VIEWPOINT: No End to Litigation, Part 2

Two weeks ago, we wrote about a case now before the Hawaii Supreme Court in which the State audited and assessed the taxpayers, causing the taxpayers to spend millions of dollars on litigation that resulted in a court judgment. The State then audited and assessed more of the same taxes (General Excise taxes) for the same years, forcing both the taxpayers and the court system through the wringer again without any apparent limit.

The Foundation asked the Hawaii Supreme Court to participate in the litigation as an “amicus,” or “friend of the court,” in order to present a perspective from its role as a watchdog for taxpayers generally.

On Halloween, the State filed a response opposing the Foundation’s request, saying that our brief “cannot aid the Court in the disposition of this dispute.”  The State argued:

TFH’s proposed brief fails to take into account that the [taxpayers] did not file tax returns, including “annual reconciliation returns,” for the periods to which any res judicata argument might apply.  The broad principles of res judicata that TFH urges the Court to adopt are not properly asserted when the taxpayers utterly fail to meet their filing obligations.  Rather, principles of res judicata should have no application to taxpayers that flaunt their reporting obligations, like the OTCs here.  For this reason TFH’s motion should be denied because it fails to aid the Court in any way.

Although the Foundation wanted to file a response to the State’s opposition memo, the appellate court rules didn’t allow us to.  So, we are using this space to tell you, the court of public opinion, what we would have filed on Halloween.  We wanted to say:

The State opposes the Foundation’s motion because it says the ideas expressed in its proposed brief will not help this Court.  The State essentially argues that the rules of law and justice should be tossed out the window because the taxpayers before the Court failed to file returns.

The Department fundamentally misconceives what this issue is about.  The Department apparently regards the taxpayers here as lower life forms and wants to give them no respect.  This case, however, is not about respect for the taxpayers.  It is about respect for this Court and the Hawaii Judiciary.  The Legislature provided that the Executive Branch could assess taxes when the taxpayer fails to self-assess.  It also provided that the Judiciary could review those assessments.  Thus, the taxpayers and the Department litigated the assessments, and the courts have rendered judgment.  Even if the taxpayers were demons, ghouls, or devils incarnate, they have a judgment.  The issue is the respect to be accorded that judgment.  If the Department can pursue repeated litigation without mercy and without end, woe be to the rest of us, for we do not know who the Department will demonize tomorrow.

UPDATE:  On November 7, the Court allowed the Foundation to file its brief.  So there!  Oral argument and a decision of the Court won’t be expected until weeks or months later.  We like to think that our viewpoint will someday help taxpayers in our state, so we will be anxiously awaiting the next chapter in this story.

The MAUIWatch Community Network invites readers to express their views in the Community Viewpoint. Community Viewpoint columns should be on or around 800 words. Community Viewpoint submissions are subject to editing. We do not print letters announcing events to come, extensive quotations from other material, open letters or form letters. Send to contact (at) mauiwatch (dot) com



About Tom Yamachika

Tom Yamachika
Tom Yamachika is the President of the Tax Foundation of Hawaii, a private, nonprofit educational organization dedicated to informing the taxpaying public about the finances of our state and local governments in Hawaii. Tom is also a tax attorney in solo practice and has been since early 2013. Prior to 2013, he was with the accounting firm Accuity LLP, which was formed in 2006 from the Honolulu office of Coopers & Lybrand (which later became PricewaterhouseCoopers). Before that, he served as an Administrative Rules Specialist in the State of Hawaii Department of Taxation from 1994 to 1996, where he drafted rules, interpretive releases, and legislation on several different state taxes. Prior to that, he practiced litigation and tax law with Cades Schutte Fleming & Wright in Honolulu.

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