Changing Hawaii REIT’s Tax Status Structure Wouldn’t Generate State Windfall, Expert Says



Hawaiian lawmakers have shelved a bill that, if passed, would have changed the tax structure of real estate investment trusts, or REITs, in the state. Proponents of filing invoice claim it could result in “millions in tax revenue from owners of large commercial properties,” but the Hawaii National Association of Real Estate Investment Trusts disagreed on the benefits of the proposed legislation.

“The unprecedented housing shortage across the state means that every available housing unit should be used to house local residents. This bill will impose a financial penalty on leaving properties vacant and will make vacant properties less attractive for investor speculation,” said Sen. Stanley Chang (D), who helped introduce the bill, Told the local ABC News affiliate.

Forty-nine percent of Hawaiian households invest in REITs as long-term investors, according to Nareit Hawaii.

“Changing the state tax structure for REITs would not generate any sort of windfall for Hawaii. In fact, it would have the opposite effect,” said Gladys Quinto Marrone, executive director of Nareit Hawaii. McKnight Business Daily.

She said REITs in Hawaii pay hundreds of millions of dollars a year in state and county taxes and support tens of thousands of jobs across the state.

“The Hawaii State Department of Taxation said eliminating the deduction that dividend-paying REITs are allowed by federal law may only generate about $2 million in the first year and possibly $10 million every year thereafter,” Marrone said. “However, this change in tax status would result in a much greater loss of general excise tax revenue for the State of Hawaii. Nobody wants that to happen.” In addition to adding tax revenue, Nareit Hawaii and the REITs operating in Hawaii also support community programs and initiatives.Among its efforts, Nareit Hawaii offers grants that support affordable housing projects.The Nareit Foundation and Nareit Hawaii have make a donation $1.74 million to 19 nonprofits across the state in the first three years of their charitable giving initiative. Earlier this month, Nareit Hawaii’s Community Giving Initiative provided $130,000 to the Kaua’i Housing Development Corp. to help build a home under the county housing agency’s affordable housing designation.


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