STAND. COM. REP. NO. 2677

Honolulu, Hawaii

RE:    S.B. No. 2925

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Eighth State Legislature

Regular Session of 2016

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred S.B. No. 2925 entitled:

"A BILL FOR AN ACT RELATING TO TAX ADJUSTMENTS,"

begs leave to report as follows:

     The purpose and intent of this measure is to specify that taxpayers who file an amended return under section 235-101, Hawaii Revised Statutes, may not claim a refund unless the refund is claimed within the time limits established by section 235-111, Hawaii Revised Statutes.

     Your Committee received testimony in support of this measure from the Department of Taxation.

     Your Committee received testimony in opposition to this measure from one individual.

     Your Committee received comments on this measure from the Chamber of Commerce Hawaii and Tax Foundation of Hawaii.

     Your Committee finds that this measure is intended to address the possibility that a taxpayer who has failed to file a refund claim within the time limits established by section 235-111, Hawaii Revised Statutes, may seek to extend the statute of limitations by merely submitting an amended federal tax return, even if no substantive changes are made to the return and irrespective of whether the return is actually accepted by the Internal Revenue Service.

     However, your Committee has received testimony raising concerns that the measure, as currently drafted, is confusing and could lead to unfair treatment of taxpayers.  In order to address these concerns, the Department of Taxation provided proposed language that replaces the measure's current amendments to section 235-101, Hawaii Revised Statutes, with amendments to specify that the untimely filing of an amended federal income tax return does not reopen Hawaii's statute of limitations for claiming a tax refund.  Your Committee notes that the proposed language is similar to recommendations made by the Tax Foundation of Hawaii.

     Your Committee has amended this measure by deleting the original amendments to section 235-101, Hawaii Revised Statutes, and replacing them with the amendments recommended by the Department of Taxation.

     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. 2925, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2925, S.D. 1, and be placed on the calendar for Third Reading.

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

________________________________

JILL N. TOKUDA, Chair