Federal ruling blocks Hawaii's climate change tourist tax on cruise ships

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HONOLULU (AP) — A federal appeals court ruling on New Year's Eve blocked Hawaii from enforcing a climate change tourist tax on cruise ships passengers, a levy that was set to go into effect at the start of 2026.

Cruise Lines International Association challenged the tax in a lawsuit, arguing that the new law violates the U.S. Constitution by taxing cruise ships for entering Hawaii ports. They also argued it would make cruises more expensive. The lawsuit notes the law authorizes counties to collect an additional 3% surcharge, bringing the total to 14% of prorated fares.

The levy increases rates on hotel room and vacation rental stays but also imposes a new 11% tax on the gross fares paid by a cruise ship’s passenger, prorated for the number of days the vessels are in Hawaii ports. The lawsuit notes the law authorizes counties to collect an additional 3% surcharge, bringing the total to 14% of prorated fares.

In the nation’s first such levy to help cope with a warming planet, Hawaii Gov. Josh Green signed legislation in May that raises tax revenue to deal with eroding shorelines, wildfires and other climate problems. Officials estimate the tax would generate nearly $100 million annually.

U.S. District Judge Jill A. Otake last week upheld the law and the plaintiffs appealed to the 9th U.S. Circuit Court of Appeals. The U.S. government intervened in the case and also appealed Otake's ruling.

The order by two 9th Circuit judges granted both requests for an injunction pending the appeals.

“We remain confident that Act 96 is lawful and will be vindicated when the appeal is heard on the merits,” Toni Schwartz, spokesperson for the Hawaii attorney general's office, said in an email.

The order temporarily halts enforcement of the law on cruise ships while the appeals process moves forward, her email noted.

The lawsuit challenged only the law's cruise ship provisions.

Cruise Lines International Association spokesperson Jim McCarthy said he wasn't sure he could get comment from the plaintiffs given the timing of the ruling before a holiday.