STAND. COM. REP. NO.205

Honolulu, Hawaii

, 2001

RE: S.B. No. 1195

 

 

Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committees on Commerce, Consumer Protection and Housing and Judiciary, to which was referred S.B. No. 1195 entitled:

"A BILL FOR AN ACT RELATING TO TAXPAYER COMMUNICATION CONFIDENTIALITY PRIVILEGES,"

beg leave to report as follows:

The purpose of this measure is to make the tax laws consistent with respect to privileged taxpayer communications.

The Department of Taxation testified in support of the measure. The Tax Foundation of Hawaii submitted comments on the measure.

Section 7525 of the federal Internal Revenue Code (section 7525) extended the attorney-client privilege to tax advice communications between a taxpayer and any federally authorized tax practitioner, including attorneys, certified public accountants, and enrolled agents and actuaries. Act 174, Session Laws of Hawaii 2000, established the applicability of section 7525 to state taxpayer communications, but only in the area of income tax. Taxpayer communications made within the context of other types of state taxes are not similarly privileged.

This measure corrects the inconsistency in the law by making the provisions of section 7525 operable as to taxpayer communications concerning all state taxes, not just income tax. Your Committees find that by removing the reference to section 7525 from chapter 235, Hawaii Revised Statutes (HRS), and placing it within chapter 231, HRS, this measure will provide for the equitable and consistent treatment of taxpayer communications, and conform state law to federal law.

As affirmed by the records of votes of the members of your Committees on Commerce, Consumer Protection and Housing and Judiciary that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 1195 and recommend that it pass Second Reading and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Commerce, Consumer Protection and Housing and Judiciary,

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BRIAN KANNO, Chair

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RON MENOR, Chair