Senate Ways and Means panel approves GET exclusion for federal Restaurant Relief Fund, sets effective date

The Senate Committee on Ways and Means on Tuesday recommended passage of Senate Bill 1278, approving an amendment that sets the bill’s effective date to March 11, 2021 and clearing the measure for further legislative action.

The bill would exclude federally distributed Restaurant Relief Fund (RRF) grants from Hawaii’s general excise tax (GET). The committee adopted an amendment proposed during the hearing to adjust the effective date and instructions for the bill’s implementation.

The committee’s action follows public and industry testimony pressing for tax parity between the RRF and earlier pandemic-era federal relief programs such as PPP, EIDL and PUA. Russell Ryan of Highway Inn told the committee, “This is a tremendously important bill for the restaurant industry, in Hawaii.” Longtime operator Bill Comerford recounted business losses and added, “I had to sell 2 bars for virtually nothing,” underscoring the economic harm restaurant and bar operators said they experienced during the COVID-19 emergency.

Representatives of the Hawaii Restaurant Association and other industry groups also testified in support. Tom Jones of the Hawaii Restaurant Association said the association “stand[s] on a written testimony.” Several individual businesses listed their support during public testimony, including Maui Brewing Company and others.

Tom Yamachika of the Tax Foundation of Hawaii recommended technical changes to the bill’s effective date during his testimony and flagged administrative issues for how refunds would be handled. Yamachika said the Department of Taxation had asked that refund claims be filed by April 20, 2025, but noted the Legislature would not be adjourned by that date and recommended a protective procedure for refund claims and an adjusted effective date. The committee adopted an amendment reflecting an earlier Tax Foundation recommendation to set an explicit effective date in March 2021.

The committee record shows the measure advanced with the amendment; committee members voted to adopt the recommendation and the committee report will reflect the changes the panel approved.

Why it matters: Excluding RRF grants from the GET would allow restaurants that received those federal grants to avoid state tax on the amounts, aligning the state tax treatment with prior administrative practice for other federal pandemic relief distributions, according to supporters. Restaurant owners said the change would prevent additional tax liabilities tied to federal relief that they said was intended to offset pandemic losses.

Next steps: The committee adopted the recommendation; the bill will be reported out of Ways and Means consistent with the committee’s normal process.