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Tax Foundation of Hawai'i v. State

Supreme Court of Hawaii

March 21, 2019

TAX FOUNDATION OF HAWAI'I, a Hawai'i non-profit corporation, on behalf of itself and those similarly situated, Plaintiff-Appellant,
v.
STATE OF HAWAI'I, Defendant-Appellee.

          APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CAAP-16-0000462; CIV. NO. 15-1-2020-10)

          Paul Alston and Lori King Stibb for appellant

          Robert Nakatsuji and Nathan S.C. Chee for appellee Michael A. Lillyfor amicus curiae

          RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ. [1]

          OPINION

         PART ONE

         I. Introduction

         Appellant Tax Foundation of Hawai'i challenges the State of Hawai'i's implementation of Hawai'i 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 standing[2]; (3) 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 Hawai'i 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 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 disburses the remaining balance to each applicable county's Director of Finance. Id., § 5 at 773.

         B. Proceedings in the Circuit Court [4]

         1. Tax Foundation's Complaint

         On October 21, 2015, Tax Foundation of Hawai'i (Tax Foundation) filed a class action[5] on behalf of all taxpayers in the City and County of Honolulu. The complaint alleged[6] 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 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 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 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 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 Hawai'i 454, 184 P.2d 769 (App. 2008), aff'd in part and rev'd in part on other grounds, 120 Hawai'i 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 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.

         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, Hawai'i 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 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 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 "at least one opportunity to amend" its complaint. Tax Foundation cites Hawai'i 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 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 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. Hawai'i Tourism Authority, 100 Hawai'i 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

         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. Hawai'i Gov't Employees Ass'n, AFSCME, Local 152, 107 Hawai'i 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 Hawai'i 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.

Casumpang, 94 Hawai'i 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 Hawai'i 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 Hawai'i 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 Hawai'i 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 Hawai'i v. A&B Properties, 126 Hawai'i 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 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 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 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 Council v. Lingle, 117 Hawai'i 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 Hawai'i 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 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' 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 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.

         PART TWO: TAX FOUNDATION HAS HRS ...


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