HI HB2605

Disallows the dividends paid deduction for real estate investment trusts (REITs) for taxable years beginning after December 31, 2020, and ending before January 1, 2024.

Decouples Hawaii's state income tax treatment of REITs from federal tax law, which currently allows REITs to deduct dividends paid to shareholders, resulting in no tax at the corporate level.

Addresses a tax revenue gap where REITs owning approximately $17 billion in Hawaii real estate assets generate $1 billion in annual income but pay minimal state income tax because dividends flow to out-of-state shareholders who are not subject to Hawaii taxation.

Modifies Hawaii Revised Statutes sections 235-2.3(b) and 235-71(d) to implement the REIT tax change and establish it as a temporary three-year measure.

Becomes effective July 1, 2112, for taxable years beginning after December 31, 2020, and repeals automatically on December 31, 2023.