STAND

STAND. COM. REP. NO.3173

Honolulu, Hawaii

, 2002

RE: H.B. No. 2568

H.D. 1

S.D. 1

Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 2568, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE COLLECTION OF TAXES,"

begs leave to report as follows:

The purposes of this measure are to:

(1) Subject sales of products or services between affiliated companies or persons where consideration is not indicative of fair market value to the imposition of State taxes measured by the actual fair market value of the sale;

(2) Authorize the Department of Taxation to continuously levy upon salary or wages to enforce the payment of taxes;

(3) Provide that any person who honors a tax levy by surrendering the property or rights to property of a delinquent taxpayer shall be discharged from any liability to any person (in addition to the delinquent taxpayer) arising from the surrender or payment; and

(4) Broaden the class of persons liable for deducting and paying withholding taxes to include persons responsible within corporate entities and any employer regardless of organizational structure (corporation, limited liability company, etc.).

Testimony supporting this measure was received from the Department of Taxation. Comments on this measure were received from the Tax Foundation of Hawaii.

Your Committee finds that this measure enhances the ability of the Department of Taxation to administer taxes more effectively and efficiently. In addition, this measure changes state taxation laws to conform to federal law.

Upon further consideration, your Committee has amended this measure by clarifying that the requirement that the tax on transactions between affiliated companies or persons shall be based on the fair market value of the transaction is not limited to the sales of products or services, and includes all sales.

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. 2568, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2568, H.D. 1, 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,

		____________________________ BRIAN T. TANIGUCHI, Chair