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Tax Law Roundup current law developments in U.S. taxation

Category Archives: REITs

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IRS Suspends Private Rulings on Many REIT Spin Off Conversions

Posted in Real Estate, REITs

The flurry of Opco-Propco REIT conversions has hit a stumbling block this week when the IRS issued a Revenue Procedure announcing a “no rule” policy for a key corporate tax issue for many REIT spin offs. Basically to do a tax-free REIT spin off, the existing single corporation must be able to qualify the REIT entity… Continue Reading

IRS Treats Rotating Digital Display Income As Good REIT Income

Posted in Real Estate, REITs

In PLR 201522002, the IRS clarified that REITs can earn good rent income from outdoor advertising displays even if multiple tenants rent the same display area for rotating ads. In the ruling, the REIT owned outdoor advertising displays (i.e., billboards) and planned to build new displays with rotating digital displays. The taxpayer planned to make… Continue Reading

Senate Finance Committee Proposes FIRPTA Reform

Posted in International, Real Estate, REITs

Today was an important step in moving forward US tax reforms to encourage international investment in U.S. real estate.  The Senate Finance Committee passed 17 different tax bills for consideration by the entire Senate.  This package includes a FIRPTA reform bill sponsored by Senators Robert Menendez (D-NJ) and Michael Enzi (R-WY) to reduce the burden… Continue Reading

IRS Procedure Helps REITs with Rebounding Distressed Debt

Posted in REITs

75% of a REIT’s assets must be real estate.  When a REIT owns a debt secured by both real estate and non-real estate, the regulations create an apportionment formula that, although typically favorable, creates an inappropriate bias against real estate classification for distressed debt.  The IRS previously published Rev. Proc. 2011-16 to provide taxpayers with… Continue Reading

Proposed Regulations Update Definition of Real Property for REITs

Posted in Real Estate, REITs

The IRS issued new proposed regulations for the definition of real property for REIT purposes, updating the original 1962 regulations.  The proposed regulations come in the wake of news reports criticizing the IRS for allowing too many taxpayers to convert to REIT status and a temporary moratorium (since lifted) on private letter rulings regarding the… Continue Reading

Rep. Camp Tax Reform – Top 10 Real Estate Considerations

Posted in General, Partnership/LLC, Passthrough Entity, Real Estate, REITs, Tax reform

Last week Rep. Camp (R-MI), Chair of the House Ways and Means Committee, announced a comprehensive tax reform discussion draft as part of his efforts to reduce top corporate tax rates to 25% and provide individual brackets at 10%, 25%, and for many, 35% (after adding a 10% surtax for non-domestic production income of high-income… Continue Reading

Sen. Baucus Reveals International Tax Reform Draft

Posted in General, International, Legislative, Real Estate, REITs

Today Sen. Baucus of the Senate Finance Committee released a discussion draft for international tax reform.  The proposal is the first in a series on how to reform international tax rules with more drafts expected later this week.  This action by the Senate is in contrast to the recently expected delays by the House.  Feedback… Continue Reading

IRS Resumes Non-Traditional REIT Conversion Rulings

Posted in Corporate, Real Estate, REITs

The IRS has re-started issuing private letter rulings to corporations wishing to convert to REIT status after an IRS “working group” began studying the issue of non-traditional REITs in June.  This working group was formed after there was significant national attention to the many non-traditional corporations converting to REIT status and the related tax benefits to… Continue Reading

IRS Provides Details on Section 179 Expensing for Qualified Real Property

Posted in Compliance, General, Real Estate, REITs

As part of the January 2013 tax legislation, Congress expanded the definition of property qualifying for favorable Section 179 expensing to include qualified real property placed in service in any taxable year beginning in 2010, 2011, 2012, or 2013.  In general, qualified real property is depreciable real property purchased to be used in the taxpayer’s… Continue Reading

IRS Issues Final RIC and REIT Built-In Gain Regulations

Posted in Corporate, Passthrough Entity, Real Estate, REITs

The IRS published final regulations under section 337(d) to provide helpful technical clarification on rules addressing the transfer of C corporation built-in gain assets to a RIC or a REIT.  The final regulations are effective for applicable transactions that occur after August 2, 2013, but taxpayers can apply them to earlier transactions. What are the… Continue Reading

Developing a Tax Strategy to Invest in US Real Estate

Posted in International, Joint Venture, Passthrough Entity, Real Estate, REITs

Article by Steven Schneider, John Grumbacher, and Bob Towsner of Goulston & Storrs PC as published in AFIRE News Introduction Most non-US persons do not directly invest into US real estate. Instead, both tax and non-tax considerations generally drive investments through various intervening entities, depending on the optimal tax structure for the particular investor and… Continue Reading

FIRPTA Reform Reintroduced in Senate

Posted in International, Legislative, Real Estate, REITs

Senators Bob Menendez (D-NJ) and Mike Enzi (R-WY) and 22 co-sponsors introduced S.1181, the Real Estate Investment and Jobs Act of 2013, based on the original S.1616 legislation introduced in 2011.  The legislation would increase from 5 to 10 percent the amount of publicly traded REIT stock minority shareholders can hold without triggering FIRPTA tax…. Continue Reading

Senate issues 8th Tax Reform Paper: Types of Income and Business Entities

Posted in Compensation, Debt vs. Equity, Financial Products, Legislative, REITs, S corporation, Tax reform

The Senate Finance Committee issued its 8th tax reform paper, discussing the tax treatment types of income (e.g., ordinary, wages, capital gains) and business entities (e.g., C corporations, pass-throughs, RICs, and REITs).  The report also addresses the disparate treatment between debt and equity and financial product reform.  For pdf version click here.  This follows the… Continue Reading

Proposed Legislation to Extend and Expand Green Incentives for Commercial and Residential Buildings

Posted in Energy, Green, Legislative, REITs

Four Senators introduced the Commercial Building Modernization Act (S. 3591) (the “Bill”), extending and expanding the federal Section 179D energy efficiency tax deduction.  The deduction applies to qualifying energy efficient construction or rehabilitation of commercial and residential buildings.  Most notably, the Bill would both significantly expand the deduction and also extend it through the end… Continue Reading

IRS REIT Guidance – Money Market Investment Treated as Cash

Posted in Real Estate, REITs

The IRS issued Rev. Rul. 2012-17, treating a money market investment by a Real Estate Investment Trust (REIT) as cash for REIT asset testing purposes.  REIT qualification requires 75% of the entity’s assets to be comprised of real estate, Government securities, or “cash and cash items”.  Industry groups including the National Association of REITs (NAREIT) and… Continue Reading

Proposed Regulations Address RIC and REIT Built-in Gains Tax

Posted in Corporate, REITs

New taxpayer-favorable regulations clarify the application of the section 337(d) and section 1374 built-in gain rules for transfers of property to RICs and REITs.  The new regulations clarify the prior 2003 regulations.  Under the prior regulations, when C corporations transfer appreciated property to a RIC or a REIT, section 1374 rules track any carryover built-in… Continue Reading

Proposed Regulations Issued for DC’s New Combined Reporting Rules

Posted in Corporate, General, REITs, State and Local Tax

In the fall of 2011, the District of Columbia (DC) adopted a “combined reporting” regime that effectively shares the taxable income of a DC subsidiary to certain related non-DC corporations.  Other states have adopted similar rules, although the specifics vary significantly per state on questions such as whether related non-DC corporations are removed from combined… Continue Reading

Proposed FIRPTA Legislation For Foreign Investors in U.S. Real Estate

Posted in General, International, Real Estate, REITs

On September 21, H.R. 2989, the Real Estate Jobs and Investment Act of 2011, was introduced in the House to ease the rules for Foreign Investment in U.S. Real Estate known as “FIRPTA”.  The legislation would increase the percentage of a publicly traded REIT that a foreign investor could own from 5% to 10% before… Continue Reading

JCT Report Provides Detail on Obama Tax Proposals

Posted in Green, Legislative, REITs, Tax Exempt

  The Joint Committee on Taxation has issued a 600-page report providing significant detail on the Obama 2012 “Greenbook” tax proposals. Also attached are the excerpts relating to: energy efficient building incentives; carried interest; fractions rule simplification; and partial repeal of the REIT preferential dividends rule. The energy efficient building proposal would convert the existing… Continue Reading

Timber Forest Carbon Emission Units are Good REIT Assets

Posted in Green, Real Estate, REITs

The IRS has ruled in PLR 201123003 that a timber REIT can treat its tradable carbon emission units as an interest in real property that is a good REIT asset which creates good real estate income. The applicable forestry program granting the units imposes land use restrictions on the forest owner by requiring the forest… Continue Reading

PLR Disregards REIT’s Share of REIT Loan to Partnership

Posted in Partnership/LLC, Real Estate, REITs

The IRS held that, for purposes of the REIT asset and income tests, a REIT should disregard its pro rata share of its loan to its operating partnership. Specifically, in PLR 201118015, a publicly traded REIT used proceeds of a public offering of debentures to loan money to its operating partnership (OP). The OP loan… Continue Reading

President Releases 2012 Budget Proposals

Posted in REITs

The President released the new 2012 Budget Proposals. Proposals include: cap itemized deductions for upper-income taxpayers at 28 percent; extension of the estate tax at 2009 levels; expiration of the 2001 and 2003 tax cuts for upper-income taxpayers at the end of 2012; tax qualified dividends and net long-term capital gains at 20% marginal rate… Continue Reading

Obama Proposes Incentives for Energy Efficient Buildings – Paid for by Oil & Gas Industry

Posted in Energy, REITs, Tax Credits

Obama announced a new “Better Buildings Initiative” to make commercial buildings 20 percent more energy efficient over the next decade. In a February 3 speech, President Obama proposed significantly increasing the existing §179D incentives for energy efficient buildings. The President is calling on Congress to redesign the current tax deduction for commercial building upgrades, transforming… Continue Reading