Hawaii Legislature Adjourns without Further Action on anti-REIT Bills

On May 3, 2018, the Hawaii State Legislature adjourned for the 2017-18 legislative session without action on three REIT-related bills, H.B. 2702, H.D. 1, S.B. 3067, and H.B. 1012, H.D. 2. Both H.B. 1012, H.D. 2 and H.B. 2702, H.D. 1 had been approved by the Hawaii House, but neither had advanced in the Senate. S.B. 3067 had been approved by the Senate Ways and Means Committee, but a full vote of the Senate recommitted the bill to the Ways and Means Committee for further action. The Ways and Means Committee took no further action on the bill.

H.B. 2702, H.D. 1 and S.B. 3067 would have required, among other things, REITs to withhold and pay Hawaii tax on the Hawaii source portion of REIT dividends distributed to non-residents. H.B. 1012, H.D. 2 would have eliminated the REIT dividends paid deduction. Nareit, along with a coalition of REIT members, opposed these bills. The Investment Company Institute, the mutual fund industry’s trade association, and the Securities Industry and Financial Markets Association, the national trade association representing broker-dealers, banks and assets managers, also submitted letters in opposition to H.B. 2702, H.D. 1. For more information about these bills, click here.

Honolulu City Council Defers Bill Proposing Use of Income Method for Certain High Value Properties

On Feb. 28, 2018, Honolulu City Councilmember Ann Kobayashi introduced Honolulu City Council Bill 11, which would have mandated the use of an income approach as the tax basis for commercial and hotel properties with valuations at or over $100 million dollars at any point in time. The income approach would be a more burdensome approach not only for property owners, but also for the local assessor’s office, which expressed concerns about the legislation. Furthermore, it would have had the potential effect of including non-assessable value such as intangibles in the tax base.

Bill 11 passed a first reading on Feb. 28, 2018, and a second reading on April 25, 2018. However, at a May 2, 2018 hearing on the bill, the Council deferred action on the bill. Instead, Council members acknowledged that the income approach is unworkable, and asked the assessor’s office to analyze other methodologies for real property valuations. A number of Nareit REIT members, along with local non-REIT property owners and trade associations, submitted testimony in opposition to the bill. For more information about Bill 11, including testimony submitted, click here.