Tax Foundation of Hawaiʻi v. State.

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Electronically Filed
Supreme Court
SCAP-XX-XXXXXXX
21-MAR-2019
08:05 AM

IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

---oOo---
________________________________________________________________

TAX FOUNDATION OF HAWAIʻI, a Hawaiʻi non-profit corporation,
on behalf of itself and those similarly situated,
Plaintiff-Appellant,

vs.

STATE OF HAWAIʻI,
Defendant-Appellee.
________________________________________________________________

SCAP-XX-XXXXXXX

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CAAP-XX-XXXXXXX; CIV. NO. 15-1-2020-10)

MARCH 21, 2019

RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.1
1
Chief Justice Recktenwald, joined by Justices Nakayama, McKenna,
Pollack, and Wilson, writes for the majority of the court in Part One.
Justice McKenna, joined by Justices Pollack and Wilson, writes for the
majority of the court with respect to Part Two. Chief Justice Recktenwald,
joined by Justices McKenna, Pollack, and Wilson, writes for the majority of
the court in Part Three.
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OPINIONS OF THE COURT

PART ONE
(By: Recktenwald, C.J., with whom Nakayama,
McKenna, Pollack, and Wilson, JJ., join)

I. Introduction

Appellant Tax Foundation of Hawaiʻi challenges the

State of Hawaii’s implementation of Hawaiʻi Revised Statutes

(HRS) § 248-2.6 (Supp. 2015), which authorizes the State to be

reimbursed for its costs in administering a rail surcharge on

state general excise and use taxes on behalf of the City and

County of Honolulu. More specifically, the issues on appeal

are: (1) whether we lack jurisdiction because this is a

“controversy with respect to taxes” under HRS § 632-1; (2)

whether Tax Foundation has standing to bring its challenge; (3)

whether the State violated HRS § 248-2.6 by retaining 10% of the

gross proceeds of the surcharge without calculating the actual

cost of administering the surcharge; and (4) whether the State’s

application of HRS § 248-2.6 is unconstitutional.

We conclude that: (1) the circuit court had

jurisdiction to hear Tax Foundation’s claims because its

complaint was not a “controversy with respect to taxes” within

the meaning of HRS § 632-1; (2) Tax Foundation has standing2; (3)

2
Four members of this court have determined that Tax Foundation has
standing, but on different grounds. Justices McKenna, Pollack, and Wilson
(continued . . .)

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the State did not violate HRS § 248-2.6 by retaining 10% of the

gross proceeds of the surcharge; and (4) the State’s application

of HRS § 248-2.6 does not violate the Hawaiʻi or United States

Constitutions. Accordingly, we vacate the circuit court’s order

and judgment granting the State’s motion to dismiss for lack of

jurisdiction, and remand this case to the circuit court with

instructions to grant the State’s motion for summary judgment on

the merits.

II. Background

A. Act 247

In 2005, the legislature enacted Act 247, authorizing

counties to impose a surcharge of up to 0.5% on state general

excise and use taxes. 2005 Haw. Sess. Laws Act 247, §§ 3-4 at

770-72. The purpose of Act 247 was to allow counties to levy

surcharges “to fund public transportation systems.” Id., § 1 at

770. The county surcharges are levied, assessed, collected, and

otherwise administered by the Department of Taxation (DOTAX).

Id., § 3 at 771. After collecting the surcharge, DOTAX

(. . . continued)
conclude that Tax Foundation established standing under HRS § 632-1, and as
such, do not believe it is necessary to address taxpayer standing. I
conclude that Tax Foundation has satisfied the requirements of taxpayer
standing. Justice Nakayama concludes that Tax Foundation does not have
standing to challenge the State’s implementation of HRS § 248-2.6. See Part
II, the Dissenting Opinion by Recktenwald, C.J., and the Dissenting Opinion
by Nakayama, J., for detailed discussions regarding Tax Foundation’s
standing.

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transmits the funds to the State Department of Budget and

Finance (Budget and Finance), which deposits them into special

accounts. Id., § 5 at 773. After deducting and withholding

costs as specified in HRS § 248-2.6,3 Budget and Finance

3
HRS § 248-2.6 (Supp. 2015) provides:

(a) If adopted by county ordinance, all county
surcharges on state tax collected by the director of
taxation shall be paid into the state treasury
quarterly, within ten working days after collection,
and shall be placed by the director of finance in
special accounts. Out of the revenues generated by
county surcharges on state tax paid into each
respective state treasury special account, the
director of finance shall deduct ten per cent of the
gross proceeds of a respective county’s surcharge on
state tax to reimburse the State for the costs of
assessment, collection, and disposition of the county
surcharge on state tax incurred by the State.
Amounts retained shall be general fund realizations
of the State.

(b) The amounts deducted for costs of assessment,
collection, and disposition of county surcharges on
state tax shall be withheld from payment to the
counties by the State out of the county surcharges on
state tax collected for the current calendar year.

(c) For the purpose of this section, the costs of
assessment, collection, and disposition of the county
surcharges on state tax shall include any and all
costs, direct or indirect, that are deemed necessary
and proper to effectively administer this section and
sections 237-8.6 and 238-2.6.

(d) After the deduction and withholding of the costs
under subsections (a) and (b), the director of
finance shall pay the remaining balance on [a]
quarterly basis to the director of finance of each
county that has adopted a county surcharge on state
tax under section 46-16.8. The quarterly payments
shall be made after the county surcharges on state
tax have been paid into the state treasury special
accounts or after the disposition of any tax appeal,
as the case may be. All county surcharges on state
tax collected shall be distributed by the director of
finance to the county in which the county surcharge
on state tax is generated and shall be a general fund
realization of the county, to be used for the
(continued . . .)

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disburses the remaining balance to each applicable county’s

Director of Finance. Id., § 5 at 773.

B. Proceedings in the Circuit Court4

1. Tax Foundation’s Complaint

On October 21, 2015, Tax Foundation of Hawaiʻi (Tax

Foundation) filed a class action5 on behalf of all taxpayers in

the City and County of Honolulu. The complaint alleged6 that

after Act 247 was enacted, the City and County of Honolulu

enacted Ordinance 05-027, imposing a surcharge on state general

excise and use taxes (Honolulu County surcharge). Tax

Foundation asserted the following about the surcharge. Honolulu

is the only county to have adopted such a surcharge. Budget and

Finance has retained 10%7 of the Honolulu County surcharge

(. . . continued)
purposes specified in section 46-16.8 by each of the
counties.

(Emphases added.)

4
The Honorable Edwin C. Nacino presided.

5
Nothing in the record shows that the class was certified.

6
The following factual allegations taken from the complaint appear to be
uncontested.

7
We note that Act 1 (S.B. 4), 29th Leg., 1st Spec. Sess. (2017), was
enacted on September 5, 2017, and among other things, amended the State’s
withholding from 10% to 1% of gross proceeds of the surcharge. This newly
enacted legislation postdates the period at issue here, and therefore does
not affect our consideration of the State’s previous application of HRS §
248-2.6. To avoid confusion, all references to the surcharge withholding
under HRS § 248-2.6(a) in this opinion will be to the 10% figure.

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amounts collected by DOTAX since it was initially levied, and

disbursed the remaining 90% to the City and County of Honolulu.

During the fiscal years ending June 30, 2012, 2013, 2014, and

2015, Budget and Finance retained approximately $21.2, $19.3,

$24.2, and $24.8 million, respectively, which went to the State

general fund. As of December 31, 2015, the cumulative total of

the State’s surcharge withholdings was $177,865,487.24.

Tax Foundation also alleged that the State violated

HRS § 248-2.6(d) by retaining 10% of the City and County of

Honolulu’s surcharge gross proceeds without calculating the

actual costs of administering it.8 Tax Foundation alleged that

the 10% retained by the State “grossly exceed[ed]” the costs

incurred to assess, collect, and dispose of the Honolulu County

surcharge funds. Tax Foundation further alleged that City and

County of Honolulu taxpayers were required to pay a higher state

tax than taxpayers of other counties as a result of the State’s

failure to follow HRS § 248-2.6, that the State had violated the

general laws provision in Article VIII, § 1 of the Hawaii

8
Act 213, SLH 2007, § 121 required DOTAX to provide two years of
reporting that detailed the level of staffing and funding necessary to
administer county surcharge collections. DOTAX reported that the total
amount budgeted for staffing positions was $749,876 for the 2008 fiscal year
and $700,508 for the 2009 fiscal year. Apart from the 2008 and 2009 fiscal
years, it appears undisputed that DOTAX has not calculated the actual costs
incurred in assessing, collecting, and distributing the surcharge, asserting
that it is not “necessary or required” to perform such an analysis.

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Constitution, and violated the equal protection clauses of the

Hawaii and United States Constitutions.

Tax Foundation sought declaratory, injunctive, and

mandamus relief. In Count I, Tax Foundation sought an “order

enjoining the State from continuing to violate” constitutional

provisions and injunctive relief in the form of reimbursements,

to the plaintiffs “and/or” the City and County of Honolulu, of

amounts “improperly kept by the State.” In Count II, Tax

Foundation sought “mandamus directing the State to follow HRS

§ 248-2.6(d), and deduct and withhold only the cost of

administering the Oahu surcharge and to pay the remaining

balance of the 10% county surcharge initially withheld to

Honolulu.”

2. The State’s Motion to Dismiss

The State filed a motion to dismiss the complaint,

asserting: (1) the circuit court lacked jurisdiction because

HRS § 632-1 (1993)9 prohibits declaratory relief in “‘any

9
HRS § 632-1 provides in relevant part:

In cases of actual controversy, courts of record,
within the scope of their respective jurisdictions,
shall have power to make binding adjudications of
right, whether or not consequential relief is, or at
the time could be, claimed, and no action or
proceeding shall be open to objection on the ground
that a judgment or order merely declaratory of right
is prayed for; provided that declaratory relief may
not be obtained in any district court, or in any
controversy with respect to taxes, or in any case
where a divorce or annulment of marriage is sought.
(continued . . .)

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controversy’ with respect to taxes,” (2) mandamus and injunctive

relief was not warranted because HRS §§ 40-35 (Supp. 2006)10 and

232-14.5 (Supp. 2006)11 provided adequate and exclusive remedies

for tax disputes in tax appeal court, and (3) Tax Foundation

lacked standing. Regarding the relief sought by Tax Foundation,

the State argued that “any taxpayer can pay a tax under protest

and file suit for a refund under section 40-35, HRS, or timely

file a tax refund claim and appeal from a denial of the refund

claim to the Tax Appeal Court under section 232-14.5, HRS.”

3. Tax Foundation’s Opposition to the State’s Motion to
Dismiss

Tax Foundation opposed the State’s motion to dismiss,

arguing that the circuit court had subject matter jurisdiction

because its complaint did not challenge the assessment or

collection of taxes, but rather sought to correct mishandling

(. . . continued)
Controversies involving the interpretation of deeds,
wills, other instruments of writing, statutes,
municipal ordinances, and other governmental
regulations, may be so determined, and this
enumeration does not exclude other instances of
actual antagonistic assertion and denial of right.

(Emphasis added.)

10
HRS § 40-35(b) provides that “[a]ny action to recover payment of taxes
under protest shall be commenced in the tax appeal court.”

11
HRS § 232-14.5(a) provides that “[t]he denial in whole or in part by
the department of taxation of a tax refund claim may be appealed by the
filing of a written notice of appeal to a board of review or the tax appeal
court within thirty days after notice of the denial of the claim.”

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after assessment and collection of the Honolulu County

surcharge. Tax Foundation argued that the matter was not a “tax

controversy” or an attack on the State’s ability to collect

taxes, and was instead an attempt to force the State to comply

with HRS § 248-2.6.

Tax Foundation analogized to the ICA opinion in Hawaii

Insurers Council v. Lingle, where the ICA held that HRS § 632-

1’s prohibition on actions regarding taxes did not apply because

the plaintiff was not attempting to keep the State from

assessing and collecting taxes. 117 Hawaiʻi 454, 184 P.2d 769

(App. 2008), aff’d in part and rev’d in part on other grounds,

120 Hawaiʻi 51, 201 P.3d 564 (2008).

Tax Foundation also changed its position regarding the

relief it was requesting. Although Tax Foundation initially

sought reimbursement to itself “and/or” the City and County of

Honolulu in its complaint, in its opposition, it stated that it

“does not seek any refund for itself or any other taxpayer.”

Tax Foundation argued that since it did not seek a declaratory

ruling as to its own liability for taxes, and only sought to

have the State pay its excess surcharge withholdings to the City

and County of Honolulu, its claim did not belong in tax appeal

court.

Tax Foundation asserted that it had standing because

it paid general excise tax on income derived from fundraising

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that it conducted to support its activities. As to the injury

suffered, Tax Foundation argued that if the State returned the

excess funds it had diverted to the City and County of Honolulu,

the Honolulu surcharge “could end sooner.” Tax Foundation

argued that this injury was traceable to the State’s actions,

and was redressable, asserting that “the State could, if it

chose, determine the costs” of administering the Honolulu County

surcharge.

4. Motions for Summary Judgment

Tax Foundation filed a motion for summary judgment,

and argued, inter alia, that the “plain and unambiguous language

of HRS § 248-2.6” supported its interpretation, and that the

State’s reading of HRS § 248-2.6 is unconstitutional and forces

the City and County of Honolulu taxpayers to subsidize the rest

of the State.

In its cross-motion for summary judgment, the State

argued: (1) the circuit court lacked jurisdiction over Tax

Foundation’s claims, (2) HRS § 248-2.6 expressly requires that

the State retain 10% of the Honolulu County surcharge, (3)

retention of 10% does not violate the equal protection clause,

(4) retention of 10% is consistent with the general laws

provision of the state constitution, and (5) Tax Foundation was

challenging a “policy decision” and should seek a statutory

amendment from the legislature.

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5. Hearing on the Motions

At a hearing on the various motions, the circuit court

found that Tax Foundation’s complaint presented a controversy

arising out of a tax, and that it lacked jurisdiction over the

dispute based on HRS § 632-1, stating that HRS § 632-1 “broadly

implies many controversies that can arise out of a tax.” Tax

Foundation orally requested leave to amend its complaint to

clarify that the declaratory relief it sought was not subject to

HRS § 632-1’s prohibition against tax controversies. The

circuit court denied the request. The circuit court also

determined that it lacked authority to impose mandamus relief on

another branch of government. Thus, the circuit court granted

the State’s motion to dismiss, and did not reach the issue of

whether Tax Foundation had standing. The court further ruled

that the cross-motions for summary judgment were moot.

The circuit court subsequently filed its written order

granting the State’s motion to dismiss. The order stated:

The court, having read the memoranda in support and
in opposition to the motion and the declarations
filed therewith, and having heard the arguments of
counsel, and based on the records and files herein
and for good cause shown, GRANTS Defendant STATE OF
HAWAII’S Motion to Dismiss Complaint Filed on October
21,2015 (Filed on November 10, 2015) for the reason
that Plaintiff’s claims for relief are barred by
section 632-1, Hawaiʻi Revised Statutes, because
Plaintiff’s complaint constitutes or involves “a
controversy with respect to taxes,” and thus this
court lacks subject matter jurisdiction.

Plaintiff’s request for leave to amend their
complaint filed on October 21, 2015 is denied for the

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reason that the Court has dismissed the Plaintiff’s
complaint.

The parties’ cross motions for summary judgment filed
on January 21, 2016, and March 3, 2016, respectively
are, therefore moot, given the Court’s decision to
grant Defendant’s motion to dismiss the complaint.

Final judgment was entered on June 1, 2016.

C. Appeal

Tax Foundation timely appealed, seeking review of the

circuit court’s judgment and order granting the State’s motion

to dismiss. We granted Tax Foundation’s subsequent request to

transfer the appeal to this court.

1. Tax Foundation’s Opening Brief

Tax Foundation raises three points of error. Tax

Foundation argues that the circuit court erred in: (1) granting

the State’s motion to dismiss on the basis that it had no

jurisdiction because the complaint sought declaratory relief

involving a controversy with respect to taxes, (2) not granting

Tax Foundation’s motion for summary judgment, and (3) not

allowing Tax Foundation the opportunity to amend its complaint.

As to the first point of error, Tax Foundation argues

“[t]his is NOT a dispute over taxes.” (Capitalization in

original). Tax Foundation asserts that its claim “arises from,

and involves, only what the State does after the Surcharge has

been assessed, collected, and deposited into the State’s

coffers.” (Emphasis in original). Tax Foundation emphasizes

the portion of HRS § 632-1 providing that controversies
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involving the interpretation of statutes are not prohibited.12

Tax Foundation argues that HRS § 632-1 allows a declaratory

ruling on the proper interpretation of HRS § 248-2.6 because

such declaratory relief would not affect the State’s ability to

assess or collect the general excise tax or the Honolulu County

surcharge.

Tax Foundation also argues that the tax appeal court’s

limited jurisdiction would not include the claims in its

complaint. HRS § 232-13 limits the jurisdiction of the tax

appeal court to determining “‘the amount of valuation or taxes,

as the case may be, in dispute[.]’” The liability for paying

the general excise tax or Honolulu County surcharge is

undisputed; therefore, Tax Foundation argues, the tax appeal

court does not have jurisdiction over this case.

As to the second point of error, Tax Foundation

asserts that HRS § 248-2.6 is “clear and unambiguous[,]” and

mandates that the State should retain only the costs it incurs

in administering the Honolulu County surcharge.

As to the third point of error, Tax Foundation argues

that the circuit court abused its discretion in not allowing it
12
HRS § 632-1(a) provides, in relevant part:

[D]eclaratory relief may not be obtained in any
district court, or in any controversy with respect to
taxes . . . . Controversies involving the
interpretation of . . . statutes . . . may be so
determined[.]

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“at least one opportunity to amend” its complaint. Tax

Foundation cites Hawaiʻi Rules of Civil Procedure (HRCP) Rule

15(a)(2)13 and case law stating that in the absence of an

apparent or declared reason, such as undue delay, bad faith, or

dilatory motive, leave to amend should be freely given.14

2. The State’s Answering Brief

In its Answering Brief, the State argues: (1) the

circuit court correctly dismissed the case for lack of subject

matter jurisdiction because it is a tax controversy under HRS

§ 632-1, (2) the circuit court correctly denied Tax Foundation’s

request for mandamus relief, (3) Tax Foundation does not have

standing, (4) Tax Foundation improperly argues the merits of the

case, (5) the State should prevail on the merits, and (6) the

circuit court did not abuse its discretion in denying Tax

Foundation’s oral motion to amend its complaint. The State also

13
HRCP Rule 15(a) (2012) provides in pertinent part:

Amendments before trial.
(1) AMENDING AS A MATTER OF COURSE. A party may
amend the party’s pleading once as a matter of course
at any time before a responsive pleading is served .
. .

(2) OTHER AMENDMENTS. In all other cases, a
party may amend the party’s pleading only by leave
of court or by written consent of the adverse party;
and leave shall be freely given when justice so
requires. . . .
14
Since we conclude that the circuit court had jurisdiction, see infra,
we do not address this argument further.

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argues that Tax Foundation is “[a]sking the court to interfere

with a statute . . . [which] violates the separation of powers

at the heart of our system of government.”

As to subject matter jurisdiction, the State argues

that the plain language of HRS § 632-1 supports dismissal,

because HRS § 632-1 applies to “‘any controversy with respect to

taxes’” instead of being limited to the assessment or collection

of taxes. The State asserts that interpretations of the federal

Declaratory Judgment Act and Tax Anti-Injunction Act protect not

just assessment and collection, but “any activities that are

intended to or may culminate in the assessment or collection of

taxes[.]” The State argues that Tax Foundation’s lawsuit “may

ultimately culminate in the ‘collection’ of the State’s portion

of the taxes being obstructed.”

The State also argues that this type of case belongs

in tax appeal court rather than in circuit court. The State

argues that the tax appeal court has jurisdiction to hear: (1)

“‘taxpayer appeals from assessments’” pursuant to HRS Chapter

232, (2) “‘challenges to taxes paid under protest’” pursuant to

HRS § 40-35, (3) “‘adverse rulings by the Director,’” and (4)

appeals from the denial of refund claims by DOTAX pursuant to

HRS § 232-14.5. The State also argues that, even if the court

finds that this case is not a “controversy with respect to

taxes,” the circuit court lacks jurisdiction because the tax

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appeal statutes in HRS Chapter 232 provide a “‘special form of

remedy’ specific to tax cases” that must be followed according

to HRS § 632-1.

The State argues that it is appropriate for an

appellate court to rule on the standing issue presented in the

State’s motion to dismiss, asserting that standing is a

jurisdictional matter that the court must address as a threshold

matter. The State further asserts that Tax Foundation does not

satisfy the first and third prongs of the Sierra Club v. Hawaiʻi

Tourism Authority, 100 Hawaiʻi 242, 59 P.3d 877 (2002) (plurality

opinion) test for standing.15

As to the merits, the State argues that although “it

would be improper for this Court to decide this case on the

merits when the circuit court did not have an opportunity to

address the merits first[,]” if this court decides to address

the merits, the State should prevail as a matter of law based on

the rules of statutory construction, legislative intent, and

principles of statutory interpretation.

3. Tax Foundation’s Reply Brief

15
The three-part test used to determine whether a plaintiff has standing
is whether: (1) the plaintiff has suffered “an actual or threatened injury”
as a result of the defendant’s wrongful conduct, (2) the injury is fairly
traceable to the defendant’s actions, and (3) a favorable decision would
likely provide relief for the plaintiff’s injury. Sierra Club, 100 Hawaiʻi at
250, 59 P.3d at 885 (citation omitted).

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In its Reply Brief, Tax Foundation argues: (1) the

circuit court had jurisdiction pursuant to the ICA’s decision in

Hawaii Insurers Council, (2) Tax Foundation has standing, (3)

the State misreads HRS § 248-2.6, (4) the State’s interpretation

of HRS § 248-2.6 is not consistent with the intent of the

legislature, and (5) the circuit court erred in not allowing Tax

Foundation to amend its complaint and amendment would not be

futile.

III. Standards of Review

A. Existence of Jurisdiction and Dismissal for Lack of
Jurisdiction

“The existence of jurisdiction is a question of law

that we review de novo under the right/wrong standard.” Lingle

v. Hawaiʻi Gov’t Employees Ass’n, AFSCME, Local 152, 107 Hawaiʻi

178, 182, 111 P.3d 587, 591 (2005).

“A trial court’s dismissal for lack of subject matter

jurisdiction is a question of law, reviewable de novo.”

Casumpang v. ILWU, Local 142, 94 Hawaiʻi 330, 337, 13 P.3d 1235,

1242 (2000) (emphasis removed) (citing McCarthy v. United

States, 850 F.2d 558, 560 (9th Cir. 1988)).

Our review [of a motion to dismiss for lack of
subject matter jurisdiction] is based on the contents
of the complaint, the allegations of which we accept
as true and construe in the light most favorable to
the plaintiff. Dismissal is improper unless it
appears beyond doubt that the plaintiff can prove no
set of facts in support of his claim which would
entitle him to relief.

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Casumpang, 94 Hawaiʻi at 337, 13 P.2d at 1242 (citations and

quotation marks omitted).

B. Standing

“[T]he issue of standing is reviewed de novo on

appeal.” Mottl v. Miyahira, 95 Hawaiʻi 381, 388, 23 P.3d 716,

723 (2001) (citation omitted).

C. Statutory Interpretation

“The interpretation of a statute is a question of law

reviewable de novo.” Peer News LLC v. City & Cty. of Honolulu,

138 Hawaiʻi 53, 60, 376 P.3d 1, 8 (2016).

D. Constitutional Questions

“We review questions of constitutional law de novo,

under the right/wrong standard.” State v. Kalaola, 124 Hawaiʻi

43, 49, 237 P.3d 1109, 1115 (2010) (citation omitted).

E. Summary Judgment

“On appeal, the grant or denial of summary judgment is

reviewed de novo.” First Ins. Co. of Hawaiʻi v. A&B Properties,

126 Hawaiʻi 406, 413-14, 271 P.3d 1165, 1172-73 (2012) (citation

omitted). Furthermore,

[S]ummary judgment is appropriate if the
pleadings, depositions, answers to interrogatories
and admissions on file, together with the affidavits,
if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled
to judgment as a matter of law. A fact is material
if proof of that fact would have the effect of
establishing or refuting one of the essential
elements of a cause of action or defense asserted by
the parties. The evidence must be viewed in the

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light most favorable to the non-moving party. In
other words, we must view all of the evidence and
inferences drawn therefrom in the light most
favorable to the party opposing the motion.

Id. (citation omitted) (brackets in original).

IV. Discussion

A. The Relief Requested by Tax Foundation Does Not Constitute
a Tax Refund Claim

We must first address whether the circuit court had

subject matter jurisdiction to adjudicate Tax Foundation’s

complaint. The tax appeal court has exclusive jurisdiction over

tax refund claims. HRS §§ 232-13 and 232-14.5(a),(c). HRS

§ 232-13 states that the jurisdiction of the tax appeal court is

limited to disputes about the “amount of valuation or taxes.”

HRS § 232-14.5(a) provides that a denial of a tax refund claim

by DOTAX “may be appealed by the filing of a written notice of

appeal to a board of review or the tax appeal court[,]” and

subsection (c) provides that “this section shall apply to tax

refund claims for all taxes administered by the department of

taxation.” The circuit court therefore does not have

jurisdiction over tax refund claims, and only the tax appeal

court may consider tax refund claims.

The State argues that Tax Foundation seeks a tax

reimbursement to itself and class members, and as such, presents

a tax refund controversy over which the tax appeal court has

exclusive jurisdiction. Tax Foundation, however, now only seeks

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reimbursement to the City and County of Honolulu. Initially,

Tax Foundation’s complaint effectively sought a partial tax

refund by requesting reimbursement to itself, its class members,

“and/or” the City and County of Honolulu of the allegedly

improperly kept surcharge funds. However, Tax Foundation later

disclaimed any refund remedy for itself and its class members in

its opposition to the State’s motion to dismiss, leaving only

the City and County of Honolulu to recover. Therefore, taxpayer

liability is not in dispute.

Because the tax appeal court’s jurisdiction is limited

to determining “the amount of valuation or taxes, as the case

may be, in dispute[,]” HRS ' 232-13, and here there is no dispute

about any taxpayer’s tax liability, Tax Foundation cannot bring

its claim before the tax appeal court. Tax Foundation’s dispute

concerns only the post-collection disposition of the surcharge

funds. Accordingly, the circuit court is not barred from

hearing Tax Foundation’s claim based on HRS § 232-14.5.

B. HRS § 632-1 Does Not Bar Subject Matter Jurisdiction in
this Suit

The parties dispute whether the circuit court

correctly dismissed this case for lack of subject matter

jurisdiction under HRS § 632-1, which prohibits declaratory

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judgment actions in any “controversy with respect to taxes[.]”16

Tax Foundation and the State make arguments related to the

portions of HRS § 632-1 emphasized below:

In cases of actual controversy, courts of record,
within the scope of their respective jurisdictions,
shall have power to make binding adjudications of
right, whether or not consequential relief is, or at
the time could be, claimed, and no action or
proceeding shall be open to objection on the ground
that a judgment or order merely declaratory of right
is prayed for; provided that declaratory relief may
not be obtained in any district court, or in any
controversy with respect to taxes, or in any case
where a divorce or annulment of marriage is sought.
Controversies involving the interpretation of deeds,
wills, other instruments of writing, statutes,
municipal ordinances, and other governmental
regulations, may be so determined, and this
enumeration does not exclude other instances of
actual antagonistic assertion and denial of right.

HRS § 632-1 (emphasis added).

The ICA has held that HRS § 632-1’s tax exclusion

provision prohibits declaratory relief in tax matters, in order

to “permit the government to assess and collect taxes alleged to

be due it without judicial interference.” Hawaii Insurers

16
In previous cases involving the issue of subject matter jurisdiction
under the tax exclusion provision of HRS § 632-1, this court has applied
various tests to determine whether the funds at issue were a tax and
therefore subject to HRS § 632-1’s exclusionary provision, or a fee and
therefore not subject to the exclusion. See, e.g., Hawaii Insurers Council
v. Lingle, 120 Hawaiʻi 51, 64-66, 201 P.3d 564, 577-79 (2008). As discussed
infra, we conclude that this is not a “controversy with respect to taxes”
within the meaning of HRS § 632-1 because the prohibition against tax
controversies does not apply if the declaratory relief sought does not
interfere with the government’s ability to assess and collect taxes. We
therefore do not make a determination on whether the funds retained by the
State are appropriately characterized as a tax or a fee, because even as a
tax, this is still not a prohibited tax controversy. Accordingly, the
circuit court had subject matter jurisdiction to hear Tax Foundation’s claim.

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Council v. Lingle, 117 Hawaiʻi 454, 463, 184 P.2d 769, 778 (App.

2008) (citation and quotation marks omitted), aff’d in part and

rev’d in part on other grounds, 120 Hawaiʻi 51, 201 P.3d 564

(2008). In Hawaii Insurers Council, an insurance trade

association challenged the constitutionality of a statute that

permitted the Director of Finance to transfer funds from the

Compliance Resolution Fund, into which assessments imposed on

insurers were deposited, to the State’s General Fund. Id. at

457, 184 P.3d at 772. The circuit court determined that it

lacked jurisdiction because the lawsuit violated the prohibition

against declaratory relief actions in tax controversies under

HRS § 632-1. Id. at 458, 184 P.3d at 773. The ICA determined

that the transfer of funds operated as a tax, but rejected the

argument that the matter was a prohibited “controversy with

respect to taxes” under HRS § 632-1. Id. at 463, 184 P.3d at

778. The ICA noted that HRS § 632-1 was amended in 1972 to

mirror the tax exclusion in the federal Declaratory Judgment

Act, which “prohibits declaratory relief in tax matters to

permit the government to assess and collect taxes alleged to be

due it without judicial interference.” Id.

The ICA determined that the Insurers Council was not

attempting to keep the State from assessing and collecting

taxes, but rather challenging the transfer of proceeds on the

ground that they were unconstitutional taxes. Id. Because the

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constitutional challenge did not interfere with the government’s

assessment or collection of taxes, the ICA concluded that the

case was not a “controversy with respect to taxes” within the

meaning of HRS § 632-1 or HRCP Rule 57. Id.

As previously indicated, HRS § 632–1 was amended in

1972 to mirror the tax exception in the federal Declaratory

Judgment Act, 28 U.S.C. § 2201. 1972 Haw. Sess. Laws Act 89, §

1 at 338. We therefore turn to federal case law interpreting

the Declaratory Judgment Act’s tax exception.

In Cohen v. United States, 650 F.3d 717, 719 (D.C.

Cir. 2011), appellants argued that the refund procedure created

by the Internal Revenue Service for taxpayers to recoup money

from an illegal tax on phone calls was unlawful. The Court of

Appeals for the District of Colombia rejected a broad

interpretation of the Declaratory Judgment Act’s tax exclusion,

which would have precluded all suits “conceivably ‘with respect

to Federal taxes.’” Id. at 730. The court looked to the

legislative history of the Declaratory Judgment Act, which

stated that “the orderly and prompt determination and collection

of Federal taxes should not be interfered with.” Id. (quoting

S. Rep. No. 74-1240, at 11 (1935)). The court also considered

precedent stating that the interpretation of the Declaratory

Judgment and Anti-Injunction Acts was coextensive, and

ultimately determined that “‘with respect to Federal taxes’

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means ‘with respect to the assessment or collection of taxes.’”

Id. at 727 (citing E. Kentucky Welfare Rights Org. v. Simon, 506

F.2d 1278, 1284 (D.C. Cir. 1974); Ecclesiastical Order of the

ISM of AM, Inc. v. I.R.S., 725 F.2d 398, 404-05 (6th Cir. 1984);

In re Leckie Smokeless Coal Co., 99 F.3d 573, 583-84 (4th Cir.

1996); Perlowin v. Sassi, 711 F.2d 910, 911 (9th Cir. 1983);

McCabe v. Alexander, 526 F.2d 963 (5th Cir. 1976); Tomlinson v.

Smith, 128 F.2d 808, 811 (7th Cir. 1942)). Since the suit did

not affect the assessment or collection of the tax, the

Declaratory Judgment Act did not limit the court’s jurisdiction.

Id. at 736; see also Direct Marketing Ass’n v. Brohl, 135 S. Ct.

1124 (2015) (constitutional challenge to statutory reporting

requirements preceding the assessment and collection of taxes

was not barred).

We are persuaded by the D.C. Circuit Court’s

interpretation of the federal Declaratory Judgment Act, and the

reasoning of the ICA. Accordingly, we adopt the ICA’s holding

in Hawaii Insurers Council that declaratory relief may be

obtained in tax matters under HRS § 632-1 where such relief does

not interfere with the assessment or collection of taxes.

Declaratory relief may be obtained here because Tax

Foundation’s claim does not interfere with the government’s

ability to assess or collect either the general excise and use

tax, or the Honolulu County surcharge. A ruling in Tax

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Foundation’s favor would not impact DOTAX’s ability to assess or

collect these taxes because Tax Foundation does not dispute its

liability to pay general excise and use tax, or the Honolulu

County surcharge. Tax Foundation contests only the

“administration and allocation” of the Honolulu County surcharge

after it is assessed and collected.

Accordingly, this is not a “controversy with respect

to taxes” and the exclusionary provision does not apply because

only suits that would restrain the assessment and collection of

taxes fall within the scope of HRS § 632-1. The circuit court

therefore had jurisdiction and erred in dismissing on that

basis.

/s/ Mark E. Recktenwald

/s/ Paula A. Nakayama

/s/ Sabrina S. McKenna

/s/ Richard W. Pollack

/s/ Michael D. Wilson

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PART TWO: TAX FOUNDATION HAS HRS § 632-1 STANDING
(By: McKenna, J., with whom Pollack and Wilson, JJ., join)

C. Standing

1. Introduction

In general, standing is a prudential concern regarding

whether the party seeking a forum has alleged a sufficient

personal stake in the outcome of a controversy as to justify the

exercise of the court’s remedial powers on the party’s behalf.

See Life of the Land v. Land Use Comm’n (“Life of the Land II”),

63 Haw. 166, 172, 623 P.2d 431, 438 (1981) (citation omitted).

In Hawaiʻi state courts, standing is a prudential consideration

regarding the “proper – and properly limited – role of courts in

a democratic society” and is not an issue of subject matter

jurisdiction, as it is in federal courts. Importantly, this

court has repeatedly ruled that standing requirements may be

tempered, or even prescribed, by legislative declarations of

policy.17 Therefore, standing requirements can differ based on

legislative enactments.

HRS Chapter 632 is an example of a statutory scheme in

which standing requirements have been prescribed by legislative

declarations. See Life of the Land II, 63 Haw. at 172 & n.5,

17
See Life of the Land II, 63 Haw. at 172, 623 P.2d at 438; see also,
e.g., Asato v. Procurement Policy Bd., 132 Hawaiʻi 333, 364, 322 P.3d 228, 259
(2014); Sierra Club v. Dep’t of Transp. (“Superferry I”), 115 Hawaiʻi 299,
321, 167 P.3d 292, 314 (2007); Citizens for Protection of North Kohala
Coastline v. Cnty. of Hawaiʻi, 91 Hawaiʻi 94, 100, 979 P.2d 1120, 1126 (1999).

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623 P.2d at 438 & n.5. Through language in HRS Chapter 632, the

Hawaiʻi State Legislature has stated its views regarding when a

party should be able to bring declaratory relief claims under

that Chapter. Despite this, some of our recent opinions have

required a party requesting declaratory relief under HRS § 632-1

to also satisfy the common law three-part “injury in fact” test

for standing, which requires a showing that (1) the plaintiff

has suffered an actual or threatened injury as a result of the

defendant’s conduct, (2) the injury is fairly traceable to the

defendant’s actions, and (3) a favorable decision would likely

provide relief for the plaintiff’s injury.18 Requiring

satisfaction of this test, which was originally developed in

federal courts due to subject matter jurisdiction concerns,

limits declaratory relief otherwise available under the language

of Chapter 632, thereby contravening prudential considerations

of the “proper – and properly limited – role of courts” as

“prescribed” by the Hawaiʻi State Legislature.

18
See Corboy v. Louie, 128 Hawaiʻi 89, 104, 283 P.3d 695, 710 (2011),
which is cited to in the Chief Justice’s Dissenting Opinion. Dissenting
Opinion by Recktenwald, C.J. (“Dissent”). Corboy involved a request for
refund under HRS §§ 40-35(b) and 232-3 of taxes paid under protest; although
the plaintiff also sought declaratory relief regarding the bases for
requesting a refund, see Corboy, 128 Hawaiʻi at 94, 283 P.3d at 700, HRS §
632-1 was not discussed in the opinion. The Dissent characterizes the
“injury in fact” test as the “traditional injury in fact” analysis, also
citing Superferry I, 115 Hawaiʻi at 319, 167 P.3d at 312. Superferry I arose
out of the Hawaiʻi Environmental Policy Act, HRS Chapter 343, and did not
involve HRS § 632-1. See Superferry I, 115 Hawaiʻi at 304, 167 P.3d at 297.

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Based on these considerations as well as the reasons

discussed below, we hold that a party seeking declaratory relief

under HRS § 632-1 need not satisfy the three-part “injury in

fact” test to have standing. Rather, consistent with standing

requirements prescribed by the legislature through the language

of HRS § 632-1, we hold that a party has standing to seek

declaratory relief in a civil case brought pursuant to HRS §

632-1(b) (2016): (1) where antagonistic claims exist between the

parties (a) that indicate imminent and inevitable litigation, or

(b) where the party seeking declaratory relief has a concrete

interest in a legal relation, status, right, or privilege that

is challenged or denied by the other party, who has or asserts a

concrete interest in the same legal relation, status, right, or

privilege; and (2) a declaratory judgment will serve to

terminate the uncertainty or controversy giving rise to the

proceeding. Applying this standard, Tax Foundation has standing

to seek declaratory relief under HRS § 632-1. We therefore need

not address whether Tax Foundation has “taxpayer standing.”19

19
The Dissent concludes that Tax Foundation has “taxpayer standing.” See
infra notes 35 & 39. Justice Nakayama agrees with the Chief Justice that HRS
§ 632-1 does not set out a test for standing, but she would not address
taxpayer standing based on Mottl v. Miyahira, 95 Hawaiʻi 381, 23 P.3d 716
(2001), and Corboy, 128 Hawaiʻi 89, 283 P.3d 695, in which we did not consider
general taxpayer standing when that basis for standing had not been expressly
argued. See Mottl, 95 Hawaiʻi at 391 n.13, 23 P.3d at 726 n.13; Corboy, 128
Hawaiʻi at 106 n.32, 283 P.3d at 712 n.32.

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2. Background

In this case, Tax Foundation, as a putative class

representative, requested a declaratory judgment pursuant to HRS

§ 632-1 (1993), as well as other ancillary relief. The circuit

court dismissed Tax Foundation’s complaint due to an alleged

lack of subject matter jurisdiction based on the language in HRS

§ 632-1 that declaratory judgments are not available for “any

controversy with respect to taxes.” The State of Hawaiʻi

(“State”) had alternatively requested dismissal based on Tax

Foundation’s alleged lack of standing, but the circuit court did

not address standing due to its dismissal based on subject

matter jurisdiction grounds.

In its Answering Brief, the State reasserts Tax

Foundation’s alleged lack of standing as an alternative basis on

which this court should affirm the circuit court’s dismissal of

Tax Foundation’s lawsuit. The State argues that because Tax

Foundation seeks to have the State pay the City and County of

Honolulu (“City”) the portion of the ten percent deduction from

the City’s 0.5% general excise tax surcharge (“Surcharge”) that

exceeds costs of administration, only the City can meet the

three-part “injury in fact” test for standing.20

20
The State cites to Sierra Club v. Hawaiʻi Tourism Authority, 100 Hawaiʻi
242, 59 P.3d 877 (2002) (plurality opinion), to assert that Tax Foundation
must meet the three-part “injury in fact” test for standing. Sierra Club was
(continued . . .)

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In its Reply Brief, Tax Foundation argues it has

standing to request declaratory relief. It did not specifically

assert “taxpayer standing,” but it alleges that “[g]overnments

do not pay taxes; taxpayers do[,]” and that as a taxpayer, it is

continuously injured by the State’s diversion of money away from

the Honolulu Authority for Rapid Transportation (“HART”)

project, “which causes over-collection of the amounts needed to

sustain HART.” It contends that a favorable decision would

provide more support to HART for the benefit of the City to the

relief of affected taxpayers, including itself, and that the

(. . . continued)
not an HRS § 632-1 lawsuit, but instead involved a request for declaratory
relief under HRS § 201B-15 (Supp. 2000), which then provided in relevant
part:

[A]ny action or proceeding to which the authority,
the State, or the county may be party, in which any
question arises as to the validity of this chapter or any
portion of this chapter, or any action of the authority may
be filed. . . .

This language differs significantly from HRS § 632-1, which is quoted and
discussed more extensively below.

The State also cites to Akinaka v. Disciplinary Board of the Hawaiʻi
Supreme Court, 91 Hawaiʻi 51, 979 P.2d 1077 (1999) (per curiam), for the
additional proposition that “one does not have standing to assert a violation
of rights belonging to another, since the person entitled to a right is the
only one who can be directly injured by its deprivation.” 91 Hawaiʻi at 58,
979 P.2d at 1084 (citation omitted). Akinaka is inapposite, as it dealt with
an opposing party seeking to compel attorney disciplinary proceedings. See
91 Hawaiʻi at 53, 979 P.2d at 1079. We held that the complainant lacked
standing because he had “no recognizable interest in the outcome of the . . .
investigation” and was therefore not injured. 91 Hawaiʻi at 58, 979 P.2d at
1085.

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more the State diverts, the less the City receives, and the

longer the Surcharge is needed, the more taxpayers must pay.

3. Discussion

a. The Nature of Standing Requirements in Hawaiʻi
State Courts

Before discussing standing requirements for purposes

of HRS § 632-1, it is important to clarify that, in Hawaiʻi state

courts, the issue of standing is a prudential concern and not an

issue of subject matter jurisdiction, as suggested by some of

our cases. For example, in Kēahole Defense Coalition, Inc. v.

Board of Land & Natural Resources (“Kēahole”), 110 Hawaiʻi 419,

134 P.3d 585 (2006), we stated that “standing is a

jurisdictional issue that may be addressed at any stage of a

case.” Kēahole, 110 Hawaiʻi at 427, 134 P.3d at 593 (citation

and footnote omitted). In Akinaka, we also stated that this

court has a duty to address standing sua sponte, even if it is

not raised by the parties. See Akinaka, 91 Hawaiʻi at 55, 979

P.2d at 1081.

In federal courts, standing does implicate subject

matter jurisdiction. The three-part “injury in fact” test is

based on the “cases and controversies” limitation on federal

court jurisdiction under Article III, section 2 of the United

States Constitution. See Lujan v. Defenders of Wildlife, 504

U.S. 555, 560 (1992) ( “Though some of its elements express

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merely prudential considerations that are part of judicial self-

government, the core component of standing is an essential and

unchanging part of the case-or-controversy requirement

of Article III.” (citation omitted)). Thus, in federal courts,

although standing secondarily implicates prudential concerns,

standing is fundamentally an issue of subject matter

jurisdiction. In other words, in federal courts, where a

plaintiff lacks standing, no “case or controversy” exists to

confer subject matter jurisdiction.

Hawaiʻi state courts, on the other hand, are not

subject to a “case or controversy” jurisdictional limitation.

Rather, pursuant to Article VI, Section 1 of the Constitution of

the State of Hawaiʻi, “[t]he several courts . . . have original

and appellate jurisdiction as provided by law . . . .” In

Hawaiʻi courts, standing is solely an issue of justiciability,

arising out of prudential concerns of judicial self-governance.

See Life of the Land II, 63 Haw. at 171-72, 623 P.2d at 438. As

explained by Justice Nakamura in Trustees of the Office of

Hawaiian Affairs v. Yamasaki, 69 Haw. 154, 737 P.2d 446 (1987):

Unlike the federal judiciary, the courts of Hawaii
are not subject to a cases or controversies limitation like
that imposed by Article III, § 2 of the United States
Constitution. But like the federal government, ours is one
in which the sovereign power is divided and allocated among
three co-equal branches. Thus, we have taken the teachings
of the Supreme Court to heart and adhered to the doctrine
that the use of judicial power to resolve public disputes
in a system of government where there is a separation of
powers should be limited to those questions capable of
judicial resolution and presented in an adversary context.

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And, we have admonished our judges that even in the absence
of constitutional restrictions, they must still carefully
weigh the wisdom, efficacy, and timeliness of an exercise
of their power before acting, especially where there may be
an intrusion into areas committed to other branches of
government.

Our guideposts for the application of the rules of
judicial self-governance founded in concern about the
proper — and properly limited — role of courts in a
democratic society reflect the precepts enunciated by the
Supreme Court. When confronted with an abstract or
hypothetical question, we have addressed the problem in
terms of a prohibition against rendering advisory opinions;
when asked to decide whether a litigant is asserting
legally recognized interests, personal and peculiar to him,
we have spoken of standing; when a later decision appeared
more appropriate, we have resolved the justiciability
question in terms of ripeness; and when the continued
vitality of the suit was questionable, we have invoked the
mootness bar.

We have also followed the teachings of the Supreme
Court where political questions” are concerned. . . .

Yamasaki, 69 Haw. at 170-72, 737 P.2d at 455-56 (internal

citations, quotation marks, punctuation, and footnotes omitted)

(emphases added).

Thus, Yamasaki recognizes that standing is a

prudential concern in Hawaiʻi state courts, which are not subject

to the case and controversy subject matter jurisdiction

limitation of federal courts. Yamasaki also noted that standing

is a prudential concern “founded in concern about the proper –

and properly limited – role of courts in a democratic society.”

69 Haw. at 171, 737 P.2d at 456 (citation omitted). Furthermore,

our previous pronouncements that “standing principles are

governed by ‘prudential rules’ of judicial self-governance,” and

that “the touchstone of this court’s notion of standing is ‘the

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needs of justice[,]’” see, e.g., Mottl, 95 Hawaiʻi at 389-90, 23

P.3d at 724-25, reflect our awareness that standing is a

prudential issue and not an issue of subject matter

jurisdiction, as “the needs of justice” cannot eliminate the

requirement of subject matter jurisdiction.21 In addition, as

pointed out earlier, in Hawaiʻi state courts, standing

requirements may be tempered, or even prescribed, by legislative

declarations of policy. See Life of the Land II, 63 Haw. at

172, 623 P.2d at 438.

Courts of other states also recognize that standing is

a prudential concern and not an issue of subject matter

jurisdiction. See, e.g., Weatherford v. City of San Rafael, 395

P.3d 274, 278 (Cal. 2017) (“Unlike the federal Constitution, our

21
Furthermore, if lack of standing was an issue of subject matter
jurisdiction, it could not be waived, and a case in which a plaintiff lacks
standing would have to be dismissed. Hawaiʻi Rules of Civil Procedure
(“HRCP”) Rule 12(h)(3) (2000) provides that “[w]henever it appears by
suggestion of the parties or otherwise that the court lacks jurisdiction of
the subject matter, the court shall dismiss the action.” See also Chun v.
Emps.’ Ret. Sys., 73 Haw. 9, 14, 828 P.2d 260, 263 (1992), reconsideration
denied, 73 Haw. 625, 829 P.2d 859 (1992) (“[L]ack of subject matter
jurisdiction can never be waived by any party at any time.” (citation
omitted)). We have noted, however, that a claim of lack of standing can be
waived. See Ito v. Inv’rs Equity Life Holding Co., 135 Hawaiʻi 49, 59 n.24,
346 P.3d 118, 128 n.24 (2015) (“In its Reply Brief . . . IELHC again claims
that HLDIGA does not have standing . . . . However, this argument was waived
on appeal because IELHC did not raise it in its opening brief.” (citation
omitted)); see also In re Tax Appeal of Univ. of Hawaiʻi v. City & Cty. of
Honolulu (“In re Univ. of Hawaiʻi”), 102 Hawaiʻi 440, 445 n.13, 77 P.3d 478,
483 n.13 (2003) (“We do not address the issue of whether the University has
standing to appeal pursuant to a specific statute, inasmuch as the University
did not raise this issue on appeal.” (citation omitted)). Both Ito and In re
Univ. of Hawaiʻi cited to Hawaiʻi Rules of Appellate Procedure (“HRAP”) Rule
28(b)(7) in support of this point, which provides that “[p]oints not argued
may be deemed waived.”

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state Constitution has no case or controversy requirement

imposing an independent jurisdictional limitation on our

standing doctrine. . . . Our standing jurisprudence nonetheless

reflects a sensitivity to broader prudential and separation of

powers considerations elucidating how and when parties should be

entitled to seek relief under particular statutes.” (citation

omitted)); Deutsche Bank Nat’l Trust Co. v. Johnston, 369 P.3d

1046, 1052 (N.M. 2016) (“[W]hile a plaintiff’s . . . lack of

prudential standing [is] not strictly jurisdictional, [it]

implicate[s] the ‘properly limited . . . role of courts in a

democratic society’ and [is a] relevant concern[] throughout a

litigation.” (citation omitted)); Biggs v. Cooper ex rel. Cty.

of Maricopa, 341 P.3d 457, 460 (Ariz. 2014) (“In Arizona,

standing is a prudential consideration rather than a

jurisdictional one.” (citation omitted)); Nicely v. State, 733

S.E.2d 715, 719 n.6 (Ga. 2012) (“[W]e note that prudential

standing generally is not jurisdictional.” (citation omitted));

Fumo v. City of Philadelphia, 972 A.2d 487, 500 n.5 (Pa. 2009)

(“[I]n Pennsylvania, the issue of standing implicates prudential

concerns.” (citation omitted)).

Therefore, we preliminarily clarify that, in Hawaiʻi

state courts, standing is not an issue of subject matter

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jurisdiction,22 but arises solely out of justiciability concerns

based on prudential concerns of judicial self-governance, and is

based on “concern about the proper – and properly limited – role

of courts in a democratic society.” Accordingly, although

Hawaiʻi state courts may consider standing even when not raised

by the parties, they are not required to do so sua sponte, as

they would be required to do if they perceive issues of subject

matter jurisdiction.

In this case, however, the State expressly alleged

lack of standing as an alternative basis for its dismissal

motion. We therefore address standing in our de novo review of

the parties’ cross motions for summary judgment.

22
It appears the line of cases erroneously suggesting that standing is a
matter of subject matter jurisdiction started with State v. Kam, 69 Haw. 483,
488, 748 P.2d 372, 375-76 (1988) (“Although the question of standing ‘was not
raised by the parties, appellate courts are under an obligation to insure
that they have jurisdiction to hear and determine each case.’” (citation
omitted)). Subsequent cases include Akinaka, 91 Hawaiʻi at 55, 979 P.2d at
1081; Kēahole, 110 Hawaiʻi at 427-28, 134 P.3d at 593-94; Hui Kakoʻo Aina
Hoʻopulapula v. Board of Land & Natural Resources, 112 Hawaiʻi 28, 59, 143
P.3d 1230, 1261 (2006); and McDermott v. Ige, 135 Hawaiʻi 275, 283, 349 P.3d
382, 390 (2015).

The conflation of the subject matter jurisdiction and justiciability
implications of standing may have arisen due to language in our precedent
stating that it would not be proper to “invoke a court’s jurisdiction” where
a plaintiff lacks standing. See, e.g., Mottl, 95 Hawaiʻi at 389, 23 P.3d at
724 (“It is well settled that the crucial inquiry with regard to standing is
whether the plaintiff has alleged such a personal stake in the outcome of the
controversy as to warrant his or her invocation of the court’s jurisdiction
and to justify exercise of the court’s remedial powers on his or her behalf.”
(quoting Akinaka, 91 Hawaiʻi at 55, 979 P.2d at 1081)).

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b. Declaratory Judgments under HRS Chapter 632

Tax Foundation premises its request for declaratory

relief on HRS § 632-1, which is part of HRS Chapter 632

governing “Declaratory Judgments.” The Chapter has four

sections, HRS § 632-1 relating to “[j]urisdiction; controversies

subject to,” HRS § 632-2 (2016) relating to “[a]ppeals,” HRS §

632-3 (2016) relating to “[f]urther relief upon judgment,” and

HRS § 632-6 (2016) relating to “[p]rovisions, remedial.” HRS §

632-1 provides as follows:

Jurisdiction; controversies subject to. (a) In cases of
actual controversy, courts of record, within the scope of
their respective jurisdictions, shall have power to make
binding adjudications of right, whether or not
consequential relief is, or at the time could be, claimed,
and no action or proceeding shall be open to objection on
the ground that a judgment or order merely declaratory of
right is prayed for; provided that declaratory relief may
not be obtained in any district court, or in any
controversy with respect to taxes, or in any case where a
divorce or annulment of marriage is sought. Controversies
involving the interpretation of deeds, wills, other
instruments of writing, statutes, municipal ordinances, and
other governmental regulations may be so determined, and
this enumeration does not exclude other instances of actual
antagonistic assertion and denial of right.

(b) Relief by declaratory judgment may be granted in civil
cases where an actual controversy exists between contending
parties, or where the court is satisfied that antagonistic
claims are present between the parties involved which
indicate imminent and inevitable litigation, or where in
any such case the court is satisfied that a party asserts a
legal relation, status, right, or privilege in which the
party has a concrete interest and that there is a challenge
or denial of the asserted relation, status, right, or
privilege by an adversary party who also has or asserts a
concrete interest therein, and the court is satisfied also
that a declaratory judgment will serve to terminate the
uncertainty or controversy giving rise to the
proceeding. Where, however, a statute provides a special
form of remedy for a specific type of case, that statutory
remedy shall be followed; but the mere fact that an actual
or threatened controversy is susceptible of relief through
a general common law remedy, a remedy equitable in nature,

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or an extraordinary legal remedy, whether such remedy is
recognized or regulated by statute or not, shall not debar
a party from the privilege of obtaining a declaratory
judgment in any case where the other essentials to such
relief are present.

When construing a statute, our foremost obligation is

to ascertain and give effect to the intention of the

legislature, which is to be obtained primarily from the language

contained in the statute itself, and we must read statutory

language in the context of the entire statute and construe it in

a manner consistent with its purpose. See In re Doe, 95 Hawaiʻi

183, 191, 20 P.3d 616, 624 (2001) (citation omitted).

HRS § 632-1 is somewhat verbose, but can be broken

down as follows. The title of HRS § 632-1 is “Jurisdiction;

controversies subject to.”23 In general, subsection (a) discusses

subject matter jurisdiction. It starts by providing that, in

cases of actual controversy, courts of record have power to make

binding adjudications of right whether or not consequential

relief is, or at the time could be, claimed. It also provides

that a declaratory relief action cannot be objected to on the

grounds that declaratory relief is the only relief sought; in

23
The Dissent opines that HRS § 632-1, which is entitled “Jurisdiction;
controversies subject to” does not set out standing requirements but is
merely a jurisdictional statute. Yet, the Dissent acknowledges we have
stated that HRS Chapter 632 is an instance in which standing requirements
have been “tempered, or even prescribed, by legislative declarations of
policy[,]” citing Life of the Land II, 63 Haw. at 172 & n.5, 623 P.2d at 438
& n.5. It is difficult to understand how the legislature “tempered, or even
prescribed” standing requirements in Chapter 632, if Chapter 632 does not
actually contain standing criteria or requirements.

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other words, other remedies, such as damages or injunctive

relief, need not also be sought.24 Subsection (a) further

provides that the district courts do not have subject matter

jurisdiction over declaratory relief claims25 and that other

courts of record cannot grant declaratory relief in any

controversy with respect to taxes or in a case seeking divorce

or annulment. The subsection clarifies, however, that

declaratory relief can be sought in controversies involving the

interpretation of deeds, wills, other instruments of writing,
24
As noted in Justice Acoba’s dissenting opinion in County of Hawaiʻi v.
Ala Loop Homeowners, 123 Hawaiʻi 391, 235 P.3d 1103 (2010):

[S]ince its enactment in 1921, HRS § 632–1 has undergone
several amendments. In 1945, a pertinent amendment was
made to HRS § 632–1 with the intent “to expand the
proceedings for declaratory judgments to a scope that will
render such proceedings of real value[.]” S. Stand. Comm.
Rep. No. 235, in 1945 Senate Journal, at 656. Furthermore,
the House Committee on the Judiciary noted that the
amendment would “afford greater relief by declaratory
judgment than the present law.” H. Stand. Comm. Rep. No.
76, in 1945 House Journal, at 566. This court has recently
determined that, by this amendment, the legislature
“intended to ‘afford [citizens] greater relief,’” and,
therefore, a petitioner was not precluded “from bringing a
declaratory judgment action under the current HRS § 632–1,
even though [relief through another right of action was]
available provided that ‘the other essentials to such
relief [were] present.’” Dejetley v. Kahoʻohalahala, 122
Hawaiʻi 251, 268, 226 P.3d 421, 438 (2010) (quoting HRS
§ 632–1).

123 Hawaiʻi at 434, 235 P.3d at 1146 (Acoba, J., dissenting).

25
In 1921, when Hawaiʻi’s declaratory judgment act was enacted, district
courts were not courts of record. Effective January 1, 1972, Act 188, 1970
Hawaii Sess. Laws 443, established district courts as courts of record and
redesignated district magistrates as district judges. See State v. Okuda, 71
Haw. 434, 438 n.6, 795 P.2d 1, 4 n.6 (1990) (per curiam).

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statutes, municipal ordinances, or other governmental

regulations. It further states that this list is not

exhaustive, and that declaratory relief can also be sought in

other situations involving other antagonistic assertions or

denials of rights.

Subsection (b) of the statute more specifically addresses

“controversies subject to” declaratory relief.26 It states that

relief by declaratory judgment may be granted in civil cases27

where (1) there is an actual controversy between contending

parties; or (2) (a) antagonistic claims exist between the

parties (i) that indicate imminent and inevitable litigation, or

(ii) where the party seeking declaratory relief has a concrete

interest in a legal relation, status, right, or privilege that
26
Our discussion does not include the repeated phrase that “the court is
satisfied.” Interestingly, there are numerous federal cases relating a
“court is satisfied” with standing or standing requirements. See, e.g.,
Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1550 (2016) (“The [Ninth Circuit
Court of Appeals] thus concluded that Robins’ ‘alleged violations of his
statutory rights were sufficient to satisfy the injury-in-fact requirement of
Article III.’” (internal brackets and citation omitted)); Walker v. Lamb,
Case No. 4:18-cv-04094, 2019 WL 542328, at *7 (W.D. Ark. Feb. 11, 2019)
(“[T]he Court is satisfied that Plaintiff has standing to bring the present
lawsuit.”); Am. Fed’n of State, Cty. & Mun. Emps. (AFSCME) Council 79 v.
Scott, 278 F.R.D. 664, 668–69 (S.D. Fla. 2011) (“The Court is satisfied that
the Union has demonstrated an injury in fact. . . . [T]he Court is satisfied
that the Union satisfies the last two standing prongs.”); White v. Engler,
188 F. Supp. 2d 730, 743 (E.D. Mich. 2001) (“The Court is satisfied that
Plaintiffs have standing to pursue such action. The Court is also satisfied
that the NAACCP has standing to pursue this action on behalf of its
members.”).
27
Declaratory relief ordinarily cannot be utilized to enjoin the
enforcement of a valid criminal statute, but may be available where a
criminal statute affects a continuing course of conduct but is not subject to
challenge in a criminal court because the government refuses to bring
criminal proceedings. See Pacific Meat Co. v. Otagaki, 47 Haw. 652, 656, 394
P.2d 618, 620-21 (1964).

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is challenged or denied by the other party, who has or asserts a

concrete interest in the same legal relation, status, right, or

privilege; and (b) a declaratory judgment will serve to

terminate the uncertainty or controversy giving rise to the

proceeding.28

As indicated in the paragraph above, the plain

language of HRS § 632-1(b) seemingly allows for declaratory

relief where there is an “actual controversy between contending

parties” or “antagonistic claims” are present between contending

parties (along with other requirements). We discuss the first

“or” in HRS § 632-1(b) in more detail in Section IV.C.3.d below.

In any event, subsection (b) of HRS § 632-1 further

provides that where another statute provides a special form of

remedy for a specific type of case, that statutory remedy must

be followed. The subsection also clarifies, however, that if

the other requirements for declaratory relief delineated in the

statute are met, a party will not be prohibited from obtaining a

declaratory judgment even if the actual or threatened

controversy is susceptible of relief through a general common

28
The Dissent opines that because HRS § 632-1 does not use language such
as “an aggrieved party,” “any interested person,” or “any person” in
describing who can bring a declaratory judgment action, it does not set out
standing requirements. The language of subsection (b), however, clearly lays
out when “parties” can bring a request for declaratory relief.

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law remedy, an equitable remedy, or an extraordinary legal

remedy, whether or not such a remedy is recognized by statute.

HRS § 632–6 then provides:
This chapter is declared to be remedial. Its purpose is to
afford relief from the uncertainty and insecurity attendant
upon controversies over legal rights, without requiring one
of the parties interested so to invade the rights asserted
by the other as to entitle the party to maintain an
ordinary action therefor. It is to be liberally
interpreted and administered, with a view to making the
courts more serviceable to the people.

(Emphasis added.)

Thus, nothing in the language of HRS § 632-1, the

statement of legislative intent in HRS § 632-6, nor any other

provision in HRS Chapter 632 requires a party to satisfy a

three-part “injury in fact” test in order to seek declaratory

relief.

c. Our Precedent Regarding Standing under
HRS § 632-1

Recently, in Asato v. Procurement Policy Board, 132

Hawaiʻi 333, 322 P.3d 228 (2014), we clarified the confusion in

our case law regarding whether the three-part “injury in fact”

test applies to declaratory judgment lawsuits brought pursuant

to HRS § 91-7 under which “any interested person” may seek

declaratory relief regarding the validity of administrative

rules.29 Analyzing the somewhat confusing pronouncements of our

29
HRS § 91-7 (2012 & Supp. 2014) provides in pertinent part:

(continued . . .)

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prior case law on the issue, we held that a person seeking a

judicial declaration under HRS § 91-7 need not satisfy the

three-part “injury in fact” test to qualify as an “interested

person” with standing under that statute. See Asato, 132 Hawaiʻi

at 342-46, 322 P.3d at 237-41. The Asato majority noted that in

Life of the Land II, this court held that plaintiffs whose

interests “may have been adversely affected” had standing to

request declaratory relief under HRS § 91-7. Asato, 132 Hawaiʻi

at 342, 322 P.3d at 237 (citing Life of the Land II, 63 Haw. at

177-78, 623 P.2d at 441). We also noted that in Richard v.

Metcalf, 82 Hawaiʻi 249, 921 P.2d 169 (1996), however, this court

appeared to have adopted a more stringent standing standard,

requiring that the plaintiff demonstrate an “injury in fact” to

have standing under HRS § 91-7. See Asato, 132 Hawaiʻi at 342,

322 P.3d at 237 (citing Richard, 82 Hawaiʻi at 253-54, 921 P.2d

at 173-74). We stated:

(. . . continued)
Declaratory judgment on validity of rules. (a) Any
interested person may obtain a judicial declaration as to
the validity of an agency rule as provided in subsection
(b) by bringing an action against the agency in the circuit
court or, if applicable, the environmental court, of the
county in which the petitioner resides or has its principal
place of business. The action may be maintained whether or
not the petitioner has first requested the agency to pass
upon the validity of the rule in question.

The original 1961 version of the statute was in effect at the time of Asato;
in 2014, the legislature added “or, if applicable, the environmental court.”
2014 Haw. Sess. Laws Act 218, § 3 at 739.

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However, it is not clear how Richard reached this
conclusion. Richard states that it was relying on Bush [v.
Watson, 81 Hawaiʻi 474, 479, 918 P.2d 1130, 1135 (1996),
reconsideration denied, 82 Hawaiʻi 156, 920 P.2d 370
(1996)], which, according to Richard, “applied the ‘injury
in fact’ test to determine the standing of a party who had
filed a declaratory judgment action under HRS § 91–7.”
Richard, 82 Hawaiʻi at 253, 921 P.2d at 173. However, Bush
does not mention either HRS § 91–7 or “[a]ny interested
person”, or provide any analysis on why the injury in fact
test should apply to “[a]ny interested person[s].” See
Bush, 81 Hawaiʻi at 479, 918 P.2d at 1135.

Id. We opined that “in the absence of supportive reasoning, it

is difficult to accord governing impact to this aspect of

Richard, particularly where the plain language of HRS § 91-7 and

the legislative history of that statute require a different

result that is in accord with Life of the Land [II].” Asato,

132 Hawaiʻi at 343, 322 P.3d at 238 (footnote omitted).

The Asato majority also addressed the dissent’s

statement that it had “been well settled that a plaintiff must

satisfy the three-part ‘injury in fact’ test in order to have

standing under HRS § 91-7,” Asato, 132 Hawaiʻi at 362, 322 P.3d

at 257 (Recktenwald, C.J., dissenting, in which Nakayama, J.,

joined), by noting Richard had not proffered reasoning as to why

an “interested person” must meet the “injury in fact” test,

despite the fact that it was the first case to adopt that

requirement. Asato, 132 Hawaiʻi at 346, 322 P.3d at 241 (citing

Richard, 82 Hawaiʻi at 253–54, 921 P.2d at 173–74). The majority

noted that “Richard may have erroneously assumed that the issue

had already been resolved in Bush.” Id. (citing Richard, 82

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Hawaiʻi at 253, 921 P.2d at 173). We noted that although the

doctrine of stare decisis must not be treated lightly, we were

“address[ing] an issue that was not well-supported or well-

settled.” Asato, 132 Hawaiʻi at 346, 322 P.3d at 241. We also

noted that “[s]tanding is a prudential doctrine, and where no

prudential reasons have ever been set forth in support of a

particular standing requirement, review of that requirement is

warranted, as we do so here.” Asato, 132 Hawaiʻi at 346, 322

P.3d at 241 (citing Citizens, 91 Hawaiʻi at 100, 979 P.2d at

1126) (emphasis added).

Similar to Asato, which evaluated our precedent

regarding standing to bring a declaratory relief action under

HRS § 91-7, as discussed below, our precedent regarding

requirements for standing under HRS § 632-1 has also been

confusing and has not been well settled. As further discussed

below, our cases that have required satisfaction of a three-part

“injury in fact” test for HRS § 632-1 standing have not

adequately set forth prudential reasons for doing so. Rather,

our imposition of a three-part “injury in fact” test to HRS §

632-1 standing actually contravenes prudential considerations

regarding the appropriate role of the judiciary within the three

branches of government, because the three-part test contradicts

the language of HRS § 632-1 and the legislative mandate of HRS §

632-6.

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Dalton v. City and County of Honolulu, 51 Haw. 400,

462 P.2d 199 (1969), appears to be the first reported case in

which we expressly addressed standing in the context of a case

requesting a declaratory judgment pursuant to HRS § 632-1. We

stated:

The standing necessary to pursue a declaratory
judgment is described in HRS § 632-1:

Controversies involving the
interpretation of . . . statutes, municipal
ordinances, and other governmental regulations,
may be so determined, and this enumeration does
not exclude other instances of actual
antagonistic assertion and denial of right.

Relief by declaratory judgment . . . may
be granted in all civil cases where an actual
controversy exists between contending parties,
. . . or where in any such case the court is
satisfied that a party asserts a legal
relation, status, right, or privilege in which
he has a concrete interest . . . .

Dalton, 51 Haw. at 402-03, 462 P.2d at 202.

In Dalton, we held that plaintiffs residing in very

close proximity to a proposed high rise apartment building

development, which would restrict their scenic view, limit their

sense of space, and increase population density, clearly had

standing to bring an HRS § 632-1 declaratory relief action

because they had a “concrete interest” in a “legal relation” and

because the case was an “actual controversy,” not merely a

hypothetical problem. Dalton, 51 Haw. at 403, 462 P.2d at 202.

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There was no reference in Dalton to a three-part “injury in

fact” test for standing.30

Twenty-two years after Dalton, Life of the Land II

also briefly discussed HRS § 632-1 declaratory relief standing.

See Life of the Land II, 63 Haw. at 178, 623 P.2d at 442. We

stated:

Standing is that aspect of justiciability focusing on
the party seeking a forum rather than on the issues he
wants adjudicated. And the crucial inquiry in its
determination is “whether the plaintiff has ‘alleged such a
personal stake in the outcome of the controversy’ as to
warrant his invocation of . . . (the court’s) jurisdiction
and to justify exercise of the court’s remedial powers on
his behalf.” While standing requisites ordinarily comprise
one of the “prudential rules” discussed earlier, they may
also be tempered, or even prescribed, by legislative and
5
constitutional declarations of policy.

5 See, e.g., HRS Chapter 632, Declaratory Judgments,
and Hawaii State Constitution, Article XI, Section 9,
Environmental Rights. . . .

Life of the Land II, 63 Haw. at 172 & n.5, 623 P.2d at 438 & n.5

(quoting Warth v. Seldin, 422 U.S. 490, 498–99 (1975)). In Life

of the Land II, we discussed the liberalization of standing

requirements in federal court environmental cases, in which the

courts had shifted from the “legal right” to the “injury in

30
The Dissent asserts that since Dalton, this court has consistently
required a party seeking declaratory relief under HRS § 632-1 to establish an
injury or a threatened injury. As noted by the Dissent, however, Dalton did
not use the terms “injury” or “threatened injury.” Rather, Dalton refers to
“a ‘concrete interest’ in a ‘legal relation,’” which are the terms
specifically contained within the legislative prescription of HRS § 632-1.
Dalton, 51 Haw. at 403, 462 P.2d at 202 (citation omitted).

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fact” standard to evaluate standing. Life of the Land II, 63

Haw. at 174, 623 P.2d at 439.31 We also stated:

While the term “injury in fact” may not appear in their
text, our decisions have afforded standing on a basis at
least coextensive with federal doctrine where harm to such
interests has been alleged. This is not to suggest our
standing requisites will follow every twist or turn in the
development of federal doctrine. Our touchstone remains
“the needs of justice.”

63 Haw. 176, 623 P.2d at 441 (emphasis added) (citation

omitted). We further stated in footnote 6:

The Supreme Court’s standing doctrine includes a
requirement that there be a showing of a “logical nexus”
between the interest asserted and the claim sought to be
adjudicated. See Flast v. Cohen, 392 U.S. 83, 102 (1968).
In Duke Power Co. v. Carolina Environmental Study Group,
Inc., 438 U.S. 59 (1978), the Court summarized its doctrine
as follows:

The essence of the standing inquiry is whether
the parties seeking to invoke the court’s
jurisdiction have “alleged such a personal stake in
the outcome of the controversy as to assure that
concrete adverseness which sharpens the presentation
of issues upon which the court so largely depends for
illumination of difficult constitutional questions.”
Baker v. Carr, 369 U.S. 186, 204 (1962). As refined
by subsequent reformulation, this requirement of a
“personal stake” has come to be understood to require
not only a “distinct and palpable injury,” to the
plaintiff, Warth v. Seldin, 422 U.S. 490, 501 (1975),
but also a “fairly traceable” causal connection
between the claimed injury and the challenged
conduct. Arlington Heights v. Metropolitan Hous.
Dev. Corp., 429 U.S. 252, 261 (1977). See also Simon
v. E. Ky. Welfare Rights Org., 426 U.S. 26, 41-42
(1976); Linda R. S. v. Richard D., 410 U.S. 614, 617
(1973).

438 U.S. at 72. However, it went on to state the
requirement of the foregoing nexus was only applicable in

31
The Dissent also cites to this passage. Although Life of the Land II
did generally discuss this shift, it did so in the context of discussing
United States Supreme Court cases discussing standing requirements in federal
courts. See Life of the Land II, 63 Haw. at 172-73, 623 P.2d at 438-39
(comparing Tennessee Electric Power Co. v. Tennessee Valley Authority, 306
U.S. 118, 137-38 (1939), with Association of Data Processing Service
Organizations v. Camp, 397 U.S. 150, 153-54 (1970)).

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taxpayers’ suits and “outside the context of . . . (such)
suits, a litigant must demonstrate . . . (nothing) more
than injury in fact and a substantial likelihood that the
judicial relief requested will prevent or redress the
claimed injury to satisfy the ‘case or controversy’
requirement of Art. III.” Id. at 79.

Life of the Land II, 63 Haw. at 173 n.6, 623 P.2d at 439 n.6.

Thus, in Life of the Land II, we referred to the term

“injury in fact” as a concept that loosened, not tightened,

standing requirements under HRS § 91-7. We also made clear that

our standing requirements would not necessarily follow federal

standards, but would instead be based on the “needs of justice.”

63 Haw. at 176, 623 P.2d at 441. We noted that even under

federal standing requirements existing at that time, components

of the three-part “injury in fact” test applied only in

taxpayers’ suits. 63 Haw. at 173 n.6, 623 P.2d at 439 n.6. In

any event, Life of the Land II actually analyzed standing under

HRS § 91-7. With respect to HRS § 632-1 standing, we merely

stated as follows:

HRS § 632-1 authorizes courts of record to issue
declaratory judgments “in cases of actual controversy.”
Our brief discourse on the “prudential rules” and their
application to this case has obviated a necessity for
further debate on whether an “actual controversy” exists.

Life of the Land II, 63 Haw. at 178, 623 P.2d at 442 (footnote

omitted). As can be seen, in Life of the Land II, we analyzed

HRS § 632-1 standing based on the “actual controversy” language

of the statute, and we did not actually apply an “injury in

fact” requirement to HRS § 632-1.

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Later, in Citizens, we pointed out the difference

between standing requirements for HRS § 91-14 agency appeals and

HRS § 632-1 declaratory judgment actions, and stated:

Citizens first contends that the circuit court erred
in concluding that it did not establish an injury in fact
nor raise a genuine issue of material fact relating to the
existence of an injury in fact. Likewise, as noted above,
Chalon describes the issue of Citizens’ standing in terms
of proving an injury in fact sufficient to invoke a
contested case hearing. These arguments wholly
misapprehend and blur the distinction between standing to
participate in a contested case hearing under HRS § 91-14
and standing in an action for declaratory relief under
HRS § 632-1 (1993).

As a general rule, standing is the aspect of
justiciability focusing on the party seeking a forum rather
than on the issues he wants adjudicated. In order for
individuals or groups legitimately to invoke contested case
hearing procedures on SMA permit applications before the
State Land Use Commission (LUC), they must be “directly and
immediately affected by the Commission’s decision.” HPC
Rule 4-2(6)(B). In PASH, we stated that this requires a
party to demonstrate that its interests were injured. The
demonstration is evaluated via a three-part “injury in
fact” test requiring: “(1) an actual or threatened injury,
which, (2) is traceable to the challenged action, and (3)
is likely to be remedied by favorable judicial action.”

On the other hand, for the purposes of establishing
standing in an action for declaratory relief, HRS § 632-1
interposes less stringent requirements for access and
participation in the court process. As this court
explained in Richard v. Metcalf, 82 Hawai‘i 249, 254 n.12,
921 P.2d 169, 174 n.12 (1996),

Although HRS § 632-1 provides for standing to sue “in
cases of actual controversy,” HRS § 632-6 clarifies
that the purpose of HRS chapter 632 is to afford
relief without requiring one of the parties
interested so to invade the rights asserted by the
other as to entitle the party to maintain an ordinary
action therefor. It is to be liberally interpreted
and administered, with a view to making the courts
more serviceable to the people.

91 Hawaiʻi at 99-100, 979 P.2d at 1125-26 (footnotes and brackets

omitted, some internal citations and quotation marks omitted)

(emphases added).

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In Citizens, we did refer to the plaintiff

organization’s “injury in fact” in analyzing its standing,

stating that “although Citizens’ members are neither owners nor

adjoining owners of the Mahukona project, they nonetheless

alleged an injury in fact sufficient to constitute standing to

participate in a declaratory judgment action.” Citizens, 91

Hawaiʻi at 101, 979 P.2d at 1127. We were clear, however, that

the three-part “injury in fact” test did not govern standing for

HRS § 632-1 declaratory judgment actions, noting that “injury to

its members’ quality of life is threatened,” and concluding that

“Citizens asserts personal and special interests sufficient to

invoke judicial resolution under HRS § 632-1.” Id.32 The

concept of “personal” and “special” interests sufficient for

standing mentioned in Citizens had actually been developed to

define what constitutes a “person aggrieved” under HRS § 91-14

with standing to request judicial review of contested cases

pursuant to that statute. See, e.g., Life of the Land, Inc. v.

Land Use Comm’n, 61 Haw. 3, 8, 594 P.2d 1079, 1082 (1979); Life

of the Land II, 63 Haw. at 176, 623 P.2d at 440-41; Mahuiki v.

Planning Comm’n, 65 Haw. 506, 515, 654 P.2d 874, 880 (1982); Ka

Paʻakai O Ka ʻĀina v. Land Use Comm’n, 94 Hawaiʻi 31, 42-43, 7

P.3d 1068, 1079-80 (2000). Therefore, it appears that in

32
Although Citizens used the phrase “injury in fact,” it did not apply
the three-part “injury in fact” test for HRS § 632-1 standing.

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Citizens, we juxtaposed the “personal and special interests”

requirement for a “person aggrieved” to have standing under HRS

§ 91-14 to an HRS § 632-1 declaratory relief action.

Then, in the 2001 Mottl case, 95 Hawaiʻi 381, 23 P.3d

716, we again acknowledged liberalized standing requirements for

HRS § 632-1 declaratory judgment actions, but then applied the

three-part “injury in fact” test for standing under that

statute. In Mottl, we addressed whether the University of

Hawaiʻi Professional Assembly and some of its members had

standing to bring an HRS § 632-1 declaratory relief lawsuit

asserting that the State of Hawaiʻi wrongfully reduced the

University of Hawaii’s allotment of appropriated funds.33 We

began our standing analysis by stating:

It is well settled that the crucial inquiry with
regard to standing is whether the plaintiff has alleged
such a personal stake in the outcome of the controversy as

33
Specifically:

The complaint alleged: (1) a violation of the principle of
separation of powers implicit in the Hawaiʻi Constitution by
reducing, without authority, the budgetary allocation to the
University of Hawaiʻi below the amount legislatively appropriated;
and (2) a violation of HRS ch. 37 by (a) failure to restore to
the University of Hawaiʻi an amount sufficient to pay the faculty
paychecks on June 30, 1998 when the federal injunction precluded
implementation of the payroll lag, (b) causing monies encumbered
in fiscal year 1998 for the purchase of supplies, services, and
other purposes to be diverted to the payment of salaries, and (c)
causing the University of Hawaii’s budget in fiscal year 1999 to
be impaired by the cost shifted from the fiscal year 1998.

Mottl, 95 Hawaiʻi at 385, 23 P.3d at 720.

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to warrant his or her invocation of the court’s
jurisdiction and to justify exercise of the court’s
remedial powers on his or her behalf. In deciding whether
the plaintiff has the requisite interest in the outcome of
the litigation, we employ a three-part test: (1) has the
plaintiff suffered an actual or threatened injury as a
result of the defendant’s wrongful conduct; (2) is the
injury fairly traceable to the defendant’s actions; and (3)
would a favorable decision likely provide relief for
plaintiff’s injury.

. . . .

On the other hand, for the purposes of establishing
standing in an action for declaratory relief, HRS_§ 632–1
interposes less stringent requirements for access and
participation in the court process. As this court
explained in Richard v. Metcalf, 82 Hawaiʻi 249, 254 n.12,
921 P.2d 169, 174 n.12 (1996),

although HRS § 632–1 provides for standing to sue in
cases of actual controversy, HRS § 632–6 (1993)
clarifies that the purpose of HRS chapter 632 is to
afford relief without requiring one of the parties
interested so to invade the rights asserted by the
other as to entitle the party to maintain an ordinary
action therefor. It is to be liberally interpreted
and administered, with a view to making the courts
more serviceable to the people.

Mottl, 95 Hawaiʻi at 389, 23 P.3d at 724 (some internal quotation

marks, ellipses, footnotes, brackets, and citations omitted)

(emphases added).

In Mottl, we applied the three-part “injury in fact”

test to HRS § 632-1 standing for the first time, and we ruled

that the plaintiffs did not meet its requirements. See Mottl,

95 Hawaiʻi at 395, 23 P.3d at 730. After Mottl, a few opinions

have expressly required plaintiffs to satisfy the three-part

“injury in fact” test to establish standing in HRS § 632-1

declaratory judgment lawsuits. See, e.g., Cty. of Kauaʻi ex rel.

Nakazawa v. Baptiste, 115 Hawaiʻi 15, 26, 165 P.3d 916, 927

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(2007); Ala Loop Homeowners, 123 Hawaiʻi at 440-41, 235 P.3d at

1152-53.

As in our adoption of the three-part “injury in fact”

test in the context of HRS § 91-7 standing, discussed in Asato,

it is unclear why we adopted the test for HRS § 632-1 standing

in Mottl. Similar to the confusion in our case law regarding

standing requirements for HRS § 91-7 that we clarified in Asato,

our case law regarding standing requirements for HRS § 632-1

declaratory judgment actions has also been unsettled and

confusing.34 We therefore now clarify standing requirements for

a declaratory judgment lawsuit under HRS § 632-1.

d. Standing Requirements under HRS § 632-1(b)

As discussed in Section IV.C.3.a, standing in Hawaiʻi

state courts is a prudential doctrine in which our courts are

directed to “weigh the wisdom, efficacy, and timeliness of an

34
The Dissent opines that this court should follow the Intermediate Court
of Appeals’ (“ICA[’s]”) opinion in Bremner v. City & County of Honolulu, 96
Hawaiʻi 134, 28 P.3d 350 (App. 2001), in which the ICA applied the three-part
“injury in fact” test to determine HRS § 632-1 standing. Bremner, however,
cited to Bush, 81 Hawaiʻi at 479, 918 P.2d at 1135, as authority for its
application of the three-part “injury in fact” test to HRS § 632-1 standing.
See Bremner, 96 Hawaiʻi at 139, 28 P.3d at 355. Yet Bush was brought under 42
U.S.C. § 1983, not HRS § 632-1. See Bush, 81 Hawaiʻi at 477-78, 918 P.2d at
1133-34. Bremner also cited to Mottl as authority for its application of the
three-part “injury in fact” test for HRS § 632-1 standing. See Bremner, 96
Hawaiʻi at 139, 28 P.3d at 355. As noted, however, it is unclear why Mottl
applied the three-part “injury in fact” test to HRS § 632-1 standing, and, as
discussed in this opinion, application of the test to declaratory relief
actions under HRS Chapter 632 contravenes prudential considerations when the
legislature has clearly delineated standing requirements under HRS § 632-1.
Therefore, we decline to adopt Bremner, which is inconsistent with the
language and legislative intent of HRS Chapter 632.

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exercise of their power before acting, especially where there

may be an intrusion into areas committed to other branches of

government.” Life of the Land II, 63 Hawaiʻi at 172, 623 P.2d at

438. To reiterate, we have noted that standing requirements may

be tempered, or even prescribed, by legislative declarations of

policy. See id. In HRS §§ 632-1 and 632-6, the legislature has

declared its policy regarding standing, and has expressed its

view regarding the “proper — and properly limited — role of

[our] courts[,]” Yamasaki, 69 Haw. at 171, 737 P.2d 456

(citation omitted), with respect to declaratory judgment actions

under HRS Chapter 632.

As discussed in Section IV.C.3.b, the language of HRS

§ 632-1 provides that declaratory relief is available in civil

cases (1) where there is an actual controversy between

contending parties; or (2) (a) where antagonistic claims exist

between the parties (i) that indicate imminent and inevitable

litigation, or (ii) where the party seeking declaratory relief

has a concrete interest in a legal relation, status, right, or

privilege that is challenged or denied by the other party, who

has or asserts a concrete interest in the same legal relation,

status, right, or privilege; and (b) a declaratory judgment will

serve to terminate the uncertainty or controversy giving rise to

the proceeding.

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As further discussed in Section IV.C.3.b, the language

of HRS § 632-1(b) would seemingly allow for declaratory relief

in civil cases where there is an “actual controversy” or

“antagonistic claims” between contending parties. We first

address the meaning of “actual controversy.”

As noted in Kaleikau v. Hall, 27 Haw. 420 (Haw. Terr.

1923), Hawaiʻi’s Declaratory Judgment Act, enacted in 1921, was

copied in toto from the declaratory judgment act of Kansas.

Kaleikau, 27 Haw. at 426. The Kansas Supreme Court first

addressed its declaratory judgment act in State ex rel. Hopkins

v. Grove, 201 P. 82 (Kan. 1921). The Kansas Supreme Court noted

that its statute was explicitly limited in its operation to

cases of “actual controversy.” Grove, 201 P. at 83. In

addressing what constituted an “actual controversy,” the court

stated:

Against the validity of the statute it is urged that
the occasion for judicial action cannot arise until a claim
is made that an actual wrong has been done or is
immediately threatened, and, moreover (what is much the
same thing stated in another way), that a decision cannot
properly be classed as a judgment, as strictly judicial
act, unless, besides determining the merits of the
controversy between the parties, deciding which is right,
it affords (or denies) some additional remedy––in other
words “consequential relief”––and therefore that power to
decide a controversy in the absence of the conditions
indicated is not judicial and cannot be conferred upon
courts by the Legislature. This view appears to us to be
unsound, and to be the result of confusing declaratory
judgments with advisory opinions and decisions in moot
cases, and perhaps also of an inclination to treat a
general practice that has been long established as having
acquired the force of a constitutional guaranty. A mere
advisory opinion upon an abstract question is obviously not
a judgment at all, since there are no parties to be bound,
and the rights of no one are directly affected. The

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situation is substantially the same where opposing parties
present a moot question––one the decision of which can have
no practical effect. Where a judgment is sought of such
character as to be of no benefit unless accompanied by an
order the carrying out of which is impossible, the futility
of the proceeding is a sufficient basis for a court’s
refusal to entertain it, whether or not jurisdiction to do
so exists. But some judgments are wholly or in part self–
operative. They perform a valuable function in and of
themselves. It is often said that a cause of action arises
only upon the breach of a duty––the invasion of a right.
This, however, is merely the announcement of a general rule
of practice subject to possible exceptions and to
legislative change. . . .

201 P. at 84.

Thus, the Kansas Supreme Court indicated that an

“actual controversy” under the Kansas declaratory judgment act

(which Hawaiʻi copied in its entirety) did not require additional

“consequential relief,” but could not be an “advisory opinion”

upon an abstract question or that involved a “moot” case, for

which a declaratory judgment would have no practical effect.

Therefore, at the time of the enactment of Hawaiʻi’s declaratory

judgment act, it appears an “actual controversy” was one that

that did not lack justiciability based on the “advisory opinion”

prohibition or “mootness” prongs of justiciability concerns.

Much later, in Life of the Land II, we indicated that an “actual

controversy” was one that generally satisfied prudential rules

of self-governance, including “standing.” Life of the Land II,

63 Haw. at 171-78, 624 P.2d at 437-42.

Accordingly, the first prong of HRS 632-1(b) allowing

for declaratory relief in a case of “actual controversy” between

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contending parties merely mandates that prudential requirements,

including standing, be satisfied, but does not set out any

actual standing requirements.

In the second prong of HRS § 632-1(b), however, the

legislature has expressed its policy and has expressed its view

regarding the “proper — and properly limited — role of [our]

courts” – by providing that a party has standing to bring an

action for declaratory relief in a civil case (1) where

antagonistic claims exist between the parties (i) that indicate

imminent and inevitable litigation, or (ii) where the party

seeking declaratory relief has a concrete interest in a legal

relation, status, right, or privilege that is challenged or

denied by the other party, who has or asserts a concrete

interest in the same legal relation, status, right, or

privilege; and (2) a declaratory judgment will serve to

terminate the uncertainty or controversy giving rise to the

proceeding.

The Chief Justice’s Dissent acknowledges that “[w]hen

the bill that enacted HRS §§ 632-1 and 632-6 was first

introduced in 1921, the Senate Committee on the Judiciary

explained that its purpose was to provide ‘parties in dispute’ a

judicial determination of rights ‘before a cause of action

accrues by breach of such rights by either party.’” Dissenting

Opinion by Recktenwald, C.J. (citing S. Stand. Comm. Rep. No.

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263, in 1921 Senate Journal, at 616). Consistent with this

purpose, the plain language of HRS § 632-1 does not require

satisfaction of a three-part “injury in fact” test for a party

to have standing.35 Imposition of this additional requirement

when standing requirements of HRS § 632-1 have otherwise been

met limits the availability of declaratory relief in our state

courts. Thus, imposition of an additional “injury in fact”

requirement contravenes the legislature’s specific declaration

of policy regarding HRS § 632-1 standing as well as its general

declaration of policy under HRS § 632-6 that Chapter 632 “be

liberally interpreted and administered, with a view to making

the courts more serviceable to the people.” Requiring

satisfaction of an additional “injury in fact” test for standing

35
The Chief Justice opines that HRS § 632-1 does not set out standing
requirements and would hold that a party would usually need to satisfy the
common law three-part “injury in fact” test to have standing to seek
declaratory relief under HRS § 632-1. The Chief Justice does not address
whether Tax Foundation would satisfy the three-party “injury in fact” test
here and instead applies the common law two-part “taxpayer standing” test
articulated in Hawaii’s Thousand Friends v. Anderson, 70 Haw. 276, 283, 768
P.2d 1293, 1299 (1989), that “(1) plaintiff must be a taxpayer who
contributes to the particular fund from which the illegal expenditures are
allegedly made; and (2) plaintiff must suffer a pecuniary loss [by the
increase of the burden of taxation], which, in cases of fraud, are presumed.
70 Haw. at 282, 768 P.2d at 1298. He opines that Tax Foundation satisfies
both requirements for taxpayer standing in this case. It therefore appears
that the Chief Justice considers “taxpayer standing” to be a more relaxed
common law standing test than the three-part “injury in fact” test.
“Taxpayer standing” clearly does not require a showing of the third prong of
the “injury in fact” test — that “a favorable decision would likely provide
relief for the plaintiff’s injury.”

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under HRS § 632-1 contravenes prudential considerations of the

“proper – and properly limited – role of courts.”

To summarize, restricting standing by imposing

standing requirements that do not exist in the language of HRS §

632-1, despite the express intent of the legislature, is

antithetical to prudential considerations. As stated by the

United States Supreme Court, courts “cannot limit a cause of

action that [the legislature] has created merely because

‘prudence’ dictates.” Lexmark Int’l, Inc. v. Static Control

Components, Inc., 572 U.S. 118, 128 (2014).36

We therefore hold that a party has standing to seek

declaratory relief in a civil case brought pursuant to HRS §

632-1 (1) where antagonistic claims exist between the parties

(a) that indicate imminent and inevitable litigation, or (b)

where the party seeking declaratory relief has a concrete

interest in a legal relation, status, right, or privilege that

is challenged or denied by the other party, who has or asserts a

concrete interest in the same legal relation, status, right, or

privilege; and (2) a declaratory judgment will serve to

terminate the uncertainty or controversy giving rise to the

proceeding.

36
Our discussion of recent cases in Section IV.C.3.c, indicates that some
of our decisions may have had that result.

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Our holding is consistent with standing requirements

set out by the legislature through the language of the statute.

The common law three-part “injury in fact” test is simply

inconsistent with HRS Chapter 632. For example, the first prong

of the three-part “injury in fact” test for standing requires a

showing that “the plaintiff has suffered an actual or threatened

injury as a result of the defendant’s conduct.” This is a

greater showing than required by HRS § 632-1(b), which does not

require an “actual or threatened injury.” The second prong of

the three-part “injury in fact” test requires a showing that

“the injury is fairly traceable to the defendant’s actions,” a

requirement that also does not exist under the language of HRS §

632-1(b). The third prong of the “injury in fact” test is also

more stringent, as it requires a showing that “a favorable

decision would likely provide relief for the plaintiff’s

injury,” rather than a showing that a declaratory judgment will

serve to terminate the uncertainty or controversy. The third

prong also clearly violates the language of HRS § 632-1(a),

which provides that declaratory relief may be sought whether or

not consequential relief could be claimed.37

37
The Dissent asserts that construing HRS § 632-1 as delineating its own
standing requirements “injects unnecessary complexity into a simple doctrine
and a straightforward line of case law,” and suggests that “stray[ing] from
this court’s precedent applying the ‘injury in fact’ test to HRS § 632-1
actions” constitutes a complexity about standing that creates a barrier to
justice. The three-part “injury in fact” test for standing is, however, far
from “simple” or “straightforward.” See, e.g., Juan Olano, Note, The
(continued . . .)

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Finally, our holding regarding the requirements for

standing under HRS § 632-1 is consistent with the “less

stringent requirements for access and participation in the court

process” under HRS § 632-1, and recognizes that “[o]ur

touchstone remains the ‘needs of justice.’” Life of the Land

II, 63 Haw. at 176, 623 P.2d at 441 (citation omitted).38

e. Tax Foundation Has Standing under HRS § 632-1

Applying the standing requirements delineated above to

the facts of this case, we hold that Tax Foundation has HRS §

632-1 standing as: (1) (a) antagonistic claims exist between Tax

Foundation and the State with respect to whether HRS § 248-2.6

(1993 & Supp. 2005) requires additional amounts from its rail

surcharge payments be paid over to HART; and, under prong (ii),

(. . . continued)
Struggle to Define Privacy Rights and Liabilities in a Digital World and the
Unfortunate Role of Constitutional Standing, 72 U. Miami L. Rev. 1025, 1038-
43 (2018) (discussing “Constitutional Standing Requirements and the Confusing
Injury-in-fact Jurisprudence”); F. Andrew Hessick, Standing, Injury in Fact,
and Private Rights, 93 Cornell L. Rev. 275, 276 (2008) (“Although seemingly
simple on its face, this [injury in fact] doctrine has produced an incoherent
and confusing law of federal courts.” (footnote omitted)).
38
The Dissent states that “removal” of the “injury in fact” “requirement”
“marks a departure from a long history of judicial intervention only in
justiciable controversies that are presented in an adversary context.” As
discussed, however, there is no “long history” of the “injury in fact”
requirement for standing in Hawaiʻi courts; the concept was introduced in 1981
in Life of the Land II, and not in the context of HRS § 632-1, but in the
context of HRS § 91-7. See Life of the Land II, 63 Haw. at 173, 623 P.2d at
438-49. It was not until the 2001 Mottl case that the “injury in fact” test
was applied to HRS § 632-1. The statutory language of HRS § 632-1 has never
included an “injury in fact” requirement, so there was no “injury in fact”
requirement to remove. In addition, nothing in this opinion removes the
requirement of a “justiciable controvers[y] presented in an adversary
context.”

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based on its historical purpose as a governmental financial

accountability watchdog, Tax Foundation has a concrete interest

in an alleged right to have additional amounts from its rail

surcharge payments paid over to HART pursuant to HRS § 248-2.6

(1993 & Supp. 2005), an alleged right challenged or denied by

the State, which has or also asserts a concrete interest in the

right to keep those additional amounts; and (2) a declaratory

judgment will serve to terminate the uncertainty or controversy

giving rise to the proceeding. In fact, the uncertainty or

controversy is now terminated through the majority opinion on

the merits in favor of the State. See Opinions of the Court

Parts One and Three.39

/s/ Sabrina S. McKenna

/s/ Richard W. Pollack

/s/ Michael D. Wilson

39
We again stress that we are not addressing “taxpayer standing,” as does
the Chief Justice’s Dissent, but rather Tax Foundation’s HRS § 632-1
standing. Based on the existence of HRS § 632-1 standing, it is not
necessary to address “traditional standing” or “taxpayer standing.”

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PART THREE
(By: Recktenwald, C.J., with whom
McKenna, Pollack, and Wilson, JJ., join)

D. The State’s Application of HRS § 248-2.6 is Proper

Having determined that Tax Foundation has standing as

a taxpayer to bring suit, we now consider the merits of its

challenge.40

The parties dispute whether the plain language of HRS

§ 248-2.6 expressly requires the State to retain 10% of the

Honolulu County surcharge, as the State contends, or whether the

State is required to retain only those costs it actually incurs

in its administration of the surcharge, as Tax Foundation

contends.

HRS § 248-2.6 provides in relevant part:

(a) . . . Out of the revenues generated by county
surcharges on state tax paid into each respective state
treasury special account or the mass transit special fund,
the director of finance shall deduct ten per cent of the
gross proceeds of a respective county’s surcharge on state
tax to reimburse the State for the costs of assessment,
collection, disposition, and oversight of the county
surcharge on state tax incurred by the State. Amounts
retained shall be general fund realizations of the State.

(b) The amounts deducted for costs of assessment,
collection, disposition, and oversight of county surcharges
on state tax shall be withheld from payment to the counties
by the State out of the county surcharges on state tax
collected for the current calendar year.

40
We note that the circuit court did not reach the parties’ arguments on
the merits, having ruled that the cross-motions for summary judgment were
moot. However, this court may decide questions of law even when they were
not reached by the trial court. Gregg Kendall & Assocs., Inc. v. Kauhi, 53
Haw. 88, 94, 488 P.2d 136, 141 (1971); see also Bush v. Watson, 81 Hawaiʻi
474, 487, 918 P.2d 1130, 1143 (1996) (holding third-party agreements violated
the Hawaiian Homes Commission Act despite trial court not ruling on that
issue).

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(c) For the purpose of this section, the costs of
assessment, collection, disposition, and oversight of the
county surcharges on state tax shall include any and all
costs, direct or indirect, that are deemed necessary and
proper to effectively administer this section and sections
237-8.6 and 238-2.6.

(d) For a county with a population equal to or less than
five hundred thousand that adopts a county surcharge on
state tax, after the deduction and withholding of the costs
under subsections (a) and (b), the director of finance
shall pay the remaining balance on a quarterly basis to the
director of finance of each county that has adopted a
county surcharge on state tax under section 46-16.8. . . .

HRS § 248-2.6.

It is well-established that:

[W]here there is no ambiguity in the language of a statute,
and the literal application of the language would not
produce an absurd or unjust result, clearly inconsistent
with the purposes and policies of the statute, there is no
room for judicial construction and interpretation, and the
statute must be given effect according to its plain and
obvious meaning.

State v. Palama, 62 Haw. 159, 161, 612 P.2d 1168, 1170 (1980).

Additionally, “courts are bound, if rational and

practicable, to give effect to all parts of a statute, and that

no clause, sentence, or word shall be construed as superfluous,

void, or insignificant if a construction can be legitimately

found which will give force to and preserve all the words of the

statute.” Camara v. Agsalud, 67 Haw. 212, 215-216, 685 P.2d

794, 797 (1984).

Tax Foundation argues that HRS § 248-2.6 requires the

State’s initial 10% deduction to be reduced by the costs

specified in subsection (c), and that the State must remit the

remaining balance back to the City and County of Honolulu.

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Whether subsection (c) requires a calculation of actual costs,

when viewed in isolation, is ambiguous. However, when viewed in

context with the rest of the statute, the scope of subsection

(c) becomes clear. Nothing in the remaining portions of HRS §

248-2.6 suggests a requirement to engage in such a calculation

and reimbursement. There is no language in the statute that

establishes a procedure for remitting the funds in excess of the

State’s withholding. Beyond stating that “[a]mounts retained

shall be general fund realizations of the State[,]” the text of

HRS § 248-2.6 does not contemplate any other manner of the

disposition of the 10% deduction.

The language of HRS § 248-2.6 expressly requires that

the State retain 10% of the surcharge proceeds, and a literal

application of the statute’s language does not produce an absurd

or unjust result. HRS § 248-2.6(a) provides that the State

“shall deduct ten per cent . . . to reimburse the State for the

costs of assessment . . . .” Subsections (b) and (d) prescribe

the timing and payment of the surcharge balance to the counties,

and (c) explains the broad range of costs contemplated by the

legislature in determining that 10% was an appropriate

retention. This construction of HRS § 248-2.6(a) does not

render the remaining subsections superfluous, void, or

insignificant, as contended by Tax Foundation. Nor is this

application of the language clearly inconsistent with the

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purpose of reimbursing the State for the costs of assessment,

collection, disposition, and oversight of the county surcharge.

The legislative history of Act 247 also supports the

interpretation that HRS § 248-2.6 requires the State to retain

10% of surcharge proceeds. Prior to its final amendment in

conference committee, the bill that eventually became HRS § 248-

2.6(a) contained the following language regarding the State’s

retention of costs:

[T]he director of finance shall retain, from time to time,
sufficient amounts to reimburse the State for the costs of
assessment, collection, and disposition of the county
surcharge on state tax incurred by the State . . . .

H.B. 1309, H.D. 2, S.D. 2, 23rd Leg., Reg. Sess. (2005)

(emphasis added), available at https://www.capitol.hawaii.gov/

session2005/bills/HB1309_SD2_.htm.

The conference committee amended this subsection to

its current form, which states:

[T]he director of finance shall deduct ten per cent of the
gross proceeds of a respective county’s surcharge on state
tax to reimburse the State for the costs of assessment,
collection, and disposition of the county surcharge on
state tax incurred by the State.

Conf. Comm. Rep. No. 186, in 2005 House Journal, at 1829; 2005

Senate Journal, at 1092; 2005 Haw. Sess. Laws Act 247, § 5 at

773 (emphasis added).

The legislative history therefore reflects the

legislature’s intent to set the costs at 10% instead of

requiring the State to calculate, “from time to time, sufficient

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amounts” to reimburse itself for the costs of the surcharge’s

administration. Accordingly, we conclude that HRS § 248-2.6

requires the State to retain 10% of the surcharge’s gross

proceeds.

E. HRS § 248-2.6 Survives Constitutional Scrutiny

1. HRS § 248-2.6 Does Not Violate the Equal Protection
Clauses of the Hawaiʻi or U.S. Constitutions

Tax Foundation argues that the State’s interpretation

of HRS § 248-2.6 violates the equal protection clauses of the

state and federal constitutions. See Haw. Const. art. I, § 5;

U.S. Const. amend. XIV. “[T]he equal protection clauses of the

United States and Hawaiʻi Constitutions mandate that all persons

similarly situated shall be treated alike[.]” DW Aina Lea

Development, LLC v. Bridge Aina Lea, LLC., 134 Hawaiʻi 187, 218,

339 P.3d 685, 716 (2014) (quotation marks and brackets omitted).

“Equal protection jurisprudence has typically been concerned

with governmental classifications that affect some groups of

citizens differently than others.” Id. (quotation marks and

brackets omitted). It is well-established that “unless

fundamental rights or suspect classifications are implicated, we

will apply the rational basis standard of review in examining a

denial of equal protection claim.” KNG Corp. v. Kim, 107 Hawaiʻi

73, 82, 110 P.3d 397, 406 (2005) (quoting Sandy Beach Def. Fund

v. City Council, 70 Haw. 361, 380, 773 P.2d 250, 262 (1989))

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(emphasis omitted). The rational basis standard of review

applies here because Tax Foundation does not allege that either

a fundamental right or a suspect classification is implicated.41

Under rational basis review, “[t]he test of

constitutionality is whether that statute has a rational

relation to a legitimate state interest.” Maeda v. Amemiya, 60

Haw. 662, 669, 594 P.2d 136, 141 (1979) (citations omitted).

The party challenging the constitutionality of a statutory

classification has the burden of showing that the classification

is not rationally related to its statutory purpose. Sandy Beach

Def. Fund, 70 Haw. at 380, 773 P.2d at 262. Furthermore, the

rational basis standard “is especially deferential in the

context of classifications made by complex tax laws. [I]n

structuring internal taxation schemes the States have large

leeway in making classifications and drawing lines which in

41
The parties dispute whether Honolulu taxpayers have been classified by
the legislature as a result of HRS § 248-2.6. Tax Foundation argues that
Honolulu taxpayers are a “distinctive class” as a result of the State’s
interpretation of HRS § 248-2.6, because they alone fund State functions
available to all Hawaiʻi residents through their contributions to the
surcharge, a portion of which is retained by the State. The State asserts
that the legislature has made no classification as a result of HRS § 248-2.6
because each county was permitted to levy a surcharge on state tax by passing
the required ordinance, and therefore there is “no differential treatment of
Honolulu residents even if other counties have not chosen to implement the
surcharge.” For the purposes of this discussion, we assume that Tax
Foundation is correct since Honolulu taxpayers are subject to a different tax
burden from those of other counties.

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their judgment produce reasonable systems of taxation.”

Nordlinger v. Hahn, 505 U.S. 1, 11 (1992) (citations omitted).

Applying these principles here, the State’s collection

of 10% of the surcharge’s gross proceeds pursuant to HRS § 248-

2.6 is rational. The State’s legitimate interest is in

reimbursing itself for the costs incurred in its administration

of the surcharge. The State’s 10% retention of the surcharge’s

gross proceeds is rationally related to this interest because in

2005, it was uncertain what the potential burden of the

surcharge’s administration would be, and it was reasonable for

the State to estimate administration costs at 10% of the

surcharge’s gross proceeds. The purpose of the 10% retention

under HRS § 248-2.6(a), to reimburse the State for its costs,

was served because costs were incurred as a result of

administering the surcharge. Beyond this stated purpose, it is

also rational for Honolulu taxpayers to bear an increased tax

burden to further a state interest in mitigating increased

burdens on State services incurred by State agencies due to the

implementation of the mass transit rail system, the use and

benefit of which the City and County of Honolulu alone receives.

Accordingly, the State’s retention of 10% of the

surcharge’s gross proceeds has a rational relation to the

purpose of reimbursing the State for the cost of administering

the surcharge. HRS § 248-2.6 therefore does not violate the

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protections guaranteed by the equal protection clauses of the

Hawaii or United States Constitutions.

2. HRS § 248-2.6 Does Not Violate the General Laws
Provision of the Hawaiʻi Constitution

Tax Foundation also argues that the State’s

application of HRS § 248-2.6 is unconstitutional because it

violates the general laws provision of the Hawaiʻi Constitution,

found in Article VIII, § 1. That provision states:

The legislature shall create counties, and may create other
political subdivisions within the State, and provide for
the government thereof. Each political subdivision shall
have and exercise such powers as shall be conferred under
general laws.

Haw. Const. art. VIII, § 1.

General laws, as used in Article VIII, § 1, are laws

that:

apply uniformly throughout all political subdivisions of
the State. But a law may apply to less than all of the
political subdivisions and still be a general law, if it
applies uniformly to a class of political subdivisions,
which, considering the purpose of the legislation, are
distinguished by sufficiently significant characteristics
to make them a class by themselves.

Bulgo v. County. of Maui, 50 Haw. 51, 58, 430 P.2d 321, 326

(1967).

Act 247 applies uniformly to all political

subdivisions of the state because each county is given the

opportunity to adopt the surcharge. See HRS § 46-16.8(a) (“Each

county may establish a surcharge on state tax . . . .”). Any

county that does so is subject to a withholding by the State of

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10% of the gross proceeds of the surcharge as provided in HRS

§ 248-2.6. The fact that the City and County of Honolulu is the

only county that has adopted the surcharge does not change the

fact that HRS § 248-2.6 applies uniformly to all Hawaiʻi

taxpayers who live in counties that have opted in and adopted

the surcharge. Whether the statute requires the State to retain

10% of the surcharge’s gross proceeds or retain only its actual

costs similarly does not change the fact that each county is

treated the same with respect to the disposition of those

proceeds. Accordingly, the State’s interpretation of HRS § 248-

2.6 does not violate the General Laws provision of our

constitution.

V. Conclusion

For the foregoing reasons, we vacate the circuit

court’s order and judgment granting the State’s motion to

dismiss for lack of subject matter jurisdiction. Because we

conclude that the State’s application of HRS § 248-2.6 is

consistent with the statute’s plain language and legislative

intent, and that HRS § 248-2.6 does not violate the state or

federal constitutions, we remand this case to the circuit court

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with instructions to grant the State’s motion for summary

judgment.

Paul Alston and /s/ Mark E. Recktenwald
Lori King Stibb
for appellant /s/ Sabrina S. McKenna

Robert Nakatsuji and /s/ Richard W. Pollack
Nathan S.C. Chee
for appellee /s/ Michael D. Wilson

Michael A. Lilly
for amicus curiae

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