246-10  Valuation; consideration in fixing.  (a)  The director of taxation shall cause the fair market value of all taxable real property to be determined and annually assessed as provided by law; provided that the value of land classified and used for agriculture, whether such lands are dedicated pursuant to section 246-12 or not, shall, for real property tax purposes, be the value of such land for agricultural use without regard to any value that such land might have for other purposes or uses, or to neighboring land uses, as determined as provided in subsection (f)(2) of this section.  In making such determination and assessment, the director shall separately value and assess, within each class established in accordance with subsection (d) of this section:  (1) buildings, and (2) all other real property, exclusive of buildings.

     (b)  All property shall be valued by appropriate systematic methods so selected and applied as to obtain, as far as possible, uniform and equalized assessments throughout the State.

     (c)  So far as practicable, records shall be compiled and kept in each district which shall show the methods established by or under the authority of the director, for the determination of values.

     (d)  (1)  The land in each county shall be classified, upon consideration of its highest and best use, into the following general classes:

         (A)  Single-family and two-family residential,

         (B)  Three or more family residential, apartment, hotel and resort,

         (C)  Commercial,

         (D)  Industrial,

         (E)  Agricultural, and

         (F)  Conservation.

     (2)  In assigning land to one of the general classes the director of taxation shall give major consideration to the districting established by the land use commission pursuant to chapter 205, the districting established by a county in its general plan and zoning ordinance, use classifications established in the general plan of the State, and such other factors which influence highest and best use.

     (3)  "Improved residential property" shall mean property which is classified as residential by the department of taxation upon consideration of its highest and best use, and is property which fulfills the provisions of at least one of the following subparagraphs:

         (A)  Property which has been subdivided prior to any assessment year as a lot for single or two-family residential use in conformity with the then existing county zoning ordinances, and has been approved for sale or approved as being in conformity with all of the subdivision requirements of the particular county in which it is located, or

         (B)  Property which is in actual single or two-family residential use at a density of at least a single or a two-family residential building per acre, or

         (C)  Land which is sufficiently developed with necessary land improvements to support a use density of at least a single or a two-family residential building per acre.

     (4)  "Unimproved residential property" shall mean all residential class lands not classified as "improved residential property" by the department of taxation.

     (e)  The director shall select and require the use of mathematical tables or formulas based upon a suitable unit of quantity and designed to determine equitably the effect, upon the value, of street or highway frontages, depth from the street or highway, shape, street corners, and other physical elements the effect of which upon value the director finds feasible to determine by means of tables or formulas.  These tables or formulas shall be used for all areas where this can be done appropriately, and in any event as provided in the next paragraph.

     Whenever land has been divided into lots or parcels which are used or suitable for use for residential, commercial, or other urban or village purposes, each such lot or parcel shall be separately assessed, and the aforesaid mathematical tables or formulas shall be used unless this is precluded by the shape of the lots or parcels.

     (f)  (1)  In determining the value of land, other than land classified and used for agriculture, consideration shall be given to selling prices and income (including, where available, such data relating to the property being assessed and similar data for comparable properties), productivity, and nature of use (actual and potential), the advantage or disadvantage of factors such as location, accessibility, transportation facilities, size, shape, topography, quality of soil, water privileges, availability of water and its cost, easements and appurtenances, zoning, dedication of lands as provided for in section 246-12, and further to the opinions of persons who may be considered to have special knowledge of land values, and all other influences, whether similar to those listed or not, which fairly and reasonably bear upon the question of value.

     (2)  In determining the value of lands which are classified and used for agriculture, whether such lands are dedicated pursuant to section 246-12 or not, consideration shall be given to rent, productivity, nature of actual agricultural use, the advantage or disadvantage of factors such as location, accessibility, transportation facilities, size, shape, topography, quality of soil, water privileges, availability of water and its cost, easements and appurtenances, and to the opinions of persons who may be considered to have special knowledge of land values.

     (3)  A deferred or roll back tax shall be imposed on the owner of agricultural lands assessed according to its agricultural use as provided in subsection (a) of this section in the event of a change in land use classification by the authorized state agency to urban or rural districts or upon the subdivision of the land into parcels of five acres or less, provided that the tax shall not apply if the owner dedicates the owner's land as provided in section 246-12 within three years from the date of the change in land use classification and fulfills all of the requirements of the dedication.  The deferred tax shall be due and payable at the end of the third year following the change in land use classification provided that the land shall continue to be used for agriculture during this period.  The total amount of deferred taxes shall be computed commencing at the end of the third year following the change in classification where the land has continuously been used for agriculture; provided however that where the land has been put to a higher urban or rural use prior to the expiration of the three-year period the amount of deferred taxes shall be computed commencing at the end of the year in which the land has been put to such higher urban or rural use, and shall be retroactive to the date the assessment was made pursuant to subsection (a) of this section provided the retroactive period shall not exceed ten years.  Where the owner has subdivided the owner's land into parcels of five acres or less, the deferred tax shall commence from the date the conversion was made retroactive to the date the assessment was made pursuant to subsection (a) of this section but for not more than ten years.  Any other provisions to the contrary notwithstanding, the deferred or roll back tax shall apply only if a change in land use classification has been made as a result of a petition by any property owner or lessee and shall apply only upon lands owned by the owner or lessee who has petitioned for the change in classification.  The deferred or roll back tax shall not apply to lands owned by any owner or lessee who has not petitioned for the change in classification provided the owner or lessee shall continue to use the land in its agricultural use for a period of three years after the change in land use classification is made, or where the change in classification is initiated by any governmental agency or instrumentality.  The deferred or roll back tax shall be based on the difference in assessed value between the highest and best use and the agricultural use of the land, at the tax rate applicable for the respective years.

         (A)  Where the owner subdivides the owner's land into parcels of five acres or less, the deferred tax shall be due and payable within sixty days of such conversion, subject to a ten per cent per annum penalty, provided that if the conversion occurs within five years of the date of enactment of this law, twice the amount of taxes and penalties as provided herein shall become due and owing.

         (B)  Where the owner changes the land use classification, the deferred tax shall be due and payable within three years of such conversion except that where the land has been put to its higher urban or rural use, the tax shall be due and payable at the end of the year in which the land has been put to such higher use, subject to a ten per cent per annum penalty.

          Any other provisions to the contrary notwithstanding, the land shall continue to be assessed in its agricultural use as provided in subsection (a) of this section until the land is put to its higher urban or rural use or for a period of three years following the change in classification whichever is shorter, provided that for purposes of determining the amount of deferred taxes to be assessed to the owner or lessee, the retroactive period shall include the period during which the land is continued to be assessed in its agricultural use following the change in classification.  Any tax due and owing shall attach to the land as a paramount lien in favor of the State pursuant to section 246-55.

     (4)  Where lands located within agricultural districts are put to agricultural uses, that portion of such lands not usable or suitable for any agricultural use, whether dedicated pursuant to section 246-12 or not, the tax upon such unusable or unsuitable land shall be deferred and shall be payable upon conversion as provided under this section.

     (g)  Buildings shall be valued each year upon the basis of the cost of replacement less depreciation, if any.  Age, condition, and utility or obsolescence shall be considered.  The director shall determine and require the use of average-basic replacement cost factors.

     In determining the value of buildings, consideration shall be given to any additions, alterations, remodeling, modifications or other new construction, improvement or repair work undertaken upon or made to existing buildings as the same may result in a higher assessable valuation of said buildings, provided however that, (1) any increase in value resulting from any additions, alterations, modifications or other new construction, improvement or repair work to buildings undertaken or made by the owner- occupant thereof pursuant to the requirements of any urban redevelopment, rehabilitation or conservation project under the provisions of part II of chapter 53 shall not increase the assessable valuation of any building for a period of seven years from the date of certification as hereinafter provided and (2) any increase in value resulting from any maintenance or repairs to any residential buildings undertaken or made by the owner- occupant thereof (who occupies the entire building) pursuant to any requirements of any health, sanitation, safety, or other governmental code provisions, shall not increase the assessable valuation of any such building for a period up to and including April 11, 1972.

     It is further provided that the owner-occupant shall file with the director of taxation, in the manner and place which the director may designate, a statement of the details of the improvements certified in the following manner:

     (1)  In the case of additions, alterations, modifications or other new construction, improvement or repair work to a building that are undertaken pursuant to any urban redevelopment, rehabilitation or conservation project as hereinabove mentioned, the statement shall be certified by the urban renewal coordinator in the city and county of Honolulu, or the county chairperson of any county, or any governmental official designated by them, that the additions, alterations, modifications, or other new construction, improvement or repair work to the buildings were made and satisfactorily comply with the particular urban redevelopment, rehabilitation or conservation act provision, or

     (2)  In the case of maintenance or repairs to a residential building undertaken pursuant to any health, safety, sanitation or other governmental code provision, the statement shall be certified by the building superintendent of the building department of the city and county of Honolulu, or the county chairperson of any county, or any governmental official designated by them, that (A) the building was inspected by them and found to be substandard when the owner-occupant made the owner-occupant's claim, and (B) the maintenance or repairs to the buildings were made and satisfactorily comply with the particular code provision. [L 1932 2d, c 40, pt of 26; RL 1935, pt of 1935; am L 1939, c 208, 4; RL 1945, pt of 5146; am L 1945, c 79, 9; am L 1951, c 164, 1; am L 1955, c 213, 1; RL 1955, 128-9; am L Sp 1957, c 1, 14(c); am L 1963, c 142, 3; am L 1965, c 201, 33; am L 1966, c 34, 2; am L 1967, c 37, 1; HRS 246-10; am L 1968, c 56, 3; am L 1969, c 218, 1; am L 1973, c 175, 2; am L 1977, c 111, 1 and c 139, 2; gen ch 1985, 1993]

 

Case Notes

 

  Ascertaining fair value.  41 H. 141.  Use of unit square foot method of valuation or average square foot or acreage method of valuation.  Id.

  Method adopted for valuation of cane lands held inappropriate.  Reliance on past assessment values as sole basis for current assessment is unsound.  47 H. 41, 384 P.2d 287.

  Director not limited to replacement cost method of valuing buildings.  65 H. 499, 654 P.2d 363.

  To the extent there is any conflict between subsection (f)(1) and Revised Ordinances of Honolulu 8-7.1(a), the ordinance is controlling.  82 H. 317, 922 P.2d 371.

 

Decisions under prior law.

  Taxing water as such and again as giving increased value to land irrigated by it held double taxation and illegal.  6 H. 532.

  Assessment:  Assessment of irrigation ditch.  6 H. 322.  As to assessment based on the value of the enterprise itself rather than the value of the property which constitute its basis.  10 H. 624.  Increased assessment of property resulting from planting exempted items held erroneous.  11 H. 689.

  Valuation:  Method of valuation based on income held improper.  8 H. 81.  Valuation where lease involved, under prior laws.  8 H. 196.  Valuation of leasehold.  10 H. 643; 11 H. 210.  Failure to value property similarly for all corporations is not ground to set aside assessment as fraudulent discrimination.  10 H. 624.  Ascertaining fair value.  11 H. 235; 25 H. 278; 25 H. 769; 33 H. 149.

  Cited:  34 H. 515, 536.

 

 

246-11  Water tanks.  Any provision to the contrary notwithstanding, any tank or other storage receptacle required by any government agency to be constructed or installed on any taxable real property before water for home and farm use is supplied, and any other water tank, owned and used by a real property taxpayer for storing water solely for the real property taxpayer's own domestic use, shall be exempted in determining and assessing the value of such taxable real property. [L Sp 1957, c 1, 14(d); Supp, 128-9.1; HRS 246-11; gen ch 1985]

 

246-12  Dedicated lands.  (a)  A special land reserve is established to enable the owner of any parcel of land within an agricultural district, a rural district, a conservation district, or an urban district to dedicate his land for a specific ranching or other agricultural use and to have his land assessed at its value in such use provided that if the land is located within an urban district, (1) a lessee of the land with a term of ten or more years remaining from the date of the petition shall also be deemed an owner of the land within these provisos; (2) the land dedicated must be used for the cultivation of crops such as sugar cane, pineapple, truck crops, orchard crops, ornamental crops, or the like; (3) the land dedicated must have been substantially and continuously used for the cultivation of crops such as sugar cane, pineapple, truck crops, orchard crops, ornamental crops, or the like for the five-year period immediately preceding the dedication request; provided further that land situated within an agricultural district may be dedicated for a period of twenty years and shall be taxed at fifty per cent of its assessed value in such use.

     (b)  If any owner desires to use his land for a specific ranching or other agricultural use and to have his land taxed at its assessed value in this use or fifty per cent of its assessed value as the case may be, he shall so petition the director of taxation and declare in his petition that his land can best be used for the purpose for which he requests permission to dedicate his land and that if his petition is approved he will use his land for this purpose.

     Upon receipt of any such petition, the director shall request the department of agriculture to make a finding of fact as to whether the land in the petitioned area is reasonably well suited for the intended use.  The finding of the department of agriculture shall include and be based upon the productivity ratings of the land in those uses for which it is best suited, a study of the ownership, size of operating unit, and present use of surrounding similar lands and other criteria as may be appropriate.

     The director shall also request the director of business, economic development, and tourism to make a finding of fact as to whether the intended use is in conflict with the over-all development plan of the State.

     If both findings are favorable to the owner, the director shall approve the petition and declare that the owner's land is dedicated land; provided that for lands in urban districts, the director shall make further findings respecting the economic feasibility of the intended use of the land.  If all three findings are favorable, the director shall approve the petition and declare the land to be dedicated.  A change in the dedicated use may be made by petition as provided in this subsection.

     (c)  The approval by the director of the petition to dedicate shall constitute a forfeiture on the part of the owner of any right to change the use of the owner's land to a use other than agriculture for a minimum period of ten years or twenty years as the case may be, automatically renewable indefinitely, subject to cancellation as follows:

     (1)  In the case of a ten-year dedication, the owner, after the ninth year and years thereafter, may give notice of cancellation by filing with the director, a written notice of cancellation, on or before April 9, to be effective as of January 1 of the following year;

     (2)  In the case of a twenty-year dedication, the owner, during the nineteenth year and years thereafter, may give notice of cancellation as provided by this subsection;

     (3)  In the case of a change in major land use classification not as a result of a petition by any property owner or lessee such that the owner's land is placed within an urban district, the dedication may be canceled within sixty days of the change by the owner.

Upon any conveyance or any change in ownership during the period of dedication, the land shall continue to be subject to the terms and conditions of the dedication unless a release has been issued by the director.

     (d)  Failure of the owner to observe the restrictions on the use of his land shall cancel the dedication and special tax assessment privilege retroactive to the date of the dedication, but in any event, shall not exceed the term of the original dedication, and all differences in the amount of taxes that were paid and those that would have been due from assessment in the higher use shall be payable with a ten per cent a year penalty from the respective dates that these payments would have been due.  The additional taxes and penalties, due and owing as a result of a breach of the dedication, shall be a paramount lien upon the property pursuant to section 246-55.  Failure to observe the restrictions on the use means failure for a period of twelve consecutive months to use the land in that manner requested in the petition or the overt act of changing the use for any period provided that a change in land use classification upon petition by the owner of such dedicated lands shall not be deemed to constitute an overt act of changing the use of the land.  Any other provisions to the contrary notwithstanding, when a portion of the dedicated land is subsequently applied to a use other than the use set forth in the original petition, only such portion as is withdrawn from the dedicated use and applied to a use other than ranching or other agricultural use shall be taxed as provided by this subsection.

     (e)  The director shall prescribe the form of the petition.  The petition shall be filed with the director of taxation by September 1 of any calendar year and shall be approved or disapproved by December 15.  If approved, the assessment based upon the use requested in the dedication shall be effective on January 1, next.

     (f)  The owner may appeal any disapproved petition as in the case of an appeal from an assessment.

     (g)  The term "owner" as used in this section includes lessees of real property whose lease term extends at least ten years from the date of the petition in the case of a ten-year dedication or lessees of real property whose lease term extends at least twenty years from the date of the petition in the case of a twenty-year dedication.

     (h)  A special land reserve is established to enable the owner of any parcel of land within an urban district to dedicate his land for a specific livestock use such as feed lots, calf- raising and like operations in dairy, beef, swine, poultry and aquaculture, but excluding grazing or pasturing, and to have his land assessed at its value in such use; provided that (1) a lessee of the land with a term of ten or more years remaining from the date of the petition shall also be deemed an owner of the land within these provisos; (2) the land dedicated must be used for livestock uses such as feed lots, calf-raising, and like operations in dairy, beef, swine, poultry and aquaculture but excluding grazing or pasturing; (3) the land dedicated must have been substantially and continuously used in the livestock uses enumerated in (2) hereinabove; (4) and such livestock use must be compatible with the surrounding uses. [L 1961, c 187, 3; am L 1963, c 2, 2 and c 205, 3; am L 1965, c 277, 1, 2; Supp, 128-9.2; am L 1967, c 269, 1; HRS 246-12; am L 1969, c 170, 5; am L 1973, c 175, 1, 3; am L 1975, c 157, 5; am L 1977, c 111, 2; am L 1986, c 339, 20; am L 1987, c 336, 7; am L 1990, c 293, 8]

 

Revision Note

 

  Subsection "(h)" designation added by revisor.

 

Case Notes

 

  No home exemption for land dedicated to agriculture.  This section held to provide for forfeiture of right to change use for certain number of years.  56 H. 492, 542 P.2d 361.