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THE SENATE |
S.B. NO. |
3176 |
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THIRTY-SECOND LEGISLATURE, 2024 |
S.D. 1 |
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STATE OF HAWAII |
H.D. 1 |
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A BILL FOR AN ACT
RELATING TO TAX ENFORCEMENT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Section 235-107, Hawaii Revised Statutes, is amended to read as follows:
"§235-107 Procedure upon failure to file return. If any taxpayer or employer liable to make
and file a return under this chapter fails, neglects, or refuses to make and
file a return as required within the time prescribed, or declines to
authenticate a return if made, the department of taxation shall make a return
for the taxpayer or employer from the best information obtainable and shall
levy and assess against the taxpayer or employer the tax upon the amount of
taxable income, or the tax required to be withheld from wages and paid over, as
shown by such return, to which shall be added the penalties and interest
provided by section 231-39. The
assessment shall be presumed to be correct until and unless, upon an appeal
duly taken as provided in this chapter, the contrary shall be clearly proved by
the taxpayer or employer and the burden of proof upon appeal shall be upon the
taxpayer or employer to disprove the correctness of the assessment. Notice of the assessment shall be given, and
an appeal therefrom may be taken, in the manner and within the time provided in
section [235-108(b)] 235-108(c) and section 235-114."
SECTION
2. Section
235-108, Hawaii Revised Statutes, is amended to read as follows:
(b)
Any person liable for any tax imposed under this chapter or for the
collection or deduction thereof at the source shall produce all account books,
bank books, bank statements, records, vouchers, copies of federal tax returns,
and any and all other documents and evidence relevant to the determination of
the income or wages as required to be returned under this chapter within thirty
business days after a written demand is mailed to that person by the
department, or as soon thereafter as the director may deem reasonable under the
circumstances. Any person who fails to produce
documents or evidence as provided in this subsection shall be prohibited from
introducing the documents or matters in evidence, or
otherwise relying upon or utilizing said documents or matters, in any tax
appeal or action under section 40-35 arising from the audit in which the
documents or matters were demanded, unless it is shown that the failure is due
to reasonable cause and not neglect or refusal.
[(b)] (c) Additional taxes. If the department of taxation discovers from
the examination of the return or otherwise that income, or the liability of an
employer in respect of wages, or any portion thereof, has not been assessed, it
may assess the same and give notice to the taxpayer or employer of the
assessment, and the taxpayer or employer shall thereupon have an opportunity
within thirty days to confer with the department as to the proposed
assessment. After the expiration of
thirty days from [such] the notification, the department
shall assess the income of the taxpayer, or the liability of the employer in
respect of wages, or any portion thereof [which] that it believes
has not heretofore been assessed, and shall give notice to the taxpayer or
employer of the amount of the tax and interest and penalties if any, and the
amount thereof shall be paid within twenty days after the date the notice was
mailed, properly addressed to the taxpayer or employer at the taxpayer's or
employer's last known address or place of business."
SECTION 3. Section 235-110, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) This section [does] shall not
apply in the case of a payment made pursuant to an assessment by the department
of taxation under section 235-107 or [235-108(b).] 235-108(c). No refund or overpayment credit [may] shall
be had under this section in any event unless the original payment of the tax
was due to the law having been interpreted or applied in respect of the
taxpayer concerned differently than in respect of the taxpayers generally. As to all tax payments for which a refund or
credit is not authorized by this section (including without prejudice to the
generality of the foregoing cases of unconstitutionality) the remedies provided
by appeal or under section 40-35 are exclusive.
However, nothing in this subsection shall be deemed applicable to a
credit or refund authorized by sections 235-55, 235-66, or 235-71, or resulting
from the tax as returned being less than the tax as estimated; in any of these
cases a credit or refund [is] shall be authorized even though the
tax for the taxable year remains subject to determination by the department and
assessment as provided by law."
SECTION 4. Section 236E-18.5, Hawaii Revised Statutes,
is amended to read as follows:
"[[]§236E-18.5[]] Audit of return; procedure upon failure to
file return; additional taxes; limitation period. (a)
The director of taxation, or the director's designee, [is authorized
and empowered to] may examine all account books, bank books, bank
statements, records, vouchers, copies of federal tax returns, and any and all
other documents and evidence [having any relevance] relevant to
the determination of any amount relevant to the Hawaii transfer tax, as
required to be returned under this chapter, and the director may employ the
director's powers under section 231-7 for these purposes.
(b)
Any person liable for any tax imposed under
this chapter shall produce all account books, bank books, bank
statements, records, vouchers, copies of federal tax returns, and any and all
other documents and evidence relevant to the determination of the income as
required to be returned under this chapter within thirty business days after a
written demand is mailed to that person by the department, or as soon thereafter
as the director may deem reasonable under the circumstances. Any person who fails to produce documents or
evidence as provided in this subsection shall be prohibited from introducing
the documents or matters in evidence, or otherwise relying upon or utilizing
said documents or matters, in any tax appeal or action under section 40-35
arising from the audit in which the documents or matters were demanded, unless
it is shown that the failure is due to reasonable cause and not neglect or
refusal.
[(b)]
(c) If the department discovers
from the examination of the return or otherwise that any amount has not been
assessed or otherwise properly included in determining any amount relevant to
the Hawaii transfer tax, it may assess those amounts.
[(c)]
(d) If the person required to
file the return required under this chapter fails to file the return or
declines to authenticate a return, the department shall make a return for the
person based upon the best information obtainable and shall levy and assess
against the person the tax as shown on the return.
[(d)]
(e) For the purposes of this
section, the department shall give notice of the assessment to the person
required to file the return required under this chapter. The person put on notice shall have thirty days
to confer with the department as to the proposed assessment. After the expiration of thirty days from the
notification, the department shall finalize the assessment and give notice to
the person of the tax and interest and penalties, if any. The amount shall be paid within twenty days
after the date the notice, properly addressed to the person required to file
the return required to be filed under this chapter, is mailed to the person's
last known address.
[(e)]
(f) In the case of an audit
commenced under this section, the amount of Hawaii transfer tax imposed by this
chapter shall be assessed or levied within three years after the return was
filed, or within three years of the due date prescribed for the filing of that
return, whichever is later. In the case
of a false or fraudulent return with intent to evade tax, or of a failure to
file a return, the tax may be assessed or levied at any time; provided that the
burden of proof with respect to the issues of falsity or intent to evade tax
shall be upon the State. The limitation
period shall be suspended if the person required to file the return agrees to
suspend the period."
SECTION
5. Section 237-39, Hawaii Revised
Statutes, is amended to read as follows:
"§237-39 Audits; procedure, penalties. (a)
For the purpose of verification or audit of a return made by the
taxpayer, or where there is reasonable ground to believe that any return made
is so deficient as not to form the basis of a satisfactory assessment of the
tax, or for the purpose of making an assessment where no return has been made,
the department of taxation or the Multistate Tax Commission pursuant to chapter
255, or the authorized representative thereof, may examine all account books,
bank books, bank statements, records, vouchers, taxpayer's copies of federal
tax returns, and any and all other documents and evidence [having any
relevancy] relevant to the determination of the gross income or
gross proceeds of sales of any taxpayer as required to be returned under this
chapter and may summon or require the attendance of the person by or for whom
the return, if any, has been made or whose tax is being assessed, and any
employee of the person, and may summon or require the attendance of any person
having knowledge in the premises, naming the time and place in the summons, and
may require the production of any books, statements, or other evidence open to
examination, and may take testimony in reference to any matter relevant to the
gross income or gross proceeds of sales of the taxpayer for the period under
consideration, with power to require that the person so called and appearing
shall be interrogated under oath and to administer the oath.
(b)
Any person liable for any tax imposed under this chapter or for the
collection or deduction thereof at the source shall produce all account books,
bank books, bank statements, records, vouchers, taxpayer's copies of federal
tax returns, and any and all other documents and evidence relevant to the
determination of the gross income or gross proceeds of sales as required to be
returned under this chapter within thirty business days
after a written demand is mailed to that person by the department, or as soon
thereafter as the director may deem reasonable under the circumstances. Any person who fails to produce documents or
evidence as provided in this subsection shall be prohibited from introducing
the documents or matters in evidence, or otherwise relying upon or utilizing
said documents or matters, in any tax appeal or action under section 40-35
arising from the audit in which the documents or matters were demanded, unless
it is shown that the failure is due to reasonable cause and not neglect or
refusal.
[(b)]
(c) If the department determines that
any gross income or gross proceeds of sales liable to the tax have not been
assessed, the department may assess the same as provided in sections 237-36 and
237-38.
[(c)] (d) Any individual knowingly giving false
testimony under oath at any hearing before the department shall be guilty of
perjury and shall be punished as provided by law.
[(d)] (e) Any person refusing or neglecting to obey any
summons issued by the department, and any individual appearing and refusing to
testify under oath, shall be fined $50 for the first offense and $100 for each
succeeding offense."
SECTION 6. Section 244D-8, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) If it should appear upon [such] the
examination or thereafter within five years after the filing of the return, or
at any time if no return has been filed, as a result of [such] the
examination or as a result of any examination of the records of the taxpayer or
of any other inquiry or investigation, that the correct amount of the tax is
greater than that shown on the return, or that any tax imposed by the chapter
has not been paid, an assessment of such tax may be made in the manner provided
in section [235-108(b).] 235-108(c). The amount of the tax for the period covered
by the assessment shall not be reduced below the amount determined by an
assessment so made, except upon appeal or in a proceeding brought pursuant to
section 40-35."
SECTION 7. Section 245-7, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) If it should appear upon the examination or
within five years after the filing of the return, or at any time if no return
has been filed, as a result of the examination, or as a result of any
examination of the records of the wholesaler or dealer, or of any other inquiry
or investigation, that the correct amount of the taxes is greater than that
shown on the return, or that any taxes imposed by this chapter have not been
paid, an assessment of the taxes may be made in the manner provided in section
[235-108(b).] 235-108(c).
The amount of the taxes for the period covered by the assessment shall
not be reduced below the amount determined by an assessment so made, except
upon appeal or in a proceeding brought pursuant to section 40-35."
SECTION 8. Statutory material to be repealed is
bracketed and stricken. New statutory
material is underscored.
SECTION 9. This Act shall take effect on July 1, 3000; provided that:
(1) Sections 2 and 5 shall apply to taxable years beginning after December 31, 2023; and
(2) Section 4 shall apply to decedents dying and taxable transfers occurring after December 31, 2023.
Report Title:
Tax Enforcement; Audits; Time to Respond; Failure to Respond; Appeals
Description:
Provides deadlines for taxpayers under audit to comply with demands to produce documents and evidence. Requires the Tax Appeal Court to preclude documents or evidence not produced pursuant to a demand from being introduced in evidence in a tax appeal or action unless the failure was due to reasonable cause. Effective 7/1/3000. (HD1)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.