HI HCR30

Request the Department of Taxation to conduct a study on the advantages and disadvantages of disallowing the dividends paid deduction for real estate investment trusts (REITs) in Hawaii.

Study must estimate the change in state revenue from disallowing the deduction, including impacts on general excise taxes from hotels owned by REITs and other corporate income tax deductions REITs could claim.

Study should examine other states' policies on REIT dividends paid deductions and analyze differences in property maintenance and capital improvements between REITs and non-REIT owners.

Study must consider possible exceptions to disallowing the deduction, including REITs with majority assets in Hawaii and those generating revenue from hotel operations.

Resolution addresses the tax anomaly where REITs doing business in Hawaii pay no state income tax when dividends are paid to out-of-state shareholders, despite owning more real estate per capita in Hawaii than any other state.