Requesting The Department Of Taxation To Conduct A Study On Disallowing The Dividends Paid Deduction For Real Estate Investment Trusts.
If HCR30 is enacted, the study will evaluate the possible revenue increases for the state should the dividends paid deduction be disallowed. It will assess how such a change could affect not just income taxes but also general excise taxes collected from hotels owned by REITs. Additionally, the study intends to compare maintenance and capital improvements between properties owned by REITs versus those owned by local entities, which could reflect on the overall management and economic impact of these investments in Hawaii.
House Concurrent Resolution 30 (HCR30) requests the Department of Taxation of Hawaii to conduct a comprehensive study on the disallowance of the dividends paid deduction specifically for real estate investment trusts (REITs). The resolution arises from a recognition that, under current laws, REITs can avoid Hawaii income tax due to the provision that allows dividends to go untaxed at the state level when paid to shareholders located outside Hawaii. This creates a potential loss of state revenue as significant portions of real estate in Hawaii are owned by out-of-state investors.
Some stakeholders may view the potential disallowance of the dividends paid deduction for REITs as a way to ensure that local taxes are fairly collected on income generated within the state, which could also be seen as strengthening local governance over tax policies. Conversely, others could argue that such a change might deter investment in Hawaii’s real estate market, negatively impacting economic growth and developments. The findings from this study are aimed to balance the financial implications for the state against the interests of investors and businesses operating within Hawaii.