In recent years, there has been a considerable expansion of the types of companies holding non-traditional real estate assets that have elected to become real estate investment trusts for US federal income tax purposes (“REITs”). Companies considering becoming REITs have been able to receive private letter rulings (“PLRs”) from the US Internal Revenue Service (the “IRS”) confirming that their non-traditional assets qualified as real estate assets that may be owned by a REIT. This recognition of the different types of non-traditional real estate assets that may be held by a REIT, along with liberalization of the rules governing “taxable REIT subsidiaries” (which are corporate subsidiaries of REITs that operate businesses and hold assets that are not REIT-eligible), has encouraged many C corporations (corporations taxed under the standard corporate tax provisions of the US Internal Revenue Code of 1986, as amended (the “Code”)) to convert to REITs. Other companies with assets eligible to be held by a REIT have considered undertaking tax-free spin-offs of such assets into REITs.
View Full Memo, Revival of REIT Rulings Could Mean Good News for Companies with Non-Traditional Assets Considering Becoming REITs