Maui owners came up with a sample tax concession petition to Maui County to retroactively lower the property taxes assessed on Maui vacation rentals, reflecting their loss of use during COVID-19 pandemic.
In Maui County, property’s tax rates depend on its classification for tax rate purposes. Properties that are classified as short-term rentals are subject to the highest property tax. According to 2020 Classification table, owners renting short term are paying 1.1% while owner occupied tax is around 2.6% and non-owner occupied tax is around 6%.
Since the COVID-19 pandemic started and up to now, the owners of vacation rentals on Maui were effectively prohibited from renting their condos for over 6 months, because of the quarantine. Properties get classified by each December 31 for next fiscal year, that starts in July next year. The intended use classification can be changed for the future use, but there is presently no process to receive refunds for the past. This petition asks to establish such a procedure and to bring the taxes charged in alignment with the actual use of the properties during the unprecedented times of Covid-19.
We publish the text of the petition below. Any short-term rental owner on Maui who believes that their property tax for part of 2020 should be lowered, and who wants to cast their vote in support to this Maui tax concession petition, can use this text as a template for their letter to Maui County authorities. Make sure that you edit the text according to your situation before sending it. Kauai vacation rental owners can vote similar petition posted on change.org.
It can also be addressed and emailed to Maui Council member that represents the area that your property is in. For example, Kelly Takaya King is the Council member for South Maui, and her email address is Kelly.King@mauicounty.us
Maui Tax Concession Petition
To: County of Maui Department of Finance Director Scott Teruya, Deputy Director May-Anne Alibin, Councilmember Kelly King
Cc: Mayor of Maui, Michael Victorino
Subject: Establish a new procedure to allow retroactive refunds of property taxes for short-term rentals
We the undersigned are owners of vacation rental properties in Maui, who are currently being taxed for fiscal years 2019/2020 and 2020/2021 as though our properties were actually being used for their intended purpose of being rented out to paying guests. In reality, we have not been allowed by the State of Hawaii or the County of Maui to rent out our vacation properties since mid-March 2020. Most of us have had no rental income whatsoever since the travel restrictions began in March. This situation poses a grave financial hardship to Maui vacation rental owners, and no part of the federal relief packages thus far have applied to us.
By October 1, 2020, we vacation rental owners will have been effectively prohibited for more than six consecutive months from using our condominiums as short term vacation rentals. At this point, we have no confidence such prohibitions will not extend further, perhaps even well into 2021. Even after the prohibitions are removed, potential guests will likely remain gun-shy about making future reservations because they fear the rules will change yet again. Some guests have already been rescheduled more than once, and are ready to give up on visiting Hawaii. Very few guests who like to stay in vacation rentals are suddenly going to book stays at hotels instead. Those who choose to rent condos require the freedom, space, ability to cook and do laundry, and the sense of being in a home away from home in order to enjoy their vacations maximally, and most hotels simply don’t offer same features at anything approaching the affordable prices that most families and retirees are looking for, and find in our vacation rental properties.
In accordance with the guidelines of the County of Maui-Department of Finance Condominium Use Declaration Form, property taxes on condominium properties are supposed to reflect their actual usage. In this case, the prohibitions on use made in response to the CoVID-19 situation (which nobody could have predicted on December 31, 2018, when the intended use of our condos for fiscal year 2019/2020 was determined, or on December 31, 2019, when the intended use of our condos for fiscal year 2020/2021 was determined) have effectively taken away from owners the intended use of our properties as vacation rentals. Additionally, because we owe our vacation rental guests with confirmed future reservations their scheduled future rental times, we cannot just switch over to renting longer term, and because we cannot travel to Maui ourselves at will, Hawaii’s prohibitions have effectively prevented us from all use of our properties altogether.
We feel that a fair response to this situation, which is not caused by any action of ourselves as vacation rental condo owners, requires immediate retroactive tax reclassification of our properties for fiscal years 2019/2020 and 2020/2021.
We therefore ask you to establish a procedure to revise retroactively the property taxes assessed on Maui vacation rentals, reflecting their loss of use from the date travel restrictions were first implemented in March 2020, through October 1, 2020, as well as any possible loss of business beyond that. We suggest the following options below:
1. Allow Maui vacation rental condo owners to pay property taxes based on no more than the residential, owner occupied, tax rate for this fiscal year July 2020 – June 2021, refunding directly to owners any property tax overpayments.
2. Pro-rate calendar year 2020 Maui vacation rental property taxes, using the vacation rental rate for January through the date travel restrictions began in March 2020, and a rate reflecting no effective usage (for which the tax rate should be zero) from that date through the duration of quarantine requirements, and a reduced usage rate thereafter since travelers won’t return to Maui immediately upon lifting of quarantine and other restrictions. Their trust in Hawaii as a reliable destination must be re-earned by the state.
Vacation rental condos have nearly all been sitting empty since the start of the pandemic-related travel restrictions in March 2020. It is therefore financially difficult, if not impossible, for owners to pay their property taxes. Moreover, it is patently unfair for owners to be taxed based on a presumed usage category that has been rendered illegal by the taxing entity for over half of 2020, with this situation possibly continuing even longer than October 1, 2020.
We trust that your sense of good will and fairness will be extended to both in-state and out-of-state vacation rental owners. We all love Maui, and have worked hard over the years to provide wonderful residential vacation experiences for our guests, encouraging them to share their great experiences with family and friends, thus supporting and promoting Hawaii’s tourist economy. Hawaii’s government policies attendant upon the CoVID-19 situation have created great hardship for us, and we ask you to remedy at least the property tax component of that hardship.
Thank you in advance for your consideration and swift response to our tax situation. We join you in hoping for a rapid resolution of the pandemic, and in the meantime, success in reopening Maui safely and soon.
UPDATE: Oct 15, 2020
Maui County denial reply to the petition
In response to the petition above, one of the owners received the following denial reply.
Quoting their basis for denial: “There is no provision in Maui County Code Chapter 3.48 that provides for a reclassification and proration of real property taxes based upon a change in use after the assessment date.”
But that’s exactly what the petition asks for: “We therefore ask you to establish a procedure to revise retroactively the property taxes assessed on Maui vacation rentals, reflecting their loss of use from the date travel restrictions were first implemented in March 2020, through October 1, 2020, as well as any possible loss of business beyond that.”
What to do when you receive a reply that doesn’t address your request
We suggest sending two followup letters:
To: County of Maui Department of Finance Director Scott Teruya, Deputy Director May-Anne Alibin, Mayor of Maui Michael Victorino
State that the entire point of the petition is to ask that Maui County take action to establish such a procedure. Repeat your request to reclassify condo owners’ 2020 usage immediately to refund the difference in payment OR or to refund without the reclassification. While Covid-19 and the resulting government decisions are unprecedented, they affected the actual use of vacation rental proprties and this has to be properly addressed and resolved.
To: Your Councilmember (find out who s/he is – see resources at the beginning of this article)
Let your Councilmember know about the tautological denial reply from the county and ask him/her to follow up and support your cause.