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Model Hawaii's claim of right deduction and credit (section 1341 as operative in Hawaii from 2022) - #10200

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Model Hawaii's claim of right deduction and credit (section 1341 as operative in Hawaii from 2022)#10200
MaxGhenis wants to merge 38 commits into
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hi-claim-of-right

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@MaxGhenis MaxGhenis commented Oct 13, 2026 •
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Held for Max's ruling on the Hawaii floor and AGI add-back readings (decision d1461). Do not merge before it.

Summary

From 2022 Hawaii applies 26 U.S.C. 1341 on its own: Hawaii compares the tax with a deduction for an eligible repayment over $3,000 with the tax without that deduction less the decrease in prior-year Hawaii tax. The decrease is a refundable credit. Before 2022, and for repayments of $3,000 or less, a repayment is a miscellaneous itemized deduction above 2% of Hawaii AGI while Hawaii allows those deductions (through 2025). PolicyEngine had none of this, so a repayment changed nothing in Hawaii. This PR adds it.

Stacked on #10038 (federal-claim-of-right-1341), whose reviewed head 60cb3dd35a4f025af95cbde0deae952b48b366d6 is now merged here. That parent fixes California's federal deduction carry-through and gates North Carolina relief on section 1341 eligibility. This branch also merges current main, including #10202's Hawaii credit ordering. Neither merge rebases the branch. The shared property-test conflict keeps this PR's state entries and the parent's removal of California from STATES_WITHOUT_THE_DEDUCTION.

  • Inputs: hi_claim_of_right_prior_year_tax_decrease (tax unit; Form N-364 lines 4–6) and hi_claim_of_right_repayment_excluded_from_income (person; income Hawaii did not tax when received).
  • hi_claim_of_right_repayment, hi_claim_of_right_section_1341_eligible, and hi_claim_of_right_credit_applies, which compares final Hawaii income tax in two override branches (hi_income_tax_if_claiming_claim_of_right_credit, ..._deduction), as Model the claim of right repayment deduction and credit (26 U.S.C. 1341) and North Carolina's rules that depend on it #10038 does federally and as the model already does for Virginia's and Delaware's EITC.
  • hi_claim_of_right_deduction joins Hawaii's itemized sources; hi_claim_of_right_credit joins Hawaii's refundable credits from 2022.
  • Parameters: gov.states.hi.tax.income.claim_of_right.section_1341_operative (from 2022) and gov.states.hi.tax.income.deductions.itemized.miscellaneous_deductions_allowed (through 2025).

Changes after review

  • David's should-fix 1: merged main and state the combined result with Apply Hawaii refundable credits before nonrefundable credits #10202 below. Added final-tax YAML cases for the 2022 nonrefundable EITC interaction, David's $22,500 household, a no-repayment baseline, a fixed-credit branch, and a 2025 section 1341(b)(1) refund.
  • David's should-fix 2: queued the dispatch-ready Hawaii section 1341 parity issue linked in the axiom: line. The issue separates the implementable comparison and credit from the floor addendum awaiting d1461.
  • Inherited Model the claim of right repayment deduction and credit (26 U.S.C. 1341) and North Carolina's rules that depend on it #10038 finding: merged the parent's reviewed 60cb3dd35a head, including its California and North Carolina fixes, and retained both sides of the shared property-test changes.
  • Suggestions: split the original mixed YAML file into variable-named files, assert final tax in the two existing method-choice examples, correct the single-page reference title, add the source reasoning for d1461, and replace the projected CI cost with the figures David reported. The optional shared miscellaneous-expense pool remains follow-up scope; the disclosure below now describes that gap accurately.

The law

  • Act 56, SLH 2023, section 2, makes section 1341 the exception to Hawaii's exclusion of Subchapter Q in HRS 235-2.3(b)(40). Section 7(1) (PDF p. 5) applies that amendment to taxable years beginning after December 31, 2021. Act 35, SLH 2026 (HB2329 CD1) keeps the exception, renumbered (b)(45).
  • Form N-364 (2025) compares the tax using the repayment deduction with the tax using the prior-year decrease, at Hawaii rates. Lines 4–6 compute the decrease in prior-year Hawaii tax. The instructions exclude repayments of income Hawaii never taxed. Schedule CR (2025) lists the credit on line 9 of Part I, Refundable Tax Credits.
  • HRS 235-2.4(b), before 2026, makes section 67 operative while declining to adopt the section 67(g) suspension. Act 35 deletes that exception for taxable years beginning after December 31, 2025 (PDF pp. 17–18, 34); DOTAX Announcement 2026-06 confirms Hawaii's conformity to section 67(h)'s disallowance of miscellaneous itemized deductions.
  • Worksheet A-6 (2025 N-11 instructions) applies the 2% floor to Hawaii AGI, with a floor of zero when AGI is zero or negative.
  • Before 2022, N-11 instructions expressly subject claim of right repayments over $3,000 to the 2% limitation (2018; 2021).

Combined result with #10202

HRS 235-91.5 requires refundable credits to be used before nonrefundable credits, notwithstanding contrary credit provisions. The 2022 N-11 instructions implement this by subtracting refundable credits at line 34 and capping nonrefundable credits at the remaining adjusted tax liability. #10202 implements that order for Hawaii, and the merge puts this PR's credit into that calculation. Credit ordering no longer awaits a d1461 ruling.

For the credits currently modeled, this interaction affects only 2022: the claim of right credit begins then, and Hawaii's EITC is nonrefundable through 2022 and refundable from 2023. The method comparison reads final hi_income_tax, so it includes any EITC displaced by the credit.

For a 2022 head of household with one child aged 5, no TANF receipt, a $10,000 repayment and a $600 prior-year Hawaii decrease:

Wages No-repayment Hawaii tax Hawaii tax with repayment Relief Chosen method
$15,000 $0.00 −$447.90 $447.90 Credit
$22,500 $0.00 $0.00 $0.00 Deduction (tie)

At $22,500, the fixed credit branch starts with $728 of tax and subtracts $710 of refundable credits: the $110 food/excise credit plus the $600 claim of right credit. Adjusted tax liability is $18, so the EITC is capped at $18 and final tax is zero. Without the repayment, the EITC uses the full $618 remaining after the food/excise credit, again leaving zero tax. The deduction branch also ends at zero, so the strict comparison keeps the deduction. The new tests pin the baseline, the chosen method, and the fixed-credit calculation. At the former head, before #10202, this household received $600 of additional relief; that historical result is superseded by the merged ordering.

The credit can still produce a section 1341(b)(1) refund. A 2025 single filer with $40,000 of wages, a $10,000 repayment and a $3,000 Hawaii decrease has $1,570.21 of tax before this credit and no other Hawaii credit; the credit wins and hi_income_tax is −$1,429.79. A new final-tax case asserts that refund.

The readings for Max (d1461)

The floor and N-364 AGI add-back remain held for Max's ruling. This update changes neither reading.

2022–2025 floor. This PR follows the statute: section 67(b)(9), operative through HRS 235-2.4(b), keeps the section 1341 deduction over $3,000 outside the 2% floor, while the smaller repayment remains in the floored pool. The 2022 and 2025 N-11 lists put the over-$3,000 deduction under expenses subject to the floor and the $3,000-or-less deduction outside it, reversing the federal categories.

Two source points support the implemented reading. First, HRS 235-2.5(a) makes a reference from an operative federal provision to an inoperative one inoperative too. The inference is that section 67(b)(9)'s reference to section 1341 could not exempt the larger repayment before section 1341 became operative; Act 56 removes that reason from 2022. Second, the 2017 federal Schedule A instructions put repayments of $3,000 or less on line 23 within the floor and larger repayments on line 28 outside it. Both Hawaii entries point to the repayment discussion in 2017 Publication 525, which sends wage repayments back to Schedule A and its instructions. The inference is that the N-11 categories were transposed, rather than that Hawaii intended a separate floor rule.

From 2026 the floor question disappears under the statute reading because Act 35 disallows miscellaneous deductions. Treating an otherwise qualifying over-$3,000 section 1341 deduction as miscellaneous would instead disallow it entirely.

N-364 line 2's AGI add-back. N-364 directs a filer who took the federal deduction to add the repayment to Hawaii AGI, reasoning that the deduction entered federal taxable income. But N-11 line 7 starts from federal AGI, and a Schedule A deduction does not reduce that amount. PolicyEngine's Hawaii itemized list also never includes the federal claim of right deduction. For the itemized repayments this model covers, an AGI add-back would therefore add income that was never subtracted. An add-back could matter for a repayment deducted in arriving at AGI, but claim_of_right_repayment excludes those repayments. The model keeps the Hawaii deduction at zero under section 1341(a)(5) without adding the repayment to AGI.

Design notes

  • Hawaii decides its own method. The comparison uses Hawaii tax at Hawaii rates, independent of the federal method. Ties go to the deduction, as 26 CFR 1.1341-1(b)(3) provides federally. The comparison runs only when some return qualifies.
  • The threshold and credit inputs. The model reads Model the claim of right repayment deduction and credit (26 U.S.C. 1341) and North Carolina's rules that depend on it #10038's $3,000 parameter and tests the head's and spouse's repayments of income Hawaii taxed. The prior-year Hawaii decrease is a leaf input, as the federal decrease is.
  • Miscellaneous floor. Hawaii's itemized list omits other modeled miscellaneous expenses, including total_misc_deductions (unreimbursed employee expenses and tax preparation fees). This PR applies the 2% floor to the repayment alone. Combining those expenses and the floored repayment into one Worksheet A-6 pool is deferred follow-up scope. Hawaii's existing itemized limitation (hi_reduced_itemized_deductions) reduces the repayment deduction as it does other nonexempt itemized deductions.
  • Scope. Repayments deducted in arriving at AGI, such as repaid business income, remain outside claim_of_right_repayment, so their Hawaii section 1341 relief is not modeled here.

Household examples (2025, single, age 40)

These examples were originally compared at historical main 95eefa51e5, #10038 dc10cc58ce, and this branch 612ea5e94e. The new YAML assertions also pin their final Hawaii tax on the merged branch.

Household Without Hawaii relief With this PR
Wages $60,000, repays $10,000; Hawaii decrease $1,500 $3,029.86 $1,529.86, Hawaii credit $1,500
Wages $100,000, charity $20,000, repays $10,000; Hawaii decrease $100 $4,884.26 $4,124.26, Hawaii deduction $10,000 at 7.6%

Tests

The original ten YAML cases are split into hi_claim_of_right_credit_applies.yaml (four cases) and hi_claim_of_right_deduction.yaml (six cases), under gov/states/hi/tax/income/claim_of_right/. They cover each fixed Hawaii method, the $3,000 threshold, the 2% floor, 2021 before section 1341 was operative, 2026 after miscellaneous deductions end, income Hawaii never taxed, a joint return counting both spouses, each chosen method, and another state. The two chosen-method cases now also assert hi_income_tax: $1,529.86 and $4,124.26.

New hi_income_tax.yaml cases pin the combined 2022 ordering, the $22,500 no-repayment baseline and deduction tie, the fixed-credit branch's displaced EITC, and the 2025 refund described above.

tests/unit/test_hi_claim_of_right_properties.py retains its 11 property tests over a 108-return grid for each of 2021, 2025 and 2026 (repayment × Hawaii decrease × wages × charity). Separate simulations test the lesser-of comparison and each branch, deduction/credit exclusivity, independence from the federal method, no increase over no-repayment tax, and monotonicity as repayment or decrease grows. Python is needed because these checks compare independent branch simulations.

The shared tests/unit/test_claim_of_right_section_1341_properties.py retains this PR's explicit state entries while carrying the reviewed parent's California change.

Historical mutation checks made each of four single-line mutants fail the property suite: ties to the credit, a 2% floor on the section 1341 deduction, the credit omitted from the refundable list, and section 1341 operative from 2021.

Current foreground validation, run one file per process with the prescribed thread caps: macOS, Python 3.13.9, policyengine-core 3.33.2. hi_claim_of_right_credit_applies.yaml: 4 passed; hi_claim_of_right_deduction.yaml: 6 passed; new hi_income_tax.yaml: 5 passed; test_hi_claim_of_right_properties.py: 11 passed; shared test_claim_of_right_section_1341_properties.py: 47 passed. No new Python property cases were added. make format also passes.

The same five new final-tax cases at original head a046804c7a give 4 failed, 1 passed; on the merged tree they give 5 passed. The 2025 refund already worked at the original head and is now pinned by an independent expected amount. Exact failure values (rounded here to cents) and merged expectations:

New case Original head Merged head
2022 wages $22,500, no repayment −$52.85 $0.00
2022 wages $22,500, chosen method −$652.85 $0.00 (deduction tie)
2022 wages $22,500, fixed credit −$652.85 $0.00 (EITC $18)
2022 wages $15,000, chosen credit −$740.00 −$447.90
2025 wages $40,000, refund −$1,429.79 −$1,429.79

Saved before/after output is in this job's untracked hub-evidence/10200-*.log; the PR's pre-update body is saved as hub-evidence/10200-body-before.md. Historical full CI at former head a046804c7a passed all 27 checks (run 38545546945), but its merge ref predated #10202 and did not test the combined ordering.

Cost

David reported about 10 seconds for the property file in CI run 38545546945 (3.76 seconds of fixture setup and 6.30 seconds of teardown). The Rest shard-1 remaining group ran for 14:30 wall time and peaked at 7.82 GB on a 16 GB runner, against 7.76 GB in #10038's run. These are the reviewer's reported Linux figures for the former head, not a measurement of the updated branch. Earlier local measurement was about 6 seconds and 1.88 GB peak including model import; the property fixture makes 15 simulations of 108 returns and frees them at teardown.

Review history

The earlier r1, r2 and delta approvals described former heads. David's October 14 review requested the combined-order tests and a valid queued parity issue, plus the inherited parent fix. The Changes after review section records this update's response. The earlier proposal to leave credit ordering to d1461 is superseded by HRS 235-91.5 and #10202; the floor and AGI add-back remain pending.

Changing an input after calculating can leave stale results in PolicyEngine generally because core does not invalidate calculated values; this is not specific to the Hawaii branches.

Microsimulation

At this head: no change (hub, 2026-10-19). 2025, default dataset, main at the merge base f9b55fc4dd against b565542902, under the shared heavy lock. claim_of_right_repayment is $0 on every record of both sides, and no record changes in hi_income_tax, ca_income_tax, nc_income_tax, state_income_tax, income_tax, household_net_income, household_benefits (federal income tax is $2,418,712,434,080 on both sides). The new variables (claim_of_right_credit_applies, claim_of_right_relief_claimed, claim_of_right_deduction, claim_of_right_credit, hi_claim_of_right_deduction, hi_claim_of_right_credit) exist only on the branch, so they are not compared. Comparison: ~/reviews/us-hub/fixes/10200-impact/compare.2025.json. The run described next is the earlier one.

Historical 2025 microsimulation (default populace_us_2024 dataset at populace-us-2024-spm-20260909, run October 13) compared #10038 dc10cc58ce with this branch d1b8b2b124. Every record had zero claim_of_right_repayment, so Hawaii's deduction and credit were zero throughout and no record changed in income_tax, state_income_tax, household_net_income, claim_of_right_credit_applies or hi_income_tax. Driver and outputs remain in ~/reviews/us-hub/claim-of-right-states/impact/. The hub's run at the current head is the paragraph above.

Axiom

axiom: TheAxiomFoundation/rulespec-us#1796 queued

The former d1459 draft hold is superseded by this queued issue. Act 56 (SLH 2023) / HRS 235-2.3(b)(40) is queued for the Hawaii section 1341 comparison and refundable credit. The 2022–2025 floor placement under HRS 235-2.4(b) is a separate addendum awaiting Max's d1461 ruling; it does not block dispatch of the comparison and credit. rulespec-us still pins Hawaii's conformity at December 31, 2024 and defers itemized deductions (us-hi/policies/income_tax/resident_core_liability_pipeline.yaml); the parity issue records that existing scope and confirms the pinned corpus contains the section 1341 exception.

🤖 Generated with Claude Code

MaxGhenis and others added 18 commits October 9, 2026 08:50
@MaxGhenis @claude
Add North Carolina's claim of right repayment itemized deduction
edf7cf1 
G.S. 105-153.5(a)(2)d, added by S.L. 2016-5 for 2014 and later, lets North
Carolina itemizers deduct repayments of income included in AGI in an earlier
year under a claim of right (Form D-400 Schedule A line 8). Repayments above
$3,000 are deductible in full; smaller ones are reduced by 2% of federal AGI
less other miscellaneous itemized deductions, which the 2016 and 2025 NCDOR
worksheets both reproduce. PE had no input for these repayments, so it adds
claim_of_right_repayment (person level; only the head's and spouse's count)
and moves North Carolina's uncapped itemized items into a parameter list.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
From 2026 limit North Carolina's claim of right deduction to income N…
3b57231 
…C taxed

Review r1 (subfleet 20261009-090558-nc-itemized-review):
- S.L. 2026-31 section 1.8 rewrites G.S. 105-153.5(a)(2)d for taxable years
  beginning on or after January 1, 2026: the repaid amount must have been
  included in AGI "as modified in G.S. 105-153.5 and G.S. 105-153.6" in the
  earlier year. New person input
  nc_claim_of_right_repayment_excluded_from_income (the part NC deducted when
  received, such as repaid Social Security) and a dated parameter apply it.
- Count only the head's and spouse's other miscellaneous expenses against
  the pre-2018 floor; a dependent's are on the dependent's return.
- The property grid now varies property taxes (so the $20,000 cap binds) and
  adds a 2026 grid for the excluded part.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Model the section 1341 claim of right deduction and credit; wire Nort…
a6a96cd 
…h Carolina's 1341(a)(5) bar and G.S. 105-266.2 payment (WIP)

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Keep the federal claim of right deduction and credit out of state rul…
4526aed 
…es that exclude them (AZ, KS, WI, MO, OR, VA); property tests

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Document the unmodeled pre-2018 small repayment deduction; changelog …
09ee710 
…fragment

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Fix the federal method in the North Carolina worksheet property test …
0343962 
…to keep it at two seconds

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Remove a stray empty log file
8f268ca 
Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Address review: isolate the method branches, compare to the cent, ret…
6c2a76e 
…urn-level prior-year inputs, California and Montana flows

- The branches that fix the claim of right method start from inputs only, and
  the itemization branches settle the method in the parent first, so a tax
  liability calculated before the method is known cannot leak into them.
- Ties are compared to the cent, so a one-cent difference picks the credit.
- The prior-year federal decrease and NC increase are return-level inputs
  defined on chapter 1 and Article 4 tax.
- California leaves out the federal deduction (Schedule CA Part II line 16);
  Montana deducts it through 2023 (Form 2 itemized line 18).
- Section 67(g) is now 67(h); document the Arizona and NC coverage limits.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Keep the simulation's claim of right method in the itemizing branches
c2b9602 
Review r2 found that with itemization branching off, tax_liability_if_not_itemizing
used the parent's method when calculated first but chose its own after
income_tax. The itemizing branches now take the method as an input. A branch
keeps its parent's cache when an override equals the value the parent already
holds, so ordinary simulations still share it. Adds the review's Texas
household as an order test under both itemization settings.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis
Merge main into North Carolina claim of right deduction
81528e0
@MaxGhenis @claude
Merge PR 10028's branch (with main) into the section 1341 branch
1500215 
Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Restore conservative branch invalidation; fix the method in itemizing…
9c98f0d 
… branches only when someone qualifies

Review r3 showed that keeping a parent's cache when an override equals the
parent's current value can reuse tax calculated before another input
changed. Branches again drop inherited values whenever the parent knows an
overridden variable. The itemizing branches add the claim of right method as
an override only when some tax unit repays more than $3,000, so simulations
without a qualifying repayment keep sharing the parent's cache. Adds the
review's stale-parent sequence as a test.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Merge main into the section 1341 branch
de58d20 
Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Test both NC contrib credits stacked on the claim of right payment wi…
dc10cc5 
…th use tax

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Derive the states with their own claim of right rules in the cross-st…
dcf9749 
…ate property test

Under the federal credit method, section 1341(b)(3) keeps the repayment out of
every state that only follows the federal deduction, so their tax must not
change. States with their own claim of right relief may lower tax under either
method. The test now reads which states have their own rule from the model's
variable names (<state>_claim_of_right_...), so a state PR adds its variables
without editing this list.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Model Hawaii's claim of right deduction and credit (statute reading, …
6d2cd4c 
…pending Max's ruling)

Act 56 (SLH 2023) made section 1341 operative in Hawaii for taxable years
beginning after December 31, 2021, and Act 35 (SLH 2026) keeps it. Hawaii tax
is the lesser of the tax with a deduction for a repayment over $3,000 and the
tax without it less the decrease in prior-year Hawaii tax (Form N-364), which
is a refundable credit (Schedule CR line 9). Hawaii makes its own comparison
with branches on hi_income_tax, independent of the federal method.

Before 2022, and for repayments of $3,000 or less, a repayment is a
miscellaneous itemized deduction above 2% of Hawaii AGI while Hawaii allows
those (HRS 235-2.4(b); Act 35 ends that from 2026).

For 2022-2025 this follows the statute: section 67(b)(9) keeps the section
1341 deduction outside the 2% floor. The 2022-2025 N-11 instructions list the
items the other way round, and Form N-364 adds the repayment to Hawaii AGI when
the federal deduction was taken; those readings go to Max.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Property tests for Hawaii's claim of right deduction and credit
2c83441 
Over a grid for 2021, 2025 and 2026, against simulations that fix Hawaii's
method as an input: Hawaii tax is the lesser of the two methods (ties to the
deduction) and the branches equal those simulations; the deduction and credit
are all or nothing and never both, with no credit before 2022; Hawaii tax does
not depend on the federal method, never rises with a repayment, and never rises
as the repayment or the prior-year decrease grows. Four single-line mutants
(ties to the credit, a floor on the section 1341 deduction, the credit left
out of the refundable list, section 1341 operative from 2021) each fail.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
List the states whose own claim of right relief applies under the fed…
612ea5e 
…eral credit

Reviews of #10195, #10196 and #10198 found that reading own-rule states from
variable names weakened the cross-state test: North Carolina and Montana lost
their exact check, nothing asserted that a state's own relief actually lowered
its tax, and any future <state>_claim_of_right_ input would exempt a state.

Now an explicit, sourced map names each state whose relief applies under the
federal credit method and the variable that carries it. Under that method each
listed state whose variable is in the model must lower the household's tax by
more than $1, and every other state's tax must not change. The same commit is
on every state branch, so they still merge in any order.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
This was referenced Oct 13, 2026
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MaxGhenis and others added 3 commits October 13, 2026 07:19
@MaxGhenis @claude
Describe Act 35 as deleting the section 67 sentence, citing DOTAX Ann…
d1b8b2b 
…ouncement 2026-06

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Merge main into the section 1341 branch
2d36a76 
Resolves the add/add conflicts with #10028's squash (557b539) by
keeping this branch's 26 U.S.C. 1341(a)(5) bar on the North Carolina
deduction, its added NC cases and the method fixture in the NC property
grid, and keeps both sides' Arizona itemized deduction cases.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Merge #10038's merge of main into the hi-claim-of-right branch
73a2229 
Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis
MaxGhenis marked this pull request as ready for review October 13, 2026 12:09
MaxGhenis and others added 2 commits October 13, 2026 08:59
@MaxGhenis @claude
Carry the claim of right deduction into Montana itemized deductions f…
32b0c13 
…rom 2024

From 2024 Montana Form 2 line 2 takes the federal itemized deductions
(2024 instructions, Worksheet A line 1: Form 1040 line 12), which include
Schedule A line 16. The miscellaneous list was empty from 2024, so a
Montana itemizer lost the federal claim of right deduction. Review r5b
(P3-1) found it.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Merge #10038's Montana 2024 list change into the hi-claim-of-right br…
0aa72e4 
…anch

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis MaxGhenis mentioned this pull request Oct 13, 2026
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MaxGhenis commented Oct 13, 2026

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Hand-off to the US + core hub (Hawaii; state claim of right lane, session local_d0c92ac9).

@MaxGhenis MaxGhenis mentioned this pull request Oct 13, 2026
Merged
MaxGhenis and others added 2 commits October 14, 2026 02:47
@MaxGhenis @claude
Merge main into the section 1341 branch
6f34ccd 
Resolves the period_branch.py conflict with #9913 (5c51e0d) by taking
main's _input_keys docstring, which no longer says whether Core's clone
copies or shares the input-key set.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Merge #10038's merge of main (6f34ccd) into the hi-claim-of-right branch
87a7f96 
Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis

MaxGhenis commented Oct 14, 2026

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Hand-off update (2026-10-14): new head 87a7f96e28, MERGEABLE. It merges #10038's 6f34ccde23 (its second merge of main). The PR's own changes are unchanged since the approving review. Local runs at this head: YAML 10, property 11, all passing. Everything else in the hand-off comment above still holds; the hub-file line is re-appended with this head.

MaxGhenis and others added 3 commits October 14, 2026 03:14
@MaxGhenis @claude
Give every itemizing branch the simulation's claim of right method
d1c695b 
From 2026 tax_unit_itemizes opens the itemizing branch for the section 68
limitation (#10136) with only tax_unit_itemizes overridden. From
policyengine-core 3.33 (#560), set_input on a branch drops the values stored
after the overridden variable was first stored anywhere in the simulation,
so that branch lost the inherited section 1341 method and chose its own as a
filer forced to itemize. Its itemized deductions then decided itemization on
a liability tie, or always with itemization branching off: CI failed two 2026
grid points, and a 2026 household with branching off came out at $4,988
instead of $4,100.

get_itemization_branch builds the itemizing and non-itemizing branches for
all three callers, adding the method as an input whenever someone qualifies,
so they share one branch and none chooses a method. A 2026 test covers that
household in every calculation order under both itemization settings; it
fails before this change.

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Merge #10038's d1c695b (itemizing branches inherit the claim of right…
4c1e0c4 
… method) into the hi-claim-of-right branch

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis @claude
Drop #10028's merged changelog fragment; date period_branch's set_inp…
17cad4b 
…ut note

main compiled the North Carolina claim of right fragment into CHANGELOG.md
when #10028 merged, so the copy left on this branch would print it again.
The period_branch module docstring said set_input on a branch clears
nothing, which policyengine-core 3.33 changed (review r8).

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis MaxGhenis mentioned this pull request Oct 14, 2026
Open
@MaxGhenis @claude
Merge #10038's 17cad4b (drops the compiled NC changelog fragment) int…
a046804 
…o the hi-claim-of-right branch

Co-Authored-By: Claude Opus 5.5 <noreply@anthropic.com>
@MaxGhenis

MaxGhenis commented Oct 14, 2026

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Hand-off update (2026-10-14, supersedes the earlier one today): head a046804c7a merges #10038's final head 17cad4b53b (handed to the hub). Local runs at the d1c695b2f7 merge, under policyengine-core 3.33.3 (the version CI resolves): YAML 10, property 11 (2021, 2025, 2026), all passing; 17cad4b53b adds no code. The PR's own changes are unchanged since the approving review. The hub-file line is re-appended with this head.

@DTrim99

DTrim99 commented Oct 14, 2026

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PR Review: Model Hawaii's claim of right deduction and credit (section 1341 as operative in Hawaii from 2022)

PR #10200 (author: MaxGhenis, head a046804c7a, merge-base a2f63c1235). Stacked on #10038 (head 17cad4b53b). I reviewed its incremental diff, 17cad4b53b..a046804c7a: 17 files (+754/−10) in 5 commits (dcf9749147, 6d2cd4ccde, 2c83441e5d, 612ea5e94e, d1b8b2b124). Its other commits are merges of #10038's heads. Axiom: "Act 56 (SLH 2023) / HRS 235-2.3(b)(40) and 235-2.4(b) — not yet queued".

Summary

Act 56 of 2023 makes section 1341 operative in Hawaii for taxable years beginning after December 31, 2021. When a filer repays more than $3,000 of income Hawaii taxed in an earlier year, Hawaii tax is the lesser of two amounts, figured at Hawaii rates (Form N-364):

  • the tax with a deduction for the repayment;
  • the tax without it, minus the decrease in the earlier year's Hawaii tax. The decrease is a refundable credit.

Before 2022, and for repayments of $3,000 or less, a repayment is a miscellaneous itemized deduction above 2% of Hawaii AGI, while Hawaii allows those (through 2025). The PR adds:

The Hawaii work is right:

  • The law checks out. Every quote in the code and body matches its source at the pages given: Act 56 §§2 and 7(1), Act 35 of 2026, HRS 235-2.4(b), Form N-364, Schedule CR, the 2018, 2021, 2022 and 2025 N-11 instructions and DOTAX Announcement 2026-06.
  • Hawaii decides on Hawaii tax.
    • The comparison reads only Hawaii income tax, as N-364 says ("whichever results in the least tax"; "use the Hawaii tax rate"). It never reads the federal method.
    • The credit is refundable, as Schedule CR lists it in Part I.
  • Nothing double counts, and there is no cycle.
    • Hawaii's itemized list never holds the federal deduction.
    • The Hawaii deduction is zero under (a)(5).
    • The branches take the method as an input.
  • The arithmetic is right. I hand-checked all 10 YAML cases, the body's two households, Hawaii's row in the cross-state test, a refund case and a 2022 household at both trees.
  • The tests pass at the head, on a merge with current main, and in CI.

One should-fix comes from main's #10202.

  • What the merge does. It is clean, and on the merged tree the credit is used before nonrefundable credits, as HRS 235-91.5 requires.
  • What's missing. The PR neither states nor tests that result, though its body says whichever of the two PRs lands second will. The body still describes the old order and leaves the question to Max under d1461.
  • When it matters. Only 2022 has both this credit and a nonrefundable Hawaii credit, the EITC. There a head of household with the EITC can lose some or all of the relief. With $22,500 of wages, a $10,000 repayment and a $600 Hawaii decrease, relief is $0 on the merged tree, against $600 at this head.
  • The refund. Nothing asserts the (b)(1) refund either.

A second should-fix: the axiom line isn't valid, as on #10203.

Five suggestions follow. This branch also inherits #10038's unresolved Should 1, so it can be approved only after #10038 is fixed and this branch merges #10038's new head.

Critical (must fix)

None.

Should address

1. The combined result with main's #10202 isn't stated or tested, and the body describes the old credit order.

  • What Apply Hawaii refundable credits before nonrefundable credits #10202 did. It merged into main on 2026-10-14 at 10:21 UTC, after this head.

    • It adds hi_adjusted_tax_liability: hi_income_tax_before_non_refundable_credits minus hi_refundable_credits (N-11 line 34).
    • It caps hi_non_refundable_credits and the 2018–2022 nonrefundable hi_eitc at that amount.

  • What the merge does. git merge-tree --write-tree PolicyEngine/main a046804c7a is clean (tree add05b02d7). On that tree, hi_refundable_credits holds hi_claim_of_right_credit from 2022, so the credit now comes before nonrefundable credits.

    • Only 2022 changes. gov.states.hi.tax.income.credits.non_refundable holds only hi_eitc through 2022 and is empty from 2023, and the credit starts in 2022.
    • There is no cycle. The chain runs hi_eitc → hi_adjusted_tax_liability → hi_refundable_credits → hi_claim_of_right_credit → hi_claim_of_right_credit_applies, which both branches take as an input. Apply Hawaii refundable credits before nonrefundable credits #10202's test_credit_lists_do_not_overlap still holds, because the credit is only in the refundable list.
    • The comparison adapts. It compares the final hi_income_tax in each branch, so it counts any EITC that the credit displaces.

  • Hawaii law agrees with the merge.

    • The statute. HRS 235-91.5 (L 2010, c 21): "Notwithstanding any other law to the contrary providing for the use of an income tax credit under this chapter, in the offsetting of a taxpayer's income tax liability, tax credits that may be refunded or paid to the taxpayer who has no income tax liability shall be used first, followed by nonrefundable tax credits that may be used as credit against taxes in subsequent years until exhausted."
    • The form. 2022 N-11 instructions, PDF p. 21: line 34 is "Line 27 minus line 33", and "the total of the nonrefundable credits used cannot be greater than your adjusted tax liability. If line 34 is zero or less, nonrefundable tax credits may not be used."
    • The credit is refundable. Schedule CR lists it in Part I, Refundable Tax Credits:
      • 2024, line 9c: "Credit for repayment of amounts included in income from earlier years".
      • 2025, line 9: "Claim of Right Tax Credit (attach Form N-364)".

  • What the body says. Under "The reading for Max (d1461)": "The model applies every Hawaii refundable credit after nonrefundable credits capped at gross tax, and this PR follows that order, which matches section 1341(a)(5) ... Fixing it for all Hawaii credits is Apply Hawaii refundable credits before nonrefundable credits #10202 (draft, another session), which would give this credit N-11's order too; whichever of the two lands second states the combined result."

  • The effect. I took a 2022 head of household with a child aged 5 who repays $10,000 of income Hawaii taxed, with a $600 Hawaii decrease. Each cell gives Hawaii income tax without the repayment → with it, and the relief:

    Wages This head (nonrefundable credits first) Merged with main (refundable credits first)
    $15,000 −140.00 → −740.00 (600) 0.00 → −447.90 (447.90)
    $20,000 −110.00 → −710.00 (600) 0.00 → −142.00 (142)
    $22,500 −52.85 → −652.85 (600) 0.00 → 0.00 (0)
    $25,000 187.05 → −412.95 (600) 187.05 → 0.00 (187.05)
    $27,500 428.55 → −171.45 (600) 428.55 → 0.00 (428.55)
    $30,000 698.45 → 98.45 (600) 698.45 → 98.45 (600)
    • At $22,500 on the merged tree:
      • Tax is $728, and refundable credits are $710: the $110 food/excise tax credit plus the $600 claim of right credit.
      • Line 34 is $18, so the $670.85 Hawaii EITC is cut to $18 and line 36 is zero.
      • Without the repayment, line 34 is $618, the EITC is cut to $618, and line 36 is still zero.
      • The deduction method also ends at zero (tax $271.46, line 34 $161.46).
      • So the $600 credit only takes the place of EITC, and the comparison ties and keeps the deduction.
    • From $30,000 the EITC fits under line 34 either way, so the order doesn't matter.
    • Both columns are the lesser of the two fixed-method simulations, which agree with each tree's branch variables.
    • Part of the change is Apply Hawaii refundable credits before nonrefundable credits #10202's own. The no-repayment figures change too: $15,000 goes from −$140 to $0, because the food/excise credit now comes before the EITC. The relief figures isolate this PR's credit under each order.

  • No test covers this or the refund.

    • The YAML asserts the method, the deduction and hi_claim_of_right_credit, but never hi_income_tax.
    • The property tests compare the model with itself, over single filers without children in 2021, 2025 and 2026. So there is no 2022 and no nonrefundable credit.
    • So no expectation tells the two credit orders apart: the PR's tests pass unchanged at the head and on the merged tree, though the table differs between them.
    • Nothing pins the (b)(1) refund either. Case 1's Hawaii tax is −$820 at both trees: the $600 credit plus a $220 food/excise tax credit.
    • CI's merge ref (9f2f692f) merged this head into a2f63c1235, before Apply Hawaii refundable credits before nonrefundable credits #10202, so CI never ran the combination.

  • Fix:

    • Merge main.
    • Replace the body's third d1461 reading with the combined result: from 2022 the credit is used before nonrefundable credits (HRS 235-91.5, as Apply Hawaii refundable credits before nonrefundable credits #10202 implements). This affects only the 2022 Hawaii EITC, and the comparison already counts any EITC displaced.
    • Assert the (b)(1) refund. For example, take a 2025 single filer with $40,000 of wages, a $10,000 repayment and a $3,000 Hawaii decrease. At both trees that gives hi_claim_of_right_credit_applies: true and hi_income_tax: -1_429.79: 1,570.21 − 3,000, with no other Hawaii credit. Case 1's −$820 would also do, but it includes a $220 food/excise tax credit.
    • Add a 2022 case from the table, for example the $15,000 household. On the merged tree it gives hi_claim_of_right_credit_applies: true, hi_eitc: 0 (line 34 is −447.90) and hi_income_tax: -447.90. This head gives −740.

2. The axiom line isn't valid, and no rulespec-us issue covers Hawaii's section 1341.

  • Where: the body's "## Axiom" section: "axiom: Act 56 (SLH 2023) / HRS 235-2.3(b)(40) and 235-2.4(b) — not yet queued. A rulespec-us pe-parity draft is held with the others (decision d1459) and waits on d1461 for the 2022-2025 reading."
  • The rule. main's CLAUDE.md, "Axiom Parity (required for policy changes)", requires one line: encoded-correct, <rulespec PR> encoded, <rulespec issue> queued or n/a: <reason>.
    • needed is reserved for external contributors.
    • A queued issue must be open, labelled pe-parity and dispatch-ready.
  • Nothing to point to yet.
  • d1461 blocks only part of it. The section 1341 comparison and the N-364 credit don't depend on the floor reading. Only the 2022–2025 floor for repayments of $3,000 or less does.
  • Fix:
    • File a dispatch-ready pe-parity issue on the Add AMT parameters for 2020-2023 #1467 model:
      • Module path: for example us-hi/statutes/235-2.3.yaml for (b)(40), beside 235-54 and 235-55. It can apply Replace aggr calls with add #1657's us/statutes/26/1341.yaml to Hawaii tax.
      • Corpus citation: us-hi/statute/235-2.3, which the Hawaii pipeline already cites. The issue should confirm that the pinned text has the (b)(40) exception. The 2022 start is in Act 56 §7(1), so quote it too.
      • Verbatim law: 235-2.3(b)(40) as Act 56 §2 amends it (PDF p. 3), Act 56 §7(1) (PDF p. 5), and N-364's "whichever results in the least tax" and "use the Hawaii tax rate".
      • Required outputs:
        • whether the restored income Hawaii taxed exceeds $3,000;
        • whether the credit applies (strictly less tax, with ties going to the deduction);
        • the deduction;
        • the refundable credit.
      • Companion tests, from the sources the YAML uses:
        • $3,000 → not eligible
        • $10,000, all of it never taxed by Hawaii → nothing
        • spouses' $2,000 + $2,000 → eligible
        • case 8 → the credit, with Hawaii tax $1,529.86
        • case 9 → the deduction, with Hawaii tax $4,124.26
    • After d1461, add the 2022–2025 floor placement (235-2.4(b) with §67(b)(9)) as an addendum.
    • Then change the line to axiom: HRS 235-2.3(b)(40) TheAxiomFoundation/rulespec-us#NNNN queued.

Suggestions

1. For the d1461 ruling: the sources favor the implemented readings 1 and 2.

  • Reading 1 (the 2022–2025 floor). Three points support the statute reading.
    • Why DOTAX floored every repayment before 2022.
      • HRS 235-2.5(a), PDF p. 16: "Reference in provisions of the Internal Revenue Code which are operative in this State to provisions in the Internal Revenue Code which are not operative in this State shall be considered inoperative".
      • Section 67(b)(9) refers to section 1341. So while section 1341 was inoperative, the over-$3,000 repayment stayed in the 2% pool. That is the 2018–2021 note.
      • Act 56 removed that reason from 2022.
    • DOTAX swapped the federal lines. The 2022 and 2025 N-11 lists reuse the 2017 Schedule A instructions' wording with the categories swapped.
      • Federally: "Deduction for repayment of amounts under a claim of right if $3,000 or less" is on line 23, subject to the 2% floor (PDF p. 12). "... if over $3,000" is on line 28, outside it (PDF p. 13).
      • Hawaii: the over-$3,000 deduction is listed as subject to the floor, and the $3,000-or-less deduction as not subject to it.
    • DOTAX's own pointer agrees with the statute. Both Hawaii entries say "See Repayments in the 2017 federal Publication 525". That section (PDF pp. 33–34) sends wage repayments to Schedule A, "and see the instructions there", which leads back to lines 23 and 28.
  • Reading 2 (N-364 line 2's add-back).
    • The stated reason doesn't hold. It is "Because the deduction is included in the computation of your federal taxable income". But Hawaii starts from federal AGI (2025 N-11 instructions, PDF p. 11, line 7), and the Schedule A deduction never reduces federal AGI.
    • The add-back only matters above the line. It does something only for a repayment deducted in arriving at AGI, which claim_of_right_repayment excludes. For the repayments the model covers, an add-back would tax the repayment as income, so leaving it out is right.
  • Reading 3 is settled by statute (Should 1).
  • Fix: add these points to "The reading for Max".

2. Put the cases in variable-named files and pin the final tax.

  • The rule. CLAUDE.md: "Add household examples, thresholds, edge cases, and mixed-household/vectorized cases to the corresponding variable-named YAML files." hi_claim_of_right.yaml names no variable and mixes the outputs of six.
  • Fix:
    • Split it, for example cases 1, 2, 8 and 9 into hi_claim_of_right_credit_applies.yaml and cases 3–7 and 10 into hi_claim_of_right_deduction.yaml.
    • Add hi_income_tax to cases 8 and 9: $1,529.86 and $4,124.26, the body's figures, which I reproduced by hand and at both trees. The cases then pin the result the method choice is for.

3. Drop the page from a single-page reference title.

  • Where: section_1341_operative.yaml:25: "Act 35, SLH 2026 (HB2329 CD1), HRS 235-2.3(b)(45) #page 11".
  • The rule. CLAUDE.md: "One cited page: #page=57 in the href only, no page in the title."
  • Fix: delete " #page 11" from the title. The href already has #page=11.

4. Update the body's cost line.

5. (Optional) Pool the repayment with the model's other miscellaneous expenses.

  • The gap. The 2% floor applies to the repayment alone, as the body discloses. But the model already has expenses that share Worksheet A-6's floor: total_misc_deductions (unreimbursed employee expenses and tax preparation fees, lines 23–24). Hawaii's itemized list leaves them out in 2018–2025, a gap that predates this PR.
  • Fix. Make one pool of total_misc_deductions plus the floored repayment, with a single floor, as Add Arkansas's claim of right deduction (Ark. Code § 26-51-457) #10203 does for Arkansas. That closes both gaps. A follow-up is fine.

Verified correct

  • Hawaii law. Each citation shows the stated text:

    Source Content
    Act 56, SLH 2023, PDF p. 3 §2 amends 235-2.3(b)(40): Subchapter Q is not operative "except for section 1341 (with respect to computation of tax where taxpayer restores substantial amount held under claim of right)".
    Act 56, PDF p. 5 §7(1): "the amendment to section 235-2.3(b)(40) ... shall apply to taxable years beginning after December 31, 2021", matching section_1341_operative.yaml 2022-01-01: true. Approved June 5, 2023.
    Act 35, SLH 2026 (HB2329 CD1), PDF p. 11 "(45) Subchapter Q ... except for section 1341".
    HB2329 CD1, PDF pp. 17–18, 34 §3 strikes the section 67 sentence (struck text on pp. 17–18), and section 68 becomes (b). §7(1): sections 2–4 "shall apply to taxable years beginning after December 31, 2025".
    HRS ch. 235 (compiled to 12/31/2025), PDF p. 11 235-2.4(b): "Section 67 (with respect to the 2-percent floor on miscellaneous itemized deductions) of the Internal Revenue Code shall be operative for purposes of this chapter, except that the suspension in section 67(g) shall not be operative". PDF p. 8 has (b)(40) with the section 1341 exception.
    DOTAX Announcement 2026-06, PDF p. 2 "Hawaiʻi will conform to IRC section 67(h), which disallows miscellaneous itemized deductions. Hawaii previously decoupled from the federal suspension ... for tax years 2018 through 2025."
    Form N-364 (2025) "whichever results in the least tax"; "Remember to use the Hawaii tax rate in your computations"; "If the amount repaid was not taxed by Hawaii, no deduction or credit is allowed"; line 1: "If the amount on line 1 is $3,000 or less, STOP"; line 6 goes to Schedule CR line 9; one form per earlier year, with the line 6 amounts added.
    Schedule CR (2022, 2023, 2024, 2025) The credit is in Part I from 2024 (line 9c, then line 9). The 2022 and 2023 schedules have no line for it, and files.hawaii.gov has no N-364 before 2025, so for 2022 and 2023 the credit was in the law but not on the forms.
    2018 N-11 instructions, PDF p. 21; 2021, PDF p. 19 "Repayments under a claim of right over $3,000 are subject to the 2% limitation for Hawaii income tax purposes."
    2022 and 2025 N-11 instructions, PDF p. 19 The over-$3,000 deduction is under "Expenses Subject to the 2% Limit", and "of $3,000 or less" is under "Expenses NOT Subject to the 2% Limit": the reversal the body describes.
    2025 N-11 instructions, PDF p. 34 Worksheet A-6: line 27 is "Form N-11, line 20 (Hawaii AGI)"; line 28 is "Multiply line 27 by 2% (.02). If zero or less, enter zero". The Total Itemized Deductions Worksheet, line 2, exempts only medical, investment interest, casualty and theft, and gambling.

  • The lesser-of mechanics.

  • Independence and (b)(3).

    • Hawaii AGI starts from federal AGI (N-11 line 7), which the Schedule A deduction never touches.
    • The Hawaii list (charitable_deduction, hi_medical_expense_deduction, hi_interest_deduction, hi_casualty_loss_deduction, hi_salt_deduction) holds no federal claim of right amount.
    • Under (a)(5) the Hawaii deduction is zero. The property test's federal-credit run and the cross-state test confirm Hawaii tax ignores the federal method.

  • No cycle or stale branch.

    • SALT. Hawaii's SALT deduction reads estimated withholding (hi_withheld_income_tax), not Hawaii tax.
    • The branches. They keep the default inherit_calculated=True, as the Virginia and Delaware EITC and Idaho aged-or-disabled branches do. That's safe:
      • Only the main simulation computes Hawaii tax, because the federal itemization and method branches compute only federal income_tax.
      • get_override_branch drops the inherited cache if the parent already holds the method.

  • Floor and limitation.

    • The floor is 2% of Hawaii AGI, not less than zero (max_(hi_agi, 0), Worksheet A-6 line 28), read from gov.irs.deductions.itemized.misc.floor.
    • hi_reduced_itemized_deductions reduces the deduction, which matches the worksheet: it isn't among the line 2 exemptions.

  • Household lists. household_refundable_credits and household_refundable_state_credits read hi_refundable_credits whole, so the credit reaches them.

  • Threshold and inputs.

  • Tests: hand checks (2025 single rates: 1.4% to $9,600 ... 7.2% to $48,000, then 7.6%; standard deduction $4,400; exemption $1,144).

    Expectation By hand
    Case 1 Credit method fixed: credit = the 600 decrease; deduction 0 under (a)(5)
    Case 2 Deduction method fixed: deduction 10,000, outside the floor; credit 0
    Case 3 $3,000 doesn't exceed $3,000: 3,000 − 2% × 50,000 = 2,000
    Case 4 2021, section 1341 inoperative: 10,000 − 1,000 = 9,000; no credit
    Case 5 2026, miscellaneous deductions disallowed: 2,000 → 0
    Case 6 10,000 − 10,000 never taxed = 0: neither amount
    Case 7 2,000 + 2,000 = 4,000 > 3,000; the child's 5,000 is left out
    Case 8 SALT is the withholding estimate on 60,000 − 4,400: 2,539.20 + 7.6% × 7,600 = 3,116.80, below the 4,400 standard deduction. Credit: taxable 54,456; 2,539.20 + 7.6% × 6,456 = 3,029.86; less 1,500 = 1,529.86. Deduction: itemized 13,116.80; taxable 45,739.20; 1,675.20 + 7.2% × 9,739.20 = 2,376.42. The credit wins.
    Case 9 No SALT (AGI is not below $100,000). Deduction: taxable 68,856; 2,539.20 + 7.6% × 20,856 = 4,124.26. Credit: taxable 78,856 gives 4,884.26; less 100 = 4,784.26. The deduction wins.
    Case 10 California: 0 (defined_for)
    Cross-state test, Hawaii Wages 60,000, gifts 25,000, SALT 3,116.80. No repayment: taxable 30,739.20; 859.20 + 6.8% × 6,739.20 = 1,317.47. Repays 10,000 with no Hawaii decrease entered, so Hawaii takes its deduction: taxable 20,739.20; 552 + 6.4% × 1,539.20 = 650.51.
    Refund (2025, wages 40,000, $3,000 Hawaii decrease) SALT 1,648 is below 4,400. Taxable 34,456: 859.20 + 6.8% × 10,456 = 1,570.21; less 3,000 = −1,429.79. Deduction: taxable 27,208; 859.20 + 6.8% × 3,208 = 1,077.34. The credit wins, and $1,429.79 is refunded.
    2022 head of household, $22,500, merged tree Standard deduction 3,212 and two exemptions of 1,144: taxable 17,000; 561.60 + 6.4% × 2,600 = 728. Refundable credits 110 + 600 = 710, so line 34 is 18. The EITC is 20% × (3,733 − 15.98% × 2,370) = 670.85, cut to 18, and line 36 is 0. Deduction: SALT 1,087.20; taxable 9,124.80; 165.60 + 5.5% × 1,924.80 = 271.46; line 34 is 161.46 and line 36 is 0. A tie, so the deduction applies.

    The YAML covers both branches of the lesser-of rule, $3,000, the joint return, 2021, 2026 and another state. The property grid adds $3,001. The refund and the 2022 order are Should 1.

  • Python coverage and cost.

    • Why Python. The method comes from two branch computations, which only separate simulations can check. That meets CLAUDE.md's test for Python coverage.
    • Cost in CI. About 10 s, and the group peak barely moves (Suggestion 4).

  • Code patterns.

    • All nine variables have defined_for = StateCode.HI.
    • No values are hard-coded: the start year and the end of the pool are parameters, and the threshold and floor come from the federal parameters Hawaii adopts.
    • The branch variables follow the existing Virginia, Delaware and Idaho pattern.
    • The parameter descriptions follow the boolean template ("..., if this is true.").

  • Changelog. changelog.d/hi-claim-of-right.added.md is top-level and typed added.

  • No partner test file is touched.

  • Local runs (policyengine-core 3.32.29; CI uses 3.33.3):

    • At the head: the 10 YAML cases, the 11 property tests (23.7 s) and test_states_under_each_federal_method all pass.
    • On the merged tree (add05b02d7): the same files pass, plus Apply Hawaii refundable credits before nonrefundable credits #10202's three Hawaii YAML files, 25 cases (hi_adjusted_tax_liability.yaml, hi_non_refundable_credits.yaml and integration.yaml).
    • Probes. At both trees they reproduce cases 8 and 9, the body's households, Hawaii's cross-state row and the refund case. Each tree's derived tax equals the lesser of the two fixed-method simulations. The 2022 table is the only difference between the trees.

Cross-cutting checks

  1. Law first: verified (table above), with the floor and add-back readings open for d1461 (Suggestion 1).
  2. The (a)(4)/(a)(5) choice and (b)(3): Hawaii's own comparison on Hawaii tax; the deduction is zero under (a)(5); no federal amount is read; no cycle.
  3. Threshold and aggregation: $3,000 with a strict >, on the head's and spouse's repayments net of income Hawaii never taxed. There is one return-level decrease, summed over earlier years as N-364 says.
  4. State conformity:
    • Annual conformity to the Code, with section 1341 operative from 2022 (Act 56 §7(1)).
    • The credit is refundable.
    • Against Hawaii's other credits, the order on main follows HRS 235-91.5 (Should 1).
  5. Inputs: two Hawaii inputs, documented. The person input is one of the five near-duplicates in Add Arkansas's claim of right deduction (Ark. Code § 26-51-457) #10203's stack-wide Suggestion 4.
  6. "Other states" corrections: none in this PR.
  7. Tests: 10 cases and 5 households hand-checked (the body's two, the cross-state row, the refund case and a 2022 household). The refund and the 2022 order are untested (Should 1).
  8. Code patterns: right; the YAML file isn't variable-named (Suggestion 2).
  9. Axiom: invalid (Should 2).
  10. CI and branch: green; the merge is clean, but its credit order is untested (Should 1).

Inherited from #10038

#10038's posted findings are in this branch unchanged: Should 1 (California leaves the federal deduction out of CA itemized deductions) and Suggestions 1–5 (gate NC on eligibility; tighten the input docs and add "Federal" to a label; drop the 67(b)(9) reference; add NY IT-196 line 34 to the follow-up; fix the WI comment and stale status). Fix them in #10038, then merge its new head here.

Axiom line assessment

Invalid (Should 2).

  • Why "not yet queued" doesn't qualify. It isn't one of the allowed forms. The author is staff, so needed doesn't apply either.
  • No target yet. rulespec-us has no module or issue for HRS 235-2.3(b)(40) or Act 56. Its Hawaii pipeline defers itemized deductions.
  • The corpus is likely ready. The Hawaii pipeline already cites us-hi/statute/235-2.3, so the issue can be dispatch-ready now once it confirms the (b)(40) text. Only the floor placement waits on d1461.

CI status

All 27 checks pass (gh pr checks 10200, run 38545546945, attempt 1, on head a046804c7a).

  • Core version. CI used policyengine-core 3.33.3.
  • The YAML cases ran. "Baseline (states-shard-4)" ran hi_claim_of_right.yaml (10 cases), all passing, in a group of 510.
  • The property tests ran. "Rest (Python, shard-1 + variables)" ran all 11 tests in test_hi_claim_of_right_properties.py and test_states_under_each_federal_method (PASSED, 7.03 s), in the remaining group (2,351 passed).
  • The merge CI tested predates Apply Hawaii refundable credits before nonrefundable credits #10202. The checkout was refs/remotes/pull/10200/merge at 9f2f692f ("Merge a046804 into a2f63c1"), so Apply Hawaii refundable credits before nonrefundable credits #10202 wasn't in it (Should 1).
  • Partner tests. The PR touches no partner test files, and the Household API Partners job passes.

Branch status

Own findings: 0 critical, 2 should, 5 suggestions. Changes are requested for this PR's Should 1 (the combined result with #10202) and Should 2 (the axiom line), and for the inherited #10038 Should 1. Approve once those are fixed, #10038 is fixed, and this branch merges #10038's new head.

Verdict: REQUEST_CHANGES

DTrim99
DTrim99 requested changes Oct 14, 2026
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Requesting changes; details in the full report above. This PR's own findings are 0 critical and 2 should. (1) The combined result with main's #10202 is neither stated nor tested. The merge is clean, and on the merged tree the credit is used before nonrefundable credits, as HRS 235-91.5 requires. That only matters for 2022 (the nonrefundable Hawaii EITC): a head of household with $22,500 of wages, a $10,000 repayment and a $600 decrease gets $0 relief merged versus $600 at this head. No test reads hi_income_tax, so neither the ordering nor the (b)(1) refund is pinned. Please state the combined result and add tests. (2) The axiom line "not yet queued" is not an allowed form, and no rulespec-us issue covers HRS 235-2.3(b)(40). Please file a dispatch-ready pe-parity issue; only the floor addendum needs to wait on d1461. This branch also carries #10038's unresolved Should 1 (California), so approve once both items are fixed, #10038 is fixed, and this branch picks up #10038's new head. The Hawaii law checks out (Acts 56 and 35, HRS 235-2.4(b), N-364, Schedule CR), and all 10 YAML cases and 5 households were hand-checked.

@MaxGhenis MaxGhenis mentioned this pull request Oct 19, 2026
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@MaxGhenis @DTrim99