Monday, September 28, 2020
Hawai'i Free Press

Current Articles | Archives

Sunday, November 13, 2016
Tax Appeal Court Strikes Down Honolulu’s “Residential A”
By Tom Yamachika @ 4:01 AM :: 3078 Views :: Taxes

Tax Appeal Court Strikes Down Honolulu’s “Residential A”

by Tom Yamachika, President, Tax Foundation Hawaii

In 2013, Honolulu established a new property tax classification for residential property (1) valued at over $1 million and (2) for which the home exemption was not taken. Honolulu set the tax rate for this classification, called “Residential A,” 70% higher than the tax rate for other residential property. Earlier this year, a member of the City’s 2014 Real Property Tax Advisory Commission, Schuyler “Lucky” Cole, who was represented by Ray Kamikawa, who happened to chair that Commission, sued in Tax Appeal Court to attack the legality and constitutionality of the Residential A classification – and recently won.

In court, Cole’s side argued that the Residential A classification was illegal for four reasons, and the Tax Appeal Court agreed with all four of them.

Cole argued that the classification was illegal because the property tax ordinance classifies property according to its highest and best use, but the two triggers for Residential A – valuation over $1 million and no home exemption – are not based on use. Valuation of a property has nothing to do with how it is used. And, because use of the property is determined by what it is used for rather than who is using it, the home exemption has nothing to do with use either. This problem could be fixed through careful rewording of the ordinance, but then there are also constitutional problems.

Cole argued that the classification ran afoul of three protections that the U.S. Constitution, and, to some extent, the Hawaii Constitution, provide under the Commerce Clause, the Equal Protection Clause, and the Privileges and Immunities Clause.

The Commerce Clause states that the Congress has the power to regulate commerce, but the courts have held that limitations are placed on the States’ taxing powers even when the Congress doesn’t explicitly regulate. One limitation is that taxes can’t discriminate against commerce from citizens of other states and countries.

The Equal Protection Clause limits the power of the government, at both the federal and state levels, so that it may not impose taxation that unequally burdens persons or property of the same class (although the government may make certain classifications if it has a rational basis for doing so).

The Privileges and Immunities Clause says that a citizen of one state cannot be forced to pay taxes in another state that are heavier than those imposed on that state’s own citizens. Thus, no discrimination against out-of-state Americans is allowed.

Cole’s argument is, basically, that the Residential A classification was intended to penalize wealthy people from other states and countries who are buying up Hawaii property and, in the process, appear to be driving up the cost of housing for our locals to unbearable levels. If a tax discriminates against nonresidents or foreigners just because they are nonresidents or foreigners, these constitutional problems arise. The City argued very strongly that the tax ordinance is written to be neutral and in fact applies to locals, like Mr. Cole. But one critical point emerged in the Tax Appeal Court hearing: Residential A status depends on the lack of a home exemption, and there is no way a nonresident can qualify for a home exemption. The City pointed out that home or homestead exemptions appear in 48 states, and argued that they couldn’t possibly be unconstitutional. The Tax Appeal Court seemed to disagree.

It may be too late for Honolulu property owners to contest their property tax classifications for this year – the deadline was September 30th – but we expect further developments in the case this and next year. Homeowners who are in this property class would be well advised to watch for these developments.

---30---

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

ACA Signups Hawaii

ALEC

Alliance Defending Freedom

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Ballotpedia Hawaii

Better Hawaii

Blaisdell Memorial Project

Broken Trust

Build More Hawaiian Homes Working Group

ChinaTownWatch.com

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

Coffee Break

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Habele.org

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HIEC.Coop

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Hawaiian

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

SenatorFong.com

Sink the Jones Act

Statehood for Guam

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT