W. Maui Resort Partners, LP v. Cnty. of Maui

• Docket Number: SCAP-22-0000587,SCAP-23-0000139
• Decision Date: 23 April 2024
• Parties: In the Matter of the Tax Appeal of WEST MAUI RESORT PARTNERS LP, Appellant-Appellant, v. COUNTY OF MAUI, Appellee-Appellee. In the Matter of the Tax Appeal of OCEAN RESORT VILLAS VACATION OWNERS ASSOCIATION, Appellant-Appellant, v. COUNTY OF MAUI, Appellee-Appellee.
• Court: Hawaii Supreme Court

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In the Matter of the Tax Appeal of WEST MAUI RESORT PARTNERS LP, Appellant-Appellant,
v.
COUNTY OF MAUI, Appellee-Appellee.

In the Matter of the Tax Appeal of OCEAN RESORT VILLAS VACATION OWNERS ASSOCIATION, Appellant-Appellant,
v.
COUNTY OF MAUI, Appellee-Appellee.

Nos. SCAP-22-0000587, SCAP-23-0000139

Supreme Court of Hawaii

April 23, 2024

APPEAL FROM THE TAX APPEAL COURT (CAAP-22-0000587; CASE NO. 1CTX-21-0000071; 1CTX-21-0000071 THROUGH 1CTX-21-0000073; 1CTX-21-0000075 THROUGH 1CTX-21-0000078; 1CTX-21-0000080 THROUGH 1CTX-21-0000117; 1CTX-21-0000119 THROUGH 1CTX-21-0000297; 1CTX-21-0000299 THROUGH 1CTX-21-0000397; 1CTX-21-0000399 THROUGH 1CTX-21-0000430; and 1CTX-21-0000432 THROUGH 1CTX-21-0000489); (CAAP-23-0000139; CASE NO. 1CTX-21-0000569; 1CTX-21-0000570 THROUGH 1CTX-21-0000584; 1CTX-21-0000585; 1CTX-21-0000586; 1CTX-21-0000588; 1CTX-21-0000590; 1CTX-21-0000591; 1CTX-21-0000593; 1CTX-21-0000595; 1CTX-21-0000597; 1CTX-21-0000598; 1CTX-21-0000600; 1CTX-21-0000601; 1CTX-21-0000603; 1CTX-21-0000604; 1CTX-21-0000606; 1CTX-21-0000607; 1CTX-21-0000609; 1CTX-21-0000610; 1CTX-21-0000612; 1CTX-21-0000614; 1CTX-21-0000615; 1CTX-21-0000617; 1CTX-21-0000619; 1CTX-21-0000620; 1CTX-21-0000622; 1CTX-21-0000624; 1CTX-21-0000627; 1CTX-21-0000628; 1CTX-21-0000629; 1CTX-21-0000630; 1CTX-21-0000633; 1CTX-21-0000635; 1CTX-21-0000637; 1CTX-21-0000638; 1CTX-21-0000641; 1CTX-21-0000643; 1CTX-21-0000645; 1CTX-21-0000647; 1CTX-21-0000651; 1CTX-21-0000653; 1CTX-21-0000655; 1CTX-21-0000657; 1CTX-21-0000658; 1CTX-21-0000659; 1CTX-21-0000662; 1CTX-21-0000665; 1CTX-21-0000675; 1CTX-21-0000677; 1CTX-21-0000680; 1CTX-21-0000683; 1CTX-21-0000686; 1CTX-21-0000689; 1CTX-21-0000693; 1CTX-21-0000695; 1CTX-21-0000696; 1CTX-21-0000698 THROUGH 1CTX-21-0000703; 1CTX-21-0000708; 1CTX-21-0000711; 1CTX-21-0000714; 1CTX-21-0000717; 1CTX-21-0000720; 1CTX-21-0000722; 1CTX-21-0000725; 1CTX-21-0000728; 1CTX-21-0000732; 1CTX-21-0000734; 1CTX-21-0000738; 1CTX-21-0000740; 1CTX-21-0000743; 1CTX-21-0000746; 1CTX-21-0000748; 1CTX-21-0000752; 1CTX-21-0000755; 1CTX-21-0000760; 1CTX-21-0000765; 1CTX-21-0000774; 1CTX-21-0000783; 1CTX-21-0000808; 1CTX-21-0000815; 1CTX-21-0000824; 1CTX-21-0000828; 1CTX-21-0000831; 1CTX-21-0000835; 1CTX-21-0000837; 1CTX-21-0000846; 1CTX-21-0000849; 1CTX-21-0000901; 1CTX-21-0000904; 1CTX-21-0000906; 1CTX-21-0000909; 1CTX-21-0000910; 1CTX-21-0000917; 1CTX-21-0000919; 1CTX-21-0000922; 1CTX-21-0000924; 1CTX-21-0000927; 1CTX-21-0000928; 1CTX-21-0000931; 1CTX-21-0000933; 1CTX-21-0000935; 1CTX-21-0000939; 1CTX-21-0000941; 1CTX-21-0000958; 1CTX-21-0000960; 1CTX-21-0000963; 1CTX-21-0000965; 1CTX-21-0000968; 1CTX-21-0000972; 1CTX-21-0000977; 1CTX-21-0000980; 1CTX-21-0001008; 1CTX-21-0001010; 1CTX-21-0001012; 1CTX-21-0001015; 1CTX-21-0001017; 1CTX-21-0001019; 1CTX-21-0001023; 1CTX-21-0001025; 1CTX-21-0001029; 1CTX-21-0001069; 1CTX-21-0001071; 1CTX-21-0001073; 1CTX-21-0001075; 1CTX-21-0001076; 1CTX-21-0001078; 1CTX-21-0001080; 1CTX-21-0001082; 1CTX-21-0001084; 1CTX-21-0001094; 1CTX-21-0001097; 1CTX-21-0001099; 1CTX-21-0001100; 1CTX-21-0001105; 1CTX-21-0001106; 1CTX-21-0001117; 1CTX-21-0001119; 1CTX-21-0001122; 1CTX-21-0001123; 1CTX-21-0001125; 1CTX-21-0001129; 1CTX-21-0001131; 1CTX-21-0001135; 1CTX-21-0001136; 1CTX-21-0001139; 1CTX-21-0001140; 1CTX-21-0001143; 1CTX-21-0001144; 1CTX-21-0001146; 1CTX-21-0001149; 1CTX-21-0001151; 1CTX-21-0001153 THROUGH 1CTX-21-0001243; 1CTX-21-0001247; 1CTX-21-0001250; 1CTX-21-0001252; 1CTX-21-0001254; 1CTX-21-0001256; 1CTX-21-0001258; 1CTX-21-0001260; 1CTX-21-0001263; 1CTX-21-0001264; 1CTX-21-0001267; 1CTX-21-0001269; 1CTX-21-0001271; 1CTX-21-0001273; 1CTX-21-0001275; 1CTX-21-0001277; 1CTX-21-0001280; 1CTX-21-0001282; 1CTX-21-0001284; 1CTX-21-0001286; 1CTX-21-0001288; and 1CTX-21-0001289)

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Kurt W. Klein, James M. Yuda, (Robert G. Klein and David A. Robyak on the briefs) for appellant-appellant West Maui Resort Partners LP

William C. McCorriston, Brett R. Tobin for appellant-appellant Ocean Resort Villas Vacation Owners Association

Brian A. Bilberry for appellee-appellee

Thomas Yamachika on the briefs) for amicus curiae Tax Foundation of Hawai‘i

RECKTENWALD, C.J., McKENNA, AND EDDINS, JJ., CIRCUIT JUDGE OCHIAI AND CIRCUIT JUDGE SOMERVILLE, ASSIGNED BY REASON OF VACANCIES

OPINION

RECKTENWALD, C.J.

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I. INTRODUCTION

Appellants West Maui Resort Partners LP (West Maui Resort) and Ocean Resort Villas Vacation Owners Association (Ocean Resort), plan managers for nearly 700 time share units, appealed their Maui County tax assessments to the Tax Appeal

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Court, which granted summary judgment for the County in both cases. They argue on appeal that the County's tax assessments are unconstitutional and violated the County's own code. In particular, they allege that the County's creation of a Time Share real property tax classification acts as an illegal tax on time share visitors. Appellants also contend that time share units and hotel units have an identical "use" for real property purposes, and therefore, should be taxed in the same real property tax classification. In other words, Appellants want to have their time share properties taxed at the same, lower tax rate as that of hotel and resort properties.

We are not persuaded by Appellants' arguments. The County acted within its constitutional authority to tax real property in creating the Time Share classification and taxing properties assigned to it. The Hawai'i Constitution grants broad powers of real property taxation to the counties under article VIII, section 3, including counties' ability to create real property tax classifications. Neither the Hawai'i Constitution nor the Maui County Code requires that the County consider only real property use when creating those classifications. Further, time share unit owners are not a protected class and do not otherwise receive heightened protections under the equal protection clauses of the Hawai'i or U.S. Constitution. The County had several legitimate policy purposes rationally related

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to the creation of the Time Share classification, including raising revenue for infrastructure maintenance and addressing time share properties' unique impacts on the community.

We therefore affirm the Tax Appeal Court's summary judgment for the County in both cases.

II. BACKGROUND

A. Factual Background

The Maui County Code (MCC) outlines the real property classifications in the County and how real property is classified and valued for real property tax purposes. At the time of the assessments at issue, MCC § 3.48.305 (2021)^[1] stated:

A. Except as otherwise provided in subsection B, real property must be classified, upon consideration of its highest and best use, into the following general classes:

1. Owner-occupied.

2. Non-owner-occupied.

3. Apartment.

4. Hotel and resort.

5. Time share.

6. Short-term rental.

7. Agricultural.

8. Conservation.

9. Commercial.

10.Industrial.

11.Commercialized residential.

B. In assigning land to one of the general classes, the director must give major consideration to: the districting established by the land use commission in accordance with chapter 205, Hawai'i Revised Statutes; the districting established by the County in its general plan and comprehensive zoning ordinance; use classifications

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established in the Hawai'i state plan; and other factors that influence highest and best use; except that:

. . .

5. Real property that is subject to a time share plan as defined in section 514E-1, Hawai͑i Revised Statutes, as amended, must be classified as "time share."

MCC § 3.48.290 described, the County Finance Director's role in real property tax assessments:

The director must cause the fair market value of all taxable real property to be determined and annually assessed by the market data and cost approaches to value using appropriate systematic methods suitable for mass valuation of properties for taxation purposes, so selected and applied to obtain, as far as possible, uniform and equalized assessments throughout the County . . . .

In 1986, the State created the transient accommodation tax (TAT) to "'provide money that can be made available to the counties to improve tourist-related infrastructure.'" Travelocity.com, L.P. v. Dir. of Tax'n, 135 Hawai'i 88, 121, 346 P.3d 157, 190 (2015) (citation omitted); see 1986 Haw. Sess. Laws Act 340, § 1 at 758-64. The TAT is a tax on transient accommodation units imposed directly on individual visitors, including those at both time share and hotel and resort units. For hotel guests, the TAT is assessed based on "the gross rental or gross rental proceeds derived from furnishing transient accommodations." Hawai'i Revised Statutes (HRS) § 237D-2(a) (2017). For time share occupants, the TAT is assessed based on the unit's fair market rental value. HRS § 237D-2(c). Fair market rental value is defined as "an amount equal to one-

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half of the gross daily maintenance fees that are paid by the owner and are attributable to the time share unit located in Hawai'i." HRS § 237D-1 (2017).

Before 1997, the County classified time share units in either the Apartment or Hotel and Resort real property classifications. In 1997, the County passed Ordinance 2569, reclassifying all time share units into the Hotel and Resort classification. We upheld that ordinance in Gardens at W. Maui Vacation Club v. Cnty. of Maui, 90 Hawai'i 334, 978 P.2d 772 (1999).

In 2004, the County's Budget and Finance Committee proposed a bill to the Council entitled "A BILL FOR AN ORDINANCE ESTABLISHING A REAL PROPERTY TAX CLASSIFICATION FOR TIME SHARES," and the relevant committee report stated:

The purpose of the draft bill is to add a new "Time Share" real property tax classification.

. . . .

Your Committee notes that the draft bill removes Time Share properties from the Hotel and Resort real property tax

...