By Jason A. Economou, Government Affairs, Realtor Association of Maui (RAM)

        I’ve been getting a lot of questions lately regarding recent changes to the Maui County Code that impact real property taxes, so I thought it prudent to try and explain what these changes mean. In order to do that properly, I need to start by providing some context.

        On December 4, 2020, the Maui County Council passed a number of bills that made changes to the County’s real property tax system. Among these bills were Bill 129 (2020) and Bill 130 (2020), which have been the cause of many recent questions. Both of these bills passed the County Council unanimously, but both were opposed by RAM. Bill 130 took effect immediately upon approval, and will impact property owners during the 2021/2022 tax year. Bill 129, on the other hand, does not take effect until January 1, 2022, but it is already raising a lot of concerns for the 2022/2023 tax year. For the sake of clarity, I will address these bills one at a time.

        First, I want to address Bill 130, because Bill 130 is the more immediate issue. Bill 130 (which is also known as Ordinance No. 5160) makes changes to Section 3.48.305 of the Maui County Code, which deals with the classification of land and buildings for the purposes of real property taxes. More specifically, it amends the portion of the code that relates to declarations of use for properties that have been subdivided into condominium units. The most significant of the amendments made are to the definitions of the “Non-owner-occupied” tax class and the “Short-term rental” tax classification. For more clarity, I have put side by side comparisons of the previous version of definitions and the newly amended definitions below:

Previous version of definition	Newly revised definition
Non-owner-occupied. Only those units occupied by the owner for personal use or by a lessee for a term of at least six consecutive months or more will be classified as “non-owner-occupied.”	Non-owner-occupied. Units occupied by the owner for personal use where transient vacation rental use is prohibited by the comprehensive zoning ordinance or units occupied by a lessee for a term of at least six consecutive months or more.
Short-term rental. Unless classified as “time share,” “hotel and resort,” or “commercialized residential,” lodging or dwelling units, as defined in the comprehensive zoning ordinance, occupied by transient tenants for periods of less than six consecutive months will be classified as “short-term rental,” including properties granted a short-term rental home permit, or conditional permit allowing transient vacation rental use.	Short-term rental. Unless classified as “time share,” “hotel and resort,” or “commercialized residential,” lodging or dwelling units, as defined in the comprehensive zoning ordinance, occupied by transient tenants for periods of less than six consecutive months, including properties granted a short-term rental home permit, or conditional permit allowing transient vacation rental use and units occupied by the owner for personal use or are vacant where transient vacation rental use is allowed by the comprehensive zoning ordinance.

If it isn’t clear from the side by side comparison, the basic gist of Bill 130 is that it will cause a number of condominium property owners who were in the “Non-owner-occupied” tax class to be moved into the “Short-term rental” tax classification for this tax year. This sudden shift in tax classification means that some property owners may get stuck paying upwards of 60% more in property taxes this year than they did last year. If you are asking yourself “what the heck is the County thinking,” you can get some sense by reading the memorandum from Finance Director Teruya that was attached to the original version of the bill. If you don’t have time for that, let me summarize: the County sees this as a fast way to add upwards of $9,000,000 in tax revenue without a major impact to people who vote here.

        If you or one of your clients is a property owner impacted by Bill 130, you have until April 9th, 2021, to appeal the assessment or classification on your property. Please note, however, that you still need to pay your property tax even while it is under appeal. For more information on the appeal process, or to find additional forms, please follow this link and navigate accordingly.

        Bill 129 is a bit more complicated to explain, because it does not go into effect until 2022, and it also has a mixed impact on property owners. The positive side of Bill 129 is that it creates a “long-term rental” tax classification, as well as a long-term rental tax exemption. This means that effective Jan. 1, 2022, real property occupied as a long-term rental, with a signed contract to lease for 12 consecutive months or longer to the same tenant, may qualify an owner for an exemption of up to $200,000 of assessed value. Real property rented on a long-term basis (12 consecutive months or longer) without a home exemption, will be eligible for the $200,000 long-term rental exemption and will be classified as Long-term Rental. Real property with a home exemption that also qualifies for the long-term rental exemption will be eligible for an additional $100,000 exemption and will be classified as Owner-occupied. Thelong-term-rental exemption claim form

is available with other forms at: 

https://www.mauicounty.gov/1953/RPA-Forms-andInstructions. The deadline to file for the long-term rental exemption will be 12/31/2021.

        Though RAM has been a proponent of creating a separate tax class and additional incentives for property owners who provide long-term rentals, we did oppose some of the more troublesome aspects of Bill 129. The most troublesome aspect of Bill 129 is that it removes the portion of the Maui County Code that relates to real property tax classifications for condominium units and actual use declarations^[1]. Without the ability to declare their actual use, condominium units will end up being taxed based on “highest and best use” of the property, unless some other property tax exemption applies and puts them in a different class (e.g. homeowners exemption/owner-occupied class, or long-term rental exemption/long-term rental class). This means that an apartment zoned condominium that is allowed transient vacation rental use pursuant to zoning^[2] may now be taxed in the Short-term rental classification by default, even if the bylaws prohibit TVR use or the owner has never conducted such use. That is a drastic change to the status quo, and not nearly enough has been done to prepare property owners for this change. 

        Both of these bills have already been signed into law, so you’ve missed your opportunity to formally oppose the legislation. Notwithstanding, you are still allowed to reach out to your elected officials and share your thoughts. Moreover, you can even suggest additional changes to the law that might improve our real property tax system. If you are so inclined, here is the contact information for your elected representatives:

• Mayor Michael Victorino:Mayors.Office@co.maui.hi.us

• Council Chair Alice Lee:Alice.Lee@mauicounty.us

• Council Vice-Chair Keani Rawlins-Fernandez:Keani.Rawlins@mauicounty.us 

• Presiding Officer Pro Tempore Tasha Kama:Tasha.Kama@mauicounty.us 

• Councilmember Gabe Johnson:Gabe.Johnson@mauicounty.us 

• Councilmember Kelly King: Kelly.King@mauicounty.us,

• Councilmember Mike Molina: Mike.Molina@mauicounty.us,

• Councilmember Tamara Paltin:Tamara.Paltin@mauicounty.us,

• Councilmember Shane Sinenci:Shane.Sinenci@mauicounty.us,

• Councilmember Yuki Lei Sugimora: Yukilei.Sugimura@mauicounty.us,

PS: While you are at it, you can also tell them that you oppose Bill 10 (2021). This bill increases the requirements for 201H development projects in Maui County, and it will likely result in a reduction of affordable housing construction in Maui County. The current requirement is that 201H fast-tracked developments have to offer 50% of their units at affordable rates; Bill 10 increases the requirement to 75% of the units at affordable rates for Maui County. That will make it harder for developers to finance 201H projects in Maui County, and that means less developers will be looking to build affordable units in Maui County.

[1] This also happens to be the portion of the code that was amended through Bill 130. That means that the changes made in Bill 130 will be removed when Bil 129 goes into effect on January 1, 2022. It also demonstrates how unnecessary Bill 130 actually is.

[2] Like one of these properties: https://www.mauicounty.gov/DocumentCenter/View/112945/Short-Term-Occupancy-List-as-of-12242020?bidId=