Hawaii Senate Bill SB3145

Hawaii 2022 Regular Session

• Introduced: 1/26/22
• Refer: 1/26/22

Caption

Relating To State Tax Administration.

Impact

The proposed changes are set to significantly alter the operational landscape for taxpayers in Hawaii. By mandating electronic filing, SB3145 seeks to reduce the use of paper filings, which can be cumbersome and prone to errors. Tax return preparers who manage more than ten returns of a similar type are also required to follow electronic filing protocols. Moreover, nonresidents who derive income through partnerships, estates, or trusts in Hawaii are required to adhere to new withholding tax obligations, ensuring that the state collects taxes more efficiently.

Summary

SB3145 aims to modernize state tax administration by allowing the Department of Taxation in Hawaii to mandate electronic filing of specific tax returns. This bill targets various groups of taxpayers, particularly those with significant liability thresholds, such as employers with withholding tax liabilities exceeding $40,000 and taxpayers with income tax liabilities above certain limits. The bill is part of an ongoing effort to streamline tax processes and reduce administrative burdens, thereby improving efficiency within the state's tax system.

Contention

One notable point of contention surrounding the bill involves the increased penalties associated with late filings and payments. The legislation raises the maximum late filing penalty from 25% to 75%, which critics argue could impose a heavy burden on individuals and small businesses that may struggle with electronic filing. Additionally, there are concerns about the fairness of requiring electronic filing for taxpayers not liable to do so under federal law, raising questions about the state's authority to impose stricter standards than those applicable at the federal level. The bill’s passage might thus elicit debate on the balance between administrative efficiency and taxpayer rights.