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GM 1261

Informing the Legislature that on June 25, 2026, the Governor signed the following bill into law: HB2429 HD2 SD2 CD1 (ACT 160).

2026 Regular Session

Hawaii will annually evaluate tax expenditures (credits and exemptions) for effectiveness and cost, with data access and a yearly legislature report.

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Bill Summary · GM 1261

Summary of HB 2429, HD 2, SD 2, CD 1 (Act 160) – Hawaii, 2026

Main purpose and intent

  • Establishes a formal annual evaluation framework for tax expenditures in Hawaii. The goal is to assess whether income tax credits and general excise/use tax exemptions achieve their stated public purposes, remain cost-effective, and align with current budget priorities.
  • Treats tax expenditures as public spending that should be reviewed for efficiency, equity, and relevance over time.

Key provisions and changes

  • Section 1 (Findings and purpose)

    • States that periodic evaluation of tax expenditures is essential to ensure effectiveness, fairness, accountability, and alignment with evolving public priorities.
    • Argues that regular reviews help determine whether incentives still meet goals (e.g., job creation, economic growth, targeted social benefits) and whether resources could be better directed elsewhere.
    • Emphasizes data-driven policymaking and the potential to improve equity and competition across industries.

  • Section 2 (New statutory requirement)

    • Adds a new requirement under Hawaii Revised Statutes Chapter 201:
    • The Department of Business, Economic Development, and Tourism (DBEDT), in collaboration with the Department of Taxation (DOTAX), shall study the effectiveness of tax expenditures and prepare summary descriptive statistics.
    • DBEDT/DOTAX must submit an annual report to the Legislature by September 1 of each year.
    • They must develop appropriate schedules and tax return forms to collect data necessary for evaluating tax expenditures.
    • The act also authorizes DBEDT staff to access certain information on tax returns to conduct these evaluations.

  • Sections 3 and 4 (Confidentiality and access to return information)

    • Amends confidentiality provisions to allow access to tax return information for purposes of evaluating tax expenditures, with specific listed recipients who may access the data (e.g., authorized state personnel, Multistate Tax Commission, certain family/organizational representatives, etc.).
    • Violations of confidentiality remain a Class C felony, ensuring protections around taxpayer data.

  • Section 5 (Editorial)

    • Administrative formatting provisions for statutory material.

  • Section 6 (Effective date and applicability)

    • Takes effect July 1, 2026.
    • Applies to taxable years beginning after December 31, 2026.

Who/what is affected

  • Tax expenditure programs in Hawaii, including:
    • Income tax credits
    • General Excise Tax (GET) and use tax exemptions
  • State agencies:
    • Department of Business, Economic Development, and Tourism (DBEDT)
    • Department of Taxation (DOTAX)
  • Taxpayers and return preparers, whose return information may be accessed for the purposes of evaluation (subject to confidentiality protections)

Procedural and timeline aspects

  • Annual evaluation cycle:
    • Data collection and analysis by DBEDT and DOTAX
    • Preparation of summary statistics and an annual report to the Legislature
    • Report due by September 1 each year, beginning after December 31, 2026 tax years
  • Data access:
    • Authorized with strict confidentiality protections; specified individuals and entities may access relevant return information for evaluation purposes
    • Violations of confidentiality carry Criminal penalties (Class C felony)

Likely impact and considerations

  • Improves transparency and accountability of tax expenditures.
  • Enables evidence-based decisions on continuation, modification, expansion, or removal of incentives.
  • Aims to reduce reliance on anecdotal claims by providing regular, standardized data on outcomes and costs.
  • Potentially enhances fiscal discipline by realigning incentives with current priorities and fiscal conditions.
  • Requires robust data collection infrastructure (new schedules/forms) and interagency collaboration.

Notes: The Governor signed the bill into law on June 25, 2026 (Act 160), with the relevant sections taking full effect for tax years beginning after December 31, 2026.

Compiled from official sources — confirm details with the bill’s official record.

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