Hawaii House Bill HB1174

Hawaii 2025 Regular Session

• Introduced: 1/23/25
• Refer: 1/27/25
• Report Pass: 2/14/25
• Refer: 2/14/25
• Report Pass: 2/28/25
• Engrossed: 2/28/25
• Refer: 3/4/25
• Report Pass: 3/19/25
• Refer: 3/19/25

Caption

Relating To The Procedure For Payment Under Protest Lawsuits.

Summary

HB1174 amends Hawaii’s payment-under-protest statute, section 40-35, to address how disputed payments are handled when a lawsuit is filed before the relevant agency has issued a final decision. The bill is aimed at the situation identified in Grace Business Development Corp. v. Kamikawa, where a premature refund suit could be dismissed and later become impossible to refile, potentially leaving the payer without a judicial ruling on the merits. To reduce that risk, the bill creates a specific procedure for retaining the disputed money in the litigated claims fund and allowing the claimant to refile after the agency acts. The measure also clarifies the treatment of interest earned on money held in the litigated claims fund. In non-tax cases, if the claimant prevails, the earned interest would be paid out along with the judgment. For tax refund disputes, the bill preserves the existing tax-refund framework by directing interest and overpayment treatment to the procedures in section 231-23(c) and (d). The bill keeps the general 30-day filing deadline for protest actions, but adds a new path for cases dismissed as premature: if the agency later issues a final decision, the claimant may refile within 30 days; if the agency does not act within 180 days or rules for the claimant, the agency must refund the payment with interest. In practical terms, HB1174 would modify how disputed payments move through state accounts and how agencies and courts coordinate on protest claims. It preserves the concept that untimely protest actions become government realizations, but it creates an exception when the original filing was premature rather than substantively defective. It also requires agencies to budget for judgments if the litigated claims fund is insufficient, which could affect departmental budget requests and state fiscal administration. The general sentiment reflected in the available history appears favorable and technical rather than controversial. The Senate Judiciary Committee passed the bill with amendments by a 5-0 vote, suggesting broad support for the procedural fix. The bill’s stated purpose is to prevent unfair loss of claims due to timing issues, and the discussion record provided does not show opposition or extensive debate. The main point of contention, to the extent one exists, is the balance between finality for the state and preserving a claimant’s access to court. The bill addresses a narrow procedural problem, but it also extends the time and conditions under which a protest payment can remain in the litigated claims fund and be re-litigated. That could matter to state agencies concerned about administrative closure and to claimants seeking a merits ruling on disputed exactions.

Impact

HB1174 would amend Hawaii Revised Statutes section 40-35 governing actions to recover money paid under protest. It would add a new procedure for premature filings, allow refiling within 30 days after an agency’s final decision, and require refund with interest if the agency does not act within 180 days or rules for the claimant. It also changes how interest earned in the litigated claims fund is paid in non-tax cases and preserves separate tax-refund rules under section 231-23.

Sentiment

The available record suggests the bill was viewed positively and as a corrective procedural measure. The Senate Judiciary Committee passed it unanimously with amendments, indicating support for the bill’s goal of preventing claimants from losing their day in court because of a premature filing. No committee testimony or recorded opposition was provided, so the overall sentiment appears favorable and low-conflict.

Contention

The central issue is procedural fairness versus administrative finality. Supporters appear to favor giving claimants a chance to refile when an agency has not yet issued a final decision, so disputed funds are not automatically lost to the state as a government realization. Any concern would likely come from state agencies or fiscal administrators worried about prolonged uncertainty, additional interest payments, and the need to budget for judgments if the litigated claims fund is insufficient. The bill’s tax-related carveout also distinguishes between tax and non-tax disputes, which may be relevant to agencies and taxpayers alike.