Honolulu Star-Advertiser from Honolulu, Hawaii • A7

tgi forum FRIDAY SEPTEMBER 5, 2014 A7 Dennis Francis Bill Buley President Editor-in-Chief REIT -A new kind of tax shelter? rent those assets from their REIT. The taxable operating company then gets a deduction for the rent; the REIT recognizes the rent as income but pays substantially less tax on that income. Is all of this a good deal? Is it a tax dodge? Is this kind of tax structuring tolerable because other states are letting REITs do this? Or is it necessary for us to change the rules that apply to REITs, as one other state (New Hampshire) has? These, and other thorny questions, are going to be considered by our lawmakers in the coming months. Tom Yamachika is president of the Tax Foundation of Hawaii. maintain its status, a REIT must meet certain requirements as to its ownership, organization, and the nature of its income and assets.

A REIT's activities are generally limited to investing in real estate or loans secured by real estate and related activities. It must pay out substantially all of its ordinary income as dividends. The tax benefit for a REIT is that it is allowed a deduction for dividends paid out, which most corporations don't get. Because of that rule, for federal income tax purposes, a REIT is generally treated as a passthrough entity, which means that the REIT doesn't pay tax but its shareholders are supposed to pay tax on the dividends they receive from the REIT. REITs own some major pieces of real estate in Hawaii.

There are about 20 publicly held REITs that collectively own about $6 billion in Hawaii commercial real estate. They do pay taxes, including our General Excise Tax (GET), because rent income that the REITs receive is taxable for GET purposes. They also pay real property taxes to the counties in which they own property. For corporate net income tax, however, it's another story. The REITs in Hawaii pay little or no tax under the net income tax system because of the deduction allowed for dividends paid, while the majority of the REITs' owners who receive the dividend income are outside of Hawaii and don't pay Hawaii tax either.

Why? States generally don't tax people if their only connection with a state is receiving a corporate dividend from a company headquartered within the state. The states would rather have the investment dollars flow into the state than try to tax them and scare off the investors. On the other hand, our state does try to get its tax share from out-of-state shareholders in corporations; so it might not be illogical for our state to tax REIT shareholders the same way. What qualifies as real estate for REIT purposes is an issue that recently has been in the news. Windstream Holdings, an Arkansas-based telecommunications company, in July received a private letter ruling from the IRS that allowed most of its copper and fiber-optic lines as qualifying real estate, which could enable it to cut more than $100 million a year off its federal tax bill.

REITs have also been used by computer-data storage companies, billboard owners, and private prisons. In one closely watched situation, the IRS in June cleared document-storage and shredding company Iron Mountain Inc. to restructure as a REIT. Of course, operating companies don't, by themselves, qualify as REITs. What they do is to put their real estate holdings into a REIT and have the operating company THE TAXMAN TOM YAMACHIKA This week we will talk about a special kind of corporation called a "real estate investment trust," or REIT.

Some people have called it the modern-day tax shelter, as it provides significant benefits under the federal tax code. REITs are investment vehicles that were established by Congress in 1960. To EvumCHflSE HtUi Fwl ISSL TO THE 5 you view Log on to thegardenisland.com and vote in our online poll. This week's question: Would you recycle more if the county offered curbside service? Last week's question: What is your response to Judge Barry M. Kurren's ruling that Ordinance 960, a county law regulating the use of pesticides and genetically modified crops, was pre-empted by state law and therefore invalid? 374 It was the right decision.

County should not appeal 644 It was the wrong decision. County should appeal 111 Tired of hearing about this case. There are more important things to deal with. Solar storms serious threat to US letters So how did we get here with property tax? At the recent tax workshop, which was sponsored by the Kauai County Council, I learned that in 2008 then Mayor Baptist identified some serious unfairness with regard to the 2 percent cap. He proposed a 35 percent reduction in taxes for all residents and an increase to the then low hotel and resort taxes to offset the reduction.

Of those on the current council, Councilman Tim Bynum and Councilwoman JoAnn Yukimura supported the mayor's proposal the council rejected it. During the tough times since 2008, taxes for residents did not go down like Mayor Baptist wanted. They went up, a lot. Hotel and resort taxes went down, a lot. Our surplus is gone.

In 2012, Bynum proposed Bill 2425 that would have kept the safety of the cap in place for everyone. Bynum's effort received support from Yukimura (Councilman Hooser was not on council) but the bill failed five to two. Had the bill passed, we may have been able to avoid the place we are in now and kept the cap. In reading back over the budget discussions in the council minutes from 2013 and 2014, it looks to me like Hooser and Bynum again tried to lower the Homestead tax rate to provide relief for residents. They predicted and tried to avoid the fallout that we have now.

The votes show that the rest of the council voted "no" to decreases for residents and also voted to avoid "too big of a hit" on the resort industry by setting their taxes lower, even lower than the mayor proposed this year. Hopefully, we can have some insight into the present tax situation by learning from the past. It seems like it would be very advantageous to have a regular summary in the newspaper of the proposals and the votes taken during council meetings, as very few people have time to research these decisions, which have huge impacts on our lives. Diane de Vries Kalaheo stuff, just as we all do, and as I enjoy every moment of life, I ask myself: "What if the lights go out JU.S.T NOW?" I surely don't want to be at altitude in an airliner, or elevator in a high-rise. I would just know that the 18 hours of warning gives me time to put my electronic devices in Faraday cages.

Like my ham radio gear in a steel garbage can, sealed with metal tape. And my Honda 2000 watt generator in a steel garbage can, sealed with metal tape. There could still be folks out there to contact just before our world goes back to the Stone Age, and the gasoline for the generator runs out. In conclusion, we "grassroots" folks must contact our U.S. congress-folks, as well as local government and KIUC.

The estimated cost to protect the national power grid is on the order of $1-2 for every person of the U.S. population. The cost of losing the grid (48 states) is on the order of many trillions of dollars to replace, if ever, plus loss of 90 percent of the U.S. population. UPDATE: Dr.

Peter Vincent Pry was interviewed on "Coast to Coast AM" on Nov. 21, 2014. He presented two hours of status of "the EMP hazard" facing the nation. I just downloaded an hour net, on MP3 CD of Dr. Pry.

Folks need to hear these comments by Dr. Pry! One comment was that all American citizens should write to senators and members of the house. Dr. Pry strongly suggests contacting Republican Rep. Fred Upton from Michigan, Chairman, Energy Commerce Committee Chairman Upton has not allowed an important bill covering EMP protection throughout the U.S.

upper 48, Alaska, and Hawaii. Q.E.D. Alan Faye is a resident of Princeville. "solar-max years." This usually lasts about two to three years. Our sun spits out major storm eject-a called CME (Coronal Mass Eject-a).

This CME shoots out of our sun, sometimes aimed at our planet with possible major devastation, if it happens to hit our protective magneto-sphere, and if it is of great flare strength, there will be an EMP (Electro-Magnetic-Pulse) generated. Worst case example: On Sept. 1,1859, there was a huge solar storm called "The Carrington Event." Its EMP was so powerful that it blew out telegraph stations worldwide, and caused railroad tracks to burn wooden railroad ties. The damage was worldwide. For education, Google the "Carrington Event," and find many websites, including Wikipedia.

If that same Carrington Event were to hit our planet today, we would lose all of our electricity and electronic devices. We would all be back to the 1800s, or earlier. NASA has the solar storm activity under constant surveillance. Once a solar flare is headed toward the earth with impact predicted on the earth, NASA should sound alarms and thus, our Kauai Civil Defense sirens would go off. Then we tune in to KONG andor KKCR for info.

However, we are not guaranteed that NASA will notify us to sound our sirens. Our latest solar storm activity is now. Starting in 2012 and through 2015, there just might be the equivalent of another "Carrington Event." Such solar flux in our time of high-tech electronics would mean total destruction of all electronic systems, worldwide, that are not "hardened." What does the siren mean then? Well, just know that all of our electricity could disappear. The major solar flare could knock out electronic devices, including cell phones, computers, digital devices and most impor We all like the sounds of the Civil Defense sirens at 1 1:45 a.m. the first day of each new month.

That proves that the sirens will sound when there is a warning (threat) to our way of life. What we don't like to hear, is the wailing of the sirens, when it is not "siren OTHER VOICES Alan Faye test" time. Of course, the first thing we do when sirens go off warning or false alarm? is to listen to "local" KONG andor KKCRFM radio. Then the truth usually comes out. So when we do hear the Civil Defense sirens go off, what might this mean? (1) Tsunami warning; (2) Hurricane warning, or (3) Solar storm warning.

Hey, wait-a-minute: what does this third warning really mean? Well, the solar storm warning is something new to most of us. For tsunami warnings, we know to head for higher ground, if we are near sea level. There is usually adequate warning after the sirens go off some hours of watching and waiting. For hurricane warnings, we usually have been watching the storm build up to hurricane strength for days and the siren says it may be a matter of a few hours before the hurricane hits. For a solar storm warning, the time from a sun "flare" to earth is about 18 hours.

So there is time to protect some of our electronics before it hits. We have prepared enough for tsunamis and hurricanes, like spare potable water, food and candles. What further do we need to do about a solar storm? Read on. So what about this solar storm warning? This information sounds like something new. Yes, and there is some precedence to look at.

Every 11, 12, 13 years, our sun has a rambunctious "cycle" during what is called tantly, the KIUC grid. All photo-voltaic systems that provide electricity to the Kauai grid, and off the grid, would be fried. Electronics in modern automobiles will be fried. Airliners that are electronically controlled would fall out of the sky. All of these predictions have been discussed in "federal" circles, from 2008-2014, and there is no action on the part of the government from the administration or Congress.

Dr. Peter Vincent Pry has a team of scientists who predict total collapse of the U.S. power grid unless some action takes place to "harden" the U.S. power grid. Not mentioned herein, is the possible stealth attack by a rogue nation (Iran, North Korea and others) who could do a 91 1 on the total 48 states, by lofting a small nuclear device into orbit, or high altitude and upon explosion, could create an EMP that could do the same to all of our electronics, coast-to-coast.

This EMP would be as powerful as the solar Carrington Solar storm. For nu-clear-driven-EMP, there could be no warning. Of course, this EMP would not be worldwide. A year ago, a letter went to our Congresswoman Tulsi Gabbard, asking her what our chances are for Congress to take action on hardening the electric power grid nationwide. A short note came back, stating that something would be heard from her.

Nothing heard. A memo to KIUC Board was ignored. Now, I am not always your normal happy-go-lucky local boy. Yes, I am that, but I have many years of engineering aeronautics, spacecraft, flight research and flight simulation with Boeing and later NACANASA; also, technical administration. With this "techie" background, I do notice when technology potentially appears to go down the drain.

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