The big real estate trusts pay little or no state corporate income tax on the money they earn.

Hawaiʻi is losing tens of millions of dollars every year to one of the most powerful and least understood corporate tax loopholes in the country: the dividends paid deduction, or DPD, for real estate investment trusts.

REITs are investment vehicles — often billion-dollar corporations — that own and manage real estate such as hotels, shopping centers, apartment complexes, and industrial parks.

They enjoy a special tax privilege: under federal law, REITs can deduct from their taxable income all dividends they pay to shareholders, as long as they distribute at least 90% of their profits.

This deduction, the DPD, means that REITs pay little or no corporate income tax on the money they earn.

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