Nareit Again Opposes New REIT-related Tax Bills in Hawaii

On Jan. 17, 2020, a number of REIT-related tax bills were introduced in the Hawaii state legislature. These bills are similar to bills that were introduced but not enacted in 2019 except that the new bills propose permanent changes while the bill that was vetoed by the Governor in 2019 would only have been in effect for four years. SB 2698 would require REIT shareholder withholding. SB 2409 would require shareholder withholding and would disallow the REIT dividends paid deduction (DPD) (other than to the extent attributable to “affordable housing”). SB 2697 would disallow the (DPD).

In 2019, the Hawaii legislature passed SB 301, which would have disallowed the DPD. Governor David Ige (D) vetoed this bill on July 9, 2019. The following REIT-related bills were introduced in 2019 and remain live in the 2020 legislative session: HB 475 (which also passed the Hawaii House); HB 605; HB 740, HB 1064, HB 1290, SB 1510, and SB 675. These bills would eliminate the REIT DPD and/or require REITs to file either a composite (entity-level) tax return or pay withholding tax attributable to distributions to non-resident shareholders based on their pro rata share of a REIT’s income attributable to Hawaii.

Nareit will continue to vigorously oppose these bills, just as it has opposed similar legislative proposals in past years to alter or eliminate the DPD and/or to impose REIT shareholder withholding taxes in Hawaii.

Also introduced on Jan. 17, 2020 was SB 2223, which would limit residential landlords from raising rent more than 5% plus the percentage change in the cost of living, or 10%, whichever is lower, of the lowest rent charged for a dwelling unit at any time during the prior 12 month period. Nareit is analyzing this legislation.

(Contact: Dara Bernstein at dbernstein@nareit.com)

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