The public interest and various special interests are often in contention at the Legislature. Special interests are frequently backed by big money, so it is particularly gratifying when the public interest comes out ahead. That’s what happened when the Legislature passed Senate Bill 301.

Currently, all corporations pay Hawaii’s corporate tax — with one glaring exception. Corporations known as real estate investment trusts (REITs), which own income- producing property, receive special treatment due to a tax loophole. Neither REITS nor the properties they own are required to pay Hawaii’s corporate tax. SB 301 closes that loophole.

REIT-owned properties include Ala Moana Center, the International Market Place, and the Hilton Hawaiian Village. REIT properties in Hawaii are valued at $18 billion, and they earn an estimated $1 billion in profits annually.

If Hawaii’s corporate tax rates were applied to these profits, REITs would pay an estimated $50 million in corporate taxes. The state tax revenue that would be generated could go quite a ways to improve the quality of public education, reduce homelessness, or increase the supply of affordable housing.

The REIT loophole was created 50 years ago when the federal government established the REIT model. Hawaii voluntarily adopted that model because at that time the tax implications were not well understood.

According to the federal REIT model, REIT profits are distributed to their shareholders, who pay income tax on those profits. From the perspective of the federal government, it doesn’t matter where in the country those shareholders live because the federal government will collect its tax.

From Hawaii’s perspective, however, more than 99% of the shareholders of REITs with properties in Hawaii live elsewhere besides Hawaii. They are taxed where they live, so Hawaii loses out. SB 301 would modify the federal REIT model by requiring REITs to pay Hawaii’s corporate tax.

Not surprisingly, REITs testified against the bill. They complained that their profits would be taxed twice: First, the REITs would be taxed on their profits through the corporate tax; second, the remainder of their profits that are distributed to their shareholders would be taxed through the personal income tax. But their argument is flawed.

All other corporations in Hawaii are treated exactly the way REITs don’t want to be treated. SB 301 would bring REITs in line with all other corporations, but REITs want to retain their special treatment.

REITs also claimed that investment in Hawaii would drop if SB 301 were passed. However, experience shows otherwise. New Hampshire passed a law that applies its corporate tax to REITs. That was 20 years ago. Today, investment by REITs in New Hampshire remains at high levels.

In the closing months of Hawaii’s legislative session, it was reported that the National Association of Real Estate Investment Trusts spent $128,000 to try to defeat SB 301.

By contrast, advocates for SB 301 had to depend on people power rather than money. Those who testified for the bill included community organizations, unions, corporations, other businesses, people in business, religious organizations, ministers, political organizations and many ordinary people. Their main message was that, in the interest of fairness to all, SB 301 should be passed.

The Legislature listened carefully to both sides, and then it passed SB 301. In the House of Representatives, 43 of the 51 House members voted for the bill. In the Senate it was unanimous: all 25 senators voted for the bill.

The fate of SB 301 is now in Gov. David Ige’s hands. The REITs will certainly put a lot of pressure on him to veto the bill. Hopefully, however, the governor will choose the public interest over special interests and approve SB 301.

John Kawamoto, Catherine Graham and Whitney Kim are members of the nonprofit, Faith Action for Community Equity.