HI SR134

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

Study must estimate the change in state revenue collected after disallowing the dividends paid deduction, including impacts on general excise taxes from hotel operations, other corporate income tax deductions, and differences in maintenance and capital improvements between REITs and non-REIT owners.

Study must examine how other states treat the dividends paid deduction for REITs and any resulting impacts or effects.

Study must consider possible exceptions to disallowing the dividends paid deduction for REITs and any impacts or effects resulting from such exceptions.

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