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                                                     STATE OF HAWAII—DEPARTMENT OF TAXATION
 2023 
 (REV. 2023)                    INSTRUCTIONS FOR FORM N-20

                                                Partnership Return of Income
                                (Section references are to the Internal Revenue Code (IRC) unless otherwise specified.)
          (NOTE: References to “married” and “unmarried” are also references to “in a civil union” and “not in a civil union,” respectively.)
ATTENTION:                                           Filing Requirements                                     vate delivery service and type of delivery services 
                                                                                                             qualifying under this provision. Timely filing of mail 
 Hawaii has not adopted the increased ex-            If your partnership is an electing PTE, Form            which does not bear the U.S. Post Office cancel-
pensing deduction under IRC section 179 (Ha-         N-20 along with all schedules, attachments, and         lation mark or the date recorded or marked by the 
waii limit is $25,000) or the “bonus” deprecia-      other documents MUST be filed electronically for        designated delivery service will be determined by 
tion provisions.                                     taxable years beginning after December 31, 2022,        reference to  other competent evidence.  The pri-
                                                     unless you obtain a waiver. Use Form L-110, Elec-       vate delivery service can tell you how to get written 
 Hawaii has not adopted the domestic activities      tronic Filing or Payment Exemption Application, to      proof of the mailing date.
production deduction under IRC section 199.          apply for a waiver. Failure to file electronically and/
Where To Get Tax Forms                               or submit an electronic funds transfer may result in    Six-month automatic extension of time to 
                                                     cancellation of the election for PTE taxation.          file. Section 18-235-98, Hawaii  Administrative 
 Hawaii tax forms, instructions, and schedules                                                               Rules, allows an automatic six-month extension of 
may be obtained at any taxation district office or   Who Must File                                           time to file a return without filing an application for 
from the Department of Taxation’s website at tax.    Every partnership, including limited liability          extension. This extension does not include an ex-
hawaii.gov, or you may contact a customer ser-       companies treated as partnerships for federal in-       tension of time to pay. File Form N-201V, Business 
vice representative at: 808-587-4242 or 1-800-       come tax purposes, unless expressly exempted,           Income Tax Payment Voucher, to make a payment 
222-3229 (Toll-Free).                                shall,  for  its taxable  year,  make a  return of  in- (if applicable).Form N-201V may be filed and pay-
                                                     come on Form N-20 stating specifically the items        ment made electronically through the States Inter-
Changes You Should Note                              of gross income and allowable deductions, and           net portal at hitax.hawaii.gov.
Act 50, Session  Laws  of  Hawaii  (SLH)  2023       such additional information as required below. The 
 – The Pass-Through Entity (PTE) Tax Credit          partnership return shall include the income, deduc-     Rounding Off to Whole Dollars
 allows partnerships and S corporations to an-       tions, and credits attributable everywhere together     The Department is requiring taxpayers to 
 nually elect to pay Hawaii income taxes at the      with the income, deductions, and credits attribut-      round off cents to the nearest whole dollar for all 
 entity level. Eligible members of an electing       able only to Hawaii. If the return is filed on behalf   dollar entries on the tax return and schedules. To 
 PTE may claim a nonrefundable income tax            of a syndicate, pool, joint venture, or similar group   do so, drop amounts under 50 cents and increase 
 credit for  their pro rata share of  PTE  taxes     which group was created on or after January 1,          amounts from 50 to 99 cents to the next dollar. For 
 paid by the entity. Effective for taxable years     1958, a copy of the agreement, together with all        example: $1.39 becomes $1 and $2.69 becomes 
 beginning after December 31, 2022.                  amendments thereto, should be attached to the           $3.  If  you  have  to  add  two  or  more  amounts  to 
Act 56, SLH 2023  –   This act amends  Hawaii        return, if not already filed.                           figure  the  amount  to  enter  on  a  line,  schedule, 
                                                                                                             or worksheet, you may choose to use one of two 
 Income Tax Law under chapter 235, Hawaii            When and Where to File                                  methods. Once a method of rounding is estab-
 Revised Statutes (HRS), to conform to certain 
 provisions of the IRC, as amended as of De-         Returns must be filed on or before the 20th day         lished, you must use the same method through-
 cember 31, 2022.                                    of the fourth month following the close of the tax-     out the return. The first method is to include the 
                                                     able year. If this date falls on a Saturday, Sunday,    cents  when  adding  and  round  off  only  the  total. 
Act 217, SLH 2022 – This act amends the     mo-      or legal holiday, the due date for the return is ex-    The other method is to round off each entry. For 
 tion  picture,  digital  media,  and  film  pro-    tended to the next business day.                        example: You received two 1099-INT forms, one 
 duction income tax credit for taxable years                                                                 showing interest of $50.55 and one showing inter-
 beginning  after December  31, 2022 by (1)          If you are enclosing a check or money order 
 changing  the repeal  date from January  1,         with your tax return, mail your  return with pay-       est of $185.73. For rounding method 1, show your 
 2026 to January 1, 2033; (2) increasing the         ment to:                                                total interest as $236 ($50.55 + $185.73 = $236.28 
 credit amount from 20% of qualified produc-         Hawaii Department of Taxation                           rounded to $236). For rounding method 2, show 
 tion cost to 22% in a county with a population      P.O. Box 1530                                           your total interest as $237 ($50.55 rounded to $51 
 of  over  700,000,  and  from  25%  of  qualified   Honolulu, HI 96806-1530                                 + $185.73 rounded to $186 = $51 + $186 = $237).
 production  costs to 27%  in a county with a        If you are not enclosing a payment with your            Recordkeeping
 population of  700,000 or  less;  (3)  increas-     tax return, mail your return to:                        The partnership records must be kept as long 
 ing  the credit ceiling  from $15,000,000 per       Hawaii Department of Taxation                           as they may be needed for the administration of 
 qualified production to $17,000,000 per quali-      P.O. Box 3559                                           any provision of the IRC. Usually, records that 
 fied  production;  (4)  reducing  the  amount  of   Honolulu, Hawaii 96811-3559                             support an item of income, deduction, or credit 
 qualified  production  costs  from  $200,000  to                                                            on the partnership return must be kept for three 
 $100,000; (5) removing the requirement for          If you are filing your return after the prescribed      years from the date the return is due or is filed, 
 productions  to  submit  a  verification  review    due date, the refund shown may be limited or disal-     whichever is later. Keep records that verify the 
 by  a  qualified  certified  public  accountant;    lowed due to the statute of limitations. In general, a  partnership’s basis in property for as long as they 
 (6) requiring the report by the Department of       claim for refund or credit for overpaid income taxes    are  needed  to  figure  the  basis  of  the  original  or 
 Business Economic Development  and Tour-            must be filed within three years after the return is    replacement property.  
 ism (DBEDT) to include  the dollar  amount          filed for the taxable year, within three years of the   Copies of the filed partnership returns should 
 claimed, name of the company, and name of           due date for filing the return, or within two years     also be kept as part of the partnership’s records.  
 the  qualified  production  of  the  taxpayer;  (7) from when the tax is paid, whichever is later. For      They help in preparing future returns and in mak-
 changing the time frame for DBEDT to issue          purposes of determining whether a refund or credit      ing computations when filing an amended return. 
 a letter to the taxpayer claiming the tax credit;   is allowed, taxes paid on or before the due date of 
 and (8) requiring taxpayers to submit a fee to      the return (e.g. estimated tax payments) are con-       Amended Return
 DBEDT.                                              sidered paid on the due date of the return, without     If,  after  filing  its  return,  the  partnership  be-
Purpose of Form                                      considering an extension of time to file the return.    comes  aware  of  any  changes  it  must  make  to 
 Form N-20 is used to report the income, deduc-      Private delivery  services.  Hawaii  has  ad-           income, deductions, credits, etc., it should file an 
tions, credits, gains, and losses from the operation opted the IRC provision to allow documents and          amended Form N-20 and an amended Schedule 
of a partnership. Form N-20 for 2023 is an infor-    payments delivered by a designated private deliv-       K-1 for each partner. Check the box on Form N-20 
mation return for the calendar year 2023 or other    ery service to qualify for the “timely mailing treated  at Item E(3), page 1. Give a corrected Schedule 
fiscal year beginning in 2023.                       as  timely  filing/paying  rule.”  The  Department  of  K-1 (Form N-20) to each partner. Check the box at 
                                                     Taxation (Department) will conform to the Internal      Item F(2) on each Schedule K-1 to indicate that it 
                                                     Revenue Service (IRS) listing of designated pri-        is an amended Schedule K-1. Fill in the return with

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all of the correct information and attach a com- or business during the calendar year. It must report tronic Filing or Payment Exemption Application, to
pleted Schedule AMD, Explanation of Changes interest payments if they total $10 or more. apply for a waiver.
on Amended Return, to the amended return. Also, Use Form N-196, Annual Summary and Trans- Interest at the rate of 2/3 of 1% per month or
attach all schedules, forms, and attachments re- mittal of Hawaii Information Returns, to summarize part of a month shall be assessed on unpaid taxes
quired to file a complete return. and send information returns to your respective and penalties beginning with the first calendar day
An electing PTE cannot file an amended return taxation district office. For more information about after the date prescribed for payment, whether or
to revoke their PTE election. All PTE elections are filing information returns and exceptions, see the not that first calendar day falls on a Saturday, Sun-
irrevocable. An electing PTE who would like to re- instructions for Form N-196. day, or legal holiday.
quest a refund for an overpayment of the PTE tax
paid must file their request for refund on or before Paying the Tax Attachments
the due date prescribed, including an extended The partnership must pay the tax due (line Attach schedules in alphabetical order and
due date if an extension has been granted. 20, page 2) in full on or before the 20th day of the other forms in numerical order.
fourth month after the end of the tax year. Amounts To assist us in processing the return, please
Change in Federal Taxable Income due on any Schedule PTE(s) (line 17a, page 2) complete every applicable entry space on Form
In general, a change to your federal return, attached to the partnership’s return are also due N-20. Do not attach statements and do not write
whether it is made by you, or by the IRS, must be at this time. This extension does not include an “See attached” in lieu of completing the entry spac-
reported to the State of Hawaii. extension of time to pay. If the partnership cannot es on the form.
1) Section 235-101(b), HRS, requires a report pay the full amount that is owed, you can ask to
(an amended return) to the Department if the enter into a payment agreement once you receive An entity that elects to be classified as a part-
amount of IRC taxable income is changed, a billing notice for the balance due. Please be nership by filing federal Form 8832 with the IRS
corrected, adjusted or recomputed as stated aware that penalty and interest continue to accrue shall attach a copy of that form to the entity’s Form
in (3). on the unpaid tax amount even though you have N-20 covering the first taxable year in which the
2) This report must be made: not yet received a billing notice. Payments will be entity carries on business in Hawaii, derives in-
accepted and applied to the partnership’s tax liabil- come from sources in Hawaii, or makes distribu-
a) Within 90 days after a change, correction, ity; however, to ensure the partnership’s payments tions that are received by a partner who is either a
adjustment or recomputation is finally deter- are applied correctly, your check or money order resident of Hawaii or carries on business in Hawaii
mined. must have: (1) the partnership’s name as shown and is subject to Hawaii income taxation.
b) Within 90 days after a federal amended re- on the return clearly printed on the check, (2) the If the partnership is an electing PTE, attach
turn is filed. partnership’s federal employer identification num- the PTE election Form N-362E with all required
c) At the time of filing the next income tax re- ber (FEIN), and (3) the tax year and form number signature(s) and Schedule PTE at the back of the
turn, if earlier than set forth in a) or b). being filed (e.g. 2023 N-20). If a payment is being return.
3) A report within the time set out in (2) is re- made with this return, attach your check or money If the partnership is an upper-tier PTE, attach
quired if: order on the front left side of Form N-20. Form N- Schedule PTE-U at the very back of the return be-
a) The amount of taxable income as returned 201V is no longer required when making a pay- hind all other Schedules.
to the United States is changed, corrected, ment with your return.
If you need more space on the forms or sched-
or adjusted by an officer of the United States Estimated Tax ules, attach separate sheets. Use the same ar-
or other competent authority. If a partnership is an electing PTE for the tax- rangement as the printed forms. Show the to-
b) A change in taxable income results from a able year, submit Form N-201V with payment to tals on the printed forms. Put the partnership’s
renegotiation of a contract with the United the Department. Estimated payments are paid in name and Federal Employer Identification Number
States or a subcontract thereunder. four installments. These installments are due on (FEIN) on each sheet. Also, be sure that each sep-
c) A recomputation of the income tax imposed or before the 20th day of the fourth, sixth, and arate sheet clearly indicates the line or section on
by the United States under the IRC results ninth months of the tax year and on or before the the printed form to which the information relates.
from any cause. 20th day of the first month following the taxable Payments
d) An amended income tax return is made to year. See the instructions for line 18a and Form
the United States. N-201V for more information. Form N-201V can be In some instances, payments may have to be
filed and payment made electronically through the made with the Form N-20. The amount on line 21
4) The report referred to above shall be in the State’s Internet portal at hitax.hawaii.gov. may be paid through Hawaii Tax Online at hitax.
form of an amended Hawaii income tax return. hawaii.gov or Form N-201V may be filed to make
5) The statutory period for the assessment of any Electronic Funds Transfer (EFT) a payment.
deficiency or the determination of any refund Section 231-9.9, HRS, authorizes the Depart- Withholding of Taxes on the Income
attributable to the report shall not expire be- ment to require those taxpayers whose tax liability
fore the expiration of one year from the date exceeds $100,000 during the past year to pay the of Nonresident Partners
the Department is notified by the taxpayer or tax by EFT instead of by check. The Department Partnerships are required to withhold and pay
the IRS, whichever is earlier, of such a report reviews the filing records of taxpayers and will mail to the State on behalf of their nonresident partners
in writing. Before the expiration of this one- notices to taxpayers who met this criterion. Any an amount equal to the highest marginal tax rate
year period, the Department and the taxpayer taxpayer who does not meet this criterion may still applicable to individuals, currently 11%, multiplied
may agree in writing to the extension of this voluntarily pay by EFT. If an EFT payment is dis- by the amount of the partner’s distributive share
period. The period so agreed upon may be honored, a $25 service fee will be assessed. For of income attributable to the State reflected on the
further extended by subsequent agreements more information on paying taxes by EFT, see tax. partnership’s return for the taxable period. Form N-
in writing made before the expiration of the hawaii.gov/eservices/ and Tax Information Re- 200V or N-201V (whichever is applicable) is used
period previously agreed upon. lease Nos. 95-6 and 99-1. for reporting and paying this withholding by the
Protective Claim Failure for PTEs to submit by EFT shall result partnership to the Department.
A protective refund claim is a claim filed to pro- in cancellation of the election for PTE taxation. Definitions
tect a taxpayer’s right to a potential refund based Penalty and Interest a. Partnership. The term “partnership” in-
on a contingent event for a taxable period for Late Filing of Return –The penalty for failure to cludes a limited partnership, syndicate, group,
which the statute of limitations is about to expire. A file a return on time is assessed on the tax due at pool, joint venture, or other unincorporated organi-
protective claim is usually based on contingencies a rate of 5% per month, or part of a month, up to a zation, through or by which any business, financial
such as pending litigation or an ongoing federal maximum of 25%. operation, or venture is carried on, and that is not,
income tax audit or an audit in another state. For within the meaning of the federal IRC, a corpora-
more information see Tax Facts 2021-2. Failure to Pay Tax After Filing Timely Return – tion, trust, estate, or sole proprietorship. If an orga-
The penalty for failure to pay the tax after filing a nization more nearly resembles a corporation than
Information Returns timely return is 20% of the tax unpaid within 60 a partnership or trust, it is considered an associa-
Every partnership must file information returns days of the prescribed due date. tion taxed as a corporation.
if it makes payments of rents, commissions, or Failure to Timely Pay by EFT –The penalty for Important factors in determining whether a
other fixed or determinable income totaling $600 failure to timely pay by EFT is 2% of the total tax partnership exists include:
or more to any one person in the course of its trade unless you obtain a waiver. Use Form L-110, Elec-

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1.  The parties’ conduct in carrying out the provi-       Form 1065, U.S. Partnership Return of Income, 
sions of the partnership agreement;                       will not be repeated. Please refer to the federal      Specific Instructions
2.  The testimony of disinterested persons;               instructions for discussions on the following topics   These instructions follow the line numbers on 
3.  The relationship of the parties;                      which Hawaii conforms to:                              the first page of Form N-20 and on the schedules 
                                                                                                                 that accompany it. Specific instructions for most of 
4.  The abilities and contributions of each; and            - Termination of the Partnership;                    the lines have been provided. Those lines that do 
5.  The control each has over the partnership in-           - Accounting Methods;                                not appear in the instructions are self-explanatory.
come and the purposes for which the income                  - Accounting Periods;                                File only one return for each partnership.  Mark 
is used.                                                    - Elections Made by the Partnership;                 “duplicate copy” on any copy you give to a partner.
A joint undertaking merely to share expenses is             - Elections Made by Each Partner;                    If a syndicate, pool, joint venture, or similar 
not a partnership. Mere co-ownership of property                                                                 group files Form N-20, a copy of the agreement 
that is maintained and leased or rented does not            - Partner’s Dealings With Partnership;               and all amendments must be attached to the re-
constitute a partnership. However, if the co-owners         - Contributions to the Partnership;                  turn, unless a copy has already been filed.  Under 
provide services to the tenants, a partnership ex-          - Dispositions of Contributed Property;              section 761(a), an investing unincorporated orga-
ists.                                                                                                            nization or one participating in the joint production, 
Some partnerships  may be         excluded com-             - Recognition of Precontribution Gain on             extraction, or use of property under an operating 
pletely or partially from being treated as partner-            Certain Partnership Distributions;                agreement or an organization of dealers in securi-
ships for federal income tax purposes upon the              - Unrealized Receivables and Inventory               ties for a short period for the purpose of under-
election of all of the members. See  Specific In-              Items; and                                        writing, selling, or distributing a particular issue of 
structions below for more information.                      - Passive Activity Limitations.                      securities may elect not to be treated as a partner-
                                                                                                                 ship. Make the election by attaching a statement to 
b.  General  Partner. A  general  partner  is  a          Net Operating Loss Deduction                           Form N-20 for the first year for which the partner-
member of the organization who is personally li-
able for the obligations of the partnership.                A partnership is not allowed the deduction           ship wants the exclusion.
                                                          for net operating losses (See section 703(a)(2)        Fill in applicable lines and schedules.
c. Limited Partner. A limited partner is one              (D))  unless  the  partnership  is  an  electing  PTE. 
whose  potential  personal  liability  for  partnership   The electing PTE’s net operating losses may be         Form N-20
debts is limited to the amount of money or other          carried forward as long as the entity continues to 
property that the partner contributed or is required      elect to be taxed as a PTE every taxable year until    Amended Return Checkbox
to contribute to the partnership.                         exhausted. The electing PTE’s net operating loss       If you are amending a return previously filed, 
d. Limited Partnership. A limited partnership             is not allowed as a deduction from the partner’s       check the AMENDED Return box.
is a partnership composed of at least one general         gross income.
partner and one or more limited partners.                                                                        IRS Adjustment Checkbox
e. Nonrecourse Loan. Nonrecourse loans are                Signatures                                             If you are filing an amended return due to an 
                                                                                                                 IRS adjustment, check the IRS Adjustment box in 
those liabilities of the partnership for which none of    General Partner or LLC Member                          addition to the AMENDED return box and file an 
the partners have any personal liability.                   Form N-20 is not considered a return unless it is    amended  Schedule  K-1  for  each  partner.  Check 
f. Limited Liability Company.     A limited liabil-       signed.  One general partner or LLC member must        the box on Form N-20 Item E(3) and (4) on page 
ity company (LLC) is an entity formed under state         sign the return. If a receiver, trustee in bankruptcy, 1. Give a corrected Schedule K-1 (Form N-20) to 
law  by  filing  articles  of  organization  as  an  LLC. or assignee controls the organization’s property or    each partner. Check the box at Item F(2) on each 
Unlike a partnership, none of the members of an           business, that person must sign the return.            Schedule K-1 to indicate that it is an amended 
LLC are personally liable for its debts. An LLC may       Paid Preparer’s Information                            Schedule K-1. Fill in the return with all of the cor-
be classified for federal income tax purposes as                                                                 rect information and attach a completed Sched-
a disregarded entity, partnership, or a corporation,        If someone prepares the return and does not          ule  AMD,  Explanation  of  Changes  on  Amended 
depending on elections made by the LLC and the            charge the partnership, that person should not         Return, to the amended return.  Also, attach all 
number of members.  Chapter 428,  HRS, allows             sign the partnership return.                           schedules, forms, and attachments required to file 
LLCs to operate following proper approval from the          Generally, anyone who is paid to prepare the         a complete return.
Department  of  Commerce  and  Consumer Affairs           partnership return must sign the return and fill in 
(DCCA), Business Registration Division. Hawaii            the other blanks in the Paid Preparer’s Informa-       Electing PTE Checkbox
conforms to the federal standards in determining          tion area of the return. Individual preparers may      Partnerships may make a yearly irrevocable 
whether an LLC is classified as either a partner-         furnish their alternative identifying number for in-   election to pay taxes at the PTE level and the 
ship or a corporation following proper approval by        come tax return preparers (PTIN) instead of their      election shall be binding on all partners who are 
the DCCA.                                                 social security number.                                qualified members of an electing PTE and whose 
g. Electing Pass-Through Entity. An electing                The preparer required to sign the partnership’s      distributive shares and guaranteed payments are 
pass-through  entity  means  a  qualified  PTE  that      return MUST complete the required preparer infor-      subject to PTE taxation for the taxable year.
elects PTE taxation for the taxable year.                 mation and:                                            If the Partnership elects to be taxed at the PTE 
h. Lower-Tier Pass-Through Entity. A lower-               • Sign the return in the space provided for the        level for the taxable year, check the box on Form 
tier PTE means a PTE that has at least one mem-             preparer’s signature.  Paid  preparers  may          N-20 Item E(5) “Electing PTE” on page 1. Sched-
ber that is a PTE.                                          sign original returns, amended returns, or re-       ule PTE(s) must be attached to Form N-20 if the 
i.  Qualified  Member. A  qualified  member                 quests for filing extensions by rubber stamp,        partnership is an electing PTE.
means a direct member of an electing PTE whose              mechanical device, or computer software pro-         Upper-Tier PTE Checkbox
distributive shares and guaranteed payments are             gram.                                                If the partnership is an upper-tier PTE (i.e., a 
subject to PTE taxation for the taxable year. Quali-      • Give the partnership a copy of the return in         PTE that is a member of another PTE) that re-
fied members do not include partners who are C              addition to the copy to be filed with your taxa-     ceived a PTE tax credit as a member of a lower-
corporations of an electing PTE.                            tion district office.                                tier PTE (i.e., a PTE that has at least one member 
j. Qualified Pass-Through Entity. A qualified               The partnership may authorize the Department         that is a PTE) that is either an electing PTE or an 
PTE  means  a  PTE  that  is  eligible  to  elect  PTE    to discuss its tax return with its paid preparer by    upper-tier PTE, check the box on Form N-20 Item 
taxation for the taxable year.                            checking the “Yes” box above the paid preparer’s       E(6) “Upper-Tier PTE” on page 1. Schedule PTE-
                                                          signature.  Checking  “Yes”  will  allow  the  Depart- U(s) must be attached to Form N-20. 
k. Upper-Tier Pass-Through Entity.           An up-       ment to contact the paid preparer to answer any        Address Change
per-tier PTE means a PTE that is a member of an           questions that may arise during the processing of 
electing PTE or lower-tier PTE.                           the partnership’s return. This designation does not    If your mailing address has changed, you must 
Use of Instructions for Federal                           allow the paid preparer to call the Department for     notify the Department of the change by complet-
Form 1065 —                                               information about the processing of the return or      ing Form ITPS-COA, Change of Address Form, or 
                                                          for other issues relating to the return.  This des-    log in to your Hawaii Tax Online account at hitax.
In an effort to streamline Hawaii’s partnership           ignation does not replace Form N-848, Power of         hawaii.gov. Failure to do so may prevent your ad-
return instructions, the discussion of certain top-       Attorney.                                              dress from being updated, any refund due to you 
ics already discussed in the federal instructions for                                                            from being delivered (the U.S. Postal Service is

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not permitted to forward your State refund check), Line 11a plete the signature section of federal Form 8697
and delay important notices or correspondence to following the instructions for the signature section
you regarding your return. List deductions taken for federal tax purposes of Form N-20. File federal Form 8697 by the date
but not allowed, or allowable only in part, for Ha- you are required to file your Form N-20 (including
Name, Mailing Address, Federal waii tax purposes. For example, deductions con- extensions).
Employer I.D. Number and Hawaii nected with income not taxable for Hawaii purpos-
Tax I.D. Number es or section 199 domestic activities deduction. Line 18a - Estimated Tax Payments
The partnership may use its legal or trade Line 11b Estimated taxes which are paid by the part-
nership as an electing PTE should be made on
name on all tax returns and other documents filed. Caution: Include only ordinary gains or losses Form N-201V. See the instructions for PTEs later
Print or type the partnership’s legal name and from the sale, exchanges, or involuntary conversion in these instructions for more information. Form
mailing address on the appropriate line. If this is of assets used in a trade or business activity. Ordi- N-201V can be filed and payment made electroni-
a foreign address, enter the information in the fol- nary gains or losses from the sale, exchange, or in- cally through the State’s Internet portal at hitax.
lowing order: city, province or state, country, and voluntary conversion of rental activity assets will be hawaii.gov.
postal code. Do not abbreviate the country name. reported separately on Schedules K and K-1, gener-
Show the Federal Employer I.D. Number in item A ally, as a part of the net income (loss) from the rental Any amount that was paid on partnership’s
on page 1 of Form N-20 and the Hawaii Tax I.D. activity. If the partner does not materially participate Form N-201V for the tax year should be indicated
Number in item D. in the trade or business, the gains or losses reported on line 18a.
Lines 1 - 9 on line 11b will be subject to the passive activity rules. Line 20 - Tax Due
Enter on lines 1 through 9 the requested Line 11c Subtract the amount on line 18c from the
amounts as they appear on the partnership’s fed- Enter the portion of the Hawaii jobs credit amount on line 17c and enter the difference on
eral return. Writing “See attached federal return” claimed, applicable to current year new employees line 20. If this amount is zero or less, enter 0. If
on Form N-20 and attaching a copy of the partner- that is reported on Schedule K line 20. this amount is more than zero, pay this amount
ship’s Form 1065 is not acceptable. by certified or cashier’s check made payable to
Line 11d “Hawaii State Tax Collector” and attach the check
You are NOT required to attach a copy of the As noted on page 1 of these instructions, Ha- to the front left side of Form N-20 or electronically
partnership’s federal return (Form 1065) to Form
N-20. waii has not adopted federal “bonus” depreciation through the State’s Internet portal at hitax.hawaii.
provisions. If a depreciation deduction is claimed gov.
If this is a return of a partnership with trade for Hawaii tax purposes, the partnership must: (a) If the partnership cannot pay the full amount
or business activities in several states, includ- complete a federal Form 4562 for Hawaii tax pur- that is owed, you can ask to enter a payment
ing Hawaii, and the ordinary income or loss poses using the federal depreciation guidelines in agreement after you receive a billing notice for
from trade or business activities reported on effect before the adoption of the “bonus” deprecia- the balance due. Please be aware that penalty
this return is determined using separate ac- tion provisions, (b) attach the completed federal and interest continue to accrue on the unpaid tax
counting, attach a schedule of the partner- Form 4562 to the Hawaii tax return, (c) make the amount even though you have not yet received a
ship’s Hawaii trade or business activities in- necessary adjustments to the Hawaii tax return for billing notice. Payments will be accepted and ap-
come and expenses. Enter on lines 1 through 9 the depreciation difference between federal and plied to the partnership’s tax liability; however, to
applicable amounts from this schedule instead Hawaii, and (d) attach to the Hawaii tax return any ensure that the partnership’s payments are applied
of from the partnership’s federal return. worksheet showing the computation of the adjust- correctly, your check or money order must have:
Amounts received by a qualified high technol- ments. The partnership must also keep records of (1) the partnership’s name as shown on the return
ogy business as royalties and other income de- the differences in the asset’s depreciable basis for clearly printed on the check, (2) the partnership’s
rived from patents, copyrights, and trade secrets federal and Hawaii tax purposes. FEIN, and (3) the tax year and form number being
owned by the qualified high technology business Line 17a - Pass-Through Entity Tax filed (e.g. 2023 N-20).
and developed and arising out of a qualified high
technology business are excluded from Hawaii If the partnership is not an electing PTE for the Line 21 - Amount of Payment
income. Expenses related to this income are de- taxable year, line 17a does not apply to the part- Enter the amount of your payment on line 21.
ductible. “Qualified high technology business” nership. If you are paying by check or money order, attach
means a business conducting more than 50% of Electing PTEs are liable for the income tax your check or money order to the front left side of
its activities in qualified research. “Qualified re- on the sum of all qualified members’ distributive Form N-20 and make sure your check or money
search” means (1) the same as in section 41(d) of shares and guaranteed payments multiplied by order is payable to “Hawaii State Tax Collector.”
the Internal Revenue Code; (2) the development the highest rate of tax applicable to the individual
and design of computer software for ultimate com- under section 235-51, HRS, with no separate tax For Amended Returns
mercial sale, lease, license or to be otherwise mar- rate for capital gains. The PTE tax rate is 11% for Line 22 - Amount paid (overpaid) on
keted, for economic consideration. With respect to the 2023 taxable year. Attach Schedule PTE(s), original return
the software’s development and design, the busi- showing all the qualified members’ shares of quali- Check the box on Form N-20 Item E(3)
ness shall have substantial control and retain sub- fied net income and calculated PTE tax amount “Amended Return” to indicate that this is an
stantial rights to the resulting intellectual property; reported on line 17a. amended return. Complete the partnership’s
(3) biotechnology; (4) performing arts products; (5) Interest due under the look- amended return using corrected amounts. Attach a
sensor and optic technologies; (6) ocean sciences; Line 17b -
(7) astronomy; or (8) nonfossil fuel energy-related back method for completed long-term completed Schedule AMD, Explanation of Chang-
technology. All income earned and proceeds de- contracts es on Amended Return, to the amended return.
Also, attach all schedules, forms, and attachments
rived from stock options or stock, including stock If the partnership used the look-back method required to file a complete return.
issued through the exercise of stock options or under IRC section 460(b)(2) for certain long-term
warrants, from a qualified high technology busi- contracts, complete federal Form 8697, Inter- Enter on line 22 that amount paid on the part-
ness or from a holding company of a qualified high est Computation Under the Look-Back Method nership’s original return (from line 20 on the origi-
technology business by an employee, officer, or for Completed Long-Term Contracts. If you will nal return) or the amount overpaid (from line 19 of
director of the qualified high technology business, owe interest on an unpaid amount, calculate the the original return). Place a minus sign, “-”, before
or investor who qualified for the high technology amount due using the rate of 2/3 of 1% per month, the amount of any overpayment.
business investment tax credit is excluded from in- or part of a month, beginning the first calendar day Line 23 - BALANCE DUE (REFUND)
come. If the partnership is a qualified high technol- after the date prescribed for payment whether or with amended return
ogy business and has included royalties and other not that first calendar day falls on a Saturday, Sun-
income derived from patents, copyrights, and trade day, or legal holiday. Include the amount of interest If no amount was entered on line 22, enter on
secrets the partnership owns in the income report- due on line 17b. Attach Form 8697 with a check line 23 the amount, if any, from line 19 or line 20 of
ed on line 1, these amounts should be included in made payable to “Hawaii State Tax Collector” to the amended return. If there is an amount on line
the deductions shown on line 14c. If the amount Form N-20. Write the partnership’s FEIN, day- 22, and that amount is:
reported on line 14c includes these royalties and time phone number, and “Form 8697 interest” on a. A payment and there is an amount on line 19 of
other income from patents, copyrights, and trade the check. If you are due a refund, do not attach the amended return, add these amounts and
secrets, these amounts should be identified by at- Form 8697 to your Form N-20. Instead, file federal enter the total on line 23 with a minus sign, “-”,
taching a separate schedule or listing. Form 8697 separately with the Department. Com- before the amount.

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b. A payment and there is an amount on line 20, 29, HRS. Business income shall be apportioned to from patents, copyrights, and trade secrets owned
subtract the amount on line 22 from the amount this State by multiplying the income by a fraction, by the qualified high technology business and de-
on line 20 and enter the difference on line 23. If the numerator of which is the property factor plus veloped and arising out of a qualified high technol-
the difference is a negative amount, show the the payroll factor plus the sales factor, and the de- ogy business are excluded from Hawaii income.
negative amount on line 23 with a minus sign, nominator of which is three. If the denominator of Expenses related to this income are deductible.
“-”. the property factor, payroll factor, or sales factor How Income Is Shared Among Partners
c. An overpayment and there is an amount on is zero, the denominator of the fraction in section
line 19, consider the amount on line 19 a nega- 235-29, HRS, is reduced by the number of fac- Income (loss) is allocated to a partner only for
tive amount and subtract the amount on line tors with a zero denominator, and the numerator the part of the year in which that person is a mem-
22 from the amount on line 19, and enter the of that fraction shall not include any factor with a ber of the partnership. The partnership will either
difference on line 23. If the difference is a nega- zero denominator. The property factor is a fraction, allocate on a daily basis or divide the partnership
tive amount, show the negative amount on line the numerator of which is the average value of the year into segments and allocate income, loss, or
23 with a minus sign, “-”. If there is an overpay- partnership’s real and tangible personal property special items in each segment among the persons
ment on the amended return, do NOT enter this owned or rented and used in this State during the who were partners during that segment. (See sec-
amount as a refund on line 19. tax period and the denominator of which is the av- tion 706(c)(2) for more information and for the ter-
d. An overpayment and there is an amount on erage value of all the partnership’s real and tan- mination of a partner’s interest.)
line 20, subtract the amount on line 22 from the gible personal property owned or rented and used Allocate shares of income, gain, loss, deduc-
amount on line 20, and enter the result on line during the tax period. Property owned by the part- tion, or credit among the partners according to the
23. This is the amount the partnership owes on nership is valued at its original cost. The average partnership agreement for sharing income or loss
its amended return. value of property shall be determined by averaging generally. If the partners agree, specific items may
the values at the beginning and ending of the tax be allocated among them in a ratio different from
If the partnership has an amount due on its period. The use of monthly values may be required the ratio for sharing income or loss generally. For
amended return, make the check or money order if necessary to properly reflect the average value instance, if the net income exclusive of specially
payable to “Hawaii State Tax Collector” and attach of the partnership’s property. Property rented by allocated items is divided evenly among three part-
the check or money order to the front left side of the partnership is valued (or capitalized) at eight ners but some special items are allocated 50% to
Form N-20. times the net annual rental rate. Where property one, 30% to another, and 20% to the third partner,
is rented for less than a 12 month period, the rent report the special items on the appropriate line of
Schedule D paid for the actual period of rental shall constitute the applicable partner’s Schedule K-1 and the total
Capital Gains and Losses the annual rental rate for the tax period. The pay- on the appropriate line of Schedule K instead of
Purpose of Schedule.—Use Schedule D roll factor is a fraction, the numerator of which is on the numbered lines on page 1 of Form N-20 or
(Form N-20) to report the sale or exchange of capi- the total amount paid in this State during the tax Schedule D.
tal assets, except capital gains (losses) that are period by the partnership for compensation, and If the partnership agreement does not provide
specially allocated to any partners. the denominator of which is the total compensation for the partner’s share of income, gain, loss, de-
paid everywhere during the tax period. The sales duction, or credit, or if the allocation under the
For detailed information, see the instructions (or gross receipts) factor is a fraction, the numera- agreement does not have the substantial econom-
on Schedule D (Form N-20). tor of which is the total sales of the partnership in ic effect, the partner’s share is determined accord-
this State during the tax period, and the denomi- ing to the partner’s interest in the partnership. (See
Schedule K and nator of which is the total sales of the partnership section 704(b).)
Schedule K-1 everywhere during the tax period.
Partners’ Share of Income, If this apportionment does not fairly represent Specific Instructions
Credits, Deductions, etc. the extent of the partnership’s business activity in (Schedule K only)
Purpose this State, the partnership may request the use of
separate accounting, the exclusion of one or more Enter the total distributive amount for each ap-
Schedule K is a summary schedule of all the of the factors, the inclusion of one or more addi- plicable items listed.
partners’ shares of the partnership’s income, de- tional factors, or the use of any other method to ac- (Schedule K-1 only)
ductions, credits, etc. Prepare Schedule K-1 in curately reflect the partnership’s business activity Prepare and give a Schedule K-1 to each per-
triplicate. A copy of each partner’s K-1 must be at- in the State. Complete Schedules O and P (Form son who was a partner in the partnership at any
tached to the Form N-20 filed with the Department, N-20) to show this computation. time during the year. Schedule K-1 must be pro-
one copy to be sent to each partner, and one copy
retained for the partnership’s files. Other items are attributed as follows: vided to each partner on or before the day on
Although the partnership is not subject to in- • Net rents and royalties from real property which the partnership return is required to be
come tax, the members are liable for income tax located in Hawaii are attributed to Hawaii. filed.
on their shares of the partnership income, whether Federal Form 8825 may be attached to Form Note: Generally, any person who holds an inter-
or not distributed, and must include their share on N-20 as a schedule of expenses. est in a partnership as a nominee for another per-
their tax returns. • Net rents and royalties from tangible personal son is required to furnish to the partnership the
The total amount of the distributive share items property are attributed to Hawaii if and to the name, address, etc., of the other person.
(columns b and c) reported on each line on all extent that the property is utilized in Hawaii. On each Schedule K-1, enter the names, ad-
of the partners’ Schedules K-1 should equal the • Capital gains and losses from sale of real dresses, and identifying numbers of the partner
amount reported on the same line of Schedule K property located in Hawaii are attributed to and partnership and the partner’s distributive
of Form N-20 through line 31. Hawaii. share of each item.
Complete Schedule K-1 for each partner. • Capital gains and losses from sales of tan- For an individual partner, enter the partner’s
Schedules K and K-1 have the same line numbers gible personal property are attributable to Ha- social security number. For all other partners, en-
through line 31 to make it easier for the partner- waii if the property had a situs in Hawaii at the ter the partner’s FEIN. (However, if a partner is an
ship to prepare Schedule K-1. In addition, Sched- time of the sale. individual retirement arrangement (IRA), enter the
ule K-1 has questions A through F and item G. Ad- • Interest and dividends are attributed to Ha- identifying number of the custodian of the IRA. Do
ditional copies of Schedule K-1 are available from waii if the partnership’s commercial domicile not enter the social security number of the person
your district tax office. is in Hawaii. for whom the IRA is maintained.)
Attributable to Hawaii • Patent and copyright royalties are attributed If a taxpayer and spouse each had an interest
to Hawaii if and to the extent that the patent in the partnership, prepare a separate Schedule
Each partnership must state specifically the or copyright is utilized by the payor in Hawaii. K-1 for each of them. If a taxpayer and spouse
income attributable to the State and the income at- held an interest together, prepare one Schedule
tributable everywhere with respect to each partner. • Intangible property is attributed to Hawaii if it
is used in Hawaii. K-1 if the two of them are considered to be one
Ordinary income or (loss) from trade or busi- Services are attributed to Hawaii if it is used partner.
ness activities shall be attributed to the State by •
the use of the apportionment of business income or consumed in Hawaii. Note: Space has been provided after line 37 of
allocation provisions of the Uniform Division of In- Amounts received by a qualified high technolo- Schedule K-1 for you to provide information to the
come for Tax Purposes Act (UDITPA), section 235- gy business as royalties and other income derived partners. This space may be used in lieu of attach-
ments.

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Question A.—Is This Partner a General Note: The partnership must maintain a State Ac- shows the partnership’s charitable contributions
Partner? cumulated Adjustments Account. subject to the 50%, 30%, and 20% limitations.
Question A must be answered for all partners. Box b - Report in this box the capital contribu- If the partnership made a qualified conserva-
If a partner holds interests as both a general and tions as reported on the partnership’s books. tion contribution under section 170(h), also include
limited partner, attach a schedule for each activity Box c - Enter in this box the sum of the amounts the fair market value of the underlying property
which shows the amounts allocable to the part- on lines 1 through 11, column c of this Schedule before and after the donation, the type of legal in-
ner’s interest as a limited partner. K-1 and any nontaxable income. terest contributed, and describe the conservation
purpose furthered by the donation. Give a copy of
Question B.—What Type of Entity Is This Box d - Enter in this box the sum of the amounts this information to each partner.
Partner? State on this line whether the partner is on lines 12 through 15 and 30a, column c of this
an individual, a corporation, a fiduciary, a partner- Schedule K-1 and any disallowed deductions. Line 13
ship, an exempt organization, or a nominee (custo- A partnership may elect to expense part of the
dian). If the partner entity is an LLC and it is treated Box e - Report in this box the withdrawals
as other than a disregarded entity for state income and distributions as reported on the partnership’s cost (up to $25,000) of recovery property that the
tax purposes, the partnership must enter the LLC’s books. partnership purchased this year for use in its trade
or business. The partnership may not deduct the
classification for state income tax purposes (that Box f - The amount to enter in this box is the section 179 expense, but should report the ex-
is, a corporation or partnership). If the partner is sum of the amounts from boxes a, b, and c less the pense separately on Schedules K and K-1. The
a nominee, use one of the following codes after sum of the amounts from boxes d and e. partners report their shares in the year in which the
the word “nominee” to indicate the type of entity property is placed in service. Show the total sec-
the nominee represents: I—Individual; C—Corpo- (Schedules K and K-1 unless
ration; F—Fiduciary; P—Partnership; E—Exempt otherwise noted) tion 179 expense on Schedule K, line 13, and al-
locate it to each partner on Schedule K-1, line 13.
Organization; or IRA—Individual Retirement Ar- Income (loss) The partnership must specify the item(s) of
rangement.
Line 1 section 179 property which it elects to treat as an
Item C.—Partner’s Profit, Loss, and Capital Enter the partner’s share of the ordinary in- expense and the portion of the cost of each item
Sharing Percentages. Enter in item C(ii) the per- come (loss) reported on Form N-20, line 16. If line which is being treated as an expense. Do this on
centage existing at the end of the year. However, federal Form 4562, Depreciation and Amortization,
if a partner’s interest terminated during the year, 16 is a loss, enter the partner’s full share of the
enter in item C(i) the percentages that existed im- loss. If the partner holds interests in the partner- and on a schedule attached to Schedule K-1. Gen-
mediately before the termination. When the profit ship both as a general partner and as a limited erally, any election made under section 179 may
or loss sharing percentage has changed during the partner, enter the total loss for all interests held in not be revoked except with the consent of the Di-
year, show the percentage before the change in the partnership. Enter the loss without reference to rector.
item C(i) and the end of year percentage in item the adjusted basis of the partner’s interest in the Depreciation or amortization may not be taken
C(ii). If there are multiple changes in the profit and partnership or the partner’s amount at risk. Line 1 on any amount for which a deduction is allowed
loss sharing percentage during the year, attach a should reflect the total ordinary income (loss) from under section 179.
statement giving the date and percentage before all trade or business operations.
See section 179 and federal Form 4562 for
each change. “Ownership of capital” means the Line 4 more information.
portion of the capital that the partner would receive Enter: (1) the guaranteed payments to partners Please note that Hawaii has not adopted feder-
if the partnership was liquidated at year end by the for salaries and interest deducted by the partner- al provisions relating to the increase of the section
distribution of undivided interests in partnership ship and included on Form N-20, line 9; and (2) the 179 deduction and “bonus” depreciation.
assets and liabilities. guaranteed payments to partners that the partner-
Item D.—Partner’s Share of Liabilities. En- ship is required to capitalize, such as payments or Line 15
ter each partner’s share of nonrecourse liabilities, credits to a partner for services rendered in orga- Enter any other deductions not included on line
partnership-level qualified nonrecourse financing, nizing a partnership. 12 through 14, such as:
and other liabilities. If the partner terminated his a. Amounts, other than investment interest, paid
or her interest in the partnership during the year, Line 10 by the partnership that would be itemized de-
enter the share that existed immediately before the Enter the net section 1231 gain (loss) from ductions on any of the partners’ income tax
total disposition. In all other cases, enter it as of Schedule D-1, line 8. returns if they were paid directly by a partner
the end of the year. Do not include net gain or loss from involuntary for the same purpose. These amounts in-
If the partnership is engaged in two or more conversions due to casualty or theft. Report net clude, but are not limited to expenses under
different types of at-risk activities, or a combina- gain or loss from involuntary conversions due to section 212 for the production of income other
tion of at-risk activities and any other activity, at- casualty or theft on line 11. than from the partnership’s trade or business.
tach a statement showing the partner’s share of Line 11 b. Any interest penalty on early withdrawal of
nonrecourse liabilities, partnership-level qualified savings. The federal Form 1099-INT given
nonrecourse financing, and other liabilities for Enter any other items of income, gain, or loss to the partnership by a bank or savings and
each activity. See sections 465(c)(2) and (3) to de- not included on lines 1 through 10, such as: loan association will show the amount of any
termine if the partnership is engaged in more than a. Gains from the disposition of farm recapture interest penalty the partnership was charged
one at-risk activity. property (see Schedule D-1) and other items because it withdrew funds from its time sav-
If a partnership is engaged in an activity sub- to which section 1252 apply. ings deposit before its maturity.
ject to the limitations of section 465(c)(1), give b. Recoveries of bad debts, prior taxes, and de- c. Soil and water conservation expenditures
each partner his or her share of the total pre-1976 linquency amounts (section 111). (section 175).
losses from the section 465(c)(1) activity (i.e., film c. Gains and losses from wagering (section d. Expenditures for the removal of architectural
or video tape, section 1245 property leasing, farm, 165(d)). and transportation barriers to the elderly and
or oil and gas property) for which there existed a d. Any income, gain, or loss to the partnership handicapped and which the partnership has
corresponding amount of nonrecourse liability at under section 751(b). elected to treat as a current expense (section
the end of each year in which the losses occurred. e. Net gain or loss from involuntary conversions 190).
Items E.—Publicly Traded Partnerships. If due to casualty or theft. Give each partner a e. Contributions to a capital construction fund.
the box in Item E is checked, you are a partner in schedule that separately shows each part- f. Any amounts paid during the tax year for
a publicly traded partnership and must follow the ner’s share of the amount to be reported on health insurance coverage for a partner (in-
rules for Publicly Traded Partnerships. See fed- federal Form 4684, Casualties and Theft. cluding that partner’s spouse and depen-
eral Partner’s Instructions for Schedule K-1 (Form dents).
1065) for more information. Deductions
Item G.—Reconciliation of Partner’s Capital Line 12 g. Payments for a partner to an IRA, qualified
plan, or simplified employee pension (SEP)
Account. If you are not required to complete Item Enter the total amount of charitable contribu- or SIMPLE IRA plan. If a qualified plan is a
L on Schedule K-1 (Form 1065), you are not re- tions, and each amount subject to the 50%, 30%, defined benefit plan, a partner’s distributive
quired to complete Item G on Schedule K-1 (Form and 20% limitations paid by the partnership during share of payments is determined in the same
N-20). the tax year. Attach an itemized list that separately manner as his or her distributive share of part-

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nership taxable income. For a defined ben- Other Composite Returns for
efit plan, attach to the Schedule K-1 for each Schedule K, Line 31 Nonresident Partners
partner a statement showing the amount of
benefit accrued for the tax year. See instructions for federal Form 1065, Sched- At present, there are no statutory provisions
h. Interest expense allocated to debt-financed ule K for what else to report on line 31. that: (1) allow partnerships the option to file com-
distributions. See Internal Revenue Service Schedule K-1, Lines 31 - 36 posite returns on behalf of their nonresident part-
Notice 89-35 for more information. Report on lines 31 through 36 of Schedule ners, and (2) grant the election to be taxed at the
i. Interest paid or accrued on debt properly al- K-1, credit recapture amounts for the Hawaii Low- nonresident partners’ own individual tax rates but
locable to each general partner’s share of a Income Housing Tax Credit, the Capital Goods Ex- with no standard deduction or personal exemp-
working interest in any oil or gas property (if cise Tax Credit, the Tax Credit for Flood Victims, tion. However, the Department of Taxation will
the partner’s liability is not limited). General the Important Agricultural Land Qualified Agricul- administratively allow partnerships to elect to file
partners that did not materially participate in tural Cost Tax Credit, the Capital Infrastructure Tax composite Hawaii nonresident income tax returns
the oil or gas activity treat this interest as in- Credit, and the Historic Preservation Income Tax on behalf of participating partners, all of whom are
vestment interest; for other general partners, Credit. nonresidents, and make composite payments for
it is a trade or business interest. the participating partner’s distributive share of Ha-
Schedule K-1, Line 37 waii source income based on their own individual
Credits See instructions for federal Form 1065, Sched- tax rate but with no standard deduction or personal
Lines 16 - 29 ule K-1 for what to report on line 37. exemption, provided the following conditions are
met:
See Instructions for Schedule CR for more in- Analysis (Schedule K only) The partner must be an individual.
formation on specific credits. Lines 32a and 32b •
Line 30 For each type of partner shown, enter the por- • The partner’s income from the partnership is
the partner’s only income from Hawaii sourc-
Investment Interest tion of the amount shown on line 32a of Schedule es. If a partner has other income from Hawaii
K that was allocated to that type of partner. The sources such as multiple partnerships, even
Lines 30a-30b(2) must be completed whether sum of the amounts shown on line 32b must equal though the partnerships are related, a sepa-
or not a partner is subject to the investment inter- the amount shown on line 32a. rate net income tax return must be filed by
est rules.
In classifying partners who are individuals as that partner.
Line 30a. Investment Interest Expense.— “active” or “passive,” the partnership should apply • The partnership will obtain a Power-of-Attor-
Include on this line interest paid or accrued to the following rules: ney from each of its partners to permit the
purchase or carry property held for investment. partnership to file an income tax return on the
Property held for investment includes property that 1. If the partnership’s principal activity is a trade
produces portfolio income (interest, dividends, an- or business activity, classify a general partner partners’ behalf. A copy of each power of at-
nuities, royalties, etc.). Therefore, interest expense as “active” if the partner materially participat- torney is to be attached to the initial compos-
allocable to portfolio income should be reported on ed in all partnership trade or business activi- ite tax return filed by the partnership.
line 30a of Schedule K-1 (rather than line 14 of ties; otherwise, classify a general partner as • The partnership, as an agent for the partici-
Schedule K-1). “passive.” pating partners, shall pay tax, additions to tax,
Property held for investment includes a part- 2. If the partnership’s principal activity consists interest, and penalties otherwise required to
ner’s interest in a trade or business activity that is of working interest in an oil or gas well, clas- be paid by the partners.
not a passive activity to the partner and in which sify a partner holding a working interest in the The composite Hawaii Nonresident Individual
the partner does not materially participate. An ex- oil or gas well through an entity that does not Income Tax Return, Form N-15, shall be
ample would be a partner’s working interest in oil limit the partner’s liability as “active;” other- completed as follows:
and gas property (i.e., the partner’s interest is not wise, classify the partner as “passive.”
1. Fill in the oval indicating this is a composite
limited) if the partner does not materially partici- 3. If the partnership’s principal activity is a rental return;
pate in the oil and gas activity. real estate activity, classify a general partner
as “active” if the partner actively participated 2. The first name on the return shall be “Part-
Investment interest does not include interest in all of the partnership’s rental real estate ac- ners” and the last name is the partnership’s
expense allocable to a passive activity. tivities; otherwise, classify a general partner name;
The amount on line 30a will be deducted (after as “passive.” 3. The partnership’s FEIN shall be used in place
applying the investment interest expense limita- 4. If the partnership’s principal activity is a port- of the taxpayers’ social security number. Enter
tions of section 163(d)) by individual partners on folio activity, classify all partners as “active.” the partnership’s FEIN in social security num-
their Form N-11 or N-15. 5. Classify all limited partners and all partners ber format (i.e., 123-45-6789);
Lines 30b(1) and 30b(2). Investment Income in a partnership whose principal activity is a 4. Indicate the partnership’s mailing address as
and Expenses.—Enter on line 30b(1) only the in- rental activity other than a rental real estate the taxpayers’ address;
vestment income included on lines 5 through 7 of activity as “passive.” 5. Indicate the partnership’s principal business
Schedule K-1. Enter on line 30b(2) only the invest- 6. If the partnership cannot make a reasonable activity in Hawaii as the taxpayers’ occupation;
ment expense included on line 14 of Schedule K-1. determination as to whether or not a partner’s 6. Filing status will be single. No personal ex-
If there are items of investment income or ex- participation in a trade or business activity is emption is allowed;
pense included in the amounts that are required material or whether or not a partner’s partici-
to be passed through separately to the partner pation in a rental real estate activity is active, 7. Complete pages 2 and 3, Col. B, lines 17 and
on Schedule K-1 (items other than the amounts classify the partner as “passive.” 35;
included on lines 5 through 7 and 14 of Sched- In applying the above rules, a partnership 8. Deductions necessary to determine each part-
ule K-1), give each partner a schedule identifying should classify each partner to the best of its ner’s distributive share of the partnership in-
these amounts. knowledge and belief. It is assumed that in most come are allowed;
Investment income includes gross income from cases the level of a particular partner’s participa- 9. Credits directly attributable to the partnership
property held for investment, gain attributable to tion in an activity will be apparent. are allowed;
the disposition of property held for investment, and 10. On line 37, enter zero since worldwide source
other amounts that are gross portfolio income. In- Schedules O and P income of each nonresident partner is not
vestment income and investment expenses do not Allocation and Apportionment of Income required, itemized deductions calculated us-
include any income or expenses from a passive ing the ratio of Hawaii adjusted gross income
activity. If the partnership had ordinary income or (loss)
from trade or business activities both within and to total adjusted gross income may not be
Property subject to a net lease is not treated without Hawaii, complete Schedules O and P to claimed. Also, tax credits which are based on
as investment property because it is subject to the determine the business income or (loss) appor- total adjusted gross income from all sources
passive loss rules. Do not reduce investment in- tioned to Hawaii. For more details, see the instruc- may not be claimed;
come by losses from passive activities. tions for “Attributable to Hawaii” on page 5, under 11. Complete page 3 by:
Investment expenses are deductible expenses Schedule K and Schedule K-1. Attach a copy of
(other than interest) directly connected with the Schedules O and P to Form N-20.
production of investment income.

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Page 8
a. determining the taxable income for partners, income derived from non-entity sources If you need more space on Schedule PTE to
each nonresident partner and enter and claims for non-entity deductions. report more qualified members, attach additional
the total on lines 41 and 43; Schedule PTEs as needed and check the “Supple-
b. determining the tax for each nonresi- Schedule PTE and ment to Part II Only” box at the top of the form and
dent partner and enter the total on line Schedule PTE-U continue with the remaining qualified members in
44; and Pass-Through Entity Tax Part II.
The total number of qualified members, their
c. completing lines 45 through 51 as ap- Purpose qualified net income, and their elective tax credit
propriate, and line 52 (note: on Sched-
ule CR, skip line 11). Schedule PTE is used to calculate the PTE tax amounts (Part II, lines 1 though 3) of all Schedule
of an electing PTE at the PTE level and report their PTEs should equal the amount reported in Part I,
12. Complete page 4, lines 53 through 66 as ap- qualified members’ net income and PTE tax credit lines 1, 2, and 4.
propriate. amounts under section 235-___, HRS. Schedule Schedule PTE, Part II, lines 1 through 3, should
A schedule is attached to the return detailing PTE-U is used by upper-tier PTEs to report their be the total of the amount of qualified members, in-
each partner’s: eligible partners’ distributive shares of a PTE tax come, and tax credit amount per form.
1. Name, address, social security number, and credit amount received from an electing PTE or
filing status (single); lower-tier PTE. Schedule PTE-U only
2. Distributive share of income or (loss); General Instructions Note: An upper-tier PTE’s “qualified members”
3. Allowable itemized deductions; Partnerships who make a yearly irrevocable are eligible partners of the upper-tier PTE who
election to pay taxes at the PTE level for the tax- qualify to claim the PTE tax credit.
4. Tax due computed on the taxable income of able year are liable for PTE tax on Form N-20, If the partnership is an upper-tier PTE that has
the individual partner; and page 2, line 17a. The electing PTE must attach received a PTE tax credit from an electing PTE or
5. Distributive share of credits. Schedule PTE listing all qualified members and a lower-tier PTE that the partnership is a mem-
Nonresident partners who have made Hawaii their distributive shares and guaranteed payments ber, Schedule PTE-U must be attached to Form
estimated tax payments during the 2023 tax subject to PTE tax for the taxable year. N-20. Schedule PTE-U is a summary generated
by upper-tier PTEs of the PTE tax credit amount(s)
year and who are allowed to be included on the Partnerships who are upper-tier PTEs and re- received and distributive shares of the tax credit
composite return may have those payments ceived a PTE tax credit from an electing PTE or amount allocated to its eligible partners reported
credited to the composite return. The partnership lower-tier PTE for the taxable year must attach electing PTE or lower-tier PTE separately. Sched-
may claim these payments on Form N-15, line Schedule PTE-U listing all eligible partners and ule PTE-U requires the upper-tier PTE to identify
55, by entering the total of the estimated tax their distributive shares of the PTE tax credit. their eligible partners by entering their names,
payments along with “see attached schedule” See Tax Information Release No. 2023-03, identification numbers, and their distributive
in the amount column of line 55 and attaching “Temporary Administrative Rules Relating to Pass- shares of the PTE tax credit.
a schedule of the estimated tax payments by Through Entity Taxation as Enact by Act 50, Ses- If you need more space on Schedule PTE-U
stating each individual’s: sion Laws of Hawaii 2023.” to report additional eligible partners, attach addi-
1. Name, address, and social security number, tional Schedule PTE-Us as needed and check the
and Specific Instructions “Supplement to Part II Only” box at the top of the
2. Each type of estimated payment and amount Schedule PTE only form and continue with the remaining eligible part-
of payment (e.g., N-200V, 1st quarter - $200; If the partnership is an electing PTE for the ners in Part II.
N-200V, 2nd quarter - $300; etc.) made by the taxable year, Schedule PTE must be attached to Total PTE tax credit amount(s) received from
individual. Form N-20. Schedule PTE is a summary of all the an electing PTE or lower-tier PTE that were allo-
The election to file a composite Hawaii non- qualified members that an electing PTE uses to cated to an upper-tier PTE’s eligible partners (Part
resident return may be revoked by the Department calculate the total amount of elective tax on the II, line 2) of all Schedule PTE-Us should equal
upon failure of the partnership to comply with the electing PTE’s qualified net income. Schedule PTE each reported electing PTE or lower-tier PTE re-
terms and conditions of this election. requires the electing PTE to identify their qualified ported tax credit amount(s) in Part I, line 1.
In making such an election, the partnership members by entering their names, identification Schedule PTE-U, Part II, lines 1 and 2, should
will not be required to obtain from the participating numbers, pro rata share or distributive share of be the total of the amount of qualified members
qualified net income amounts, and calculate the and tax credit amount per form.
elective tax credit amounts.

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                                                                                            Page 9
              RELATED FEDERAL/HAWAII PARTNERSHIP TAX FORMS
                                                                                       Copy of Fed. 
Federal                                                                Use             Form May Be 
Form Number   Title or Description of Federal Form                     Hawaii Form     Used
970          Application To Use LIFO Inventory Method                  None            Yes*
1065         U.S. Return of Partnership Income                         N-20            No
Schedule D   Capital Gains and Losses                                  Sch. D (N-20)   No
Schedule K-1 Partner’s Share of Income, Deductions, Credits, Etc.      Sch. K-1 (N-20) No
1128         Application to Adopt, Change, or Retain a Tax Year        None            Yes*
3115         Application for Change in Accounting Method               None            Yes*
4562         Depreciation and Amortization                             None            Yes*
4684         Casualties and Thefts                                     None            Yes*
4797         Sales of Business Property                                Sch. D-1        No
5884         Work Opportunity Credit                                   N-884           No
6198         At-Risk Limitations                                       None            Yes*
6781         Gains and Losses from Section 1256                        None            Yes* 
             Contracts and Straddles
8283         Noncash Charitable Contributions                          None            Yes*
8582         Passive Activity Loss Limitations                         None            Yes*
8586         Low-Income Housing Credit                                 N-586           No
8697         Interest Computation Under the Look-Back Method           None            Yes* 
             for Completed Long-Term Contracts
8824         Like-Kind Exchanges                                       None            Yes*
8825         Rental Real Estate Income and Expenses                    None            Yes* 
             of a Partnership or an S Corporation
8832         Entity Classification Election                            None            Yes*
8949         Sales and other Dispositions of Capital Assets            None            Yes*
* If there is no Hawaii equivalent form, the federal form must be used.

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