Relating To Taxation Of Telecommunications Carriers.
The bill mandates the Department of Taxation to conduct tax audits of each telecommunications carrier within the state to identify potential underpayments of gross receipts and property taxes dating back to January 1, 1990. The audits are expected to begin by October 1, 2021, and to conclude by September 30, 2025, with reports on audit findings required to be presented to the legislature in subsequent sessions. This requirement for audits could significantly increase revenue for the state and local jurisdictions through the identification of previously unreported tax liabilities.
House Bill 1203, also referred to as the Telecommunications Taxation Act, aims to address the valuation practices and tax liabilities of telecommunications carriers operating in Hawaii. The bill specifies that all telecommunications companies must utilize generally accepted accounting principles (GAAP) when calculating their tax obligations, a notable shift from the previously used Federal Communications Commission cost accounting rules, which are now outdated. This legislation is intended to ensure full valuation of assets, thus preventing tax underpayments by these carriers.
Proponents of HB 1203 argue that it will create a fairer tax structure and ensure that telecommunications companies contribute their fair share to state and local revenues. However, concerns may arise regarding the impact of increased regulations on these companies and the potential for heightened operational costs as they adapt to new accounting standards. There may also be apprehension among carriers concerning the administrative burden of audits and ensure compliance with GAAP, which could complicate their financial operations.