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Administrative Guidelines, Part 1 | Hawaii reporter


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While our legislature has been hard at work, and we at the Tax Foundation of Hawaii have also strived to keep pace with bills that impact taxes and public finances, the Foundation has also been on another battlefield worked and fought.

In the annual report of the Hawaii Department of Taxation, some passages refer to a class of documents called “administrative directives” (ADs). These documents are instructions from the Tax Director to the staff. They often tell staff that tax laws must be applied in a certain way. The Department also publishes other documents, such as Tax Information Releases and Department of Taxation Announcements, which also interpret the laws. The difference between these documents and ADs is that ADs are for “internal use” and are not intended to be made public.

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However, in the late 1980s, Hawaii passed public records laws, which, among other things, require interpretations of the law adopted by an agency to be made public. There should be no ‘secret law’. In other words, an interpretation for the goose must also be made for the goose.

So in May 2023, the Foundation went to the department with a public records request, asking the department to review all of their ADs. We went back and forth with them for about a year and in early May the department stated that it was drafting eleven of these guidelines and would not give us any more.

The first question that came to our mind was whether the department was withholding data and not telling us about it. For several reasons, we believe this has happened, and we are pursuing a resolution with the state Office of Information Practices.

How do we know that documents are missing? There are several indications. First, like tax information releases and Department of Revenue announcements, ADs are serially numbered on an annual basis. For example, the first AD in 1990 would be 1990-01, then 1990-02, and so on. The ministry produced AD 1982-54 and produced no other ADs from 1982. So we have to wonder what happened to the other 53 directives that preceded 1982-54.

Furthermore, different guidelines refer to others. AD 2021-02 states on page 1 that it replaces ADs 2012-02, 2012-03 and 2013-01. But the ministry has not cleared either AD 2012-02, 2012-03 or 2013-01.

In contrast, we expect the department to argue that it does not need to produce ADs that are no longer “current,” whatever that means. But public records laws do not allow agencies to suppress documents based on “what’s popular and what’s not.” If a document contains an interpretation of the law that the ministry subsequently adopted, that document must be published, period, even if the ministry never quotes it again. The department then often audits taxpayers going back several years. Suppose a couple’s 2021 tax return is audited in 2024. The calculation of their return is based on a 2020 Tax Information Release. Would it be fair if the ministry said in 2024 that it had changed its mind, reversed the 2020 release and then punished the couple for not having anything to cite had in support of their return in 2021? I’m not saying the Department actually does that, but if you look at the Department of Revenue’s list of tax information releases and announcements on their website, you’ll see several marked as “Obsolete” that are no longer clickable. These documents have important historical significance and should not be removed from view just because someone in a later tax office decides they don’t like them anymore.

Next week we’ll discuss what one of these ads actually says.

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