STAND. COM. REP. NO.1027

Honolulu, Hawaii

, 2003

RE: H.B. No. 851

H.D. 1

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Judiciary and Hawaiian Affairs, to which was referred H.B. No. 851, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION APPEALS,"

begs leave to report as follows:

The purpose of this measure is to repeal the requirement that taxpayers must pay a disputed tax prior to filing an appeal with the tax appeal court.

Your Committee received testimony in support of this measure from the Chamber of Commerce of Hawaii and two members of the National Federation of Independent Business. Testimony in opposition to this measure but supporting the Senate version of the measure was received from the Department of Taxation, the Hawaii State Bar Association, and the Hawaii Society of Certified Public Accountants. The Tax Foundation of Hawaii offered comments.

Your Committee finds that Act 199, 2000 Session Laws of Hawaii eliminated the prepayment of assessed taxes or "pay to play", for appeals to a board of review. Appeals to the tax appeal court retained the "pay to play" requirement. Because of Act 199, the board of review is experiencing a substantial backlog of cases. Your Committee further finds that extending the repeal of "pay to play" beyond a first appeal invites abuse of the tax appeal system by persons attempting to delay payment of taxes. Therefore, your Committee amended the bill by:

(1) Clarifying that no tax prepayments are required prior to filing an appeal with the board of review;

(2) Repealing the tax prepayment requirement for first appeals to the tax appeal court;

(3) Clarifying that the taxpayer must pay assessed taxes plus interest if the taxpayer appeals a decision by the board or a decision by the tax appeal court;

(4) Amending the tax court's discretion to waive the tax prepayment requirement for cases not exceeding $50,000, to apply to subsequent appeals; and

(5) Changing all references to "tax court" to "tax appeal court" for clarity and consistency.

Your Committee notes that the Deputy Director of Taxation and the representative for the Hawaii State Bar Association and the Hawaii Society of Certified Public Accountants agreed on the bill's effective date, and that the measure would apply prospectively.

As affirmed by the record of votes of the members of your Committee on Judiciary and Hawaiian Affairs that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 851, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 851, H.D. 1, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Judiciary and Hawaiian Affairs,

____________________________

COLLEEN HANABUSA, Chair