Hawaii Administrative Rules Title 18 — Department of Taxation

HAR § 18-231-3-10

Compromises

Official textfiles.hawaii.gov20 subsections

# (a)

In general.

# (1)

Authority. Pursuant to section 231-3(10), HRS, the director of the department of taxation may compromise any tax liability or interest or penalty thereon, arising under any tax law, the administration of which is within the scope of the department’s duties, subject to approval of the governor.

# (2)

Basis for compromise. An offer to compromise a tax liability may be considered only if: (A) There is doubt as to liability; (B) There is doubt as to collectability; or (C) The compromise promotes effective tax administration. No liability shall be compromised if the liability is established by a valid judgment and there is no doubt as to the State’s ability to collect the tax.

# (b)

Scope of compromise. In general, a compromise agreement may relate to civil or criminal liability with respect to taxes, interest, and penalties. Acceptance of an offer in compromise of civil liability shall not compromise criminal liability, nor shall acceptance of an offer in compromise of criminal liability compromise civil liability. Criminal liability may be compromised only if the liability results from violation of a regulatory provision or related statute, and the violation was not done deliberately or with an intent to defraud.

# (c)

Effect of compromise agreement. A compromise agreement shall relate to a taxpayer’s entire liability, including taxes, interest, penalties, or any combination thereof, for the periods specified and as set forth in the compromise agreement. Upon acceptance and approval of a compromise agreement by the governor, neither the taxpayer nor the State may reopen the matter, unless: (1) There was falsification or concealment of assets by the taxpayer, (2) A mutual mistake of a material fact was made (sufficient enough to set aside or reform an agreement), (3) The taxpayer is in breach of any collateral agreement entered into by the department of taxation and the taxpayer, or (4) The taxpayer defaults on payments owed under the compromise agreement.

# (d)

Procedure.

# (1)

Submission of an offer. The taxpayer or the taxpayer’s duly authorized agent shall submit an offer in compromise in writing to the director of the department of taxation. Any offer in compromise asserting doubt as to collectability shall be accompanied by a detailed statement of the taxpayer’s financial condition.

# (2)

Remittance of compromise amount. Each offer in compromise shall be submitted with a remittance representing the amount of the compromise offer, or a substantial deposit, if the offer provides for installment payments.

# (e)

Stay of collection proceedings. The submission of an offer in compromise to the department of taxation shall not automatically stay the collection of any tax liability. However, the director of taxation may defer collection if the State’s interest will not be jeopardized.

# (f)

Acceptance of an offer. An offer in compromise shall only be considered accepted when the taxpayer or the taxpayer’s duly authorized agent receives notice of the acceptance in writing. As a condition to acceptance, the department of taxation may require the taxpayer to enter into collateral agreements, waive tax refunds, or post security to protect the State’s interest.

# (g)

Withdrawal or rejection of an offer. An offer in compromise may be withdrawn by a taxpayer or the taxpayer’s duly authorized agent at any time prior to its acceptance. If an offer is rejected, the taxpayer or the taxpayer’s duly authorized agent shall be notified in writing. Frivolous offers or offers submitted for the purpose of delaying collection of tax liability shall be immediately rejected. If an offer in compromise is withdrawn or rejected, the amount remitted with the offer (including all installments paid), shall be refunded to the taxpayer without interest, unless the taxpayer agrees that the amount remitted may be applied to the liability with respect to which the offer was submitted.

# (h)

Release of lien. The department of taxation shall release any tax lien related to tax liability settled under a compromise agreement upon final payment. If final payment is contingent upon the simultaneous release of the tax lien (in whole or in part), payment shall be made in cash, by check (certified or cashier’s), or money order.

# (i)

Records. Pursuant to section 231-3(10), HRS, a statement containing the following information shall be placed on file in the department of taxation:

# (1)

The taxpayer’s name;

# (2)

The amount of tax assessed or proposed to be assessed;

# (3)

The amount of penalties and interest imposed or which could be imposed by law with respect to the tax, as computed by the department of taxation;

# (4)

The total amount of liability as determined by the terms of the compromise, and the actual payments made thereon with the dates thereof; and (5) The reasons for the compromise.

# (j)

Inspection of records. A copy of the statement on file with the department of taxation pursuant to section 231-3(10), HRS, shall be available for public inspection. Inspection may occur after an appointment is made with the collection division chief of the department of taxation. Upon request, copies of the statement on file pursuant to section 231-3(10) may be obtained at a cost of $1 a page.

# (k)

Statute of limitations. No offer in compromise shall be accepted unless the taxpayer waives the running of the statutory period of limitations on the assessment of tax liability for the taxable years specified in the pending offer or the period ending one year after receipt of final payment on a compromise agreement.

# (l)

Effective date. This section shall take effect upon the enactment of the law making information in subsection (i) available for public review or ten days after the filing of this section with the office of the Lieutenant Governor, whichever is later.

Last amended: [Eff 7/6/90; am 11/30/14] (Auth: HRS §231-3(9)) (Imp: HRS §231-3(10)) §18-231-3-11 to

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