The Hawai‘i Supreme Court has rejected a class-action lawsuit by a group of Maui property owners over county taxes.
In 2020, the Maui County Council passed Ordinance 5160, updating the county’s zoning designations. In particular, it changed the county’s classification of “non-owner-occupied” condominiums, prohibiting that designation in zoning districts where transient vacation rentals were permitted.
The upshot of this is that some 1,400 condo units on Maui were, overnight, reclassified as short-term rentals, accruing taxes at short-term rental rates, regardless of whether they were actually being used as short-term rentals.
A letter by Scott Teruya — then the Finance Director for the county — projected in 2020 that the new ordinance would impact 1,428 properties, increasing their annual tax burden by an average of $6,300 each, for an aggregate of about $9.1 million in additional tax revenue.
In 2022, condo owner Steven Laub, along with a trust of other taxpayers, challenged the ordinance, filing a suit against the county that eventually went before the state’s tax appeal court.
The tax court found that there was “no rational basis to explain the classification … between neighbors who are using the property in the same way versus taxpayers who are using the property in the identical fashion but simply live under different zoning requirements.”
According to court documents, Maui County issued Laub an undisclosed sum as a refund for their excessive taxes.
However, two Kihei condo owners, Christopher and Janel Piezko, then filed in 2023 a class action suit against the county, seeking their own tax refunds.
The Piezkos claimed that they used their condo as their own vacation home and had not used it as a short-term rental. In addition, the suit that the verdict in the Laub case had found that the taxes collected via Ordinance 5160 were unconstitutional.
This case was less successful. Maui County successfully moved to dismiss the case — arguing that the Piezkos should have used the county’s administrative appeals process to resolve the matter — leading the Piezkos to appeal. The Appeals Court punted the case to the state Supreme Court, which ruled Dec. 30 in favor of the county, dismissing the case.
Associate Justice Todd Eddins wrote in his opinion that the Maui District Court — and, by extension, the Appeals Court and Supreme Court — simply do not have subject matter jurisdiction over real property tax appeals, which are better directed toward the state Tax Appeals Court, as Laub did.
But even if the Supreme Court was the appropriate venue for the Piezkos to challenge their tax assessment, Eddins opined that they were too late to do so: all tax appeals must be filed by April 9 of the tax year in question. As the Piezkos filed their suit in October 2023 regarding taxes incurred in 2021, they were more than two years late.
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