THE SENATE

S.B. NO.

626

THIRTY-FIRST LEGISLATURE, 2021

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to taxation of telecommunications carriers.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


SECTION 1. The legislature finds that although the Federal Communications Commission cost accounting rules no longer apply to price cap local exchange carriers or other carriers, those Federal Communications Commission accounting rules are still routinely used to value the carriers' tangible property for property tax purposes and, sometimes, to calculate intrastate gross receipts taxes in local jurisdictions. Accordingly, some carriers do not use generally accepted accounting principles or traditional valuation methods for the purposes of paying state or local taxes.

The legislature further finds that telecommunications companies routinely "undercount" their installed fiber and copper assets by "rendering" only active cables and ignoring dark fiber or reserve copper for valuation purposes, resulting in a significant underpayment to state and local taxing jurisdictions.

Audits in this area are rare, and quite often, telecommunications companies are unaware that they should be using generally accepted accounting principles rather than the now inapplicable Federal Communications Commission uniform system of accounts.

The purpose of this Act is to require:

(1) The department of taxation to conduct a tax audit of each telecommunications carrier operating in the State of Hawaii to identify past underpayments of gross receipts taxes and property taxes, if any, dating back to January 1, 1990; and

(2) That telecommunications carriers operating in Hawaii use generally accepted accounting principles rather than the outdated Federal Communications Commission cost accounting rules to ensure that carriers render all of their property, not just that which is in service.

SECTION 2. Chapter 269, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"269-    Telecommunications carriers; generally accepted accounting principles. All telecommunications carriers that operate in the State shall use generally accepted accounting principles in calculating their tax liabilities to the State and counties."

SECTION 3. (a) The department of taxation shall conduct a tax audit of each telecommunications carrier operating in the State of Hawaii. The audit shall identify past underpayments of gross receipts taxes and property taxes, if any, dating back to January 1, 1990, by each telecommunications carrier.

(b) The department of taxation shall begin conducting the audits no later than October 1, 2021, and shall conclude the audits no later than September 30, 2025.

(c) The department of taxation shall submit:

(1) A preliminary report of the findings of each audit to the legislature no later than twenty days before the regular session of 2023; and

(2) A final report of the findings of each audit and the department's recommendations, including any proposed legislation, to the legislature no later than twenty days before the regular session of 2026.

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

DOTAX; Tax Audits; Telecommunications Companies; Generally Accepted Accounting Principles

 

Description:

Requires DOTAX to audit telecommunications companies operating in Hawaii to identify past underpayments of gross receipts taxes and property taxes, if any, dating back to January 1, 1990. Requires all telecommunications carriers that operate in Hawaii to use generally accepted accounting principles in calculating their tax liabilities to the State and counties.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.