STAND. COM. REP. NO. 2605

Honolulu, Hawaii

RE:    S.B. No. 2238

       S.D. 1

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2012

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred S.B. No. 2238 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose and intent of this measure is to repeal Act 155, Session Laws of Hawaii 2010.

     Written comments in support of this measure were submitted by the Chamber of Commerce of Hawaii.

     Your Committee finds that Act 155, Session Laws of Hawaii 2010, was enacted to improve the efficiency of the state general excise tax by requiring all businesses with excise tax exemptions to register to do business in Hawaii, file their tax returns in a timely manner, and expressly claim their entitlement.  Your Committee also finds that, while well-intentioned, it is unclear whether Act 155 has resulted in any increase in tax revenues.

Your Committee also finds that Act 155 imposes disproportionately severe penalties for failure to file tax returns.  These penalties include forfeiture of any general excise tax benefits (exemptions, deductions, income splitting, credits, wholesale rates) of a taxpayer who fails to file an annual return in a timely manner, regardless of whether the taxpayer has filed all necessary periodic returns or has any tax liability.

     Your Committee has received written comments indicating that the taxpayers most likely to inadvertently violate the technical requirements of Act 155 are small businesses, individuals, and non-profit organizations who are least likely to have access to sophisticated tax advice and are least able to bear the burden of such severe penalties.  Your Committee believes that repealing Act 155 will make the state general excise tax law fairer and more reasonable.

     Your Committee has amended this measure by making technical, nonsubstantive amendments for the purposes of clarity and style.

     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. 2238, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 2238, S.D. 1.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

____________________________

DAVID Y. IGE, Chair