STAND. COM. REP. NO.17

Honolulu, Hawaii

, 2003

RE: S.B. No. 632

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 S.B. No. 632 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 tax assessments be paid prior to appealing a tax assessment to the tax appeal court.

Your Committee received testimony supporting this measure from the Hawaii Society of Certified Public Accountants, PricewaterhouseCoopers, and the Hawaii State Bar Association Tax Section. Testimony in support of this measure was also received by two members of the National Federal of Independent Businesses and a tax attorney. The Department of Taxation opposed this measure. The Tax Foundation commented on the bill.

Your Committee finds that Act 199, 2000 Session Laws of Hawaii eliminated the requirement that assessed taxes be prepaid prior to appealing the assessment to a board of review. Your Committee further finds that Act 199 resulted in a backlog of board cases as tax professionals elected to file appeals, including complex appeals, with a board of review to avoid prepaying assessed taxes.

Your Committee believes, however, that repealing prepayment of taxes on all appeals may lead to an abuse of the appeal process in order to postpone payment of assessed taxes. Your Committee therefore has amended the bill by:

(1) Repealing prepayment of taxes for first appeals to the tax appeal court;

(2) Deleting the repeal of payment of assessed taxes plus interest if the taxpayer appeals from a decision by the board, or the decision by the board in favor of the department is not further appealed;

(3) Deleting the repeal authorizing the tax appeal court to allow an individual taxpayer to file an appeal without prepayment of taxes if the total tax liability does not exceed $50,000 upon proof that prepayment of taxes would result in hardship for the taxpayer; and

(4) Making technical, nonsubstantive changes for clarity and style.

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 S.B. No. 632, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 632, 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