Bill to tax REITs in Hawaii passes

On Tuesday the Hawaii House voted, 44 to 7, in favor of Senate Bill 301, which would impose the state’s 6.2 percent corporate tax on REITs. The bill passed the Senate in early April with a near-unanimous vote.

Hawaii would become the first state in 50 years to impose corporate income taxes on REITs. New Hampshire taxed REITs under a law passed in 1970.

Approximately $18 billion of property in Hawaii is owned by REITs. Assets include Ala Moana Center, Hilton Hawaiian Village and the International Market Place in Waikiki, none of which pay Hawaii corporate income tax.

REIT operators said that passing the tax would stifle investment in Hawaii and potentially lead to revenue and job loss if construction and remodeling projects withered, reported local media outlets.

“Hawaii needs investment from companies who are long-term investors and not ‘flippers,’” said Dara Bernstein, senior vice president and tax counsel for the National Association of Real Estate Investment Trusts, to Honolulu Civil Beat. “If this measure is enacted, it will discourage long-term investors in affordable and student housing.”

Senate Bill 301 will be sent to Gov. David Ige, who may sign it, veto it or allow it to become law without his signature.