Excerpt from SB1396 testimony of Michael McGarry, Senior Vice President, Government Affairs for Cruise Lines International Association (CLIA), April 2, 2025
… SB1396, HD2 seeks to establish a funding mechanism to address environmental impacts from visitors to Hawaii through an expansion of the Transient Accommodations Tax (TAT) to include the cruise industry as well as an increase to the current TAT rate. However, application of this tax to cruise ship cabins violates the Tonnage Clause of the US Constitution as well as federal law, 33 U.S.C. § 5(b)(2).
33 U.S.C. § 5(b)(2) No taxes, tolls, operating charges, fees, or any other impositions whatever shall be levied upon or collected from any vessel or other water craft, or from its passengers or crew, by any non-Federal interest, if the vessel or water craft is operating on any navigable waters subject to the authority of the United States, or under the right to freedom of navigation on those waters, except for —…
(2) reasonable fees charged on a fair and equitable basis that — (A) are used solely to pay the cost of a service to the vessel or water craft; (B) enhance the safety and efficiency of interstate and foreign commerce; and (C) do not impose more than a small burden on interstate or foreign commerce.
Federal courts (including the Supreme Court) have consistently ruled for over a century that fees or taxes imposed on vessels by non-federal entities are prohibited.
CLIA member lines currently pay “passenger fees” in addition to numerous existing DOT Harbors administered tariffs and fees, including port entry fees, dockage fees for vessels, pipeline tolls and bunkering charges among many others.
In 2023, the cruise industry contributed $443 million to Hawaii's GDP and supported 4,200 jobs, with a total economic impact of $990 million in the state.
We strongly urge the committee to ensure that taxes and fees proposed under the measure are allowable under federal law and do not expose the state to potential liability or risk of legal challenge….
read … FULL TESTIMONY
HNN: Cruise industry fights back against proposed taxes
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GOVERNOR GREEN WINS PASSAGE OF HISTORIC CLIMATE IMPACT LEGISLATION
News Release from Office of the Governor, May 2, 2025
HONOLULU — Governor Josh Green, M.D., today heralded the Legislature’s passage of SB1396, creating the climate impact fee, or “green fee,” that will help the islands to mitigate the impacts of climate change and the roughly 10 million annual visitors we welcome to our shores.
“This legislation, which I intend to sign, is the first of its kind in the nation and represents a generational commitment to protect our ‘āina. Hawai‘i is truly setting a new standard to address the climate crisis, and I want to thank lawmakers for their unrelenting work these past two years in bringing this to fruition,” said Governor Green.
SB1396 will increase the state’s portion of the Transient Accommodation Tax (TAT) collections from 10.25% to 11%. Additionally, all four counties have exercised their legislated authority to apply an additional TAT of up to 3% and have adopted the full amount. The net result with this 0.75% increase is a TAT of 14% statewide. General Excise Tax is applied on top of room rates. It is estimated the fee will raise $100M annually to provide disaster mitigation for the Aloha State.
“Given the devastation we saw on Maui in August of 2023, this measure is crucial because it will help us to deal with wildfire risk resulting from the climate change crisis. It is foundational to our ability to provide a safe and secure Hawai‘i for our children, our residents, our visitors and the environment,” Governor Green said.
Governor Green has until July 9, 2025, to sign the bill into law. He has repeatedly indicated his intention to do so, as it has been a priority piece of legislation for his administration.
A video statement by Governor Green shared on his social media platforms is available here. Courtesy: The Office of the Governor.