The Honorable Angus LK Mckelvey, Chair
DAVID Y. IGE RONA M. SUZUKI GOVERNOR DIRECTOR OF TAXATION JOSH GREEN M.D. DAMIEN A. ELEFANTE LT. GOVERNOR DEPUTY DIRECTOR STATE OF HAWAII DEPARTMENT OF TAXATION P.O. BOX 259 HONOLULU, HAWAII 96809 PHONE NO: (808) 587-1540 FAX NO: (808) 587-1560 To: The Honorable Angus L.K. McKelvey, Chair; The Honorable Lisa Kitagawa, Vice Chair; and Members of the House Committee on Economic Development & Business From: Rona M. Suzuki, Director Department of Taxation Re: S.B. 2697, S.D. 1, Relating to Taxation of Real Estate Investment Trusts Date: Friday, March 13, 2020 Time: 9:45 A.M. Place: Conference Room 309, State Capitol The Department of Taxation (Department) appreciates the intent of S.B. 2697, S.D. 1, and provides the following comments. S.B. 2697, S.D. 1, repeals the dividends paid deduction that real estate investment trusts (REITs) are allowed by current law, except REITs for which 100 percent of the property owned is used to provide affordable housing in Hawaii. This will subject affected REITs’ income to the Hawaii corporate income tax in the same manner as other corporations. The measure is effective July 1, 2050 and applies to taxable years beginning after December 31, 2020. The bill sunsets on December 31, 2023. The Department of Business, Economic Development, and Tourism (DBEDT) is responsible for economic development, including the role of REITs. The Department of Taxation is responsible for administering the tax laws in a fair, consistent, and efficient manner. Therefore, the Department defers to DEBDT on the substantive merits of the bill.
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