Hawaii – Department Creates Standard to Determine Whether Delinquent Taxes are Uncollectible

SALT Report 2413 – The Hawaii State Legislature enacted legislation that authorizes the Department of Taxation to use a reasonableness standard to determine whether delinquent state taxes are uncollectible, rather than waiting the two-years that was previously required.

Senate Bill 1187 provides that an account can be deleted from the Department’s records if the Department finds that there is reasonable cause to delete that account. The Department will consider factors such as the financial condition of the taxpayer, the inability to locate the taxpayer, the costs of collection with respect to the amount of tax owed, the health of the taxpayer, and the prospective future income of the taxpayer.

If the Department finds an account to be uncollectable, the Department is required to enter that account into a special record log and delete that same account from all other books maintained by the Department. At this point, the legislation releases the Department from any further duty to collect the taxes.

The authors of the Bill state that the minimum two year period created undue stress for taxpayers who may have health or insurmountable financial problems and also tied up the Department’s financial resources and manpower for amounts that they would likely never collect.

The provisions of this Bill are now in effect and retroactive to January 1, 2013.

For Further Information

Hawaii State Legislature – Senate Bill 1187, Laws 2013