RELATING TO TAX EXPENDITURE EVALUATION.
SB3278 would create a new tax expenditure evaluation framework within Hawaii law. The bill requires certain taxpayers claiming specified income tax credits, and taxpayers claiming general excise tax and related use tax exemptions, to disclose information annually to the Department of Business, Economic Development, and Tourism (DBEDT). For income tax credits, the disclosure applies for five tax years after the credit is first claimed, and for general excise/use tax exemptions, the taxpayer must report identifying information, the amount exempted, and the estimated cost to the State.
The bill directs DBEDT, working with the Department of Taxation, to use the collected information to study the effectiveness of the covered tax expenditures and prepare annual summary statistics for the Legislature by September 1 each year. It also authorizes DBEDT to request relevant tax records from the Department of Taxation, and it makes the compiled information available for public inspection and dissemination subject to public records law, with confidentiality protections for information marked confidential or otherwise protected by law. The measure takes effect July 1, 2026, and applies to taxable years beginning after December 31, 2026.
SB3278 would add new statutory sections to chapters 201 and 231 of the Hawaii Revised Statutes and would impose new reporting and disclosure conditions on taxpayers claiming certain credits and exemptions under chapters 235, 237, and 238. It would also expand DBEDT’s role in tax policy oversight by requiring annual evaluation reports and by giving DBEDT access to relevant tax information from the Department of Taxation. In practical terms, the bill is aimed at increasing transparency, data collection, and legislative oversight of tax expenditures, while potentially affecting taxpayers who rely on covered credits and exemptions and the agencies responsible for administering and reviewing them.
The available voting history suggests the bill has been received positively in committee, at least at the Senate Economic Development and Technology Committee level, where it passed 4-0 with amendments. The bill’s findings and purpose language frame it as a good-government and fiscal accountability measure, emphasizing data-driven policy, public value, and periodic review of tax incentives. No committee transcript was provided, so the record reflects support through the vote and the amended advancement of the measure rather than detailed debate.
The main points of potential contention are the new disclosure burdens on taxpayers, the expanded sharing of tax information between agencies, and the public availability of compiled tax expenditure data. Taxpayers claiming credits or exemptions may view the reporting requirements as additional compliance obligations, while some may be concerned about confidentiality and the handling of sensitive tax records. Another possible point of debate is policy scope: the bill targets certain income tax credits and general excise/use tax exemptions, which could raise questions about which incentives should be evaluated, how often, and whether the resulting data could lead to reductions, modifications, or elimination of existing tax benefits.