HOUSE OF REPRESENTATIVES
TWENTY-SEVENTH LEGISLATURE, 2014
STATE OF HAWAII
A BILL FOR AN ACT
relating to taxation.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that the federal Patient Protection and Affordable Care Act of 2010 enabled Hawaii to establish its own state-based health insurance exchange. Codified under chapter 435H, Hawaii Revised Statutes, Hawaii's health insurance exchange, also known as the Hawaii health connector, is funded through a fee on premiums of health insurance companies that sell policies through the health connector. The legislature further finds that this method of funding is inadequate for the long-term sustainability of the Hawaii health connector.
The legislature additionally finds that a tax dedicated to the funding of the Hawaii health connector should be levied on all commercial health insurance premiums in the State. The Hawaii health connector serves a wide public interest by making health insurance in Hawaii available through a vehicle that increases marketplace competition and lowers prices. This public interest therefore justifies a broad-based funding of the Hawaii health connector.
Accordingly, the purpose of this Act is to ensure the long-term sustainability of the Hawaii health connector by levying a tax of two-thirds of one per cent on the gross health insurance premiums derived from the sale of qualified dental plans and qualified plans by insurers in the State, with certain exemptions.
SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:
HAWAII HEALTH INSURANCE EXCHANGE TAX
§ -1 Definitions. As used in this chapter unless otherwise indicated by the context:
"Director" means the director of taxation.
"Federal Act" means the federal Patient Protection and Affordable Care Act, Public Law 111-148, as amended by the federal Health Care and Education Reconciliation Act of 2010, Public Law 111-152, and any amendments to, or regulations or guidance issued under, those Acts.
"Insurer" means any person or entity that issues a policy of accident and health or sickness insurance subject to article 10A of chapter 431, or chapter 432 or 432D, offering a qualified plan under chapter 435H.
"Qualified dental plan" means a dental benefit plan as described in section 1311(d)(2)(B)(ii) of the Federal Act.
"Qualified plan" means a health benefit plan offered by an insurer that meets the criteria for certification described in section 1311(c) of the Federal Act.
§ -2 Imposition and rate. (a) There is levied and shall be collected each month a Hawaii health insurance exchange tax of two-thirds of one per cent for the period beginning July 1, 2014, and thereafter, on the gross premiums derived from the sale of qualified dental plans and qualified plans by insurers. Gross premiums shall not include premium returned.
(b) Every insurer shall pay to the director the tax imposed by subsection (a) in such a form as the director prescribes.
(c) The director shall deposit the taxes received into a Hawaii health insurance exchange fund.
(d) The director shall appropriate monthly the accumulated taxes deposited into the fund to the Hawaii health insurance exchange established under chapter 435H.
(e) The director shall not allocate more than $15,000,000 to the Hawaii health insurance exchange in any calendar year.
§ -3 Exemptions. This chapter shall not apply to:
(1) Medicare supplement policies, as defined in section 431:10A-301;
(2) Enrollees in medicaid adult or children's health insurance programs, as determined by the department of human services under section 435H-7; and
(3) The Hawaii employer-union health benefits trust fund.
§ -4 Payments. (a) On or before the twentieth day of each calendar month, every insurer liable under this chapter during the preceding calendar month shall file a sworn reconciliation with the director in such form as the director shall prescribe together with a remittance for the amount of the tax in the form required by section -2.
(b) All remittances of taxes imposed under this chapter shall be made by cash, bank drafts, cashier's check, money order, or by any acceptable means by the director to the office of the taxation district to which the reconciliation was transmitted.
§ -5 Reconciliation; form requirement. (a) On or before the twentieth day of the fourth month following the close of the taxable year, every insurer that became liable for the payment of taxes under this chapter during the preceding taxable year shall file a reconciliation on a form as prescribed by the director indicating the amount of gross premium that was subject to such tax imposed under this chapter.
(b) On or before the twentieth day of the fourth month following the close of the taxable year, every insurer that has become liable for the payment of taxes under this chapter during the preceding taxable year shall file a reconciliation indicating whether the appropriate amount of taxes had been paid.
§ -6 Assessment of tax upon failure to make reconciliation; limitation period; exceptions; extension by agreement. (a) If any insurer fails to make a reconciliation as required by this chapter, the director shall make an estimate of the tax liability of the insurer from any information the director obtains, and according to the estimate so made, assess the taxes, interest, and penalty due to the State from the insurer, give notice of the assessment to the insurer, and make demand upon the insurer for payment. The assessment shall be presumed to be correct until and unless, upon an appeal duly taken as provided in section -8, the contrary shall be clearly proved by the insurer assessed, and the burden of proof upon the appeal shall be upon the insurer assessed to disprove the correctness of assessment.
(b) After a reconciliation is filed under this chapter, the director shall cause the reconciliation to be examined, and may make such further audits or investigation as the director considers necessary. If the director determines that there is a deficiency with respect to the payment of any tax due under this chapter, the director shall assess the taxes and interest due to the State, give notice of the assessment to the insurer liable, and make demand upon the insurer for payment.
(c) Except as otherwise provided by this section, the amount of taxes imposed by this chapter shall be assessed or levied within three years after the annual reconciliation was filed, or within three years of the due date prescribed for the filing of the reconciliation, whichever is later, and no proceeding in court without assessment for the collection of any of the taxes shall be begun after the expiration of the period. Where the assessment of the tax imposed by this chapter has been made within the applicable period of limitation, the tax may be collected by levy or by a proceeding in court under chapter 231; provided that the levy is made or the proceeding was begun within fifteen years after the assessment of the tax.
(d) In the case of a false or fraudulent reconciliation with intent to evade tax, or of a failure to file the annual reconciliation, the tax may be assessed or levied at any time; provided that the burden of proof with respect to the issues of falsity or fraud and intent to evade tax shall be upon the State.
(e) Where, before the expiration of the period prescribed in subsection (c), both the department of taxation and the insurer have consented in writing to the assessment or levy of the tax after the date fixed by subsection (c), the tax may be assessed or levied at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.
§ -7 Overpayment; refunds. Upon application by an insurer, if the director determines that any tax, interest, or penalty has been paid more than once, or has been erroneously or illegally collected or computed, the tax, interest, or penalty shall be credited by the director on any taxes then due from the insurer under this chapter. The director shall refund the balance to the insurer or the insurer's successors, administrators, executors, or assigns in accordance with section 231-23. No credit or refund shall be allowed for any tax imposed by this chapter, unless a claim for such credit or refund is filed as follows:
(1) If an annual reconciliation is timely filed, or is filed within three years after the date prescribed for filing the annual reconciliation, then the credit or refund shall be claimed within three years after the date the annual reconciliation was filed or the date prescribed for filing the annual reconciliation, whichever is later.
(2) If an annual reconciliation is not filed, or is filed more than three years after the date prescribed for filing the annual reconciliation, a claim for credit or refund shall be filed within:
(A) Three years after the payment of the tax; or
(B) Three years after the date prescribed for the filing of the annual reconciliation,
whichever is later.
Paragraphs (1) and (2) are mutually exclusive. The preceding limitation shall not apply to a credit or refund pursuant to an appeal, provided for in section 237D-11.
As to all tax payments for which a refund or credit is not authorized by this section including, without prejudice to the generality of the foregoing, cases of unconstitutionality, the remedies provided by appeal or by section 40-35 are exclusive.
§ -8 Appeals. Any insurer aggrieved by any assessment of the tax for any month or any year may appeal from the assessment in the manner and within the time and in all other respects as provided in the case of income tax appeals by section 235-114.
§ -9 Records to be kept; examination. Every insurer shall keep in the English language within the State, and preserve for a period of three years, suitable records of gross premium relating to the business taxed under this chapter, and such other books, records of account, and invoices as may be required by the department, and all such books, records, and invoices shall be open for examination at any time by the department or the Multistate Tax Commission pursuant to chapter 255, or the authorized representative thereof.
§ -10 Disclosure of reconciliations unlawful; destruction of reconciliations. (a) All reconciliations and reconciliation information required to be filed under this chapter, and the report of any investigation of the reconciliation or of the subject matter of the reconciliation, shall be confidential. It shall be unlawful for any person or any officer or employee of the State to intentionally make known information imparted by any reconciliation or reconciliation information filed pursuant to this chapter, or any report of any investigation of the reconciliation or of the subject matter of the reconciliation, or to wilfully permit any reconciliation, reconciliation information, reconciliation or report so made, or any copy thereof, to be seen or examined by any person; provided that for tax purposes only the insurer, the insurer's authorized agent, or persons with a material interest in the reconciliation, reconciliation information, or report may examine them. Unless otherwise provided by law, persons with a material interest in the reconciliation, reconciliation information, or report shall include:
(3) Persons named in a board resolution or a one per cent shareholder in case of a corporate reconciliation;
(4) The person authorized to act for an insurer in dissolution;
(5) The shareholder of an S corporation;
(6) The trustee in bankruptcy or receiver, and the attorney-in-fact of any person in paragraphs (1) to (5);
(7) Persons duly authorized by the State in connection with their official duties;
(8) Any duly accredited tax official of the United States, of any state or territory, or of any county of this State;
(9) The Multistate Tax Commission or its authorized representative; and
(10) Members of a limited liability company.
Any violation of this subsection shall be a misdemeanor. Nothing in this subsection shall prohibit the publication of statistics so classified as to prevent the identification of particular reports or reconciliations and the items of the reports or reconciliations.
(b) The department may destroy reconciliations upon the expiration of three years after the end of the calendar or fiscal year in which the taxes so returned accrued.
§ -11 Collection by suit. The department may collect taxes due and unpaid under this chapter, together with all accrued penalties, by action in assumpsit or other appropriate proceedings in the circuit court of the judicial circuit in which the taxes arose.
§ -12 Application of tax. The tax imposed by this chapter shall be in addition to any other taxes imposed by any other laws of the State, except as otherwise specifically provided in this chapter; provided that if it be held by any court of competent jurisdiction that the tax imposed by this chapter may not legally be imposed in addition to any other tax or taxes imposed by any other law or laws, then this chapter shall be deemed not to apply, but the other laws shall be given full effect with respect to such property and use.
§ -13 Administration and enforcement; rules. (a) The director of taxation shall administer and enforce this chapter. In respect of:
(1) The examinations of books and records and of insurers;
(2) Procedure and powers upon failure or refusal by an insurer to make a reconciliation or proper reconciliation; and
(3) The general administration of this chapter;
the director of taxation shall have all rights and powers conferred by this chapter with respect to taxes thereby or thereunder imposed; and, without restriction upon these rights and powers, sections 237-8 and 237-36 to 237-41 are made applicable to and with respect to the taxes, taxpayers, tax officers, and other persons, and the matters and things affected or covered by this chapter, insofar as not inconsistent with this chapter, in the same manner, as nearly as may be, as in similar cases covered by chapter 237.
(b) The director may adopt, amend, or repeal rules under chapter 91 to carry out this chapter."
SECTION 3. Section 432:1-403, Hawaii Revised Statutes, is amended to read as follows:
"§432:1-403 Nonprofit medical,
hospital indemnity associations; tax exemption. Every association or
society organized and operating under this article solely as a nonprofit
medical indemnity or hospital service association or society or both shall be,
from the time of such organization, exempt from every state, county and
municipal tax, except the unemployment compensation tax[
Hawaii health insurance exchange tax. Nothing in this section shall be
deemed to exempt the association or society from liability to withhold the
taxes payable by its employees and to pay the same to the proper collection
officers, and to keep such records, and make such returns and reports, as may
be required in the case of other corporations, associations or societies
similarly exempted from such taxes."
SECTION 4. Section 435H-3, Hawaii Revised Statutes, is amended to read as follows:
Funding. The connector may receive contributions, grants, endowments,
fees, or gifts in cash or otherwise from public and private sources including
corporations, businesses, foundations, governments, individuals, and other
sources subject to rules adopted by the board. The State may appropriate
moneys to the connector. As required by section 1311(d)(5)(A) of the Federal
Act, the connector shall be self-sustaining by January 1, 2015, and may charge
assessments or user fees to participating health and dental carriers, or may
otherwise generate funding to support its operations. Moneys received by or under
the supervision of the connector [ shall not] may be placed into
the state treasury and the State [ shall not] may administer any
moneys of the connector [ nor]; provided that the State shall not
be responsible for the financial operations or solvency of the connector."
SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 6. This Act shall take effect on July 1, 2014.
Taxation; Hawaii Health Insurance Exchange; Hawaii Health Connector
Ensures the long-term sustainability of the Hawaii health connector by levying a tax of two-thirds of one per cent on the gross health insurance premiums derived from the sale of qualified dental plans and qualified plans by insurers in the State, with certain exemptions.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.