TWENTY-SIXTH LEGISLATURE, 2012
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO TAXATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Chapter 231, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§231- Whistleblower awards. (a) Except as provided in subsections (b) and (c), if the director of taxation proceeds with an administrative or judicial action for any violation of title 14 by a taxpayer, based on information received from an individual, the individual shall receive as an award at least fifteen per cent but not more than thirty per cent of the collected proceeds, including penalties, interest, additions to tax, and additional amounts, resulting from the action, any related actions, or any settlement in response to the action; provided that no award shall be made under this section unless:
(1) In the case of any action brought against an individual taxpayer, the taxpayer's gross income exceeds $200,000 for any taxable year subject to the action;
(2) The tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $500,000; and
(3) The information that the individual provides the director of taxation is submitted under penalty of perjury.
The determination of the amount of any award under this subsection shall depend upon the extent to which the individual substantially contributed to the action, as determined by the director of taxation.
(b) In the event the action described in subsection (a) is one which the director of taxation determines to be based principally on a disclosure of specific allegations, rather than information provided by the individual described in subsection (a), that resulted from a judicial or administrative hearing, or from a governmental report, hearing, audit, or investigation, or from the news media, the director of taxation may award such sums as the director of taxation determines to be appropriate, but in no case more than ten per cent of the collected proceeds, including penalties, interest, additions to tax and additional amounts, resulting from the action, any related actions, or any settlement in response to the action, taking into account the significance of the individual's information and the role of the individual and any legal representative of the individual in contributing to the action.
This subsection shall not apply if the information resulting in the initiation of an action described in subsection (a) was originally provided by the individual described in that subsection.
(c) If the director of taxation determines that the claim for an award under this section is brought by an individual who planned and initiated the activities that led to the violation for which the director of taxation proceeded with an administrative or judicial action, the director of taxation may reduce the award accordingly; provided that if the individual is convicted of criminal conduct arising from those activities, the director of taxation shall deny any award.
(d) Within thirty days of any determination regarding an award under this section, the determination may be appealed to the tax appeal court, which shall have jurisdiction over the matter.
(e) No contract with the department shall be necessary for any individual to receive an award under this section.
(f) Any individual described in subsection (a) or (b) may be represented by counsel."
SECTION 2. Section 231-7.5, Hawaii Revised Statutes, is amended to read as follows:
Expedited appeals and dispute resolution program. (a) The department
shall be authorized to implement an administrative appeals and dispute
resolution program that shall expeditiously resolve all tax, penalty, interest,
fine, assessment, and other such disputes between the department and the
taxpayer or return preparer. The director or the director's designee, who
shall report directly and be answerable solely to the director, shall serve as
an independent appeals officer and shall be authorized to compromise, settle,
or otherwise resolve any dispute on any basis, including hazards and costs of
litigation, considering equally the position of the taxpayer and the department
on an impartial basis. The independent appeals officer shall not be influenced
by any department tax compliance initiatives and policies, or loss of revenue
to the State. Decisions of the independent appeals officer shall be in writing
stating the facts, analysis, and conclusions in support, which shall be
provided to the taxpayer and return preparer. Persons who currently serve or
have served in the previous five years as an auditor, audit supervisor or
manager, collector, collection supervisor or manager, district manager or
supervisor, or tax compliance administrator, shall not be eligible to be the
(b) Notwithstanding any other law to the contrary, including tax appeal procedures set forth under chapter 232, a taxpayer shall be eligible to petition the department once for participation in the administrative appeals and dispute resolution program after issuance of a notice of proposed assessment; provided that if a taxpayer has filed a tax appeal with the tax appeal court or other court, the taxpayer shall first be required to obtain the approval of the director and permission from the respective court prior to petitioning the department for participation. The director shall have the right to deny a petition for cause.
(c) The department shall adopt procedures to carry out the purposes of this section, including procedures relating to ex parte communications between the director or the director's designee and other department personnel to ensure that such communications do not compromise or appear to compromise the independence of the administrative appeals and dispute resolution program.
(d) The director of taxation may appoint an administrative appeals officer as necessary to administer this section, and perform other duties as directed by the director. The administrative appeals officer shall be exempt from chapter 76 and may be a legal or accounting professional; provided that no individual appointed under this section shall render legal services reserved to the attorney general under chapter 28."
SECTION 3. Section 231-36.4, Hawaii Revised Statutes, is amended to read as follows:
Wilful failure to collect and pay over tax. (a) Any person required to collect, account for, and pay over
any tax imposed by title 14, who wilfully fails to collect or truthfully
account for and pay over such tax shall be guilty of a class C felony, in
addition to other penalties provided by law and, upon conviction, shall be
subject to one or any combination of the following:
(1) A fine of not more than $100,000;
(2) Imprisonment of not more than five years; or
provided that a corporation shall be fined not more than $500,000.
(b) This section shall not apply to any portion of an underpayment on which a penalty is imposed under section 231-36, 231-36.6, or 231-36.8."
SECTION 4. Section 231-36.6, Hawaii Revised Statutes, is amended to read as follows:
Substantial understatements or misstatements of amounts; penalty. (a) There shall be added to the tax an amount equal
to twenty per cent of the portion of any underpayment that is attributable to
any substantial understatement of any tax in a taxable year. The penalty under
this section shall be in addition to any other penalty assessable by law.
(b) Except as provided under subsection (c), there is a substantial understatement of tax for any taxable year if the amount of the understatement for the taxable year exceeds the greater of:
(1) Ten per cent of the tax required to be shown on the return for the taxable year; or
(c) In the case of a corporation other than a corporation taxable under subchapter S of the Internal Revenue Code, there is a substantial understatement of tax for any taxable year if the amount of the understatement for the taxable year exceeds the greater of:
(1) Ten per cent of the tax required to be shown on the return for the taxable year; or
(d) The amount of any understatement shall be reduced by that portion of the understatement that is attributable to:
(1) The tax treatment of any item by the taxpayer if there is or was substantial authority for such treatment; or
(2) Any item if the relevant facts affecting the item's tax treatment are adequately disclosed in the return or in a statement attached to the return and there is a reasonable basis, as defined under section 231‑36.8, for the tax treatment by the taxpayer.
The reduction in this subsection shall not apply to any item attributable to a tax shelter as described in section 231‑36.7.
(e) This section shall be construed in accordance with regulations and judicial interpretations given to section 6662 of the Internal Revenue Code.
(f) For purposes of this section, "understatement" means the excess of:
(1) The amount of tax required to be shown on the return for the taxable year; over
(2) The amount of tax imposed that is shown on the return, reduced by any rebate as that term is defined by section 6211(b)(2) of the Internal Revenue Code.
(g) This section shall not apply to any portion of an underpayment on which a penalty is imposed under section 231-36, 231-36.4, or 231-36.8."
SECTION 5. Section 231-36.8, Hawaii Revised Statutes, is amended to read as follows:
Erroneous claim for refund or credit.
(a) If a claim for refund or credit with respect to tax is made for an
excessive amount, the person making the claim shall be liable for a penalty in
an amount equal to twenty per cent of the excessive amount; provided that there
shall be no penalty assessed where the penalty calculation under this section
results in an amount of less than $400.
(b) It shall be a defense to the penalty under this section that the claim for refund or credit had a reasonable basis. A person claiming the reasonable basis defense shall have the burden of proof to demonstrate the reasonableness of the claim.
(c) This section shall be construed in accordance with regulations and judicial interpretations given to section 6676 of the Internal Revenue Code.
(d) For purposes of this section:
"Excessive amount" means the amount by which the amount of the claim for refund or credit for any taxable year exceeds the amount of the claim allowable for such taxable year.
"Reasonable basis" means a standard of care used in tax reporting that is significantly higher than not frivolous or not patently improper. A reasonable basis position will be more than arguable and based on at least one or more authorities of either state or federal tax administration. A position is considered to have a reasonable basis if a reasonable and well-informed analysis by a person knowledgeable in tax law would lead that person to conclude that the position has approximately a one-in-four, or greater, likelihood of being sustained on the merits. A reasonable basis includes innocent mistakes where the excessive amount is the result of inadvertence, mathematical error, or where otherwise defined as innocent by the director pursuant to a formal pronouncement issued without regard to chapter 91.
(e) This section shall not apply to any portion of an underpayment on which a penalty is imposed under section 231-36, 231-36.4, or 231-36.6."
SECTION 6. Section 237D-4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) Each operator or plan manager as a condition precedent to engaging or continuing in the business of furnishing transient accommodations or in business as a resort time share vacation plan shall register with the director the name and address of each place of business within the State subject to this chapter. The operator or plan manager shall make a one-time payment as follows:
(1) $5 for each registration for transient accommodations consisting of one to five units;
(2) $15 for each registration for transient accommodations consisting of six or more units; and
(3) $15 for each resort time share vacation plan within the State;
upon receipt of which the director shall issue a certificate of registration in such form as the director determines, attesting that the registration has been made. The registration shall not be transferable and shall be valid only for the operator or plan manager in whose name it is issued and for the transaction of business at the place designated therein.
The registration, or in lieu thereof a notice stating where the registration may be inspected and examined, shall at all times be conspicuously displayed at the place for which it is issued. Acquisition of additional transient accommodation units after payment of the one-time fee shall not result in additional fees.
The registration provided for by this section shall be effective until canceled in writing. Any application for the reissuance of a previously canceled registration identification number shall be regarded as a new registration application and shall be subject to the payment of the one-time registration fee. The director may revoke or cancel any license issued under this chapter for cause as provided by rule under chapter 91.
The website address to a website containing the operator or plan manager's registration identification number shall be displayed conspicuously in all advertisements and solicitations and on all operator- or plan manager-maintained websites regarding transient accommodations for which the registration is issued, unless ten or fewer registration identification numbers are to be listed, in which case the registration identification number shall be displayed conspicuously directly on the advertisement, solicitation, or website; provided that if the operator resides out-of-state or on another island from where the transient accommodations are located, contact information of an agent who resides on the island on which the transient accommodations are located shall be included."
SECTION 7. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.
SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 9. This Act shall take effect on July 1, 2112; provided that sections 3, 4, and 5 of this Act shall apply to taxable years beginning after December 31, 2011; provided further that section 6 of this Act shall take effect on January 1, 2013.
Taxation; Whistleblower Awards; Administrative Appeals Officer; Transient Accommodations Tax; Tax Penalties
Establishes monetary awards for whistleblowers for a Department of Taxation administrative or judicial action. Authorizes the Director of Taxation to appoint an administrative appeals officer. Prohibits certain penalties from being added to tax underpayments on which certain other penalties are already imposed. Requires all advertisements and solicitations for transient accommodations to display the registration identification number or the website address containing the registration identification number. Effective July 1, 2112. (SB2947 HD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.