tioned to this State by multiplying the income by a fraction, the numerator 
(k) Every trust company authorized to conduct business as a trust company                 of which is the property factor plus the payroll factor plus the sales factor, 
    under chapter 412, HRS.                                                               and the denominator of which is three. The property factor is a fraction, 
(l)  Every corporation, domestic or foreign, which is a financial corporation             the numerator of which is the average value of the taxpayer’s real and 
    (1) within the meaning of section 5219 of the Revised Statutes of the                 tangible personal property owned or rented and located or used in this 
    United States, as amended (12 U.S.C. 548), or other similar law, or (2)               State during the tax period plus the average value of the taxpayer’s loans 
    an interbank broker (effective 7/1/90), doing business in the State and               and credit card receivables located in this State during the tax period, 
    not subject to the taxes imposed by chapters 237 and 235, HRS, or not                 and the denominator of which is the average value of all such property 
    subject to one of these taxes. However, an insurance company which                    located or used everywhere during the tax period. Real and tangible per-
    pays the tax on premiums imposed by chapter 431, HRS, is excluded.                    sonal property owned by the taxpayer is valued at its original cost. Real 
                                                                                          and tangible personal property rented by the taxpayer is valued at eight 
(m) Every  small  business  investment  company  approved  by  the  federal               times the net annual rental rate. Where property is rented for less than 
    Small  Business Administration  and  issued  a  license  to  operate  under           a twelve-month period, the rent paid for the actual period of rental shall 
    the provisions of the federal Small Business Investment Act of 1958, as               constitute the annual rental rate for the tax period. Loans and credit card 
    amended.                                                                              receivables are valued at their outstanding principal balance, without re-
                                                                                          gard to any reserve for bad debts. The average value of property shall be 
(n) Every development company approved by the federal Small Business                      determined by averaging the values at the beginning and ending of the 
    Administration to operate under the provisions of Title V of the federal              tax period. If averaging on this basis does not properly reflect average 
    Small Business Investment Act of 1958, Public Law 699, as amended.                    value, the taxpayer may elect or the Department may require averaging 
                                                                                          on a more frequent basis. The payroll factor is a fraction, the numerator 
II.  “Income Year,” Chapter 241, HRS, References,                                         of which is the total amount paid in this State during the tax period by 
     Explained.                                                                           the taxpayer for compensation, and the denominator of which is the total 
                                                                                          compensation paid everywhere during the tax period. The sales factor 
(a) The income year is the year the income of which is the measure of the                 is a fraction, the numerator of which is the total sales of the taxpayer in 
    tax for the franchise tax year involved. For all years except the first, sec-         this State during the tax period, and the denominator of which is the total 
    ond, and final year of business, the income year is the preceding calen-              sales of the taxpayer everywhere during the tax period. If this apportion-
    dar year, or in the case of a taxpayer operating on a fiscal year basis, the          ment does not fairly represent the extent of the taxpayer’s business activ-
    preceding fiscal year.                                                                ity in this State, the taxpayer may petition for or the Department may re-
                                                                                          quire the use of separate accounting, the exclusion of one or more of the 
(b) Whenever reference is made to chapter 235, HRS, known as the Hawaii                   factors, the inclusion of one or more additional factors, or the use of any 
    Income Tax Law, the provisions that are to be followed are those that are             other method to accurately reflect the taxpayer’s business activity in the 
    applicable for income tax purposes to income derived or received on and               State. For more information, see section 18-241-4, Hawaii Administrative 
    after the date the franchise tax is imposed. For example, to determine                Rules. To compute your apportionment factors, complete Schedule P on 
    the franchise tax imposed as of January 1, 2024, the governing provi-                 page 4 of Form F-1.
    sions of chapter 235, HRS, are those applicable to the income derived or 
    received on or after January 1, 2024.                                              (2) Deductions connected with excluded income from sources without the 
                                                                                          State are not allowable. Interest paid or accrued to purchase or carry 
III. Rate and Measure of Tax.                                                             property owned without the State, or to carry on trade or business without 
                                                                                          the State, is not deductible. Proper adjustments must be made so that no 
    The rate of the franchise tax is 7.92% and is measured by the entire net              such deductions are taken.
income from all sources of the income year, as explained in Instruction II.
                                                                                       VI.  Interest on Obligations of the United States, 
IV.  Determination of Entire Net Income From All                                          States, etc.
     Sources For The Income Year.
                                                                                       (a) Whether  or  not  included  in  determining  federal  taxable  income,  there 
(a) The “entire net income from all sources” for the income year is deter-                must be included in gross income under chapter 241, HRS, the interest:
    mined in the same manner as “taxable income” under the IRC of 1986, as                (1) Upon  obligations  of  the  United  States  or  its  possessions,  or  upon 
    amended, and as further amended by the Hawaii Legislature except as                   securities issued under the authority of an Act of Congress.
    otherwise provided in chapter 235 or chapter 241, HRS. These instruc-                 (2) Upon state, territorial, municipal, county or other bonds or securities, 
    tions set forth the adjustments to be made to Internal Revenue Code                   including Hawaiian issues.
    taxable income as determined before the net operating loss deduction.
(b) The expression “entire net income from all sources” is used to signify the         (b) Interest paid or accrued within the income year or indebtedness incurred 
    inclusion in the measure of the franchise tax of net income that would                or continued to purchase or carry the securities the interest upon which is 
    be excluded if the tax were imposed on the net income itself, such as                 included in the franchise tax return, to the extent not deducted as part of 
    interest  on  obligations  of  the  United  States.  The  law  requires  that  all 
Page 2

   the federal return, may be deducted as an adjustment of federal taxable         (c) For entities which are 100% within Hawaii and, therefore, do not appor-
   income.                                                                             tion income, the amount on line 8(a) should be adjusted for the difference 
                                                                                       between the Hawaii and the federal carryforward amounts. A statement 
VII.  Bad Debts.                                                                       should be attached to the return to explain the difference between the 
                                                                                       federal and State amounts.
(a) The deductions allowed by sections 166 and 593 do not apply. However:
   (1) The provisions of the IRC as to the debts which may be the subject          X.    Disaster Losses.
       of a bad debt deduction apply in determining the bad debt deduction 
       allowed by section 241-4(b)(3), HRS. That is, except in the case of a       (a) At the election of the taxpayer losses of property owned in the State, 
       bank, a security may not be the subject of a bad debt deduction.                sustained as the result of a tidal wave, hurricane, earthquake, or volcanic 
   (2) The basis for determining the amount of the deduction for a bad debt            eruption, or as the result of flood waters overflowing the banks or walls of 
       is provided in section 166(b) which states that: “...the basis for de-          a river or stream, or from other natural disaster, if otherwise deductible, 
       termining the amount of the deduction for any bad debt shall be the             may be prorated in equal installments over a period of five years.
       adjusted basis provided in section 1011 for determining the loss from       (b) In order to exercise this election, the taxpayer must, in computing “entire 
       the sale or other disposition of property.”                                     net income from all sources” for the income year in which the loss was 
(b) In order to make the adjustment required because the deductions al-                sustained, reduce the amount otherwise deductible to the one-fifth in-
   lowed by sections 166 and 593 do not apply, there must be added to                  stallment which is deductible pursuant to the election. This adjustment, 
   federal taxable income the amount of the deduction for bad debts or for             for the income year in which the loss was sustained, will consist in the 
   addition to a reserve for bad debts taken on federal return. The deduc-             addition to federal taxable income of four-fifths of the loss deducted on 
   tion allowed for bad debts by section 241-4(b)(3), HRS, will be a further           the federal return for the income year. For subsequent income years this 
   adjustment of federal taxable income, as set forth in (c) below.                    adjustment will consist in the deduction from federal taxable income of 
                                                                                       the pro rata installment for the year.
(c) Under section 241-4(b)(3), HRS, there are two methods of treating bad 
   debts, set out below as (1) and (2). However, the use of method (2) is in       XI.  Net Operating Loss (NOL).
   the discretion of the Director. Established businesses which prior to the           The NOL deduction allowed by section 172 as adopted by Hawaii shall 
   income year had built up an adequate reserve for bad debts will not be          apply.
   permitted to use method (2).
   (1) Debts ascertained to be worthless and charged off on the books of               Note: For  NOLs  arising  in  taxable  years  ending  after  December  31, 
                                                                                   2017, Act  27,  SLH  2018,  eliminates  NOL  carrybacks  (except  for  farming 
       the taxpayer within the income year may be deducted. When the Di-           NOLs which are permitted a two-year carryback), and allows unused NOLs 
       rector is satisfied that a debt is recoverable only in part, the nonre-     to be carried forward indefinitely. Also, the NOL deduction is limited to 80% 
       coverable amount, to the extent charged off on the books within the         of taxable income for taxable years beginning after December 31, 2017.
       income year, may be deducted. In order to deduct a debt in part, a 
       taxpayer must be able to demonstrate to the satisfaction of the Direc-          You may elect to carry the farming NOL forward instead of first carrying it 
       tor the amount thereof which is not recoverable and the part thereof        back to prior years. If you make this election, then you can use your farming 
       which was charged off.                                                      NOL only in the carryforward period. To make this election, attach a state-
                                                                                   ment to your original return filed by the due date (including extensions) for 
   (2) As an alternative to the treatment of bad debts by method (1), a tax-       the farming NOL year. This statement must state that you are electing to 
       payer having permission to do so and electing to use this method may        waive the carryback period under section 235-7(d), HRS, and IRC section 
       deduct a reasonable addition to a reserve for bad debts. If an election     172(b)(1)(B)(iv).
       to use method (2) is made and the Director grants permission to do 
       so, this method must be used in returns for all subsequent years un-        XII.  Change in Federal Taxable Income, Required 
       less permission is granted by the Director to change to method (1). 
       Application for permission to change to method (1) must be made at                Reports.
       least thirty days prior to the close of the income year for which the 
       change is to be effective.                                                  (a) Section 235-101(b), HRS, which pursuant to section 241-6, HRS, ap-
   Enter on line 14(a) the amount for the current year from Schedule F,                plies to the franchise tax, requires a report to the Director if the amount 
column 5 or 7.                                                                         of federal taxable income is changed, corrected, adjusted or recomputed 
                                                                                       as stated in (c).
VIII.  Dividends.                                                                  (b) This report must be made:
                                                                                       (1) Within 90 days after a change, correction, adjustment or recomputa-
(a) The entire amount of dividends received upon the shares of stock of a                tion is finally determined.
   national banking association is excluded from gross income.
                                                                                       (2) Within 90 days after a federal amended return is filed.
(b) The entire amount of qualifying dividends, as defined in section 243(b) 
   received by members of an affiliated group is excluded from gross in-           (c) A report within the time set out in (b) is required if:
   come.                                                                               (1) The amount of taxable income as returned to the United States is 
                                                                                         changed, corrected or adjusted by an officer of the United States or 
(c) The entire amount of dividends received by a small business investment               other competent authority.
   company operating under the Small Business Investment Act of 1958 is                (2) A change in taxable income results from a renegotiation of a contract 
   excluded from gross income.                                                           with the United States or a subcontract thereunder.
(d) The special deductions allowed on a federal return are not allowed. How-           (3) A recomputation of the income tax imposed by the United States un-
   ever, there is allowed a deduction of 70% of the amount received as                   der the IRC results from any cause.
   dividends upon stocks from foreign or domestic corporations that do not             (4) An amended income tax return is made to the United States.
   qualify for the 100% dividends received deduction allowed under section 
   235-7(c), HRS.                                                                  (d) The report referred to above shall be in the form of an amended franchise 
                                                                                       tax return.
(e) Under section 857(c), a dividend paid by a Real Estate Investment Trust 
   (REIT) is not considered a “dividend” for purposes of section 235-7(c),         (e) The statutory period for the assessment of any deficiency or the deter-
   HRS, and the dividend received deduction is not allowed for Hawaii in-              mination of any refund attributable to the report shall not expire before 
   come tax purposes. Therefore, if a bank, financial institution, or small            the expiration of one year from the date the Department is notified by the 
   business investment company is an owner of a REIT, the dividend re-                 taxpayer or the Internal Revenue Service (IRS), whichever is earlier, of 
   ceived deduction is not allowed for franchise tax purposes.                         such a report in writing. Before the expiration of this one-year period, the 
                                                                                       Department and the taxpayer may agree in writing to the extension of 
(f)  If your mutual fund has provided you with a statement that some of the            this period. The period so agreed upon may be further extended by sub-
   dividends  received  from  the  mutual  fund  qualify  for  the  dividends  re-     sequent agreements in writing made before the expiration of the period 
   ceived deduction, the amount of the qualifying dividends may be includ-             previously agreed upon.
   ed in Schedule C, column 5. Other taxable dividends received from the 
   mutual fund (other than capital gains dividends) should be reported on          XIII.  Mandatory Electronic Filing of Tax Returns.
   Schedule C, line 9.
                                                                                   The Department requires franchise company taxpayers to file electronically, 
   IX.    Capital Gains.                                                           unless a waiver is obtained by filing Form L-110. The penalty for failure to file 
(a) Alternative Tax Treatment. Section 1201, with respect to alternative tax       electronically is 2% of the total tax. For more information, see Department of 
   on capital gains, is operative for chapter 241, HRS. A tax of 4% of the net     Taxation Announcement No. 2019-12 (Amended).
   capital gains is imposed.
                                                                                   XIV.  Filing of Returns.
(b) In the case of the sale or exchange of a bond, debenture, note, or certifi-
   cate or other evidence of indebtedness, sections 582(c) and 1243 shall          (a) Time. In the case of calendar year corporations, returns shall be filed 
   apply.                                                                              on or before April 20, following the close of the calendar year (income 
                                                                                                                                                         Page 3

    year). In the case of fiscal year corporations, returns shall be filed on or   IMPORTANT: A penalty of 2% of the total tax will be assessed if a tax-
    before the 20th day of the 4th month following the close of the fiscal year    payer who is required to make payments by EFT does not do so without 
    (income year).                                                                 reasonable cause. If an EFT payment is dishonored, a $25 service fee will 
    Note: If the due date falls on a Saturday, Sunday, or legal State holiday,     be assessed.
the return shall be due on the next regular business day.
    The Director may grant a reasonable extension of time for filing the return    XVI.  Refundable Credits.
but in no case shall the extension be for more than 6 months. File Form            Line 70. — Enter on this line the result from page 4, Schedule I, line 3. 
N-755 to request an automatic 6-month extension of time to file Form F-1 or        Descriptions of the refundable credits follow.
amended Form F-1 for first and second year entities.
                                                                                   Capital Goods Excise Tax Credit.
(b) Place.                                                                         This 4% credit is available to Hawaii businesses on the acquisition of 
    Form F-1 MUST be filed electronically at hitax.hawaii.gov.                     qualifying business property. See Form N-312 for more information.
    You may also mail Form F-1 and payment in full to:                             The tax credit is claimed in the year the property was purchased and 
                                                                                   placed in service. If the property is purchased and placed in service after a 
    Hawaii Department of Taxation                                                  franchise tax return has been filed, an amended franchise tax return must be 
    P.O. Box 259                                                                   filed to claim the tax credit. For example, a calendar year franchise taxpayer 
    Honolulu, Hawaii 96809-0259                                                    files the 2024 franchise tax return on April 20, 2024, but places qualifying 
                                                                                   property in service in July, 2024. The taxpayer files an amended 2024 fran-
(c) Authentication.  Returns  shall  be  authenticated  by  the  signature         chise tax return to claim the tax credit. If property for which a credit has been 
    of the president, vice president, treasurer, assistant treasurer, chief ac-    taken ceases to be eligible property or is disposed of, recapture of all, or 
    counting officer or any other officer duly authorized so to act. The fact that part, of the credit received may be necessary. See the instructions for Form 
    an individual’s name is signed on the return shall be prima facie evidence     N-312, Part II for more information. Enter the amount of any credit recap-
    that such individual is authorized to sign the return on behalf of the corpo-  tured on page 3, line 64.
    ration.                                                                        To claim this credit. Complete and attach Form N-312 to Form F-1 and 
    The Paid Preparer’s Information at the bottom of page 1 of Form F-1            enter on page 4, Schedule I, line 1 the amount of the credit claimed.
must be signed and completed by the person or in the name of the firm or           Deadline for claiming this credit. Claims for this credit, including any 
corporation paid to prepare the return. Individual preparers may furnish their     amended claims, must be filed on or before the end of the twelfth month after 
alternative identifying number for income tax return preparers (PTIN) instead      the close of your taxable year. 
of their social security number.                                                   Renewable  Energy  Technologies  Income  Tax  Credit  for  Systems 
(d) Penalty and Interest.                                                          Placed in Service on or after July 1, 2009.
    Late Filing of Return — The penalty for failure to file a return on time is    Act 61, SLH 2020, amends the Renewable Energy Technologies Income 
assessed on the tax due at a rate of 5% per month, up to a maximum of 25%.         Tax Credit (RETITC) by repealing the RETITC for commercial projects with a 
    Failure to Pay Tax After Filing a Timely Return — The penalty for failure      total output capacity of 5 megawatts or greater for taxable years beginning 
to pay the tax after filing a timely return is 20% of the tax unpaid within 60     after December 31, 2019 and provides grandfathering exceptions for com-
days of the prescribed due date.                                                   mercial solar projects with a: (1) Total output capacity of 5 megawatts or great-
                                                                                   er if the project received a Public Utilities Commission (PUC) approval prior to 
    Failure to File Electronically – Form F-1 MUST be filed electronically un-     December 31, 2019; and (2) Pumped hydroelectric energy storage system 
less you obtain a waiver. Use Form L-110 to apply for a waiver. The penalty        provided that the applicable project approval filings have been made to the 
for failure to file electronically is 2% of the total tax.                         PUC by December 31, 2021.
    Failure to Pay by EFT – The penalty for failure to pay by EFT for taxpay-      Each taxpayer who files a franchise tax return for 2024 may claim a tax 
ers who are required to pay by EFT is 2% of the total tax.                         credit for an eligible renewable energy technology system installed and placed 
    Interest — Interest at the rate of 2/3 of 1% per month, or part of a month,    in service in the State in 2024. For solar energy systems, you may claim the 
shall be assessed on unpaid taxes and penalties beginning with the first           credit as refundable by reducing the eligible credit amount by 30%. Once an 
calendar day after the date prescribed for payment, whether or not that first      election is made to treat the tax credit as refundable, the election cannot be 
calendar day falls on a Saturday, Sunday, or legal holiday.                        revoked. An amended return cannot be filed to change the tax credit from re-
                                                                                   fundable to nonrefundable. See Form N-342 for more information.
XV.  Payment of Tax.                                                               To claim this credit. Complete and attach Form N-342 to Form F-1 and 
    The tax must be paid on or before the date prescribed for filing the return.   enter  on  page  4,  Schedule  I,  line  2  the  amount  of  the  refundable  credit 
However, the corporation may elect to pay the tax in four equal installments,      claimed.
as follows: For the calendar year corporation, the first installment is to be      Deadline for claiming this credit. Claims for this credit, including any 
paid on April 20; the second on June 20; the third on September 20; and the        amended claims, must be filed on or before the end of the twelfth month after 
fourth on December 20 following the income year.                                   the close of your taxable year.
    Fiscal year corporations paying the tax in installments are to pay as fol-     Line 71.    — Adjusted Tax Liability. — Line 69 (TOTAL TAX) minus line 
lows: The first installment on the 20th day of the 4th month, the second in-       70. If line 70 is larger than line 69, also enter this amount on line 74 with a 
stallment on the 20th day of the 6th month, the third installment on the 20th      minus sign (-) to the left of the amount.
day of the 9th month, and the fourth installment on the 20th day of the 12th       If line 71 is zero or less, the nonrefundable credits may not be used. Even 
month, following the close of the fiscal year.                                     if you are not able to use the nonrefundable credits, complete the forms for 
    Notwithstanding the preceding, if the total tax liability under this chapter   any credits you qualify for and attach those forms to your Form F-1. If these 
for the taxable year exceeds $100,000, the taxes so levied shall be payable        forms are not attached, no claim for the credit has been made and you will 
in twelve equal installments, in which case the first installment shall be paid    lose the carryover of your unused credits.
on or before the tenth day of the first month following the close of the taxable 
year, and the remaining installments shall be paid on or before the tenth day      XVII.  Nonrefundable Credits.
of each calendar month after such date. If any installment is not paid on or       Line 72.— Enter on this line the result from page 4, Schedule H, line 6. If 
before the date fixed for its payment, the Department, at its election may         line 70 is larger than line 69, no nonrefundable credits may be used. Even if 
cause the balance of the tax unpaid to become payable upon not less than           you are not able to use the nonrefundable credits, complete the forms for 
ten days’ notice and demand, and this amount shall be paid upon the date           any credits you qualify for and attach those forms to your Form F-1. If these 
so fixed in the notice and demand from the Department.                             forms are not attached, no claim for the credit has been made and you will 
    If a payment is being made when the Form F-1 is filed or when applying         lose the carryover of your unused credits. Descriptions of the nonrefundable 
for an extension of time to file (or when paying additional tax due when filing    credits follow.
an amended return), attach your payment to the Form F-1 or Form N-755. 
Form VP-2, Miscellaneous Taxes Payment Voucher, is no longer required              Carryover of the Credit for Energy Conservation.
when making a payment with Form F-1 or Form N-755.
    Line 76. — Enter the total amount of franchise tax installments paid. In-      Note: The energy conservation tax credit expired on June 30, 2003. You may 
stallment payments of the franchise tax are reported and paid on Form FP-1.        claim this tax credit only if you have a carryover of the tax credit from a prior 
                                                                                   year.
    Electronic Funds Transfer (EFT). Section 231-9.9, HRS, authorizes the          If this tax credit exceeds your franchise tax liability, it is not refunded but 
Department to require those taxpayers whose tax liability for a particular tax     may be used as a credit against your franchise tax liability in subsequent 
exceeded $100,000 during the past year to pay that tax by EFT instead of by        years until exhausted.
check. The Department reviews the filing records of taxpayers and will mail 
notices to taxpayers who met this criterion. Any taxpayer who does not meet        To claim the carryover of this credit. Complete and attach Form N-323 
the criterion may still voluntarily pay by EFT. For more information on paying     to Form F-1 and enter on page 4, Schedule H, line 1 the amount of the 
taxes by EFT, please see Tax Information Release Nos. 95-6,    “Questions          credit claimed.
and Answers on Paying Taxes by Electronic Funds Transfer,” and 99-1, “Fil-         Low-Income Housing Tax Credit.
ing of Tax Returns Required by Taxpayers Who Pay Taxes by Electronic 
Funds Transfer (EFT).”                                                             Hawaii’s low-income housing tax credit is equal to 50% of the federal 
                                                                                   credit for qualified buildings located within the State of Hawaii. Effective for 
Page 4

taxable years beginning after December 31, 1999, the federal credit does           (1) The eligible net income of an international banking facility shall be the 
not have to be claimed in order to claim the Hawaii credit. Owners of quali-           amount remaining after subtracting from the eligible gross income the 
fied low-income buildings placed in service after December 31, 2011, may               applicable expenses.
receive a low-income housing tax credit loan instead of taking the credit. 
Contact the Housing and Community Development Corporation of Hawaii                (2) Eligible gross income shall be the gross income derived by an interna-
for qualifying requirements and further information.                                   tional banking facility from:
    To claim this credit. Complete and attach Form N-586 to Form F-1 and                  (A) Making,  arranging  for,  placing,  or  servicing  loans  to  foreign 
enter on page 4, Schedule H, line 2 the amount of the credit claimed.                     persons; provided that in the case of a foreign person which is an 
                                                                                          individual, or which is a foreign branch of a domestic corporation 
Carryover of the High Technology Business Investment Tax Credit.                          (other than a bank), or which is a foreign corporation or foreign 
    The high technology business investment tax credit expired on Decem-                  partnership which is eighty per cent or more owned or controlled, 
ber 31, 2010. This credit may be claimed only if the organization has a car-              either directly or indirectly, by one or more domestic corporations 
ryover of the credit from a prior year. For more information, see Form N-323,             (other than a bank), domestic partnership, or resident individual, 
Carryover of Tax Credits.                                                                 substantially all the proceeds of the loan shall be for use outside 
                                                                                          of the United States;
    To claim this credit. Complete and attach Form N-323 to Form F-1 and 
enter on page 4, Schedule H, line 3 the amount of the credit claimed.                     (B) Making or placing deposits with foreign persons which are banks 
                                                                                          or  foreign  branches  of  banks  (including  foreign  subsidiaries  or 
Carryover of the Renewable Energy Technologies Income Tax Credit                          foreign  branches  of  the  taxpayer)  or  with  other  international 
(for systems installed and placed in service before July 1, 2009).                        banking facilities; or
    To claim the carryover of this credit. Complete and attach Form N-323                 (C) Entering into foreign exchange trading or hedging transactions 
to Form F-1 and enter on page 4, Schedule H, line 4 the amount of the                     related to any of the transactions described in this paragraph.
credit claimed.
                                                                                   (3) Applicable expenses shall be any expense or other deduction attribut-
Renewable  Energy  Technologies  Income  Tax  Credit  for  Systems                     able directly or indirectly, to the eligible gross income described in para-
Placed In Service on or after July 1, 2009.                                            graph (2).
    Act 61, SLH 2020, amends the Renewable Energy Technologies Income 
Tax Credit (RETITC) by repealing the RETITC for commercial projects with a         (4) Adjusted eligible net income shall be determined by subtracting from eli-
total output capacity of 5 megawatts or greater for taxable years beginning            gible net income the ineligible funding amount, and by subtracting from 
after December 31, 2019 and provides grandfathering exceptions for com-                the amount then remaining the floor amount.
mercial solar projects with a: (1) Total output capacity of 5 megawatts or great-
er if the project received a Public Utilities Commission (PUC) approval prior to   (5) The ineligible funding amount shall be the amount, if any, determined 
December 31, 2019; and (2) Pumped hydroelectric energy storage system                  by multiplying eligible net income by a fraction, the numerator of which 
provided that the applicable project approval filings have been made to the            is the average aggregate amount for the taxable year of all liabilities, in-
PUC by December 31, 2021.                                                              cluding deposits, and other sources of funds to the international banking 
                                                                                       facility which were not owed to or received from foreign persons, and the 
    Each taxpayer who files a franchise tax return for 2024 may claim a tax            denominator of which is the average aggregate amount from the taxable 
credit  for  an  eligible  renewable  energy  technology  system  installed  and       year of all liabilities, including deposits and other sources of funds of the 
placed in service in the State in 2024. You may claim the credit as nonre-             international banking facility.
fundable  or  refundable. A  nonrefundable  credit  means  your  credit  will  be 
applied towards the amount of franchise tax you owe. If your nonrefundable         (6) The floor amount shall be the amount, if any, determined by multiply-
credit is greater than the amount of franchise tax that you owe, then you may          ing the amount remaining after subtracting the ineligible funding amount 
carryover the remaining credit and apply it towards next year’s franchise tax.         from the eligible net income by a fraction, not greater than one, which is 
You may continue to carryover the credit until it is used up.                          determined as follows:
Total Output Capacity                                                                  (A) The numerator shall be:
                                                                                          (i)  The percentage, as set forth in subparagraph (C), of the average 
    A system classified under “other solar energy system,” such as a photo-               aggregate amount of the taxpayer’s loans to foreign persons and 
voltaic system, must meet the total output capacity requirement to qualify for            deposits with foreign persons which are banks or foreign branches 
the credit, unless an exception applies.                                                  of banks, or savings and loan associations or foreign branches 
    The total output capacity requirements are:                                           of savings and loan associations, as the case may be, (including 
    1.  Single-family residential property — 5 kilowatts per system                       foreign subsidiaries or foreign branches of the taxpayer), which 
    2.  Multi-family residential property — 0.360 kilowatts per unit per system           loans and deposits were recorded in the financial accounts of the 
                                                                                          taxpayer for its branches, agencies, and offices within the State 
    3.  Commercial property — 1,000 kilowatts per system                                  for taxable years 1980, 1981, and 1982, minus:
    For more information, see Form N-342 and its instructions, Tax Informa-               (ii) The average aggregate amount of such loans and such deposits 
tion Release (TIR) No. 2010-10, “Common Income Tax & General Excise                       for the taxable year of the taxpayer (other than such loans and 
Tax Issues Associated with the Renewable Energy Technologies Income                       deposits  to  an  international  banking  facility);  provided  that  in 
Tax Credit, HRS §235-12.5,” TIR No. 2022-02, “Updated Guidance Relating                   no case shall the amount determined in this clause exceed the 
to the Renewable Energy Technologies Income Tax Credit,” and Tax Facts                    amount determined in this subparagraph;
2022-2, “Renewable Energy Technologies Income Tax Credit – Photovoltaic 
Systems.”                                                                              (B) The denominator shall be the average aggregate amount of the loans 
    To claim this credit. Complete and attach Form N-342 to Form F-1 and                  to foreign persons and deposits with foreign persons which are banks 
enter on page 4, Schedule H, line 5 the amount of the nonrefundable credit                or foreign branches of banks, including foreign subsidiaries or foreign 
claimed.                                                                                  branches of the bank, (or savings and loan associations, as the case 
    Deadline for claiming this credit. Claims for this credit, including any              may be) which loans and deposits were recorded in the financial ac-
amended claims, must be filed on or before the end of the twelfth month after             counts of the taxpayer’s international banking facility for the taxable 
the close of your taxable year.                                                           year;
    Line 73. — Carryover of the Capital Infrastructure Tax Credit. — The               (C) The percentage shall be one hundred per cent for the first taxable 
capital infrastructure tax credit expired on December 31, 2019. This credit               year in which the taxpayer establishes an international banking facil-
may be claimed only if the organization has a carryover of the credit from a              ity and for the next succeeding four taxable years. The percentage 
prior year.                                                                               shall be eighty per cent for the sixth, sixty per cent for the seventh, 
                                                                                          forty per cent for the eighth, and twenty per cent for the ninth and 
    To claim the carryover of this credit. Complete and attach Form N-348                 tenth taxable years next succeeding the year such bank or savings 
to Form F-1 and enter on page 1, line 73 the amount of the credit claimed.                and loan association establishes such facility, and zero in the elev-
    Line 74. — On this line, enter the difference between line 71 and the sum             enth succeeding year and thereafter.
of lines 72 and 73. If line 70 is larger than line 69, however, enter on this line 
the amount from line 71 with a minus sign ( ) to the-left of the amount.           (7) If adjusted eligible net income is a loss, the amount of such loss shall be 
                                                                                       added to entire net income.
XVIII.  Deduction from Entire Net Income—                                          (8) As used in this section, the term ‘foreign person’ means:
    International Banking Facility (IBF).                                                 (A) An individual who is not a resident of the United States, 
    Certain qualified banks authorized to operate international banking facili-           (B) A foreign corporation, a foreign partnership, or a foreign trust, as 
ties are eligible for a deduction from the entire net income of its operations.           defined in section 7701 of the federal Internal Revenue Code of 
Section 241-3.5, HRS, allows the following deductions:                                    1954, as amended, other than a domestic branch thereof,
    “Sec. 241-3.5 Deduction from entire net income. There shall be al-                    (C) A  foreign  branch  of  a  domestic  corporation  (including  the 
lowed as a deduction from entire net income to the extent not deductible in               taxpayer),
determining federal taxable income, the adjusted eligible net income of an 
international banking facility, as defined in section 412: 5-206, determined as           (D) A  foreign  government  or  an  international  organization  or  an 
follows:                                                                                  agency of either, or
                                                                                          (E) An international banking facility.
                                                                                                                                                                   Page 5

 For the purposes of this paragraph, the term ‘foreign’ and ‘domestic’ have    If you are filing an amended return due to an IRS adjustment to your 
the same meaning as set forth in section 7701 of the federal Internal Reve-    federal return, also check the IRS Adjustment box at the top of page 1 of 
nue Code of 1954, as amended.”                                                 Form F-1. See  XII. Change in Federal Taxable Income, Required Reports., 
 Attach your separate computation schedule to Form F-1 and report the          on page 3 of these instructions.
allowable deduction from entire net income on page 2, line 22, “Other deduc-   Line 83. — Enter on line 83 the amount paid on the original return (from 
tions.”                                                                        line 79 of the original return) or the amount overpaid (from line 80 of the 
                                                                               originalreturn). Enter overpayments with a minus sign ( ) to the-left of the 
XIX.  Amount Overpaid.                                                         amount.
 Line 80. — If line 77 is larger than line 74, and line 74 is zero or more,    Line 84. — If no amount was entered on line 83, enter on line 84 the 
subtract line 74 from line 77 and show the difference on line 80. This is the  amount, if any, from line 79 or line 80 of the amended return. If there is an 
amount overpaid.                                                               amount on line 83, and that amount is:
 However, if line 74 is less than zero, complete the following worksheet:      (1) A payment and there is an amount on line 79 of the          amended return, 
 1.  Amount from line 74 (enter as                                             subtract the amount on line 83 from the amount on line 79 and enter the 
 a positive number).. .............                                            difference on line 84. If the difference is a negative amount, show the 
                                                                               negative amount on line 84 with a minus sign (-).
 2.  Amount from line 77. ............
 3.  Add line 1 and line 2. ...........                                        (2) A payment and there is an amount on line 80, add these amounts and 
                                                                               enter the total on line 84 with a minus sign (-) to the left of the amount.
 Enter the amount from line 3 of the worksheet on line 80. This is the 
amount overpaid.                                                               (3) An overpayment and there is an amount on line 79, subtract the amount 
                                                                               on line 83 from the amount on line 79, and enter the result on line 84. This 
XX.  Amended Returns.                                                          is the amount owed on the amended return.
 If a return is filed and then it becomes necessary to make changes to         (4) An overpayment and there is an amount on line 80, consider the amount 
income, deductions, or credits, file an amended return on Form F-1. Use the    on line 80 a negative amount and subtract the amount on line 83 from the 
Form F-1 for the year being amended.                                           amount on line 80, and enter the difference on line 84. If the difference 
 Check the AMENDED Return box at the top page 1 of Form F-1 to indi-           is a negative amount, show the negative amount on line 84 with a minus 
cate that this is an amended return. Complete the amended return using         sign (-). If there is an overpayment on the amended return, do NOT enter 
corrected amounts through line 80, then go to line 83. Attach a completed      this amount on line 82.
Schedule AMD, Explanation of Changes on Amended Return, to the amend-
ed return. Also, attach all schedules, forms, and attachments required to file Protective Claim.
a complete return.                                                             A protective refund claim is a claim filed to protect a taxpayer’s right to a 
 If the return is being amended to take a farming NOL carryback deduc-         potential refund based on a contingent event for a taxable period for which 
tion, also check the NOL Carryback box at the top of page 1 of Form F-1.       the  statute  of  limitations  is  about  to  expire. A  protective  claim  is  usually 
 Note:  For  NOLs  arising  in  taxable  years  ending  after  December  31,   based on contingencies such as pending litigation or an ongoing federal in-
2017, Act  27,  SLH  2018,  eliminates  NOL  carrybacks  (except  for  farming come tax audit or an audit in another state. For more information, see Tax 
NOLs which are permitted a two-year carryback), and allows unused NOLs         Facts 2021-2, “Protective Claim.”
to be carried forward indefinitely. Also, the NOL deduction is limited to 80% 
of taxable income for taxable years beginning after December 31, 2017.

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