Honolulu, Hawaii



RE:    S.B. No. 1516

       S.D. 1




Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2019

State of Hawaii




     Your Committee on Ways and Means, to which was referred S.B. No. 1516 entitled:




begs leave to report as follows:


     The purpose and intent of this measure is to reduce taxpayer penalties for nonpayments and underpayments.


     More specifically, this measure:


     (1)  Sets lower penalty amounts and interest rates for earlier, rather than later, payments; and


     (2)  Allows a taxpayer to post a bond to avoid penalties and interest.


     Your Committee received testimony in opposition to this measure from the Department of Taxation.


     Your Committee received comments on this measure from the Tax Foundation of Hawaii.


     Your Committee finds that, under current tax law, Hawaii imposes many different penalties on different types of infractions.  These penalties are also cumulative, so that a taxpayer who fails to file a required return is often subject to much higher penalties under state law than they would be under federal law.


     Your Committee has amended this measure by:


     (1)  Deleting the provisions setting lower penalty amounts and interest rates for earlier rather than later payments;


     (2)  Establishing reduced taxpayer penalties for nonpayments and underpayments that are due to reasonable cause, and not due to negligence, intentional disregard of administrative rules, or fraud;


     (3)  Increasing the penalty for underpayment due to fraud;


     (4)  Adjusting the penalty amounts for failure to file a tax return;


     (5)  Providing that a bond posted by a taxpayer to avoid penalties and interest shall be refundable and may be posted confidentially by an agent of the taxpayer;


     (6)  Assessing interest on a deficiency in state income taxes paid by a taxpayer that is caused by a change in the taxable income reported on the taxpayer's federal tax return; and


     (7)  Changing the effective date to July 1, 2050, to facilitate further discussion on the measure.


     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 S.B. No. 1516, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1516, 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,