Requesting The Department Of Taxation To Conduct A Study On Disallowing The Dividends Paid Deduction For Real Estate Investment Trusts.
The passage of SR134 could lead to pivotal changes in the state revenue dynamics, particularly in taxation of REITs. It requests an estimation of the impact on revenue if the dividends paid deduction is eliminated, specifically focusing on general excise taxes derived from hotel operations owned by REITs and other corporate income tax implications. Furthermore, the resolution emphasizes the need to understand the maintenance levels and capital improvements made by REITs compared to other property owners, potentially influencing future policies governing real estate and taxation in the state.
Senate Resolution 134 (SR134) requests the Department of Taxation to conduct a comprehensive study regarding the potential disallowance of the dividends paid deduction for real estate investment trusts (REITs) in Hawaii. This resolution arises from the concerns that the current tax framework, which allows REITs to deduct dividends from taxable income, leads to significant tax revenue being lost for the state, especially since many shareholders reside outside Hawaii. The study aims to address both the advantages and disadvantages of this deduction, considering the broader implications on state finances and local governance.
A notable point of contention surrounding SR134 is the reliance of many REITs on tax deductions, which proponents argue are essential for encouraging investment in commercial properties and stimulating economic growth in Hawaii. Critics, however, point out that this current structure disproportionately benefits outside investors while undermining local tax revenue. The study called for in SR134 aims to explore exceptions to the disallowance of the deduction, which could lead to ongoing debates about the balance between attracting investment and ensuring fair taxation for residents and local businesses.