HRS § 231-33 — Tax debt due the State; lien


§231-33 Tax debt
due the State; lien. (a) Within the
meaning of this section:
(1) The terms "mortgagee",
"pledgee", and "purchaser" do not include any person to
whom property or an interest in property is conveyed (A) as security for or in
satisfaction of an antecedent or pre-existing debt of a debtor who is insolvent
within the meaning of the Bankruptcy Act, or (B) as trustee, assignee, or agent
for the benefit of one or more creditors, other than mortgage bondholders.
(2) The term "motor vehicle" means any self-propelled
vehicle to be operated on the public highways.
(3) The interest of a party, if required to be recorded or
entered of record in any public office in order to be valid against subsequent
purchasers, does not arise prior to the time of such recording or entry of
record.
(4) An employer or other person who is required by any tax law
to withhold tax at the source, or to collect a tax, and who is made liable for
the tax if the employer or other person does not fulfill the employer's or
other person's duties in that regard, shall be deemed a person liable for the
tax.
(5) The term "real
property" includes leasehold or other interest in real property and also
any personal property sold or mortgaged with real property if affixed to the
real property and described in the instrument of sale or mortgage.
(b) Any state tax
that is due and unpaid is a debt due the State and constitutes a lien in favor
of the State upon all property and rights to property, whether real or
personal, belonging to any person liable for the tax. The lien for the tax,
including penalties and interest thereon, arises at the time the tax is
assessed, or at the time a return thereof is filed, or at the time of filing by
the department of taxation of the certificate provided for by subsection (f)
whichever first occurs. From and after the time the lien arises it is a
paramount lien upon the property and rights to property against all parties,
whether their interest arose before or after that time, except as otherwise
provided in this section.
(c) The lien imposed by subsection (b) is not valid as against:
(1) A mortgagee or purchaser of real property, or the lien of a
judgment creditor upon real property, whose interest arose prior to the
recording by the department of the certificate provided for by subsection (f);
or
(2) A mortgagee or purchaser of a motor vehicle who becomes the
legal owner or owner at a time when the tax lien and encumbrance record
provided for by section 286-46 does not show the lien.
(d) As to tangible
personal property, possession of which is held by a person liable for tax for
the purpose of sale to the public in the ordinary course of the person's
business, the lien imposed by subsection (b) is extinguished as to any such
property sold in the ordinary course of the business by or under the direction
of the person to any purchaser for valuable consideration. As to securities,
negotiable instruments, and money, the lien imposed by subsection (b):
(1) Is extinguished as to such property upon passage of title to
a person without notice or knowledge of the existence of the lien, for an
adequate and full consideration in money or
money's worth; and
(2) Is not valid as against
a mortgagee or pledgee for an adequate and full consideration in money or
money's worth, who is located outside the State and takes possession of the
property, if at the time of taking possession of the property the mortgagee or
pledgee is without notice or knowledge of the existence of the lien. The mere
recording or filing of the certificate provided for by subsection (f) does not
constitute notice for the purposes of this subsection.
(e) Subject to the
provisions of this subsection, the lien imposed by subsection (b) is not valid
as against a mortgagee, pledgee, or purchaser who gives notice to the
department on a form prescribed by it of the mortgage, pledge, or purchase made
or about to be made, with a description of the property encumbered or conveyed
or proposed to be encumbered or conveyed thereby, and whose interest in the
property arises prior to the recording or filing by the department of the
certificate provided for by subsection (f) or within ten days after the
filing. If the notice is given the lien imposed by subsection (b) is valid
against the party giving the notice, as to any taxes set forth in a certificate
filed as provided in subsection (f) within the period of fifteen days after the
notice. The department may waive all or any part of the period herein allowed.
(f) [Subsection
effective until December 31, 2026. For subsection effective January 1, 2027,
see below.] The department may record in the
bureau of conveyances at Honolulu, or in respect of a lien on a motor vehicle,
file with the county director of finance, a certificate setting forth the
amount of taxes due and unpaid, which have been returned, assessed, or as to
which a notice of proposed assessment has issued. The certificate shall
identify the taxpayer, the taxpayer's last known address, and the tax or taxes
involved. The recording or filing of the certificate has the effect set forth
in this section, but nothing in this section shall be deemed to require that a
certificate recorded or filed by the department must include the amount of any
penalty or interest, in order to protect the lien therefor. The certificate,
if recorded or filed with the county director of finance, shall be entered of
record as provided by law. Recordation of the certificate in the bureau of
conveyances shall be deemed, at such time, for all purposes and without any
further action, to procure a lien on land registered in the land court under
chapter 501. Any cost incurred in the filing of the certificate shall be a
part of the lien for the tax therein set forth.
(f) [Subsection effective January 1, 2027. For subsection
effective until December 31, 2026, see above.] The department may record in the bureau of conveyances at Honolulu, or
in respect of a lien on a motor vehicle, file with the county director of
finance, a certificate setting forth the amount of taxes due and unpaid, which
have been returned, assessed, or as to which a notice of proposed assessment
has issued. The certificate shall identify the taxpayer, the taxpayer's last
known address, the tax or taxes involved, and the date on which the liability
for the tax or taxes was assessed. The recording or filing of the certificate
has the effect set forth in this section, but nothing in this section shall be
deemed to require that a certificate recorded or filed by the department must
include the amount of any penalty or interest, in order to protect the lien
therefor. The certificate, if recorded or filed with the county director of
finance, shall be entered of record as provided by law. Recordation of the
certificate in the bureau of conveyances shall be deemed, at such time, for all
purposes and without any further action, to procure a lien on land registered
in the land court under chapter 501. Any cost incurred in the filing of the
certificate shall be a part of the lien for the tax therein set forth.
(g) [Subsection effective until December 31, 2026. For
subsection effective January 1, 2027, see below.] The department may issue a certificate of discharge of any
part of the property subject to the lien imposed by this section, upon payment
in partial satisfaction of such lien, of an amount not less than the value as
determined by the department of the lien on the part to be so discharged, or if
the department determines that the lien on the part to be discharged has no
value. Any such discharge so issued shall be conclusive evidence of the
discharge of the lien as therein provided.
(g) [Subsection
effective January 1, 2027. For subsection effective until December 31, 2026,
see above.] The department may issue a
certificate of discharge of any part of the property subject to the lien
imposed by this section, upon payment in partial satisfaction of such lien, of
an amount not less than the value as determined by the department of the lien
on the part to be so discharged, or if the department determines that the lien
on the part to be discharged has no value. The department shall issue a
certificate of discharge as to any liability that has been satisfied or that
has become unenforceable under section 235-111, 237-40, 237D-9, 238-7, 243-14,
247-6.5, or 251-8. Any discharge so issued shall be conclusive evidence of the
discharge of the lien as therein provided.
(h) The lien imposed
by subsection (b) may be foreclosed in a court proceeding or by distraint under
section 231-25.
(i) This section
shall not apply to a tax levied by a chapter that contains a specific provision
for a lien for the tax levied by the chapter, any provision in this section to
the contrary notwithstanding.
(j) If a lien
imposed by subsection (b) is properly recorded as authorized under subsection
(f), and three hundred sixty-five days have elapsed from the date of recording
with no response or action by the taxpayer against whom the lien was recorded,
the director may apply to the circuit court to have the lien converted into a
civil judgment. The circuit court shall issue a civil judgment for an amount
equivalent to the value of the lien. If a lien is converted to a civil
judgment under this subsection, interest under section 231-39(b)(4) shall cease
to accrue after the period to collect the unpaid amount has expired under the
applicable statute of limitations or agreement.