A Honolulu ordinance that taxes homeowners at higher rates for million dollar homes that they don’t reside in full time will remain in effect after a state judge on Friday reversed his prior October decision that determined that the tax classification was unconstitutional.
After hearing new arguments from City Corporation Counsel Donna Leong, Judge Gary W.B. Chang ruled that the city’s Residential A tax classification did not discriminate against non-residents and fell within the powers of the city.
The new tax class was passed by the Honolulu City Council in 2013.
City Corporation Counsel Donna Leong said after the hearing that she was “very happy” with the judge’s decision.
“It’s a very significant decision for the entire city,” she said. “The tax revenues generated by this are about $39 million a year, so it is a very important piece of tax legislation. I can’t tell you how important it is for the city’s finances.”
About 20 property owners with parcels designated Residential A sued the city earlier this year, arguing that the ordinance was unfair and unconstitutional. Property owners who fall under the Residential A classification are taxed at $6 per $1,000 of assessed value, instead of the $3.50 per $1,000 that standard residential class owners pay.
Properties that are valued at $1 million or more and don’t have a home exemption are taxed at the higher rate. A home exemption is granted to residential owners who live in their homes.
Ray Kamikawa, an attorney for the property owners and a former state tax director, said that his clients would consider appealing the ruling.
In issuing his decision, Chang said that his reversal was based on a more in-depth review of the issues.
“Simply, the court, upon further study, came to a different conclusion,” he said.