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HB2578
HOUSE OF REPRESENTATIVES
H.B. NO.
2578
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII
A BILL FOR AN ACT
relating
to due process for establishing personal liability for tax
.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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SECTION 1.
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The legislature finds that under the general
excise tax law, the State may collect unpaid liability for tax against
responsible persons associated with an entity whose tax is unpaid.
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However, there is no clear process for
adjudicating disputes between the department of taxation and a person allegedly
responsible for the tax.
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The department
of taxation has taken the position that the disputed tax must be paid under
protest for there to be any judicial review.
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However, this may not be a viable alternative for a taxpayer alleged to
have personal liability because of a minuscule interest in a company with a
large amount of unpaid taxes.
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Therefore, the purpose of this Act
is to apply the normal tax dispute resolution processes to a responsible person
determination, thereby affording an alleged responsible person the same due
process provided to others who are assessed taxes.
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SECTION
2
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Section
237-41.5, Hawaii Revised Statutes, is amended to read as follows:
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�237-41.5
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Certain amounts held
in trust; liability of key individuals.
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(a)
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There shall be personal liability for the
taxes imposed under this chapter as provided in this section for the following
amounts of gross income or gross proceeds:
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(1)
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Any amount
collected as a recovery of the taxpayer's liability under this chapter, where
the amount is passed on as the tax owed by the taxpayer under this chapter for
the transaction and is separately stated or accounted for in a receipt,
contract, invoice, billing, or other evidence of the business activity; or
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(2)
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An amount equal to
the tax liability under this chapter on a transaction where a taxpayer does not
separately state or account for the amount as a tax recovery as provided in
paragraph (1).
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For purposes of this paragraph,
the amount of the imputed tax liability is the result of multiplying the gross
income or gross proceeds received in the transaction by the tax rate.
The amounts under paragraphs (1) and (2) shall be
held in trust for the benefit of the State and for payment to the State in the
manner and at the time required by this chapter.
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(b)
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The personal liability under this section
applies to any officer, member, manager, or other person having control or
supervision over amounts of gross proceeds or gross income collected to pay the
general excise tax and held in trust under subsection (a), or who is charged
with the responsibility for the filing of returns or the payment of general
excise tax on gross income or gross proceeds collected and held in trust under
subsection (a).
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The person shall be
personally liable for any unpaid taxes and interest and penalties on those
taxes, if such officer or other person wilfully fails to pay or to cause to be
paid any taxes due from the taxpayer pursuant to this chapter.
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This subsection shall not apply to
any officer, manager, or other person having control or supervision over
amounts of gross proceeds or gross income collected to pay the general excise
tax and held in trust under subsection (a), or who is charged with the
responsibility for the filing of returns or the payment of general excise tax
on gross income or gross proceeds collected and held in trust under subsection
(a) for a nonprofit organization.
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For purposes of this subsection:
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"Nonprofit
organization" means a corporate entity, association, or other duly
chartered entity that is registered with the State and is exempt from the
application of this chapter pursuant to section 237-23(a)(3), (4), (5), (6), or
(7).
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"Wilfully
fails to pay or to cause to be paid" shall be construed in accordance with
judicial interpretations given to similar provisions of the Internal Revenue
Code; consistent therewith, the term "wilfully" shall mean a
voluntary, intentional violation of a known legal duty.
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(c)
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An officer, member, manager, or other responsible person shall be liable
only for general excise taxes on gross income or gross proceeds collected, plus
interest and penalties on those taxes, that became due during the period the
person had control, supervision, responsibility, or a duty to act for the
taxpayer as described in subsection (b) of this section.
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(d)
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Persons liable under subsection (b) are exempt from liability when
nonpayment of the general excise tax on gross income or gross proceeds held in
trust is for good cause as determined by the director.
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(e)
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The voluntary or involuntary dissolution of the taxpayer or the
withdrawal or surrender of its right to engage in business in this State shall
not discharge the liability hereby imposed.
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(f)
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A determination that a person is liable for
the unpaid taxes of another under this section shall be an assessment to which
section 237-36 shall apply and from which a person aggrieved may appeal under
section 237-42.
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SECTION
3.
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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:
General
Excise Tax; Personal Liability; Due Process; Appeals
Description:
Provides
that a determination of personal liability for another person's unpaid taxes is
an assessment subject to the due process procedures and appeals available for
other assessments.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.