HOUSE OF REPRESENTATIVES
THIRTIETH LEGISLATURE, 2019
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO AUTHORITY OF THE DEPARTMENT OF TAXATION TO CORRECT ERRORS ON TAX RETURNS.
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- Assessments arising out of mathematical or clerical errors. (a) If a taxpayer is notified that, due to a mathematical or clerical error appearing on the taxpayer's return, an amount of tax in excess of that shown on the return is due, and that an assessment of the tax has been or will be made on the basis of what would have been the correct amount of tax, but for the mathematical or clerical error, the notice shall not be considered as a notice of final assessment for the purposes of section 235-108, 237-36, or similar law. Each notice under this subsection shall set forth the error alleged and an explanation thereof.
(b) A taxpayer, within thirty days after notice is sent under subsection (a), may file with the department a request for an abatement of any assessment specified in the notice. Upon receipt of the request, the department shall abate the assessment. Any reassessment of the tax with respect to which an abatement is made under this subsection shall be subject to the deficiency procedures prescribed by section 235-108, 237-36, or similar law.
(c) No levy or proceeding in court for the collection of an assessment made under subsection (a) shall be made, begun, or prosecuted during the period in which the assessment may be abated under subsection (b).
(d) As used in this section, the term "mathematical or clerical error" means:
(1) An error in addition, subtraction, multiplication, or division shown on any return (unless the taxpayer shall have claimed that the applicable rate of tax is lower than the rate of tax applied by the department);
(2) An incorrect use of any table provided by the department with respect to any return if the incorrect use is apparent from the existence of other information on the return;
(3) An entry on a return of an item that is inconsistent with another entry of the same or another item on the return;
(4) An omission of information that is required to be supplied on the return to substantiate an entry on the return;
(5) An entry on a return of a deduction or credit in an amount that exceeds an applicable statutory limit imposed by the law allowing the deduction or credit; provided that the limit is expressed as:
(A) A specified monetary amount; or
(B) A percentage, ratio, or fraction; or
(6) An omission of a correct taxpayer identification number to be included on a return; provided that a taxpayer shall be treated as having omitted a correct taxpayer identification number if the information provided by the taxpayer on the return with respect to the individual whose taxpayer identification number was provided differs from the information the department obtains from the issuer of the taxpayer identification number."
SECTION 2. Section 237-36, Hawaii Revised Statutes, is amended to read as follows:
"§237-36 Erroneous returns, disallowance of exemption,
payment. If any return made is
erroneous, or is so deficient as not to disclose the full tax liability, or if
the taxpayer, in the taxpayer's return, shall disclaim liability for the tax on
any gross income or gross proceeds of sales liable to the tax, or if the
taxpayer shall make application under section 237-23 for an exemption to which
the taxpayer is not entitled, the department of taxation shall correct the
error or assess the proper amount of taxes.
such] that recomputation results in an additional tax
liability, or if the department proposes to assess any gross income or gross
proceeds of sales by reason of the disallowance of an exemption claimed in the
return or for which application has been filed, the department shall first give
notice to the taxpayer of the proposed assessment, and the taxpayer shall
thereupon have an opportunity within thirty days to confer with the
department. After the expiration of
thirty days from the notification the department shall assess the gross income
or gross proceeds of sales of the taxpayer or any portion thereof which the
department believes has not theretofore been assessed, and shall give notice to
the taxpayer of the amount of the tax, and the amount thereof shall be paid
within twenty days after the date the notice was mailed, properly addressed to
the taxpayer at the taxpayer's last known address or place of business.
preliminary notice shall be necessary [
where the amount of the tax is
calculated by the department from gross income returned by the taxpayer as
subject to the tax (unless the taxpayer shall have claimed that the applicable
rate of tax is lower than the rate of tax applied by the department); in such
case the tax shall be due and payable on the tenth day after the date the
statement was mailed.] as provided in section 231- .
In a case of disallowance of an exemption for which application was made
under section 237-23 the department, before making an assessment, may require
the applicant, by demand made upon the applicant by mail or delivery thereof to
the address shown in the application, to file information returns as to the
applicant's gross income or gross proceeds of sales within [ such] a
reasonable time as the department may allow, and in the event of failure,
neglect, or refusal to comply with the demand, the department shall make an
assessment under section 237-38, in lieu of this section."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2018.
DOTAX; Authority to Correct Errors on Tax Returns
Authorizes the Department of Taxation to correct mathematical and clerical errors on tax returns and assess taxes based on these corrections prior to notifying the taxpayer.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.