SB2697 Summary

• Disallows the dividends paid deduction for real estate investment trusts (REITs) for taxable years beginning after December 31, 2020, except for REITs where 100% of real property is used to provide affordable housing in Hawaii.

• Applies to REITs doing business in Hawaii that currently pay no state income tax because they distribute income to out-of-state shareholders who pay taxes in their home states rather than Hawaii.

• Estimates potential annual tax revenue of approximately $65,000,000 based on REITs owning roughly $17,000,000,000 in Hawaii real estate assets generating $1,000,000,000 in annual income.

• Sunsets on December 31, 2023, returning to prior law unless otherwise extended, making this a three-year temporary measure.

• Effective July 1, 2050, but applies retroactively to taxable years beginning after December 31, 2020, with an exemption designed to encourage affordable housing development by REITs in the state.