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HB1174
HOUSE OF REPRESENTATIVES
H.B. NO.
1174
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO THE PROCEDURE FOR PAYMENT UNDER PROTEST
LAWSUITS
.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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SECTION 1.
�
The legislature finds that
Grace
Business Development Corporation v. Kamikawa
, 92 Hawai
ʻ
i 608, 994 P.2d 540
(2000), held that if a taxpayer pays money under protest but then sues for a
refund before the defendant agency has formally taken a position on whether the
money is due, the appeal is to be dismissed.
�
If the agency later decides that the money is indeed due, it is usually
too late for the suit to be refiled, potentially allowing the agency to keep
the disputed moneys as a government realization without allowing the taxpayer
to obtain a judicial ruling on the merits of the exaction.
�
To prevent the possibility of injustice, this
Act adds procedural safeguards to ensure that the courts will be able to reach
the merits of the dispute.
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Accordingly,
the purpose of this Act is to:
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(1)
�
Allow for the interest earned on payments
under protest in the litigated claims fund to be paid in nontaxation cases if
the claimant prevails; and
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(2)
�
Establish a procedure for the disposition of
moneys and refiling of actions when a payment under protest suit is filed
prematurely.
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SECTION
2
.
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Section 40-35,
Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read
as follows:
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"
(b)
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Action to recover
moneys paid under protest or proceedings to adjust the claim may be commenced
by the payer or claimant against the public accountant to whom the payment was
made, in a court of competent jurisdiction, [
within
]
no later than
thirty days from the date of payment.
�
If
no suit or proceeding is brought within [
the thirty-day period,
]
that
time,
the money paid under protest shall be deposited into the appropriate
account in the treasury of the State by the accountant and the amount deposited
shall thereupon become a government realization.
�
Any action to recover payment of taxes under
protest shall be commenced in the tax appeal court.
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(c)
�
If action to recover the money paid under protest or a proceeding to
adjust the claim is
timely
commenced [
within the thirty-day period
],
the amount paid under protest shall, pending final decision of the cause, be
deposited by the public accountant into the state treasury, in a fund to be
known as the "litigated claims fund", together with subsequent
payments or portions thereof, made to the accountant under the same
protest.
�
If judgment is rendered in
favor of the claimant, the claimant shall be paid the amount of the judgment
out of the litigated claims fund by warrants signed by the comptroller upon
vouchers approved by the head of the department, board, bureau, commission, or
other agency with which the claimant had the dispute.
�
If the amount of money in the litigated
claims fund is insufficient to pay the judgment the head of the department,
board, bureau, commission, or other agency with which the claimant had the
dispute shall include in their respective budget requests to the department of
budget and finance an amount necessary to pay the judgment, plus interest, as
provided herein.
�
Interest [
at the
rate of two per cent a year
]
earned on the payment by the litigated
claims fund
from the date of each payment under protest shall also be paid
out of the amount appropriated for the judgment payable to the claimant;
provided that if the claim is for the recovery of taxes paid under protest by
the claimant, the rate of interest and the overpayment of taxes shall be
refunded in the manner provided in section 231-23(c) and (d).
�
The amount of the judgment to be paid to the
claimant shall be ascertained by the head of the department, board, bureau,
commission, or other agency with which the claimant had the dispute from a
certified copy of the judgment, which shall be the authority for making payment
to the claimant.
�
If judgment is rendered
against the claimant[
,
]
on the merits,
the amount of money paid
by the claimant under protest [
which
]
that
is in the litigated
claims fund shall be deposited into the appropriate account in the treasury of
the State and the amount shall become a government realization.
�
If the claimant's suit is determined to
have been brought prematurely because the agency had not rendered a final
decision, then the claimant's payment may be retained in the litigated claims
fund and:
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(1)
�
If the agency
then renders a final decision, the claimant may, within thirty days after
notice of the decision, refile the action for a refund of the payment that is
in the litigated claims fund, whereupon the court shall have jurisdiction over
the refiled action; provided that if the agency decides against the claimant
and no suit or proceeding is brought within thirty days after notice of the
decision, the money paid under protest shall be deposited into the appropriate
account in the treasury of the State and the amount shall become a government
realization; or
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(2)
�
If the agency
has not rendered a final decision within one hundred eighty days after the date
of the claimant's payment, or decides in favor of the claimant, the agency
shall refund the payment to the claimant with interest the same as if judgment
had been rendered for the claimant, and certify to the court that it has done
so.
"
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SECTION
3.
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Statutory material to be repealed is
bracketed and stricken.
�
New statutory
material is underscored.
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SECTION 4.
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This Act shall take effect upon its approval.
INTRODUCED BY:
_____________________________
Report Title:
Payments
Under Protest; Procedure
Description:
Allows
for the interest earned on payments under protest in the litigated claims fund
to be paid in nontaxation cases if the claimant prevails.
�
Establishes a procedure for the disposition
of moneys and refiling of actions when a payment under protest suit is filed
prematurely.
The summary description
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not legislation or evidence of legislative intent.