STAND. COM. REP. NO. 3026

Honolulu, Hawaii

RE: H.B. No. 2396

H.D. 1

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2018

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 2396, H.D. 1, entitled:

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

begs leave to report as follows:

The purpose and intent of this measure is to increase funding for the Special Enforcement Section of the Department of Taxation to investigate fraud and noncompliance, especially in relation to the transient accommodations tax.

More specifically, the measure increases the annual deposit ceiling of the tax administration special fund from $700,000 to $1,000,000.

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

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

Your Committee finds that the Special Enforcement Section plays a major role in the Department of Taxation's efforts to encourage compliance with Hawaii's tax laws. Your Committee believes that increasing the Special Enforcement Section's operational budget and expanding its workforce would enable the Special Enforcement Section to enhance its tax enforcement functions.

Your Committee has amended this measure by:

(1) Increasing the annual deposit ceiling of the tax administration special fund to $2,000,000;

(2) Authorizing the use of tax administration special fund moneys to fund support staff positions in the Special Enforcement Section of the Department of Taxation;

(3) Authorizing the Department of Taxation to establish five full-time equivalent (5.0 FTE) positions within the Special Enforcement Section; and

(4) Changing the effective date from July 1, 2030, to July 1, 2018.

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 H.B. No. 2396, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2396, H.D. 1, 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,

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DONOVAN M. DELA CRUZ, Chair