SB 2590: General Excise Tax; Exemption; American Rescue Plan Act 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 Coronavirus disease 2019 (COVID-19) pandemic and the nation's recovery from the pandemic, pursuant to the Coronavirus Aid, Relief, and Economic Security Act, effective March 27, 2020; and the American Rescue Plan Act of 2021, effective March 11, 2021.

     The legislature further finds that the Coronavirus Aid, Relief, and Economic Security Act created the paycheck protection program, which provided a forgivable loan to small businesses, and the economic injury disaster loan emergency advances grant, which provided loan advances that do not need to be repaid, to small businesses.  Likewise, American Rescue Plan Act created the restaurant revitalization fund to provide grants to food and beverage businesses that experienced revenue loss related to the COVID-19 pandemic.

     The legislature also finds that on October 20, 2020, the department of taxation issued Tax Information Release No. 2020‑06 (Revised) (superseding Tax Information Release No. 2020‑02), providing guidance on the State's tax treatment of various COVID-19 relief programs and payments under the Coronavirus Aid, Relief, and Economic Security 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 paycheck protection program and economic injury disaster loan emergency advances grant.

     The legislature additionally finds that in 2024, the department of taxation announced that the general excise tax exemption applicable to the forgiven paycheck protection program and economic injury disaster loan emergency advances grant loans and loan advances under the Coronavirus Aid, Relief, and Economic Security Act does not apply to the restaurant revitalization fund grants under American Rescue Plan Act, despite the purpose of restaurant revitalization fund grants aligning with the rationale behind paycheck protection program and economic injury disaster loan emergency advances grant.

     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)  Notwithstanding any law to the contrary, 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 pursuant to subsection (a).  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          .

     (d)  The director of taxation:

     (1)  Shall prepare any forms necessary to claim a tax refund under this Act;

     (2)  May require proof of the claim for the tax refund;

     (3)  Shall notify eligible taxpayers using appropriate and available means; and

     (4)  May adopt rules pursuant to chapter 91, Hawaii Revised Statutes, to effectuate this Act.

     SECTION 3.  This Act shall take effect on July 1, 2026, and shall apply retroactively to March 11, 2021.

Report Title:

General Excise Tax; Exemption; American Rescue Plan Act 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.  Applies retroactively to 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.