HI HB1273

Adds Section 857(b)(2)(B) to the list of federal Internal Revenue Code provisions that are not operative under Hawaii tax law, relating to the dividends paid deduction for real estate investment trusts.

For taxable years beginning before January 1, 2026, limits the dividends paid deduction for REITs to the amount of dividends attributable to income taxable under Hawaii law.

For taxable years beginning after December 31, 2025, eliminates the dividends paid deduction entirely for REITs under Hawaii tax law.

Requires REITs operating in Hawaii to notify the department within 15 days of operation, properly designate REIT status on tax returns, follow specific return filing instructions, and submit copies of federal tax returns; violators subject to $50 per day penalty.

Applies to taxable years beginning after December 31, 2025.