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Senate Orders Study of REIT Tax Proposal After Heated Testimony
Summary
Following split testimony on SB 2362, which would eliminate the dividends‑paid deduction for REITs, the Senate adopted an SD1 to fund a DBEDT study of economic impacts and changed the bill’s effective date to July 1, 2050.
Lawmakers on Feb. 18 heard extensive, divided testimony on SB 2362, a measure to remove Hawaii’s dividends‑paid deduction for real estate investment trusts (REITs). Testimony came from community groups favoring the measure to raise revenue, business groups cautioning about investment and job impacts, unions, tenant advocates and tax analysts.
Proponents said the bill would capture tens of millions of dollars for state programs by taxing profits that now flow to out‑of‑state shareholders. Chris Caulfield of the Hawaii Public Health Institute told the committee a similar measure could generate an estimated $30 million to $60 million and cited prior legislative efforts. John Kawamoto cited an estimate that the tax could raise “about $50,000,000,” and argued REITs should pay corporate taxes on profits earned in Hawaii.
Opponents included industry groups and some unions that warned the change could chill investment, jeopardize projects and reduce local capital—claims proponents disputed and asked for a comprehensive study. Gladys Maroni (narrate Hawaii) warned of pension impacts and potential job losses tied to REIT investment in local development.
Given the divided record, the committee advanced an SD1 to commission a study by the Department of Business, Economic Development & Tourism (DBEDT) to analyze elimination of the dividends‑paid deduction and appropriated an unspecified amount for that study. The committee also changed the effective date to July 1, 2050 to allow time for review.
What happens next: DBEDT will be asked to analyze macroeconomic, revenue and investment impacts before lawmakers consider final action on a taxation change affecting REITs and development finance.
