STAND. COM. REP. NO.
Honolulu, Hawaii
APR 0 3 2024
RE: S.C.R. No. 158
S.D. 1
Honorable Ronald D. Kouchi
President of the Senate
Thirty-Second State Legislature
Regular Session of 2024
State of Hawaii
Sir:
Your Coirmittee on Commerce and Consumer Protection, to which
was referred S.C.R. No. 158 entitled:
"SENATE CONCURRENT RESOLUTION REQUESTING THE DEPARTMENT OF
TAXATION TO CONDUCT A STUDY ON DISALLOWING THE DIVIDENDS PAID
DEDUCTION FOR REAL ESTATE INVESTMENT TRUSTS,"
begs leave to report as follows:
The purpose and intent of this measure is to request the
Department of Taxation to conduct a study on disallowing the
dividends paid deduction for real estate investment trusts
(REITs) .
Your Committee received comments on this measure from the
Department of Taxation, Land Use Research Foundation of Hawaii,
Hawai‘i Association of REALTORS, and Nareit Hawaii.
Your Committee finds that REITs own more real estate in
Hawaii per capita than in any other state. Your Committee also
finds that existing state law conforms to the provisions of the
Internal Revenue Code that allow dividends paid deductions for
REITs. Accordingly, when REITs conduct business in Hawaii and pay
dividends to shareholders who live outside the State, no Hawaii
income tax is collected, because shareholders pay tax on dividends
to the state in which they reside and not where the income was
generated. Your Committee believes that the dividends paid
deductions for REITs may be negatively affecting the State's
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 STAND. COM. REP. NO
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income tax collections, since a substantial majority of
shareholders of Hawaii REITs reside outside of the State and pay
tax on the dividends to their home states. Your Committee finds
however, that while the State may lose out on certain income taxes
because of the tax code, the capital expenditures, jobs, and other
investments made by REITs to develop properties in the State
likely result in many other tangible benefits for Hawaii
residents. Your Committee finds that regulating and taxing REITs
requires a careful and objective approach, and therefore, this
measure requests that a study be conducted to determine the
impacts of disallowing dividends paid deductions for REITs.
Your Committee has amended this measure by:
(1) Inserting language that requests the requested study to:
(A) Be conducted by tax revenue experts and economists;
(B) Analyze REIT investments in Hawaii across ten asset
classes (tower, industrial, retail, self-storage,
lodging and resort, office, health care, specialty,
residential, and mixed-use sectors), including
affordable residential, student housing,
telecommunications infrastructure, and health care
facilities;
(C) Compare the loss of general excise taxes collected
from hotels owned by REITs to any potential
increase in corporate income tax revenues collected
by the State;
(D) Show any potential tax revenue gains of REIT owners
netted against the losses they incurred during the
coronavirus disease 2019 (COVID-19) pandemic;
(E) Examine overall capital expenditures made in Hawaii
by REITs during the COVID-19 pandemic as compared
to the capital expenditures made by non-REIT
owners, and any impact on the general excise taxes
collected and construction jobs generated for the
State;
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(F) Identify expected REIT projects and their potential
impact on general excise taxes and corporate income
taxes to be collected by the State, as well as any
loss of revenues, construction, and other jobs, if
REITs withdraw from those projects; and
(G) Include a comparison of the investments made in
Hawaii of long-term REIT owners versus non-REIT
owners that acquire and sell properties as a
business model; and
(2) Making technical, nonsubstantive amendments for the
purposes of clarity and consistency.
As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee concurs with the intent and purpose of
S.C.R. No. 158, as amended herein, and recommends its adoption in
the form attached hereto as S.C.R. No. 158, S.D. 1.
Respectfully submitted on
behalf of the members of the
Committee on Commerce and
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 The Senate
Thirty-Second Legislature
State of Hawaii
Record of Votes
Committee on Commerce and Consumer Protection
CPN
Bill / Resolution No.:* Committee Referral: Date:
__ The Committee is reconsidering its previous decision on this measure.
If so, then the previous decision was to: ______________________________________
The Recommendation is:
__ Pass, unamended Pass, with amendments __ Hold Recommit
2312 2311 2310 2313
Members Aye Aye (WR) Nay Excused
KEOHOKALOLE, Jarrett (C)
FUKUNAGA. Carol (VC)
MCKELVEY, Angus L.K.
RICHARDS, III, Herbert M. “Tim”
AWA, Brenton
TOTAL 5
Recommendation:
Adopted __ Not Adopted
Chair’s or Designee’s Signature:
Distribution: Original Yellow Pink Goldenrod
File with Committee Report Clerk's Office Drafting Agency Committee File Copy
*Only one measure per Record of Votes
Revised: 12/27/23