Authorizes the ombudsman to obtain state tax returns and return information in connection with an investigation of a taxpayer's complaint about an administrative act of the department of taxation. Effective date July 1, 2006. (HB439 CD1)

A BILL FOR AN ACT

SECTION 1. Under current law, the ombudsman is authorized to investigate administrative acts of agencies. In so doing, the ombudsman may make inquiries and obtain relevant information as the ombudsman deems fit. A recent opinion by the state attorney general, though narrow in its interpretation, concluded that state law prohibited the ombudsman from obtaining state tax returns and return information in connection with the official duties of the ombudsman.

Allowing the ombudsman access to the state tax returns and return information of a taxpayer who files a complaint with the ombudsman regarding the processing of the taxpayer's tax return would fulfill the ombudsman's duty to investigate complaints without compromising the confidentiality of tax return information of taxpayers not involved in the investigation.

The purpose of this Act is to permit the ombudsman to obtain state tax returns and return information in connection with a taxpayer's complaint about an administrative act of the department of taxation.

SECTION 2. Chapter 231, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§231-   Authority and access to records. In an investigation of a taxpayer's complaint about an administrative act of the department of taxation, the ombudsman shall have access to the complainant's tax returns and return information required to be filed pursuant to title 14."

SECTION 3. Section 235-116, Hawaii Revised Statutes, is amended to read as follows:

"§235-116 Disclosure of returns unlawful; penalty. All tax returns and return information required to be filed under this chapter shall be confidential, including any copy of any portion of a federal return [which] that may be attached to a state tax return, or any information reflected in the copy of [such] the federal return. It shall be unlawful for any person[,] or any officer or employee of the State to intentionally make known [intentionally] information imparted by any income tax return or estimate made under sections 235-92, 235-94, 235-95, and 235-97 or wilfully [to] permit any income tax return or estimate [so made] or copy thereof, to be seen or examined by any person other than the taxpayer or the taxpayer's authorized agent, persons duly authorized by the State in connection with their official duties, the ombudsman pursuant to section 231-  , the Multistate Tax Commission or the authorized representative thereof, except as provided by law, and any offense against the foregoing provisions shall be [punished] punishable by a fine not exceeding $500 or by imprisonment not exceeding one year, or both."

SECTION 4. Section 237-34, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) All tax returns and return information required to be filed under this chapter, and the report of any investigation of the return or of the subject matter of the return, shall be confidential. It shall be unlawful for any person or any officer or employee of the State to intentionally make known information imparted by any tax return or return information filed pursuant to this chapter, or any report of any investigation of the return or of the subject matter of the return, or to wilfully permit any [such] return, return information, or report [so made], or any copy thereof, to be seen or examined by any person; provided that for tax purposes only, the taxpayer, the taxpayer's authorized agent, or persons with a material interest in the return, return information, or report may examine them. Unless otherwise provided by law, persons with a material interest in the return, return information, or report shall include:

Any violation of this subsection shall be a misdemeanor."

SECTION 5. Section 237D-13, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) All tax returns and return information required to be filed under this chapter, and the report of any investigation of the return or of the subject matter of the return, shall be confidential. It shall be unlawful for any person or any officer or employee of the State to intentionally make known information imparted by any tax return or return information filed pursuant to this chapter, or any report of any investigation of the return or of the subject matter of the return, or to wilfully permit any return, return information, or report [so made], or any copy thereof, to be seen or examined by any person; provided that for tax purposes only, the taxpayer, the taxpayer's authorized agent, or persons with a material interest in the return, return information, or report may examine them. Unless otherwise provided by law, persons with a material interest in the return, return information, or report shall include:

Any violation of this subsection shall be a misdemeanor. Nothing in this subsection shall prohibit the publication of statistics so classified as to prevent the identification of particular reports or returns and the items of the reports or returns."

SECTION 6. Section 251-12, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) All tax returns and return information required to be filed under this chapter, and the report of any investigation of the return or of the subject matter of the return, shall be confidential. It shall be unlawful for any person or any officer or employee of the State to intentionally make known information imparted by any tax return or return information filed pursuant to this chapter, or any report of any investigation of the return or of the subject matter of the return, or to wilfully permit any [such] tax return, return information, or report [so made], or any copy thereof, to be seen or examined by any person; provided that for surcharge tax purposes only, the lessor or tour vehicle operator, the lessor's or tour vehicle operator's authorized agent, or persons with a material interest in the return, return information, or report may examine them. Unless otherwise provided by law, persons with a material interest in the return, return information, or report shall include:

Any violation of this subsection shall be a misdemeanor. Nothing in this subsection shall prohibit the publication of statistics so classified as to prevent the identification of particular reports or returns and the items of the reports or returns."

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect on July 1, 2006.