HB1805 HD1

HOUSE OF REPRESENTATIVES	H.B. NO.	1805
THIRTY-SECOND LEGISLATURE, 2024		H.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO THE PROCEDURE FOR PAYMENT UNDER PROTEST LAWSUITS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that Grace Business Development Corporation v. Kamikawa, 92 Hawaiʻi 608, 994 P.2d 540 (2000), held that if a taxpayer pays money under protest but then sues for a refund before the defendant agency has formally taken a position on whether the money is due, the appeal is to be dismissed. If the agency later decides that the money is indeed due, it is usually too late for the suit to be refiled, potentially allowing the agency to keep the disputed moneys as a government realization without allowing the taxpayer to obtain a judicial ruling on the merits of the exaction. To prevent the possibility of injustice, this Act adds procedural safeguards to ensure that the courts will be able to reach the merits of the dispute.

Accordingly, the purpose of this Act is to:

(1) Allow for the interest earned on payments under protest in the litigated claims fund to be paid in nontaxation cases if the claimant prevails; and

(2) Establish a procedure for the disposition of moneys and refiling of actions when a payment under protest suit is filed prematurely.

SECTION 2. Section 40-35, Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read as follows:

"(b) Action to recover moneys paid under protest or proceedings to adjust the claim may be commenced by the payer or claimant against the public accountant to whom the payment was made, in a court of competent jurisdiction, [~~within~~] no later than thirty days from the date of payment. If no suit or proceeding is brought within [~~the thirty-day period,~~] that time, the money paid under protest shall be deposited into the appropriate account in the treasury of the State by the accountant and the amount deposited shall thereupon become a government realization. Any action to recover payment of taxes under protest shall be commenced in the tax appeal court.

(c) If action to recover the money paid under protest or a proceeding to adjust the claim is timely commenced [~~within the thirty-day period~~], the amount paid under protest shall, pending final decision of the cause, be deposited by the public accountant into the state treasury, in a fund to be known as the "litigated claims fund", together with subsequent payments or portions thereof, made to the accountant under the same protest. If judgment is rendered in favor of the claimant, the claimant shall be paid the amount of the judgment out of the litigated claims fund by warrants signed by the comptroller upon vouchers approved by the head of the department, board, bureau, commission, or other agency with which the claimant had the dispute. If the amount of money in the litigated claims fund is insufficient to pay the judgment the head of the department, board, bureau, commission, or other agency with which the claimant had the dispute shall include in their respective budget requests to the department of budget and finance an amount necessary to pay the judgment, plus interest, as provided herein. Interest [~~at the rate of two per cent a year~~] earned on the payment by the litigated claims fund from the date of each payment under protest shall also be paid out of the amount appropriated for the judgment payable to the claimant; provided that if the claim is for the recovery of taxes paid under protest by the claimant, the rate of interest and the overpayment of taxes shall be refunded in the manner provided in section 231-23(c) and (d). The amount of the judgment to be paid to the claimant shall be ascertained by the head of the department, board, bureau, commission, or other agency with which the claimant had the dispute from a certified copy of the judgment, which shall be the authority for making payment to the claimant. If judgment is rendered against the claimant[,] on the merits, the amount of money paid by the claimant under protest [~~which~~] that is in the litigated claims fund shall be deposited into the appropriate account in the treasury of the State and the amount shall become a government realization. If the claimant's suit is determined to have been brought prematurely because the agency had not rendered a final decision, then the claimant's payment may be retained in the litigated claims fund and:

(1) If the agency then renders a final decision, the claimant may, within two years after notice of the decision, refile the action for a refund of the payment that is in the litigated claims fund, whereupon the court shall have jurisdiction over the refiled action; provided that if the agency decides against the claimant and no suit or proceeding is brought within two years after notice of the decision, the money paid under protest shall be deposited into the appropriate account in the treasury of the State and the amount shall become a government realization; or

(2) If the agency has not rendered a final decision within one hundred eighty days after the date of the claimant's payment, or decides in favor of the claimant, the agency shall refund the payment to the claimant with interest the same as if judgment had been rendered for the claimant, and certify to the court that it has done so."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 3000.