Hawaii Administrative Rules
Title 18 - DEPARTMENT OF TAXATION
Chapter 235 - INCOME TAX LAW
Subchapter 6 - RETURNS AND PAYMENTS; ADMINISTRATION
Section 18-235-110.7-21 - Identification of property

Universal Citation: HI Admin Rules 18-235-110.7-21

Current through August, 2024

(a) In general. A taxpayer must maintain records from which the taxpayer can establish, with respect to each item of eligible property, the following facts:

(1) The month and the taxable year in which the property was placed in service;

(2) The basis of the property;

(3) The estimated useful life or recovery period that was assigned to the property to determine eligibility for the credit; and

(4) The date the property is disposed of or otherwise ceases to be eligible property.

The above stated facts will be analyzed to determine both the eligibility for the credit, and the necessity for any recapture of credit.

(b) Insufficient records. For recapture purposes, if the taxpayer's records are insufficient to establish the above stated facts, it will generally be assumed that the most recently acquired eligible property was disposed of first.

(c) Mass assets. Where the maintenance of records of details on mass assets is impractical, the taxpayer may adopt reasonable recordkeeping practices, consonant with good accounting practices and consistent with the taxpayer's prior recordkeeping practices. Mass assets means a mass or group of individual items of property (A) not necessarily homogeneous, (B) each of which is minor in value relative to the total value of the mass or group, (C) numerous in quantity, (D) usually accounted for only on a total dollar or quantity basis, and (E) with respect to which separate identification is impracticable. Examples include portable air and electric tools, jigs, and hardware.

(d) Taxpayer uses an averaging convention to compute depreciation for eligible property. A taxpayer's use of an averaging convention to compute depreciation for eligible property will be recognized to determine if recapture is required for a particular property.

(1) "Averaging convention", defined. The averaging convention provides for assumed dates that property is placed in service, or ceases to be eligible property. For example, it might be assumed that all additions and retirements made during the first half of a given year were made on the first day of that year, and that all additions and retirements during the second half of that year were made on the first day of the following year.

(2) The taxpayer must consistently use the assumed dates to compute the recapture of credit for all eligible property depreciated under the taxpayer's averaging convention. In any event, however, the director may disregard the taxpayer's use of the averaging convention dates if the use results in a substantial distortion of eligibility for the credit.

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