 managing editor and communications director for the Grasswood Institute of Hawaii and I'm the co-host today for Tom Yamachika's Talking Tax show which tells you all about Hawaii and IRS taxes for those who need to know. Today we're going to talk about a recent internal revenue service ruling from August 18th that announced expansive tax relief for Hawaii wildfire victims and that would of course be folks on Maui and also Hawaii counties. We'll go over what that means and also touch upon the relief that the state is giving and why it is so different from what the IRS is allowing or giving as the case may be. If time permits we'll also discuss some tax treatment of some of the kinds of government payments that may be made to victims or relief organizations or other helpers so without further ado let me introduce our co-host Tom Yamachika president of the Tax Foundation of Hawaii and also we have a guest today Joe Kent my colleague at the Grasswood Institute of Hawaii executive vice president and he's been on the ground on Maui a number of times since the wildfire and so he'll have some and he used to be a teacher in fact in Lahaina at King Kamehameha elementary school King Kamehameha the third elementary school and so he has some very fond memories and knows a lot of people over there and the whole thing is just really terrible what happened so anyway let's get to the point Tom I'll take it away or what happened on August 18th what the IRS say here okay but thanks Mark for doing this show with me I'm Tom Yamachika president of the Tax Foundation of Hawaii and we're we're here to help at least get some information out to people who might need it like Mark was saying the IRS came out with some news on August 18th regarding tax filing and payment deadlines and here's basically what they said if you have a tax filing or payment that's due between August 8th and February 15th of next year then that filing can or payment can be made on or before February 15th 2024 without penalty uh examples given uh in the IRS news release include quarterly estimated tax payments like there's one coming up uh in just a little while here in September and another is due on January 16th 2024 if you live in one of the affected counties namely Maui or Hawaii counties uh if you need to you can defer your payment until February of next year one thing to note is that there's no forgiveness but you still got to pay your tax but you have a little more time to pay it other examples include payroll and excise tax returns so if you are an employer you get this kind of tax relief too if your business is located in the affected zone namely Maui and Hawaii counties then you should take take advantage of this relief if you are a calendar year partnership or S corporation whose 2022 extensions ran out on September 15th then you can get some relief as well same thing with calendar year corporations whose 2022 extensions ran out on October 16th 2023 how many people do you think are actually paying attention to this stuff personally or do they have accountants that that they can just turn it over to well um it's questionable whether people are paying attention to this or not I mean the the IRS makes its announcements over you know its own website but uh mainstream and how many people don't pick it up how many people might this affect too is this like 30 people or who are in this situation of um uh having to file or oh between those you know a few months or is it hundreds of thousands of people or how many people are we talking about here oh we've got lots of people um we we've got basically anybody who's an employer you're affected if you're in the in the affected counties if you are a gig worker and you estimate a tax uh or if you're like me if you're self-employed and you estimate a tax um then uh and and you're uh you live in the affected counties then you're affected as well and and you're eligible for this relief and but what the uh what the IRS is not saying is that we're going to reduce uh your tax liability it's it's just saying it's we're going to delay it right right so you have a you know a few more months to get your to get your money together but but you still owe what you owe and and did you say something about like what if happened if all your records went up in the fire uh you know if you're a business in Lahaina hopefully all that stuff is on the internet right or you know on the cloud somewhere that you can you can pull it all back down if you need to for the IRS right yeah for the IRS and state uh you know state income tax and state GET uh i mean a lot of a lot of businesses might included have uh cloud services uh that accounting records are backed up on and hopefully uh if uh you're a business in Lahaina or if you're in a business in one of these affected counties and your records didn't go up in smoke hopefully you got a backup somewhere but i think word affected is important because you know if you're a business owner let's say in in uh Hana on Maui um your business your business is still there you know there's people visiting your business and everything but it's also in a way affected by the drop in tourism perhaps so i wonder it um how direct a connection do you have to make when it comes to saying that you're affected well uh for the IRS they they basically uh give relief by county so if you are if you live or if your business is in uh Maui County or uh Big Island County then you can get this relief uh also if you're on primarily Lona'i or Moloka'i that's part of Maui County as well so uh you get relief as well even though uh you may not have you know your business may not have been swallowed up in flames you may have your business affected if you're on Oahu too but only if you can show it yes um if if your business was affected uh and you don't live in the affected counties there is uh procedures where you can like write a note on your on your return uh or attach a statement to it saying uh I I was affected by the wildfire because of you know these reasons and by the way if you're if you're applying for relief from the state that's all you I mean that's all you can do um the IRS is giving you automatic tax relief with some limitations that I'm going to go into the state can't in that um they don't have uh statutes that automatically go off the uh disaster declaration which and and the IRS does so the IRS has more power to grant these extensions and relief and the state is kind of more case by case so they have so that reminds me I I just saw a news release from the governor's office that he's going to be updating he's going to be having a press conference on friday tomorrow excuse me tomorrow friday about um about what he'll be having a conference today actually I guess it is um about the emergency declaration for Maui and uh is this an opportunity for him to extend you know more generous uh situation for for taxpayers I mean this is an emergency right you say it's not automatic under the emergency declaration but but he could say that right yeah I mean the governor has emergency powers as well um and uh uh you know we saw governor egay last session uh used a lot of that because of the pandemic emergency so he suspended lots of laws and uh and and did a lot of uh you know uh things that normally only kings can do we know about that and we know about that uh okay but one thing I had to point out though is that for all of these extensions that have been given um individuals with 2022 returns uh basically aren't able to get the same kind of relief and and let me tell you why because their payment of tax uh was already due in april and that was before the wildfires hit so um if they were an extension fine uh but they still have to had the proper amount of tax paid in by april uh so you have to have a properly estimated amount of tax that was paid in by april and the disaster declaration doesn't affect that at all well are we asked are we looking at a lot of um people waiting in line a big a big burden on the state agencies with people coming in case by case wouldn't it be wouldn't it make sense for the governor to just say this is automatic you got it you know you're all you everyone who's affected who's in the within the Maui County or you know Oahu anyone who could claim that you're you're good to go well we we don't know how uh deluge the agencies are at this point I mean uh joe you've you've kind of looked at things on the ground uh how how is it over there oh wow of course I mean we've had a month of people in shock and disbelief um there's still people in in disbelief and um feeling like they're in midair um with this I know people who've lost their whole businesses um businesses lahina music comes to mind which is uh a business that I would visit often as a music teacher in lahina once upon a time and uh the whole business uh and the strip mall there burned to the ground and um they were um trying to garner donations online and and I think other businesses are as well so people are just um you know trying to get back to survival mode right now okay well uh with that maybe we should then talk a little bit about disaster relief payments um yeah there are payments that the government makes to people in in this type of situation uh that are generally excluded from gross income which means you don't have to pay tax on them at all uh for example if you get a payment from FEMA for living expenses funeral expenses or home rehab that is uh considered to be disaster relief payments under uh the disaster relief payment section of the internal revenue code there is actually a section that talks about that um and you don't have to pay tax on it uh Hawaii complies with that part of the internal revenue code so uh for Hawaii net income tax you don't have to pay net income tax on that uh on those payments either that's like insurance or something like life insurance when you get that just like life insurance now uh we got different rules applying to general excise tax because that's kind of a different different beast altogether um and there is you know the possibility of some tax relief from general excise tax but it doesn't follow you know the same rules as income tax so for example if you get um a business interruption insurance you have to see whether that's you know making up for lost income and because the income is is is taxable for GE tax the uh insurance proceeds might be taxable as well you have to kind of look look at that take stock of why your insurance was was paid what kind of um what necessitated it and uh is it replacing income so you have to kind of look at that there are that kind of insurance are you saying that can be taxed when you get it sometimes get it sometimes gets worse you know um i had a client a long time ago uh that was growing guavas on kawaii and then remember hurricane nikki yeah no more guavas um so so the client got uh a payment of crop insure which which you know they had paid for crop insurance and and they got a you know good slug of cash and and they got into a fight with the state tax department because they had reported it as as wholesaling income you're the same as they would uh if they were you know they're they're normal business because they you know they they didn't sell guavas retail they sold it to uh a wholesaler which um basically crushed it up and and made the juice out of it but the auditor quite rightly pointed out well uh there's no resale you got insurance proceeds um there's no there's no second seller so i got a tax all of that at retail mainly four percent so they have to be taxed at a higher rate in other words yeah so that was kind of an unfortunate situation fortunately uh because a hurricane nikki was a was really a disaster um and and was declared as such by the state as well uh it turned out to be exempt you what about you think it was a right decision that that he had to declare it as that it had to be considered retail sale well yeah i mean there was there was no second sale what about the um all the people who are individuals who are getting payments um from donations i mean we're seeing venmo codes on uh facebook and um go fund me campaigns and some people are getting tens of thousands um and and we've seen millions of dollars given to um some people so you know at one what point does that have to um be taxed too well there are kind of like two ends you have to look at one is the donate the the people who are getting um the donation uh that's that usually counts as gifts and gifts are not taxable for either income tax or g up to a certain point or is that like well if you get into the into the millions uh you may get into gift tax um but i don't think anybody's at that point okay so that thing about giving only $14,000 to your son or something that's that's just a family uh family transfer of wealth but if you're donating $14,000 i think that's the amount to a charity or you know a disaster fund that's unlimited and you can take a tax write up on that even well let's go into that next um okay the $14,000 are for gifts to normally to individuals uh if you give more than $14,000 for to a person you start eating away at what's called unified credit uh which is a very large allowance that you get uh for for gifts to like next generation and stuff like that but uh you only get this unified credit uh once in your lifetime so uh you will be eating away at it and you have to keep track of it but that doesn't apply to most people um and if if you want to write it off then what you need to be doing is you need to be donating to a charity because you know gifts made to individual people i mean it's it's it's fine it's not taxable but you can't write it off either okay but you can write off uh donations that are made to a charitable organization if it's you know properly registered with IRS and it uh conforms with IRS rules and stuff like that i mean we have uh in one of the pieces on our website a uh a guide to verifying uh some of these you know some of these charities there are a couple of ways you can do that uh you can go to IRS directly for example there's this thing called exempt organization search and see if they are properly qualified if they are then then you can write off your donation not all tax exempt organizations are eligible for this so if you if you were to give some money to the chamber of commerce for example as a donation that's not a charitable contribution because your chamber of commerce is not a charity okay um they're like a 501c6 or something like a 501c6 instead of 501c3 that's kind of technical tax uh geek speak for um you know the type of a charity that you're allowed a personal deduction so if i was um gonna donate money to the there was an article about a couple that were that raised like over two million dollars on a go fund me thing but that do you think that i mean i don't know but would you imagine that they have registered as a 501c3 or you know as the charitable organization or is anybody who's donating to a group like that just kissing i mean there's no tax deduction they're just they're just giving it away period yeah they're just giving it away i mean individuals are not eligible to be charities right so if you wanted it then what you'd want to do is go find a list of modified charitable organizations if you wanted to if you wanted the tax deduction out of that's right like the Maui strong fund for example that's uh that's set up by um a holy community foundation and there are there are some others well to bring it back to the federal government and the state government regarding the tax situation do you think this is about as much as we could expect i mean i think the state probably i'm i'm wondering if the governor should step in and say hey forget the long lines case by case basis why don't you just make it a blanket thing for anybody who can you know who was in that district i think the irs has it by a zip code right anybody in this zip code can can qualify um maybe the state could do the same thing if they don't want to be delused by case by case appeals yeah that's that's certainly possible i mean the governor could could write a disaster proclamation and i think uh uh silvia luke already did but that doesn't mean it can be like you know uh restated like you know how how how governor eggy did every 30 30 or 60 days for the for the covid pandemic how did how did how did what did silvia look to uh she used an emergency proclamation the governor the lieutenant governor can issue a lucan an emergency proclamation yeah she was acting governor at the time because oh because because uh josh was away and traveling oh oh pardon me okay i didn't know that um so she didn't say anything about that about blanket you know you qualify for for postponement of having to pay your taxes no no that wasn't in there is that something that would have to be written into law for the future if you if the governor you know to relieve the governor having to bring that up every time i think that would be a good idea i mean we have uh the irs uh with with that type of authority under the internal revenue code we don't have anything comparable yet and uh there's i think uh a good argument that we should have something comparable now as far as getting money from the state that's probably not good do you think that's going to happen you know uh at relief grants like the federal government is doing giving each victim a certain amount of money each survivor well that that would be kind of hard at the state level because uh they got hurt too yes um they they uh the the state facing a very large loss in like tourism related revenue as a result of of the impact to uh to west maui uh and a lot of a lot of tourists are like giving up on maui period uh is that is that what you're seeing joe well yeah um businesses across the county um are struggling right now and they feel that they're in a disaster and uh may have to close shop actually um that you know the it's just like covid there's a sea of rental cars at the airport and every rental car is a hotel room that's not being rented and a cook that's not you know in a restaurant and all the wedding planners and so it's a lot of people and i'm wondering about the impact of unemployment taxes um and unemployment benefits which i assume are going to be drawn down now at the county level you know during covid everyone sort of drew on unemployment and then we all paid more but now um maui county i think will be drawing heavily on unemployment but we will still all be paying more for that right unemployment insurance is a state fund so uh if it gets depleted then all employers you know at least if if the legislature doesn't step in and do something else all employees will have to make up for it at the end of the year uh starting you know starting next year and the county um did they reduce property taxes or give some sort of uh relief there i think they're considering it yeah maui county did i thought they did um but when nisha this is a at the state level if they declared emergency proclamation is this one of those things that can drag out for years i mean i suppose it could right well uh an emergency proclamation lasts i think 60 days right but we know it it could go along a lot longer yeah it could be renewed if the emergency conditions still exist so if they so if in this emergency proclamation they say we're gonna we're gonna allow you to um i guess i'm talking about the state level here we're gonna get we're gonna give you a break on when you got to turn in your taxes pay your taxes um does that mean that that would apply indefinitely even if the 60 days expires well it depends on on what uh how it's worded yeah how it's worded i think well i hope they can provide the relief that a lot of white businesses need there's so many people in in desperate situation right now because it is fire and that's a whole subject all on its own about how it happened and you know what we do about it yeah one thing i did want to cover before we end for today is you know what kind of people are eligible for for uh for tax relief um you can be eligible if you as a taxpayer uh if you're a relief worker uh you're affiliated with a government or charity and you're assisting in the disaster area even though you live somewhere else that that's an acceptable explanation you mentioned that if your you know records were in the in the disaster area and they burned to the ground then yeah that's that's a good explanation uh or if the taxpayer uh was visiting the disaster area and was injured or killed then yeah obviously that's a good cause for tax relief as well uh again that that was from the federal statute uh for for uh state relief your mileage may vary because they don't have the the same standards but we would hope that they'd be similar well thank you tom as usual you're the man you demand on on the issue of taxes in Hawaii it's incredible how much you know on this subject and i really appreciate your advice to everyone who's going to be needing it joe thanks a lot for being here um really good to hear from someone who's been over there and knows exactly what's going on until next time tom thank you very much for having me on board today and i guess aloha everybody for watching we appreciate you being here have a great day aloha aloha aloha