Requires comfort letters received by the department of taxation to be open to public inspection and copying.

A BILL FOR AN ACT

SECTION 1. The purpose of this Act is to open to public inspection comfort letters of the department of taxation that provide qualified high technology businesses and their investors guidance on the qualifications for four types of tax incentives available under sections 235-7.3, 235-9.5, 235-110.9, and 235-110.91, Hawaii Revised Statutes, while at the same time maintaining the confidentiality of tax return information.

The legislature finds that promotion of transparency and uniform, fair, and consistent treatment among taxpayers can be enhanced by opening to public inspection comfort letters. At the same time, the legislature finds that the disclosure of information by qualified high technology businesses may be limited due to the nature of the highly sensitive and proprietary information. The legislature finds the necessity of keeping information disclosed by qualified high technology businesses confidential.

This Act is an exception to the well-established principle of confidentiality of tax information and thus, it is narrowly tailored to achieve its purpose to promote transparency and uniform, fair, and consistent treatment among taxpayers by opening to public inspection comfort letters while maintaining the confidentiality of tax return information in order to protect highly sensitive and proprietary information of the qualified high technology businesses and their investors.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235-   Public inspection, copying, and application of comfort letters. (a) Every comfort letter by the department, as redacted by the qualified high technology businesses and their investors, shall be open to public inspection and copying as provided in this section, notwithstanding any law to the contrary.

A comfort letter open to public inspection shall not be used or cited as precedent and shall apply only to the qualified

(b) For the purposes of this section, "comfort letter" means a written letter issued by the department which provides guidance to a qualified high technology business and its investors on the qualification of the following tax incentives:

(c) For purposes of subsections (a) and (b), a "qualified high technology business" means the same as defined in section 235-7.3 and section 235-110.9, as applicable, and an "investor" means any person making an investment as defined in section 235-1 and qualifying for the high technology business investment tax credit under section 235-110-9.

(d) In order for the department to make any comfort letter available for public inspection and copying under subsection (a), the qualified high technology business and its investors shall provide the department a redacted version of the comfort letter within forty-five days of issuance of the comfort letter by the department. If a qualified high technology business and its investors fail to satisfy this requirement, the department may invalidate the comfort letter except where the qualified high technology business and its investors can demonstrate reasonable cause.

(e) Copies of comfort letters shall be furnished upon the payment of $1 a page.

(f) Except as provided in this section, comfort letters shall remain subject to all laws governing tax returns and tax return information and the department shall not be required by any court to disclose any comfort letter, except specifically authorized by tax laws of this State.

(g) No officer or employee of the department shall be in violation of any law prohibiting the disclosure of such returns or tax return information, or in violation of any other law

(h) The department may adopt rules pursuant to chapter 91 to implement this section."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon approval and shall apply to comfort letter requests received or postmarked on or after July 1, 2005.