Apply Hawaii refundable credits before nonrefundable credits

changelog.d/hi-credit-ordering.fixed.md

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+Apply Hawaii refundable credits before nonrefundable credits, limiting nonrefundable credits (including the 2018-2022 Hawaii EITC) to the adjusted tax liability on Form N-11, line 34.

policyengine_us/tests/code_health/known_dead_reference_urls/west.toml

@@ -177,3 +177,18 @@ replacement = "https://www.idsaves.org/tax-benefits/"
 prefix = "https://www.srca.nm.gov/parts/title08/08.401.0002.html"
 verified = "2026-10-01"
 replacement = "https://prod-rf-lambda.rtssaas.com/PublicFiles/d89c47bd0d70402dba89b03a22bda6d1/45b8668e-460f-45cd-804f-92ee3d442343/8.401.2.html"
+
+[[dead]]
+prefix = "https://files.hawaii.gov/tax/forms/2019/n356_i.pdf"
+verified = "2026-10-13"
+replacement = "https://web.archive.org/web/20201129163620/https://files.hawaii.gov/tax/forms/2019/n356_i.pdf"
+
+[[dead]]
+prefix = "https://files.hawaii.gov/tax/forms/2020/n356_i.pdf"
+verified = "2026-10-13"
+replacement = "https://web.archive.org/web/20210624115312/https://files.hawaii.gov/tax/forms/2020/n356_i.pdf"
+
+[[dead]]
+prefix = "https://files.hawaii.gov/tax/forms/2021/n356_i.pdf"
+verified = "2026-10-13"
+replacement = "https://web.archive.org/web/20220526233754/https://files.hawaii.gov/tax/forms/2021/n356_i.pdf"

policyengine_us/tests/policy/baseline/gov/states/hi/tax/income/hi_adjusted_tax_liability.yaml

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+# Form N-11, line 34: line 27 (tax) minus line 33 (total refundable credits).
+# https://files.hawaii.gov/tax/forms/2022/n11_i.pdf#page=3
+# https://files.hawaii.gov/tax/forms/2025/n11_i.pdf#page=3
+
+- name: Tax less refundable credits
+  period: 2022
+  input:
+    state_code: HI
+    hi_income_tax_before_non_refundable_credits: 1_000
+    hi_refundable_credits: 500
+  output:
+    # Line 34 = 1,000 - 500.
+    hi_adjusted_tax_liability: 500
+
+- name: Negative when refundable credits exceed tax
+  period: 2025
+  input:
+    state_code: HI
+    hi_income_tax_before_non_refundable_credits: 300
+    hi_refundable_credits: 500
+  output:
+    # Line 34 = 300 - 500; the form allows a negative amount.
+    hi_adjusted_tax_liability: -200
+
+- name: The 2021 Act 115 refund is not a credit on the return
+  period: 2021
+  # Act 115 refunds were issued by the department to 2021 Form N-11 filers;
+  # they are not among lines 28 to 32.
+  # https://files.hawaii.gov/tax/news/announce/ann22-03.pdf#page=2
+  input:
+    state_code: HI
+    hi_income_tax_before_non_refundable_credits: 1_000
+    hi_refundable_credits: 410
+    hi_act_115_rebate: 300
+  output:
+    # Line 33 = 410 - 300 = 110; line 34 = 1,000 - 110.
+    hi_adjusted_tax_liability: 890
+
+- name: The Act 115 refund is not subtracted in years it is not paid
+  period: 2022
+  input:
+    state_code: HI
+    hi_income_tax_before_non_refundable_credits: 1_000
+    hi_refundable_credits: 410
+    hi_act_115_rebate: 300
+  output:
+    # The refund is not in the 2022 refundable list: line 34 = 1,000 - 410.
+    hi_adjusted_tax_liability: 590

policyengine_us/tests/policy/baseline/gov/states/hi/tax/income/hi_non_refundable_credits.yaml

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+# Form N-11 applies refundable credits first: line 34 is line 27 (tax) minus
+# line 33 (total refundable credits), and the nonrefundable credits on line 35
+# "cannot be greater than your adjusted tax liability. If line 34 is zero or
+# less, no tax credit may be used." Line 36 is line 34 minus line 35.
+# https://files.hawaii.gov/tax/forms/2022/n11_i.pdf#page=3
+# https://files.hawaii.gov/tax/forms/2022/n11ins.pdf#page=21
+# Form N-356, lines 10 to 13, limits the 2018-2022 nonrefundable earned income
+# tax credit to the same adjusted tax liability.
+# https://files.hawaii.gov/tax/forms/2022/n356_i.pdf#page=1
+
+- name: Nonrefundable credits are limited to tax less refundable credits
+  period: 2022
+  input:
+    state_code: HI
+    hi_income_tax_before_non_refundable_credits: 1_000
+    hi_refundable_credits: 500
+    # Hawaii EITC = 20% x 4,000 = 800.
+    eitc: 4_000
+  output:
+    # Line 27 = 1,000; line 33 = 500; line 34 = 500.
+    hi_adjusted_tax_liability: 500
+    hi_eitc_potential: 800
+    # N-356 line 13 = min(800, 500); line 35 = 500.
+    hi_eitc: 500
+    hi_non_refundable_credits: 500
+    hi_income_tax_before_refundable_credits: 500
+    # Line 36 = 500 - 500. Capping at gross tax instead gave
+    # 1,000 - 800 - 500 = -300.
+    hi_income_tax: 0
+
+- name: No nonrefundable credit when refundable credits exceed tax
+  period: 2022
+  input:
+    state_code: HI
+    hi_income_tax_before_non_refundable_credits: 300
+    hi_refundable_credits: 500
+    eitc: 4_000
+  output:
+    # Line 34 = 300 - 500 = -200, so line 35 = 0.
+    hi_eitc: 0
+    hi_non_refundable_credits: 0
+    hi_income_tax_before_refundable_credits: 300
+    # Line 36 = -200: the refundable credits are paid in full.
+    hi_income_tax: -200
+
+- name: No nonrefundable credit when refundable credits equal tax
+  period: 2022
+  input:
+    state_code: HI
+    hi_income_tax_before_non_refundable_credits: 500
+    hi_refundable_credits: 500
+    eitc: 4_000
+  output:
+    # Line 34 = 0.
+    hi_non_refundable_credits: 0
+    hi_income_tax: 0
+
+- name: Full nonrefundable credit when the adjusted tax covers it
+  period: 2022
+  input:
+    state_code: HI
+    hi_income_tax_before_non_refundable_credits: 2_000
+    hi_refundable_credits: 500
+    eitc: 4_000
+  output:
+    # Line 34 = 1,500; line 35 = 800; line 36 = 700.
+    hi_non_refundable_credits: 800
+    hi_income_tax_before_refundable_credits: 1_200
+    hi_income_tax: 700
+
+- name: The 2025 earned income tax credit is refundable
+  period: 2025
+  input:
+    state_code: HI
+    hi_income_tax_before_non_refundable_credits: 1_000
+    # Hawaii EITC = 40% x 4,000 = 1,600, on Schedule CR Part I.
+    eitc: 4_000
+    hi_food_excise_credit: 0
+    hi_cdcc: 0
+    hi_tax_credit_for_low_income_household_renters: 0
+  output:
+    hi_refundable_credits: 1_600
+    # Line 34 = 1,000 - 1,600; no nonrefundable credits in 2025.
+    hi_adjusted_tax_liability: -600
+    hi_non_refundable_credits: 0
+    hi_income_tax: -600
+
+- name: A nonrefundable 2025 credit is limited to tax less refundable credits
+  period: 2025
+  # Treat the 2025 earned income tax credit as nonrefundable, as it was
+  # before 2023, to apply the line 34 limit with 2025 parameters.
+  input:
+    gov.states.hi.tax.income.credits.non_refundable: [hi_eitc]
+    gov.states.hi.tax.income.credits.refundable:
+      [hi_food_excise_credit, hi_cdcc, hi_tax_credit_for_low_income_household_renters]
+    state_code: HI
+    hi_income_tax_before_non_refundable_credits: 1_000
+    hi_food_excise_credit: 300
+    hi_cdcc: 200
+    hi_tax_credit_for_low_income_household_renters: 0
+    # Hawaii EITC = 40% x 4,000 = 1,600.
+    eitc: 4_000
+  output:
+    hi_refundable_credits: 500
+    # Line 34 = 1,000 - 500; line 35 = min(1,600, 500).
+    hi_adjusted_tax_liability: 500
+    hi_eitc: 500
+    hi_non_refundable_credits: 500
+    # Line 36 = 500 - 500.
+    hi_income_tax: 0

policyengine_us/tests/policy/baseline/gov/states/hi/tax/income/integration.yaml

@@ -311,3 +311,106 @@
     # Total = $268.80 + $307.20 + $528.00 + $614.40 + $1,632.00 + $1,728.00
     #         + $11,704.00 + $7,900.00 + $4,125.00 = $28,807.40
     hi_income_tax_before_non_refundable_credits: 28_807.40
+
+# Credit ordering: a single filer aged 30 with $8,000 of wages and no other
+# income, through Form N-11 lines 26 to 36. Refundable credits (line 33) come
+# off the tax (line 27) first; nonrefundable credits (line 35) are limited to
+# the adjusted tax liability that remains (line 34). HRS 235-91.5.
+# https://files.hawaii.gov/tax/forms/2022/n11_i.pdf#page=3
+# https://files.hawaii.gov/tax/forms/2022/n11ins.pdf#page=21
+
+- name: 2022 nonrefundable EITC limited to the tax left after the food/excise credit
+  period: 2022
+  input:
+    people:
+      head:
+        age: 30
+        employment_income: 8_000
+    tax_units:
+      tax_unit:
+        members: [head]
+    households:
+      household:
+        members: [head]
+        state_code: HI
+  output:
+    # Line 26 = 8,000 - 2,200 standard deduction - 1,144 exemption.
+    hi_taxable_income: 4_656
+    # Line 27 by the rate schedule (the model does not use the Tax Table):
+    # 1.4% x 2,400 + 3.2% x (4,656 - 2,400) = 33.60 + 72.192.
+    hi_income_tax_before_non_refundable_credits: 105.792
+    # Line 28, Form N-311: AGI from 5,000 to 9,999 gives 100 per exemption.
+    hi_food_excise_credit: 100
+    hi_refundable_credits: 100
+    # Line 34 = 105.792 - 100.
+    hi_adjusted_tax_liability: 5.792
+    # Federal EITC = min(7.65% x 8,000, 560) = 560; Form N-356 line 3 = 20%.
+    hi_eitc_potential: 112
+    # N-356 line 13 = min(112, 5.792); Schedule CR and line 35.
+    hi_eitc: 5.792
+    hi_non_refundable_credits: 5.792
+    # Line 36 = 5.792 - 5.792.
+    hi_income_tax: 0
+
+- name: 2021 Act 115 refund paid on top of the return balance
+  period: 2021
+  input:
+    people:
+      head:
+        age: 30
+        employment_income: 8_000
+    tax_units:
+      tax_unit:
+        members: [head]
+    households:
+      household:
+        members: [head]
+        state_code: HI
+  output:
+    # Lines 26 to 28 as in 2022.
+    hi_income_tax_before_non_refundable_credits: 105.792
+    hi_food_excise_credit: 100
+    # One exemption at 300 for federal AGI under 100,000, issued by the
+    # department apart from the return.
+    # https://files.hawaii.gov/tax/news/announce/ann22-03.pdf#page=2
+    hi_act_115_rebate: 300
+    hi_refundable_credits: 400
+    # Line 33 = 100 (the Act 115 refund is not on it); line 34 = 5.792.
+    hi_adjusted_tax_liability: 5.792
+    # Federal EITC = 15.3% x 8,000 = 1,224 (2021 phase-in); 20% = 244.80.
+    hi_eitc_potential: 244.8
+    hi_eitc: 5.792
+    hi_non_refundable_credits: 5.792
+    # Line 36 = 0, less the 300 Act 115 refund.
+    hi_income_tax: -300
+
+- name: 2025 refundable credits paid in full beyond the tax
+  period: 2025
+  input:
+    people:
+      head:
+        age: 30
+        employment_income: 8_000
+    tax_units:
+      tax_unit:
+        members: [head]
+    households:
+      household:
+        members: [head]
+        state_code: HI
+  output:
+    # Line 26 = 8,000 - 4,400 standard deduction - 1,144 exemption.
+    hi_taxable_income: 2_456
+    # Line 27 by the rate schedule: 1.4% x 2,456.
+    hi_income_tax_before_non_refundable_credits: 34.384
+    # Line 28, Form N-311: AGI under 15,000 gives 220 per exemption.
+    hi_food_excise_credit: 220
+    # Federal EITC = 7.65% x 8,000 = 612; Hawaii EITC = 40% x 612 = 244.80,
+    # refundable on Schedule CR Part I (line 32).
+    hi_eitc: 244.8
+    # Line 33 = 220 + 244.80.
+    hi_refundable_credits: 464.8
+    # Line 34 = 34.384 - 464.80; line 35 = 0; line 36 = line 34.
+    hi_adjusted_tax_liability: -430.416
+    hi_non_refundable_credits: 0
+    hi_income_tax: -430.416