Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 1400 entitled:

begs leave to report as follows:

The purpose of this measure is to streamline the delinquent tax remission of penalties and interest process by removing the requirement that taxes are not delinquent for more than ninety days.

The measure also allows delinquent taxpayers who owe $50,000 or less in taxes to have their claims compromised by the Department of Taxation without the need for gubernatorial approval.

Your Committee finds that the size of the State's delinquent tax accounts grew significantly between June 30, 2001, and June 30, 2002. This increase is due to the September 11, 2001, terrorist attacks and its subsequent impact on the national and Hawaii economies. Current law allows the Department of Taxation to provide administrative relief by waiving penalties and interest added to any tax that is delinquent for ninety days or less, without gubernatorial approval. Claims that are owed after that date must be approved by the Governor through the compromise process. The difference in the timing is striking: it takes the State approximately one week to make a decision waiving penalties and interest on claims ninety days or under, and twelve to eighteen months for claims outside that time period.

Your Committee finds that there is substantial benefit to the State to make more use of the shorter waiver period, as the State receives its money much more quickly. Your Committee also finds that this bill will reduce the average time for the State to process and make a decision on offers of compromise, increase the number of accepted offers of compromise, and reach a realistic, timely, and appropriate acceptance rate.

Your Committee has amended the bill by specifying that all claims compromised by the Department of Taxation shall appear on the Department's website for five calendar days prior to approval. Your Committee also made technical nonsubstantive amendments for the purpose of clarity.

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. 1400, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1400, S.D. 1, and be placed on the calendar for Third Reading.