The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Economic Development and Technology on March 12, 2025.
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March 12, 2025, 10 a.m.
Hawaii State Capitol
Conference Room 423 and Videoconference
To: House Committee on Economic Development and Technology
Rep. Greggor Ilagan, Chair
Rep. Ikaika Hussey, Vice-Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: SB1278 SD1 — RELATING TO THE GENERAL EXCISE TAX
Aloha Chair Ilagan, Vice-Chair Hussey and other members of the Committee,
The Grassroot Institute of Hawaii supports SB1278 SD1, which would exempt from the state general excise tax any grants received by Hawaii businesses under the COVID-19-era Restaurant Revitalization Fund, and require the state Department of Taxation to issue refunds to businesses that have already paid the excise tax on RRF grants.
This bill would rectify an oversight by the state Department of Taxation and provide justice to the restaurants and eateries that were affected.
For some history: The tax department published a tax information release form in October 2020 stating that federal assistance programs such as the Paycheck Protection Program and Economic Injury Disaster Loans would not be subject to Hawaii’s GET.
“Grants or other payments that replace or supplement income are normally subject to GET,” the department wrote. “However, in light of the severity of the economic impact of the COVID-19 pandemic, GET will not be imposed on payments received under PUA [Pandemic Unemployment Assistance], loan amounts forgiven under PPP, and EIDL Grants.”[1]
It made sense to waive the general rule that all business income is subject to the GET, but the department failed to update this waiver after Congress established the Restaurant Revitalization Fund in March 2021.
The RRF program provided grants of up to $5 million per business location — not to exceed $10 million for any one company — to replace income lost because of COVID-19.[2] In Hawaii, 1,147 bars, restaurants and eateries received $416 million in grants, for an average of about $362,900 per business.[3]
But because the tax department never updated its tax release, these businesses in some cases later had to pay thousands of dollars in GET on grants intended to help them stay afloat.
Bill Comerford, who before the lockdowns owned four Honolulu bars, is just one of the many people who were shocked that they had to pay taxes on these grants.
“They’re taxing me … for receiving $3.1 million [in federal Restaurant Relief Funds], … which would be about $160,000,” Comerford said in 2024. “That’s not chump change at all.”[4]
Russel Ryan, chief financial officer of Highway Inn restaurant, said he was “astonished” when he learned the restaurant owed taxes on the RRF monies.
“And of course, you know, we’re a small company, but we have budgets. … We were never, ever, never, ever made aware in order to budget for this particular tax,” he said.[5]
For entrepreneurs Comerford, Ryan and the many others like them, this bill would right a three-year-old wrong.
Thank you for the opportunity to testify.
Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1] “Tax Information Release No. 2020-06 (Revised),” Hawaii Department of Taxation, Oct. 20, 2020, p. 3.
[2] “Restaurant Revitalization Funding Program,” U.S. Small Business Administration, April 28, 2021, p. 6.
[3] “Restaurant Revitalization Fund (RRF) FOIA,” U.S. Small Business Administration, last updated Oct. 21, 2024.
[4] “‘Surprise’ state tax last straw for veteran Hawaii bar owner?” Grassroot Institute of Hawaii, April 11, 2024.
[5] “Will state Tax Department stick to its guns on restaurant tax?” Grassroot Institute of Hawaii, Jan. 20, 2024.
