Report Title:

Income Tax; Taxpayer Records

Description:

Clarifies the state taxpayer records law and specifies that a taxpayer is not liable for fines or penalties if in compliance with the law.

HOUSE OF REPRESENTATIVES	H.B. NO.	744
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO TAX RECORDS.

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

     SECTION 1.  Section 235-102, Hawaii Revised Statutes, is amended to read as follows:

     "§235-102  Records and special returns.  (a)  Records.  Every person liable to any tax imposed by this chapter, or for the collection or deduction thereof at source, shall keep full, complete, regular, and accurate books of account in which all the person's transactions shall be entered in regular order; provided that the director of taxation may[, regulation,] provide for the keeping of simpler accounts in cases where, by reason of the [smallness] size of the income or otherwise, undue hardship or expense will be caused by the keeping of full books of account.

(b)  All books of account required to be kept by this chapter shall be preserved [for a period of three years,] and subject to the following statute of limitation periods:

If a person: The period is:

(1) Owes additional taxes and paragraphs (2), (3), and (4) do not apply Three years;

(2) Does not properly report income and the unreported amount is more than twenty-five per cent of the gross income shown on the person's tax return Six years;

(3) Files a fraudulent tax return No limit;

(4) Fails to file a tax return No limit;

(5) Files a claim for a tax credit or tax refund after a tax return was filed Three or two years,

respectively, after the

tax was paid; and

(6) Files a claim for a loss from worthless securities Seven years;

except that the director [may], in writing, may consent to [their] the destruction of records within [such] the statute of limitation period or may require that [they] the records be kept longer.

     [(b)] (c)  Special returns and statements.  [Whenever it is necessary, in the judgment of the director, the] The director may require any [taxpayer, or] person subject to this chapter, or any person liable for the collection or deduction of tax at source, by notice served upon [the taxpayer or other person,] those persons, to [make such] provide records or returns or render [such] a signed [statements] statement as the director deems sufficient to show whether or not [the taxpayer or other person is] those persons are liable under this chapter.

(d)  Any person subject to this chapter who is in compliance with this section shall not be liable for any penalty or fine for the failure to preserve tax records under this chapter.

(e)  The director of taxation may adopt rules pursuant to chapter 91 to effectuate this section."

     SECTION 2.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 3.  This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2006.

INTRODUCED BY:

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