Out-of-State Lawyers Focus of State Tax Proposals by the Hawai’i Judiciary and Legislature

All persons or entities doing business in Hawai’i are subject to its general excise tax (GET) on gross receipts. The Hawai'i State Judiciary and the Hawai’i State Legislature are considering proposals to ensure the GET is paid by pro hac vice lawyers (i.e., out-of-state lawyers) who practice in Hawai’i.

The Supreme Court of Hawai‘i is seeking public comments regarding proposed amendments to the Rules of the Supreme Court Rule 1.9 (Pro Hac Vice Appearances of Counsel for Court Proceedings) and Rule 1.9A (Pro Hac Vice Appearance of Counsel for Arbitration Proceedings).

Among other things, the Court's rule changes would require a motion for pro hac vice appearances in court or arbitration proceedings to include: (1) a copy of a certificate of good standing issued by the Department of Commerce and Consumer Affairs, and (2) a GET license number issued by the Department of Taxation with an affirmation that counsel will pay all state income tax due for all business activities in the state. The public can comment on the proposed changes online no later than Monday, March 25, 2024.

The Hawai’i state legislature is considering several bills that expressly require pro hac vice attorneys to pay the GET.? The bills at play are SB2514, SB2995, and HB2570.

Based on published testimony, the Hawaii Association of Public Accountants (HAPA) is the primary advocate for these bills.? HAPA argues "there were droves of out-of-state attorneys coming to Hawaii seeking to represent Maui wildfire victims in litigation," "contingent fee for these cases that may range from 30% - 45% of the lawsuit damages," and "HAPA found that approximately 70% of out-of-state CPA firms were not paying Hawaii taxes since Hawaii’s GET is unique in the nation."

However, as the Judiciary points out in its testimony on SB2514 and HB2570, these bills appear to achieve the same intent as the Judiciary's proposed rule amendments.? The Judiciary requests that the bills be deferred so the Judiciary can address the issue in its above-proposed rule amendments. The Judiciary is charged with regulating the practice of law under the state constitution, and it believes the "Commission on Professionalism, chaired by Justice Richard W. Pollack (ret.), would be an appropriate forum for studying the matter, and evaluating whether rule amendments should be considered."