STAND. COM. REP. NO. 3036
RE: H.B. No. 1695
Honorable Shan S. Tsutsui
President of the Senate
Twenty-Sixth State Legislature
Regular Session of 2012
State of Hawaii
Your Committee on Ways and Means, to which was referred H.B. No. 1695 entitled:
"A BILL FOR AN ACT RELATING TO TAXATION,"
begs leave to report as follows:
The purpose and intent of this measure is to incorporate the anti-stacking fairness provisions included in the federal Internal Revenue Code, by prohibiting penalties for:
(1) Failure to collect and pay taxes;
(2) Substantial understatements or misstatements on tax returns; and
(3) Erroneous claims for refund or credit on tax returns;
from being added to tax underpayments on which certain other penalties are already imposed.
Your Committee received testimony in support of this measure from one individual. Your Committee received comments on this measure from the Department of Taxation and the Tax Foundation of Hawaii.
Your Committee finds that, under the Internal Revenue Code, failure to collect and pay taxes is a criminal offense and substantial understatements or misstatements on tax returns are accuracy-related civil offenses. Your Committee also finds that the Internal Revenue Code does not preclude the stacking of penalties for criminal offenses, nor is there any indication that accuracy-related penalties should not be assessed against persons who are guilty of tax crimes. However, your Committee finds that the Internal Revenue Code does preclude the stacking of accuracy-related penalties with penalties imposed for erroneous claims for refund or credit.
Your Committee has amended this measure by:
(1) Deleting the provisions prohibiting penalties imposed for:
(A) Wilful failure to collect and pay over tax; and
(B) Substantial understatements or misstatements of amounts; and
(2) Amending the provision regarding penalties imposed for erroneous claims for refund or credit by clarifying that the prohibition against stacking shall only apply to tax underpayments on which penalties are already imposed for substantial understatements or misstatements.
As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1695, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1695, S.D. 1, and be placed on the calendar for Third Reading.
Respectfully submitted on behalf of the members of the Committee on Ways and Means,
DAVID Y. IGE, Chair