HB 2429

HOUSE OF REPRESENTATIVES
H.B. NO.
2429
THIRTY-THIRD LEGISLATURE, 2026
H.D. 2
STATE OF HAWAII
S.D. 2
C.D. 1
A BILL FOR AN ACT
RELATING TO TAX EXPENDITURE EVALUATION.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
���� SECTION 1.� The legislature finds that certain tax
expenditures should be evaluated annually to determine whether they are
efficiently fulfilling their intended purpose.
���� Once enacted, these provisions often remain
in place for years with limited reassessment.�
Periodic review and evaluation of tax expenditures is essential to
ensure they remain effective, fair, and aligned with evolving public
priorities.� Regular evaluation
strengthens accountability, supports sound budget decisions, ensures equitable
competition, and ultimately maximizes benefits for taxpayers.
���� The legislature further finds that income
tax credits and general excise and use tax exemptions represent a form of
public spending, even though they appear as reduced revenue rather than direct
expenditures.� Without systematic
evaluation, policymakers and the public may lack clear insight, or even hard
data, that can show how public resources are being used and whether anticipated
outcomes are being achieved.
���� Especially in this uncertain economic
climate, there is constant pressure to allocate limited resources among
competing needs, such as education, health care, infrastructure, and public
safety.� Tax expenditures that were
justified under past economic or social conditions may no longer reflect
current priorities.� Reviewing these
provisions allows lawmakers to determine whether funds tied up in tax
incentives could be better directed elsewhere or whether successful programs
merit continued or expanded support.�
Periodic evaluation helps to align tax incentives with current budget
priorities.
���� The legislature believes that effective tax
policy should be guided by data, rather than assumptions.� Periodic reviews allow for the measurement of
outcomes, such as job creation, economic growth, investment levels, or targeted
social benefits, relative to the cost of the incentive.� When returns are clearly defined and
measured, policymakers can distinguish between programs that deliver strong
value and those that fall short.
���� The legislature recognizes that regular
review can determine if initial objectives have been achieved.� Some tax expenditures are enacted with
specific goals, such as encouraging renewable energy development, revitalizing
distressed communities, or supporting research and development.� Over time, circumstances may change or goals
may be met.� Periodic review can provide
the data that can point to whether a credit or exemption should be continued,
modified, phased out, or replaced with a more effective approach.� A tax expenditure that made sense decades ago
may no longer be relevant or efficient today.�
Periodic evaluation ensures that tax policy adapts to changing realities
and necessary adjustments are made to maintain effectiveness and fairness.
���� Most importantly, regular review provides
better data for long-term oversight.�
Collecting and analyzing consistent information on tax expenditures
improves legislative oversight and policy design.� High-quality data enables evidence-based
decision-making, reduces reliance on anecdotal claims, and strengthens the
overall integrity of the tax system.
���� The legislature also recognizes that one
possible benefit of regular review is ensuring equitable competition among key
industry sectors.� Long-standing tax
expenditures can unintentionally favor certain industries or firms, creating
market distortions and competitive imbalances.�
Periodic review helps determine whether incentives continue to serve a
legitimate public purpose or whether they provide unfair advantages that hinder
innovation and competition.� A level
playing field encourages efficiency and economic resilience across sectors.
���� Additionally, from the taxpayer's
perspective, periodic evaluation helps identify tangible benefits.� Taxpayers deserve assurance that foregone
revenue translates into public value, such as economic opportunity, improved
services, or long-term fiscal stability.
���� The legislature notes that the periodic
review and evaluation of tax expenditures is not merely a best practice, but a
necessity for responsible fiscal management.�
By promoting accountability, aligning incentives with budget priorities,
measuring returns, ensuring fair competition, and adapting to change,
government can ensure that tax policies serve their intended purpose and
deliver meaningful value to taxpayers.�
Regular evaluation strengthens public trust and helps build a more
effective, equitable, and sustainable tax system.� Periodic evaluations can clarify whether tax
incentives truly benefit the broader public or primarily serve narrow
interests.
���� Accordingly, the purpose of this Act
is to facilitate tax reviews and the State's evaluation of tax policies by:
���� (1)� Requiring the department of business, economic
development, and tourism, in collaboration with the department of taxation, to
study the effectiveness of tax expenditures, prepare summary descriptive
statistics, submit annual reports to the legislature, and develop appropriate
schedules and tax return forms to collect adequate information for evaluation
of tax expenditures; and
���� (2)� Authorizing department of business, economic
development, and tourism staff to access certain information on tax returns to
conduct evaluations of tax expenditures.
���� SECTION 2.� Chapter 201, Hawaii Revised Statutes, is
amended by adding a new section to part I to be appropriately designated and to
read as follows:
���� "�201-   � Evaluation
of tax expenditures.� (a)�
The department, in collaboration with the department of taxation, shall
study the effectiveness of tax expenditures and prepare summary descriptive
statistics.� The department shall submit
a report on the information required under this section to the legislature by
September 1 of each year.
���� (b)�
The department, in collaboration with the department of taxation, shall
develop the appropriate schedules and tax return forms to collect adequate
information for the evaluation of tax expenditures."
���� SECTION 3.� Section 235-116, Hawaii Revised Statutes, is
amended to read as follows:
���� "�235-116�
Disclosure of returns unlawful; penalty.� All tax returns and return information
required to be filed under this chapter shall be confidential, including any
copy of any portion of a federal return that may be attached to a state tax
return, or any information reflected in the copy of the federal return.� It shall be unlawful for any person, or any
officer or employee of the State, including the auditor or the auditor's agent
with regard to tax return information obtained pursuant to section 23-5(a), to
make known intentionally information imparted by any income tax return or
estimate made under sections 235-92, 235-94, 235-95, and 235-97 or wilfully to
permit any income tax return or estimate so made or copy thereof to be seen or
examined by any person other than [[the]]:
���� (1)� The taxpayer or the taxpayer's
authorized agent[[, persons]];
���� (2)� Persons duly authorized by the State in
connection with their official duties, [[the]] including staff of the
department of business, economic development, and tourism conducting an
evaluation of tax expenditures pursuant to section 201-   ; or
���� (3)� The Multistate Tax Commission or the
authorized representative thereof,
except as otherwise provided by law.� Any offense against the foregoing provisions
shall be punishable as a class C felony."
���� SECTION 4.� Section 237-34, Hawaii Revised Statutes, is
amended by amending subsection (b) to read as follows:
���� "(b)� All tax returns and return information
required to be filed under this chapter, and the report of any investigation of
the return or of the subject matter of the return, shall be confidential.� It shall be unlawful for any person or any
officer or employee of the State, including the auditor or the auditor's agent
with regard to tax return information obtained pursuant to section 23-5(a), to
intentionally make known information imparted by any tax return or return
information filed pursuant to this chapter, or any report of any investigation
of the return or of the subject matter of the return, or to wilfully permit any
return, return information, or report so made, or any copy thereof, to be seen
or examined by any person; provided that for tax purposes only, the taxpayer,
the taxpayer's authorized agent, or persons with a material interest in the
return, return information, or report may examine them.� Unless otherwise provided by law, persons
with a material interest in the return, return information, or report shall
include:
���� (1)� Trustees;
���� (2)� Partners;
���� (3)� Persons named in a
board resolution or a one per cent shareholder in the case of a corporate
return;
���� (4)� The person
authorized to act for a corporation in dissolution;
���� (5)� The shareholder of
an S corporation;
���� (6)� The personal
representative, trustee, heir, or beneficiary of an estate or trust in the case
of the estate's or decedent's return;
���� (7)� The committee,
trustee, or guardian of any person in paragraphs (1) through (6) who is
incompetent;
���� (8)� The trustee in
bankruptcy or receiver, and the attorney-in-fact of any person in paragraphs
(1) through (7);
���� (9)� Persons duly
authorized by the State in connection with their official duties[[;]],
including staff of the department of business, economic development, and
tourism conducting an evaluation of tax expenditures pursuant to section 201-   ;
��� (10)� Any duly
accredited tax official of the United States or of any state or territory;
��� (11)� The Multistate Tax
Commission or its authorized representative;
��� (12)� Members of a
limited liability company; and
��� (13)� A person
contractually obligated to pay the taxes assessed against another when the
latter person is under audit by the department.
���� Any violation of this subsection
shall be a class C felony."
���� SECTION
5.� Statutory material to be repealed is
bracketed and stricken.� New statutory
material is underscored.
���� SECTION 6.� This Act shall take effect on July 1, 2026,
and shall apply to taxable years beginning after December 31, 2026.
Report Title:
DBEDT;
Department of Taxation; Taxation; Tax Expenditure Disclosure and Evaluation;
Income Tax Credits; General Excise and Related Use Tax Exemptions
Description:
Requires
the Department of Business, Economic Development, and Tourism, in collaboration
with the Department of Taxation, to study the effectiveness of tax expenditures,
prepare summary descriptive statistics, submit annual reports to the
Legislature, and develop appropriate schedules and tax return forms to collect
adequate information for evaluation of tax expenditures.� Authorizes Department of Business, Economic
Development, and Tourism staff to access certain information on tax returns to
conduct evaluations of tax expenditures.� Applies to taxable years beginning after
12/31/2026.� (CD1)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.