HAR §18-231-3. (Reserved

) §18-231-3-1.1 Request for Reconsideration of Assessment.  (a) A request for reconsideration of assessment means the process by which a taxpayer requests the department to grant a reconsideration of assessment under section 18-231-3-1.2. (b) A request for reconsideration of assessment is a purely administrative matter. A taxpayer’s appeal rights are unaffected by a request for reconsideration of assessment, and a request for reconsideration of assessment does not constitute an appeal to the Board of Review or the Tax Appeal Court, or participation in the Expedited Appeals and Dispute Resolution Program described in section 231-7.5, HRS. (c) The department may grant or deny any request for reconsideration of assessment in its sole discretion. (d) A request for reconsideration of assessment shall be made by the taxpayer in writing to the auditor or tax return examiner listed on the Notice of Final Assessment or Denial Letter. The request for reconsideration of assessment shall be signed by the taxpayer and shall include: (1) A detailed summary of facts and circumstances that the taxpayer believes would, if taken into consideration, result in a different assessment; (2) A list of documentation, evidence, or other information not previously considered by the department that supports the taxpayer’s position under paragraph (1); provided that if the department grants a request for reconsideration of assessment under subsection (g), the taxpayer shall provide all such listed documentation, evidence, or other information within thirty days unless otherwise specified by the department; and (3) An explanation of why the taxpayer did not provide the facts, documentation, evidence, or information under paragraphs (1) and (2) during the audit or before the department issued the Notice of Final Assessment or Denial Letter. (e) If the time for the taxpayer to appeal a Notice of Final Assessment or Denial Letter has elapsed, the department may require the taxpayer to pay no more than thirty per cent of the portion of the assessment in dispute prior to granting a request for reconsideration of assessment. The amount paid under this subsection shall be applied according to section 231-27, HRS, and shall not be considered a payment under protest under section 40-35, HRS. (f) The granting of a request for reconsideration of assessment is merely an acknowledgment that the department will consider the additional documentation, evidence, or other information listed in the taxpayer’s HRS §231-3 §18-231-3-1.2 ADMINISTRATION OF TAXES 231- 4 (Unofficial Compilation as of 12/31/2025) request, and in no way ensures or indicates that the department will issue a new, modified, or amended Notice of Final Assessment or Denial Letter after such reconsideration. (g) The department shall notify the taxpayer in writing of the grant or denial of a request for reconsideration of assessment. If the department elects to grant a request for reconsideration of assessment, the department shall notify the taxpayer in writing that: (1) The department has granted the taxpayer’s request for reconsideration of assessment; and (2) Reconsideration of assessment does not affect the taxpayer’s appeal rights and the taxpayer should take steps to ensure it perfects any appeal rights related to the existing Notice of Final Assessment or Denial Letter.” [Eff 3/26/16] (Auth: HRS §231-3(9)) (Imp: HRS §231-3) §18-231-3-1.2 Reconsideration of Assessment.  (a) For purposes of this section, “reconsideration of assessment” means the process by which the department reevaluates the results of: (1) A prior audit where tax was assessed and remains unpaid; or (2) A prior denial of a taxpayer’s claim of a refund or tax credit. (b) Upon granting a request for reconsideration of assessment under section 18-231-3-1.1, the department may: (1) Request additional substantiation, worksheets, spreadsheets, explanations and other documentation; and (2) Amend or rescind existing assessments, issue new assessments, or let existing assessments stand in its sole discretion.” [Eff 3/26/16] (Auth: HRS §231-3(9)) (Imp: HRS §231-3) §18-231-1.3 to §18-231-3-9 (Reserved.) §18-231-3-10 Compromises.  (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. HRS §231-3 HRS §231-3(10) ADMINISTRATION OF TAXES §18-231-3-14.16 231- 5 (Unofficial Compilation as of 12/31/2025) (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. [Eff 7/6/90; am 11/30/14] (Auth: HRS §231-3(9)) (Imp: HRS §231-3(10)) §18-231-3-11 to §18-231-3-14 (Reserved.) §18-231-3-14.16 Cancellation of licenses; placement on inactive status.  (a) As used in this section: “Annual return” means a tax return required to be filed under section 237-33, 237D-7, or 251-6, HRS. “License” means a license issued under chapter 237, HRS, or a certificate of registration issued under chapter 237D or 251, HRS. “Licensee” means the person to whom a license has been issued. “Periodic return” means a tax return required to be filed under section 237-30, 237D-4, or 251-3, HRS. (b) Any person who goes out of business or otherwise ceases to engage in activity for which the person was licensed, or who transfers ownership of a business, shall notify the district tax office to which the person reports by cancelling the license on a form prescribed by the department not more than ten days after the transfer of ownership or the cessation of activity. As used in this section, a transfer of ownership means that the business is conducted by a different person or company. A transfer of ownership occurs, for example, if a sole proprietorship is changed to a partnership or corporation. A licensee shall return the license to the department with the notice of cancellation. (c) A licensee that discontinues its business activity temporarily may request in writing that its license be placed on inactive status. (1) Any request for inactive status shall include the licensee’s agreement that the licensee must request reactivation of the license and file a periodic return if the licensee later derives any income from business activity. (2) The director may grant the request for inactive status for a period not to exceed two years, and upon request may extend the inactive status of a license for additional periods of no more than two years each, if the director is satisfied that the interests of the State will not be jeopardized. HRS §231-3(14) §18-231-3-14.17 ADMINISTRATION OF TAXES 231- 6 (Unofficial Compilation as of 12/31/2025) (3) If the request is granted, the director shall inform the licensee of the effective date. The director shall return a license on inactive status to active status upon a licensee’s written request. (d) Cancellation of a license, or placement of a license on inactive status, shall have no effect on liability for payment of taxes, fees, penalties, or interest incurred or imposed. [Eff 6/18/94] (Auth: HRS §§231-3(9)) (Imp: HRS §§231-3(14), 237-9, 237D-4, 251-3) §18-231-3-14.17 Revocation of licenses because of abandonment.  (a) The definitions in section 18- 231-3-14.16(a) apply to this section. (b) The director may revoke any license that has been abandoned. (c) A license shall be deemed abandoned if, according to the records of the department, the licensee has failed to file both periodic and annual returns for a period of not less than five years excluding any periods in which the department has permitted the license to be placed on inactive status. For purposes of this section, the actual filing of a return showing no tax liability is not a failure to file. (d) Before the director may revoke a license because of abandonment, the director shall give notice of intention to revoke the license by publishing the notice for a period of at least forty-five days on the department of taxation’s website. (e) If a licensee: (1) Disputes that the license has been abandoned, or (2) Claims that the department may not revoke the license because of a reason stated in section 237-9(d), 237D-4(f), or 251-3(c), HRS, or for any other valid reason, the licensee shall petition the director in writing setting forth reasons why revocation should not occur, no later than forty-five days after the publication of the notice described in subsection (d). (f) Revocation of a license shall have no effect on liability for payment of taxes, fees, penalties, or interest incurred or imposed. [Eff 6/18/94; am 3/17/2018; am 8/21/2021] (Auth: HRS §§231-3(9), 237-9(b), 237D-4(e), 251-3(b)) (Imp: HRS §§231-3(14), 237-9, 237D-4, 251-3) §18-231-3-14.18 Revocation of licenses because of death or dissolution.  (a) The definitions in section 18-231-3-14.16(a) apply to this section. (b) The director may revoke any license if the department is presented with adequate proof that the licensee is deceased, has been dissolved, or otherwise has ceased to exist. Adequate proof includes: (1) For an individual licensee, a photocopy of a death certificate or other adequate proof of death; and (2) For a licensee other than an individual, a photocopy of a certificate of dissolution or other document showing that the licensee’s existence has terminated. (c) Revocation of a license shall have no effect on liability for payment of taxes, fees, penalties, or interest incurred or imposed. [Eff 6/18/94] (Auth: HRS §§231-3(9), 237-9(b), 237D-4(b), 251-3(b)) (Imp: HRS §§231- 3(14), 237-9, 237D-4, 251-3) §18-231-3-14.19 to