Back in 2014, we wrote in this space about a nasty Honolulu City & County rule involving real property tax appeals. That rule said that if you as a property owner didn’t like your real property tax assessment and you wanted to appeal it, the appeal had better be in by January 15th. It didn’t matter if the government was open on January 15th. If the appeal came in after the 15th, the appeal would be late, and the City would have it dismissed.
Along comes a taxpayer, Kalaeloa Ventures, LLC. It wanted to file fourteen different real property tax appeals against the City taxing authorities. However, it wasn’t quite ready to file on Friday, January 13, 2017. (How unlucky!) The government closed for the weekend, which included Sunday, January 15th and Monday, January 16th, which was Martin Luther King, Jr. Day. It reopened for business on Tuesday, January 17th, and the taxpayer filed Notices of Appeal to the Tax Appeal Court in all fourteen cases.
Cackling with glee, City attorneys marched straight to Tax Appeal Court and asked the court to throw out all fourteen appeals. “Tsk, tsk. Late,” they said. “The court doesn’t have jurisdiction over late appeals.”
“Wait a minute,” the taxpayer said. “There’s a state statute, HRS section 1-32, allowing acts that are legally required to be performed on a particular date to be done the next business day when the deadline day is a Sunday or a holiday.” Under that statute, we’re good to go.”
“No, you’re not,” the City contended. “Our tax appeal ordinance, section 8-12.1, specifically says that the appeal must be in on or before January 15. The City also has an ordinance regarding due dates on a Saturday, Sunday, or holiday, namely section 8-1.16, and that ordinance specifically does not apply to tax appeals. So, a tax appeal must be in by January 15 whether the City government offices are open or not.”
“But you forgot one thing,” said the taxpayer. “The tax appeal court is a state court. It deals with appeals from all the different counties. The law governing state court procedure is state law. There is no state exception for property tax appeals. Therefore, the appeal was on time!”
“Absolutely not!” huffed the City attorney, with a noticeably quickening pulse. “The Hawaii Constitution expressly says, ‘all functions, powers and duties relating to the taxation of real property shall be exercised exclusively by the counties.’ All functions, powers and duties mean we, not the State, get to specify not only the property tax system, but also the procedure surrounding it. So, the state statutes are trumped by the property tax ordinances when it comes to property tax!”
This dispute then played out through the court system. The Tax Appeal Court thought the City had the better of the argument and tossed out the appeals. The taxpayer appealed the dismissals, and the arguments were made before the Supreme Court of Hawaii.
On July 27, 2018, the Supreme Court of Hawaii issued its decision. Apparently, the court couldn’t stomach the thought of having a state court subject to numerous procedural rules created by each county, and that the state statutes and court rules creating the court would have questionable validity because they would not be exercised exclusively by the counties. Judgment for the Taxpayer!
A word of caution: This decision might not apply when real property tax appeals are made to the Board of Review, which is a county creation, as opposed to the Tax Appeal Court, which is part of the state judiciary. To prevent taxpayer confusion, we hope that the counties won’t be too “hard head” about this and allow the weekend rule to apply across the board.
Tom Yamachika is the President of the Tax Foundation of Hawaii, a private, nonprofit educational organization dedicated to informing the taxpaying public about the finances of our state and local governments in Hawaii. Tom is also a tax attorney in solo practice and has been since early 2013. Prior to 2013, he was with the accounting firm Accuity LLP, which was formed in 2006 from the Honolulu office of Coopers & Lybrand (which later became PricewaterhouseCoopers). Before that, he served as an Administrative Rules Specialist in the State of Hawaii Department of Taxation from 1994 to 1996, where he drafted rules, interpretive releases, and legislation on several different state taxes. Prior to that, he practiced litigation and tax law with Cades Schutte Fleming & Wright in Honolulu.
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