Hawaiʻi’s first-in-the-nation climate tourism tax is now in the middle of a federal legal battle that raises a genuinely interesting question: can a state make cruise ships pay for the coral reefs they float over?
In May 2025, Governor Josh Green signed Senate Bill 1396 into law as Act 96. The legislation does two things. First, it increases Hawaiʻi’s Transient Accommodations Tax — the tax on hotels and vacation rentals — from 10.25% to 11% statewide. Second, and more controversially, it extends that tax to cruise ship passenger fares for the first time, imposing an 11% levy prorated to the number of days a vessel spends in Hawaiʻi ports. Counties can add up to an additional 3% surcharge, meaning the total bite on cruise fares could reach 14%.
The purpose of the revenue — estimated at roughly $100 million annually — is to fund climate resilience and environmental protection through a “Climate Mitigation and Resiliency Special Fund.” The state’s argument is straightforward: visitors benefit from Hawaiʻi’s natural resources, and those resources are under genuine threat from climate change. It is, at minimum, a coherent theory of shared responsibility.
The Statute
Act 96, SLH 2025 (SB 1396) — amending Hawaiʻi Revised Statutes (HRS) Chapter 237D, the Transient Accommodations Tax. The state TAT is now 11% statewide. Counties may impose a separate surcharge up to 3% under county ordinance authority.
The cruise industry did not take this lying down. The Cruise Lines International Association, joined by a Honolulu-based supplier, filed a federal lawsuit in August 2025 arguing that the tax is unconstitutional. Their core claim invokes the doctrine of federal preemption over maritime commerce — the argument that only Congress has the power to tax vessels entering American ports. The U.S. Department of Justice, in an unusual move, actually intervened on the industry’s side, filing a motion in November 2025 arguing that the Green Fee “extorts” cruise operators in violation of federal maritime authority.
In late December 2025, U.S. District Judge Jill A. Otake denied the request to block the hotel and vacation rental portions of the fee. The vast majority of the cruise industry’s claims were dismissed at the district court level. The Green Fee took effect January 1, 2026 — at least for hotel guests. But on December 31, 2025, the Ninth U.S. Circuit Court of Appeals issued an injunction pending appeal, temporarily blocking enforcement of the cruise-ship portion of the tax while the full appeal plays out.
“We remain confident that Act 96 is lawful and will be vindicated when the appeal is heard on the merits.”
— Toni Schwartz, Spokesperson, Hawaiʻi Attorney General’s Office
So as of now: if you stayed in a Kona hotel in January 2026, you paid the Green Fee. If you were on a cruise ship in the same harbor, you didn’t — not yet. The Ninth Circuit will ultimately decide whether Hawaiʻi can extend its state tax authority to vessels operating under federal maritime jurisdiction.
Why it matters beyond tourism: This case isn’t just about whether cruises get a little more expensive. It’s a test of whether states can use their taxing power to force industries to internalize the environmental costs they impose — and whether the federal preemption doctrine will be read broadly enough to stop them. A Ninth Circuit ruling in Hawaiʻi’s favor would likely embolden coastal states from California to Florida to pursue similar climate fees. A ruling against Hawaiʻi would reinforce federal supremacy over maritime commerce and narrow states’ options for climate finance significantly.
This one is worth watching.
Sources
Act 96, SLH 2025 (SB 1396); HRS § 237D (Transient Accommodations Tax)
CBS News — “Hawaii cruise passengers face new climate change tax after court ruling” (Dec. 2025)
Maui Now — “Hawaiʻi’s Green Fee survives legal challenge, takes effect Jan. 1” (Dec. 2025)
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