SB 1278: General Excise Tax; Exemption; American Rescue Plan Act of 2021; Restaurant Revitalization Fund; Department of Taxation; Notification; Refund

A BILL FOR AN ACT

RELATING TO THE GENERAL EXCISE TAX.

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

     SECTION 1.  The legislature finds that the federal government established various relief programs to provide critical assistance to millions of individuals, families, and businesses during the COVID-19 pandemic and the nation's recovery therefrom, pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) effective March 27, 2020, and the American Rescue Plan Act of 2021 (ARPA), effective March 11, 2021.

     The legislature further finds that the CARES Act created the Paycheck Protection Program (PPP), which provided a forgivable loan to small businesses, and the Economic Injury Disaster Loan Emergency Advances Grant (EIDL), which provided loan advances that do not need to be repaid, to small businesses.  Likewise, ARPA created the Restaurant Revitalization Fund (RRF) to provide grants to food and beverage businesses that experienced revenue loss related to the COVID-19 pandemic.

     The legislature also finds that on May 4, 2020, the department of taxation issued Tax Information Release No. 2020‑02 (Revised), providing guidance on the State's tax treatment of various COVID-19 relief programs and payments under the CARES Act, which specified that in light of the severity of the economic impact of the COVID-19 pandemic, state general excise tax will not be imposed on the loan amounts forgiven under PPP and EIDL.

     The legislature additionally finds that in 2024, the department of taxation announced that the general excise tax exemption applicable to the forgiven PPP and EIDL loans and loan advances under the CARES Act does not apply to the RRF grants under ARPA, despite the purpose of RRF grants aligning with the rationale behind PPP and EIDL.

     Accordingly, the purpose of this Act is to:

     (1)  Exempt Restaurant Revitalization Fund grants received by eligible businesses pursuant to the American Rescue Plan Act of 2021 from the state general excise tax;

     (2)  Require the department of taxation to notify all taxpayers eligible for refunds of any state general excise tax paid for Restaurant Revitalization Fund grants of their eligibility and require taxpayers to file refund claims no later than six months following notification; and

     (3)  Require any state general excise taxes paid by eligible businesses for Restaurant Revitalization Fund grants to be refunded to the taxpayer.

     SECTION 2.  (a)  Any grants received from the federal Restaurant Revitalization Fund by an eligible business pursuant to the American Rescue Plan Act of 2021 shall not be subject to general excise taxation under chapter 237, Hawaii Revised Statutes.

     (b)  The department of taxation shall notify all taxpayers eligible for refunds of any state general excise tax paid for grants received from the federal Restaurant Revitalization Fund of their eligibility.  Taxpayers shall file refund claims no later than six months following the department of taxation's notice of eligibility.

     (c)  Any state general excise tax paid by eligible businesses for grants received from the federal Restaurant Revitalization Fund shall be refunded to the taxpayer no later than           .

     SECTION 3.  This Act shall take effect on July 1, 3000, and shall apply retroactively to March 11, 2021.

Report Title:

General Excise Tax; Exemption; American Rescue Plan Act of 2021; Restaurant Revitalization Fund; Department of Taxation; Notification; Refund

Description:

Exempts from the state general excise tax any grants received from the federal Restaurant Revitalization Fund by an eligible business pursuant to the American Rescue Plan Act of 2021.  Requires the Department of Taxation to notify all taxpayers eligible for refunds of any state general excise tax paid for grants received from the federal Restaurant Revitalization Fund of their eligibility and requires taxpayers to file refund claims no later than six months following notification.  Requires any state general excise taxes paid by eligible businesses for Restaurant Revitalization Fund grants to be refunded to the taxpayer.  Effective 7/1/3000.  Applies retroactively to 3/11/2021.  (HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO THE GENERAL EXCISE TAX.

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

     SECTION 1.  The legislature finds that the federal government established various relief programs to provide critical assistance to millions of individuals, families, and businesses, during the COVID-19 pandemic and the nation's recovery therefrom, pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) effective March 27, 2020, and the American Rescue Plan Act of 2021 (ARPA), effective March 11, 2021.

     The legislature further finds that the CARES Act created the Paycheck Protection Program (PPP), which provided a forgivable loan to small businesses, and the Economic Injury Disaster Loan Emergency Advances (EIDL) Grant, which provided loan advances that do not need to be repaid, to small businesses.  Likewise, ARPA created the Restaurant Revitalization Fund (RRF) to provide grants to food and beverage businesses that experienced revenue loss related to the COVID-19 pandemic.

     The legislature also finds that on May 4, 2020, the department of taxation issued Tax Information Release No. 2020‑02 (Revised), providing guidance on the State's tax treatment of various COVID-19 relief programs and payments under the CARES Act, which specified that in light of the severity of the economic impact of the COVID-19 pandemic, state general excise tax will not be imposed on the loan amounts forgiven under PPP and EIDL Grants.

     The legislature additionally finds that in 2024, the department of taxation announced that the general excise tax exemption applicable to the forgiven PPP loans and EIDL Grants under the CARES Act does not apply to the RRF grants under ARPA, despite the purpose of RRF grants aligning with the rationale behind the PPP and EIDL Grants.

     Accordingly, the purpose of this Act is to exempt Restaurant Revitalization Fund grants received by eligible businesses pursuant to the American Rescue Plan Act of 2021 from the state general excise tax.

     SECTION 2.  (a)  Any grants received from the federal Restaurant Revitalization Fund by an eligible business pursuant to the American Rescue Plan Act of 2021 shall not be subject to general excise taxation under chapter 237, Hawaii Revised Statutes.

     (b)  Any state general excise tax paid by eligible businesses for grants received from the federal Restaurant Revitalization Fund shall be refunded to the tax payer, no later than           .

     SECTION 3.  This Act shall take effect on July 1, 2050, and shall apply retroactively to March 11, 2021.

Report Title:

General Excise Tax; Exemption; COVID-19; Relief Funds; American Rescue Plan Act of 2021; Restaurant Revitalization Fund; Refund

Description:

Exempts from the state general excise tax any grants received from the federal Restaurant Revitalization Fund by an eligible business pursuant to the American Rescue Plan Act of 2021.  Requires any state general excise taxes paid by eligible businesses for Restaurant Revitalization Fund grants to be refunded to the taxpayer.  Effective 7/1/2050.  Applies retroactively to 3/11/2021.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

Relating to THE General Excise Tax.

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

     SECTION 1.  The legislature finds that the federal government established various relief programs to provide critical assistance to millions of individuals, families, and businesses, during the COVID-19 pandemic and the nation's recovery therefrom, pursuant to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) effective March 27, 2020, and the American Rescue Plan Act of 2021 (ARPA), effective March 11, 2021.

     The legislature further finds that the CARES Act created the Paycheck Protection Program (PPP), which provided a forgivable loan to small businesses, and the Economic Injury Disaster Loan Emergency Advances (EIDL) Grant, which provided loan advances that do not need to be repaid, to small businesses.  Likewise, ARPA created the Restaurant Revitalization Fund (RRF) to provide grants to food and beverage businesses that experienced revenue loss related to the COVID-19 pandemic.

     The legislature also finds that on May 4, 2020, the department of taxation issued Tax Information Release No. 2020‑02 (Revised), providing guidance on the State's tax treatment of various COVID-19 relief programs and payments under the CARES Act, which specified that in light of the severity of the economic impact of the COVID-19 pandemic, state general excise tax will not be imposed on the loan amounts forgiven under PPP and EIDL Grants.

     The legislature additionally finds that in 2024, the department of taxation announced that the general excise tax exemption applicable to the forgiven PPP loans and EIDL Grants under the CARES Act does not apply to the RRF grants under ARPA, despite the purpose of RRF grants aligning with the rationale behind the PPP and EIDL Grants.

     Accordingly, the purpose of this Act is to exempt Restaurant Revitalization Fund grants received by eligible businesses pursuant to the American Rescue Plan Act of 2021 from the state general excise tax.

     SECTION 2.  (a)  Any grants received from the federal Restaurant Revitalization Fund by an eligible business pursuant to the American Rescue Plan Act of 2021 shall not be subject to general excise taxation under chapter 237, Hawaii Revised Statues.

     (b)  Any state general excise tax paid by eligible businesses for grants received from the federal Restaurant Revitalization Fund shall be refunded to the tax payer, no later than           .

     SECTION 3.  This Act, upon its approval, shall apply retroactive to taxable years beginning after March 11, 2021.

Report Title:

General Excise Tax; Exemption; COVID-19; Relief Funds; American Rescue Plan Act of 2021; Restaurant Revitalization Fund; Refund

Description:

Establishes that any grants received from the federal Restaurant Revitalization Fund (RRF) by an eligible business pursuant to the American Rescue Plan Act of 2021 shall not be subject to state general excise tax.  Requires any state general excise tax paid by eligible businesses for RRF grants to be refunded to the tax payer.  Applicable to taxable years beginning after 3/11/2021.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO.  1343

Honolulu, Hawaii

                , 2025

RE:   S.B. No. 1278

      S.D. 1

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Economic Development & Technology, to which was referred S.B. No. 1278, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE GENERAL EXCISE TAX,"

begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Exempt Restaurant Revitalization Fund grants received by eligible businesses pursuant to the American Rescue Plan Act of 2021 from the state general excise tax; and

     (2)  Require any state general excise taxes paid by eligible businesses for Restaurant Revitalization Fund grants to be refunded to the taxpayer.

     Your Committee received testimony in support of this measure from the Hawaiʻi Restaurant Association; Maui Brewing Company Restaurants; Maui Brewing Restaurant Group; Maui Chamber of Commerce; Luana Hospitality Group; Giovanni Pastrami Restaurant Group; MJ Food Group Inc.; Shorefyre/Skybox; Grassroot Institute of Hawaii; Chamber of Commerce Hawaii; La Tour Cafe; Maui Brewing Co.; Popeyes Louisiana Kitchen; Hilo Bay Cafe; 604 Hospitality Group LLC; Roy's Hawaii (Roy's Restaurant, Goen, Eating House 1849, Humble Market Kitchin); Highway Inn; Cheeseburger Restaurants; Makai Grinds LLC; L&L Hawaiian Barbecue; and numerous individuals.  Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     Your Committee finds that the COVID-19 pandemic heavily impacted the restaurant industry through mandated closures, seating limitations, and increased operational costs.  Your Committee recognizes that restaurants have not fully recovered from the financial impact of the COVID-19 pandemic and that there is a need to alleviate the tax burden placed on restaurants that received certain federal grants, loans, and loan advances.

     Your Committee has amended this measure by:

     (1)  Requiring the Department of Taxation to notify all taxpayers eligible for refunds of any state general excise tax paid for Restaurant Revitalization Fund grants of their eligibility and require taxpayers to file refund claims no later than six months following notification;

     (2)  Changing the effective date to July 1, 3000, to encourage further discussion; and

     (3)  Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     As affirmed by the record of votes of the members of your Committee on Economic Development & Technology that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1278, S.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1278, S.D. 1, H.D. 1, and be referred to your Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Economic Development & Technology,

STAND. COM. REP. NO. 676

Honolulu, Hawaii

RE:    S.B. No. 1278

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred S.B. No. 1278 entitled:

"A BILL FOR AN ACT RELATING TO THE GENERAL EXCISE TAX,"

begs leave to report as follows:

     The purpose and intent of this measure is to provide tax relief to businesses impacted by the coronavirus disease 2019 (COVID-19) pandemic.

     More specifically, this measure:

     (1)  Exempts from the state general excise tax any grants received by an eligible business from the federal Restaurant Revitalization Fund pursuant to the American Rescue Plan Act of 2021; and

     (2)  Requires any state general excise taxes paid by eligible businesses for Restaurant Revitalization Fund grants to be refunded to the taxpayer.

     Your Committee received testimony in support of this measure from Bev Gannon Restaurants; The Chamber of Commerce of Hawaii; Grassroot Institute of Hawaii; Hawaii Bar Owners Association / E&J Lounge Operating Co.; Hawaii Restaurant Association; Highway Inn; Island Catering, LLC; Jesscott, Inc., dba. Lava Java Coffee Roasters of Maui; Maui Brewing Co.; Maui Brewing Co. Restaurants; Maui Chamber of Commerce; Maui Wine, Ltd.; Merriman's Restaurants; Roy Yamaguchi Group of Restaurants; Tiki's Grill & Bar; and three individuals.

     Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     Your Committee finds that, pursuant to the American Rescue Plan Act of 2021, the federal Restaurant Revitalization Fund was established to provide grants to food and beverage businesses that experienced revenue loss related to the COVID-19 pandemic.  Your Committee also finds that, in light of the severity of the economic impact of the COVID-19 pandemic, certain funds received pursuant to relief programs established under the Coronavirus Aid, Relief, and Economic Security Act are exempt from the state general excise tax.  Your Committee further finds that this exemption does not apply to grants received by an eligible business from the federal Restaurant Revitalization Fund pursuant to the American Rescue Plan Act of 2021, despite the fact that these grants were established to provide similar relief.  This measure corrects that disparity.

     Your Committee has amended this measure by:

     (1)  Changing the effective date to July 1, 2050, to facilitate further discussion on the measure;

     (2)  Clarifying that the measure shall apply retroactively to March 11, 2021; and

     (3)  Correcting a spelling error.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1278, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1278, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,