Hawaii Has Blocked Its Own Cruise Tax Hours Before Passengers Had to Pay

Federal Court Halts Climate Fee

Hawaii tried to make cruise passengers pay for climate damage. On New Year’s Eve, a federal court said not so fast.

The state’s first-in-the-nation Green Fee was supposed to start January 1, 2026, charging cruise passengers an 11% tax on their fares.

But just hours before the law kicked in, an appeals court blocked it while a legal battle plays out. The cruise industry says the tax is unconstitutional.

Hawaii says visitors should help protect the islands. What happened next could change how states fund climate protection for years to come.

Governor Green Signed the Law in May

Governor Josh Green signed Act 96 into law on May 27, 2025, creating the nation’s first climate impact fee on tourism.

The legislation was designed to ensure all visitors to the islands contribute to addressing the threats of climate change.

Green signed the bill in the aftermath of the devastating 2023 Maui wildfires, which destroyed much of the historic town of Lahaina and killed 102 people.

The governor argued that the 10 million annual visitors should help the 1. 4 million residents protect the islands’ fragile environment.

The Tax Would Have Hit Cruise Passengers Hard

The new law would have applied an 11% surcharge on cruise passengers, calculated based on the number of days a ship spent in Hawaiian waters.

Counties also had authority to add an additional 3% surcharge, increasing the total fee to 14% in some cases. The new tax could have raised that to $350 per person, for a total of $1,400 in taxes for a family of four.

On a seven-day Norwegian Cruise Line Pride of America itinerary, travelers already pay about $200 per person in port fees and taxes.

Norwegian Warned Passengers About Price Hikes

Norwegian Cruise Line alerted its guests in an email about the potential impact.

According to NCL, this could result in a $50 to $500 fare increase, depending on the overall length and cost of the itineraries.

The company told passengers it believed the tax expansion was unconstitutional and was working with industry groups on a legal review.

The Pride of America is the only cruise ship sailing year-round from Honolulu, offering passengers four islands in seven days.

The Cruise Industry Filed Suit in August

The Cruise Lines International Association filed a lawsuit on August 27, 2025, along with Honolulu Ship Supply Co. , Kauai Kilohana Partners, and Aloha Anuenue Tours.

CLIA argued that the tax violated the U.S. Constitution and would drive up cruise prices, potentially damaging Hawaii’s tourism economy.

The association noted that cruise tourism generates nearly $1 billion in total economic impact for Hawaii while supporting thousands of local jobs.

The Constitution Limits State Port Taxes

The lawsuit centered on the Tonnage Clause in Article I of the Constitution, which prevents states from levying charges based on a ship’s size and capacity or other port entry fees without approval from Congress.

The cruise industry also cited the Rivers and Harbors Appropriation Act of 1884, which prohibits non-federal parties from imposing taxes on vessels operating on any navigable waters of the United States.

Hawaii countered that the Tonnage Clause did not prevent states from taxing ships at all, just from taxing them based on vessel size.

The Feds Called It a Scheme to Extort

The U.S. Department of Justice filed a motion to intervene in the lawsuit in November, calling the tax a scheme to extort American citizens and businesses.

The government’s complaint accused Hawaii and most of its counties of violating the Rivers and Harbors Appropriation Act, which prohibits states from taxing ships navigating U.S. waters.

The federal intervention was unusual and signaled how seriously Washington viewed the constitutional questions at stake.

A Federal Judge First Sided With Hawaii

On December 23, District Judge Jill Otake rejected the cruise industry’s request for an injunction.

She noted the case presented challenging questions but said halting the law would give cruise lines preferential treatment over land-based transient accommodations businesses.

Otake acknowledged that the Tonnage Clause and Rivers and Harbors Act are not litigated often and that the court may ultimately come to a different conclusion about Act 96 later.

The ruling cleared the way for the tax to begin January 1.

The Appeals Court Reversed One Week Later

On New Year’s Eve, a two-judge panel from the 9th U.S. Circuit Court of Appeals blocked Hawaii from enforcing the new tax on cruise ship passengers.

The December 31, 2025, ruling pauses the enforcement of the cruise-related portion of the law while the appeals process moves forward.

The Hawaii Department of Taxation announced it would refrain from enforcing Act 96 as it relates to cruise ships until further notice.

Hotels and Rentals Still Pay the Higher Tax

While the cruise tax was blocked, the Green Fee for hotels and vacation rentals went into effect as planned on January 1, 2026.

Hawaii’s transient accommodations tax on hotel guests and short-term renters is now 11% with the 0.75% Green Fee added.

For a $300 hotel room, that adds about $2. 25 per night. The lawsuit challenged only the law’s cruise ship provisions, leaving the land-based portions untouched.

The Money Was Meant for Climate Damage

The Green Fee was projected to generate approximately $100 million annually, directed toward environmental stewardship, hazard mitigation, infrastructure resilience, and enhancing the visitor experience.

Hawaii’s government cited issues from rising sea levels and erosion, as well as devastating wildfires such as the one that destroyed Lahaina in 2023.

Research shows that 70% of all sandy shorelines on Oahu, Maui, and Kauai are chronically eroding, and 13 miles of beaches have already been lost to erosion in the past century.

The Legal Fight Could Drag On for Months

Hawaii officials remain confident the law will survive.

Attorney general spokesperson Toni Schwartz said the state is confident that Act 96 is lawful and will be vindicated when the appeal is heard on the merits.

The 9th Circuit has signaled that it will expedite the appeal, meaning the current tax-free status for cruise passengers is temporary.

For now, cruise passengers booking Hawaii trips in 2026 can breathe easier. But if Hawaii wins on appeal, the fees could come back, and the state might even try to collect them retroactively.

This article was created with AI assistance and human editing.

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