A trade group representing real estate investment trusts has spent more than $126,000 in two months to defeat measures in the Hawaii Legislature that would impose taxes on some of the $18 billion worth of trust investment property in the islands.

But one of the bills to tax them is still alive this session.

The National Association of Real Estate Investment Trusts is the biggest spender of 250 organizations registered to lobby this legislative session. The groups spent a total of more than $1.1 million from Jan. 1 to Feb. 28, according to reports filed with the Hawaii State Ethics Commission.

While the association was the biggest overall spender for this reporting period, it only paid out about $8,000 directly to lobbyists at the local law firm Ashford & Wriston, including Luis Salaveria, the former director of the state Department of Business, Economic Development and Tourism.

Ala Moana Center, managed by General Growth Properties, is a real estate investment trust. Cory Lum/CIvil Beat

The majority of its money went to advertising ($63,486), lobbying materials ($35,413) and consultant fees ($19,036). What exactly all that paid for is not clear, because organizations aren’t required to provide spending details beyond those broad categories.

There’s been a surprisingly strong push in the Legislature this session to start taxing REITS. Senate Bill 301 would impose a 6.2% corporate income tax on the trusts. The bill is headed to a conference committee of House and Senate members.

The REITs association has submitted testimony in opposition, arguing the tax could scare off companies and investors, resulting in negative long-term effects on the state economy.

The company has launched a website extolling the benefits REITs have in Hawaii. Several REITs in the state sponsored a campaign set up by the National Association of Real Estate Investment Trusts Foundation to help fund affordable housing projects in Hawaii.

The association has been lobbying at the State Capitol since at least 2014, but this is only the second time its expenditures hit six-figures for a reporting period. The other time was in 2017 during the Legislature’s special session to fund rail, when the organization spent $103,369.

REITs are securities that operate under rules that require them to distribute at least 90 percent of their taxable income to shareholders annually in the form of dividends. They are allowed to deduct those dividends from their taxable income, legally avoiding federal taxes.

They own some of Hawaii’s premier real estate, including Ala Moana Shopping Center, Hilton Hawaiian Village and the International Market Place.

Shareholders are taxed on dividend income in their own home states or countries, not in the places where the income was generated. For the most part, that means not in Hawaii.

Hundreds of local church parishioners, progressive activist groups and about a dozen owners of small businesses in the state have allied in support of SB 301, charging that offshore real estate owners operating as REITs are in essence tax dodgers.

Vacation Rental Properties

The vacation rental hosting platform Airbnb is also resisting legislative efforts to tax its income.

Airbnb had lobbying expenses of $30,000. David Louie, a former attorney general turned lobbyist with Kobayashi Sugita & Goda, was paid $20,244 by the hosting platform.

Airbnb also paid about $2,600 each to Bruce Coppa, Blake Oshiro and Ross Yamasaki of Capitol Consultants, the state’s largest government relations and lobbying firm.

Two bills to tax vacation rental hosting platforms are still alive and may move into conference committee. House Bill 419 would tax the rentals and require counties to keep registries of those properties. It would also outlaw any rental not listed on the registry.

Louie sent eight pages of written testimony when the bill was last heard in a committee. He also wrote that the bill violates a federal statute that exempts websites from having to verify third-party information.

He argued that private information stored on a website should be inaccessible to the government without a search warrant.

Louie also testified in opposition to Senate Bill 1292, a similar measure that would also collect general excise and transient accommodations taxes from vacation hosts.

Verizon Top Spender On Direct Lobbying

While Aribnb and the REITs association are high on the list for total expenditures, the telecommunications company Verizon spent the most on direct payments to lobbyists.

Verizon spent $55,000 directly on lobbyists ($55,844 in total lobbying costs), followed by Kamehameha Schools at $30,712 ($32,111 total), Airbnb at $30,027 ($34,227 total), the Hawaii Medical Service Association at $26,675 ($35,052 total), and the Ulupono Initiative at $23,764 ($25,608).

Michael Bagley, Verizon’s regional public policy director, was paid $33,000. Verizon also made payments of $10,000 each to Michael Iosua and Kimberly Yoshimoto from the law firm Imanaka Asato.

Bagley sent written testimony to legislative committees in support of a pair of bills that seek to lift certain regulations on telecommunication companies.

Senate Bill 991 and its companion House Bill 272 are set to go to conference committees.

The bills would remove restrictions for a “telecommunications service provider providing fully competitive retail services.” They would cap monthly rate increases for basic services on neighbor islands at $6.50 unless companies get approval from the Public Utilities Commission, but would lift other PUC restrictions.

Companies like Hawaiian Telcom would no longer be required to get PUC approval for selling stocks and other investments. They also wouldn’t need the PUC’s blessing to lease, sell or mortgage property and infrastructure.

The bill would also exempt telecommunications companies from a state law that requires a report of any accident, including loss of life, resulting from the company’s services.

Bagley testified that the bill would modernize the state’s regulations.

“Streamlining and reducing regulations in an increasingly competitive environment in which telecommunications businesses operate is a demonstration of good public policy – it is in the public’s best interest,” Bagley said in written testimony.

While expense reports don’t say exactly which measures lobbyists are tracking, the reports list subject areas a company is lobbying in. For Verizon, those include communications and public utilities, consumer protection and commerce, government operations and finance, public safety and corrections and science, technology and economic development.

Kamehameha Schools has been busy at the Capitol this session weighing in on a number of measures related to education, health, agriculture, the environment and the minimum wage. It’s paid a total $15,000 to Melissa Pavlicek and Stephen Teves from Hawaii Public Policy Advocates, as well as more than $14,000 to its own in-house lobbyists.

The Ulupono Initiative was founded by Pierre and Pam Omidyar. Pierre Omidyar is the CEO and publisher of Civil Beat.

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