Court: County cannot redefine ‘real property’ | News, Sports, Jobs

Kaheawa wind turbines in the distance are framed by the piles of the Maalaea power station in this photo taken July 31. Hawaii’s Supreme Court ruled Tuesday that Maui County cannot include the value of wind turbines in the property’s assessment for taxes. The Maui News/MATTHEW THAYER photo

Hawaii’s Supreme Court ruled on Tuesday that Maui County does not have the authority to include wind turbines as “real estate” when he taxed Maui’s large wind farms.

The court upheld an earlier Tax Appeals Court ruling that the county exceeded its authority under the Hawaii Constitution when it changed its rules to allow wind turbines to be rated for property taxes – shortly after an appeals court ruled that wind turbines should not count as real estate.

Taxing wind turbines would have brought millions more to the county, but it could also have put the county on a slippery slope in deciding what should count when determining property taxes, according to the Tax Appeals Court.

The wind farms involved in the case are Kaheawa Wind Power I, a 30 megawatt wind farm that began operating on the slopes of the West Maui mountains in 2006; Kaheawa Wind Power II, a 21MW and 10MW battery storage project that went live just below KWP I in 2012; and Auwahi Wind, a 21 MW wind farm that has been operational in Ulupalakua since 2012.

Kaheawa leases state land, while Auwahi leases at Ulupalakua Ranch.

Around 2012, Kaheawa challenged the county’s authority under the Maui County Code to include the value of its wind turbines in property tax assessments for the 2007-11 tax years, according to court documents.

The Tax Appeals Court ruled in favor of the wind farms, and the Intermediate Court of Appeals later issued the opinion that the wind turbines were not considered real estate under the tax code. Maui County. To be considered real property, wind turbines had to qualify as “improvements” Where “fittings,” and the court said the wind turbines were neither.

Auwahi was not initially part of the Kaheawa litigation. However, after the Intermediate Court of Appeals decision, Auwahi reached an agreement with the county that Auwahi’s wind turbines were not real property under Maui County code for the year in effect. tax 2013.

However, in 2013 the county amended the code to explicitly include wind turbines, as well as other items that “increase the value” of the underlying ground. Under the new rules, the county again began including the value of the Kaheawa and Auwahi wind turbines in their property tax assessments from 2014 to 2016.

The wind farms again challenged the county, saying the county exceeded its authority in making the change, which had a huge impact on their taxes.

In 2013, the total assessed value and net assessed value of the land where KWP I is located was $3,077,900; in 2014, it was $76,911,700, according to county property tax records. For KWP II the value increased from $2,814,300 in 2013 to $71,854,800 in 2014, while in Auwahi it increased from $1,042,500 to $82,596,300.

The Court of Tax Appeals ruled in favor of the wind farms, after finding that “the delegates to the 1978 Constitutional Convention never intended to grant counties the power to redefine the term “real property” to include “personal property”. ”

If the counties had this power, “then there may be no end to what counties will ultimately do with respect to the taxation of chattels located on real property”, said the court.

Maui County appealed the decision, arguing that the constitution actually gave that power to the county. The county also challenged the method used by the Intermediate Court of Appeals to determine that the wind turbines were not “improvements” Where “fittings.” The wind turbines, according to the county, should be considered real property because they were permanent and their removal would damage the land.

The case went to the Hawaii Supreme Court, which said in an opinion on Tuesday that while counties have broad decision-making power based on past cases, “we cannot conclude in this case that this authority extends as far as the county claims.”

“The taxing authority of the counties cannot extend beyond ‘real property,’ the definition of which is now fixed by the legislature, nor affect any authority which the constitution expressly reserves to the state”, said the court.

The 2013 County Code Amendment “does both and therefore goes against the state constitution.”

Maui County spokesman Brian Perry said Tuesday that the county “is reviewing the decision and has no further comment at this time.” Perry could not say whether the county should reimburse the wind farms.

A lawyer for Kaheawa did not comment on Tuesday, while a lawyer for Auwahi could not be reached.

Meanwhile, Tom Yamachika, president of the Tax Foundation of Hawaii, applauded the decision.

Yamachika explained that after the 1978 Constitutional Convention, counties gained the right to tax real estate and had to follow the same state definitions and exemptions for 10 years. After that, they were given the freedom to set their own rates and exemptions. However, what counties cannot do is expand the state’s definition of real property, Yamachika said.

“If they want to make the definition narrower and tax less, that’s fine,” he explained. “But they can’t expand the definition and the tax items that aren’t real estate, which (Maui County) has done.”

Yamachika said including a home in property taxes is different from including wind turbines.

“Houses are considered props, and they are valued when it comes to real estate,” he said. “But converted machines are not, because converted machines don’t really help the owner of the land to use the land. It helps the owner of the land to conduct some kind of business that may have nothing to do with the land.

And, if Maui County were allowed to include wind turbines because they add value to the land, they could possibly go to a factory and include the machines or to a medical clinic and include an MRI machine, for example.

“You can walk into any place with production machinery, or something big and valuable, and say, ‘Hey, you know, this is real estate. . . then we will tax it.

“It could have completely changed the landscape.”

*Colleen Uechi can be reached at [email protected]

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