Require REITs to disclose assets and revenues
Once the REITs reporting requirements law is in place, we can have an honest and accurate conversation about the impact of REITs’ taxation to Hawaiʻi’s economy. The fact is that REIT investment hasn’t been stifled by the property and general excise taxes that REITs pay.
Opponents to the REITs taxation bill have argued that they contribute to our community through real property tax and GET. This myth is disingenuous because everyone in Hawaiʻi contributes to the community through real property taxes (it’s important to note that Hawaiʻi’s property tax rate is the lowest in the country) and GET. But everyone else in Hawaiʻi also pays income taxes.
So long as REITs aren’t paying their corporate income taxes, they aren’t paying their fair share of taxes. Even if the REITs legislation passes, they would still enjoy significant tax benefits such as the federal tax deduction (or would pay up to 21 percent otherwise).In the meantime, REIT property ownership in Hawaiʻi has increased substantially since 2013. According to the National Association of Real Estate Investment Trusts’ own website, REIT property ownership in Hawaiʻi increased by 38 percent from 2013 to 2019.
The state is losing tens of millions of dollars because it is not collecting a corporate tax on REITs. That revenue could be applied to affordable housing, social services, public education, environmental preservation efforts, public health, the court system—the list is endless. In particular, REITs benefit from the business infrastructure that the state provides, yet they don’t contribute their fair share to funding it.
If opponents of this bill are confident of their numbers, they should be happy to see the REITs reporting requirements bill passed as it would provide accurate information.
Once HB286 is codified, the state can objectively evaluate how much revenue we lose by keeping the dividends-paid deduction in place for REITs. During a time when we should be looking for every opportunity to close the deficit, accurate information around progressive tax options is critical.