Introduction
On April 9, 2024, the Department of the Treasury (“Treasury”) and the Internal Revenue Service (the “IRS”) issued two sets of proposed Treasury Regulations related to section 4501, REG-115710-22, which provides guidance on the application of section 4501, and REG-118499-23 (together with REG-115710-22, the
On April 24, 2024, the U.S. Department of the Treasury (“Treasury”) and the Internal Revenue Service (the “IRS”) issued final regulations[1] on the definition of “domestically controlled” real estate investment trusts (“REITs”) (the “Final Regulations”). The Final Regulations retain
On January 17, 2024, Senate Finance Committee Chairman Ron Wyden (D-Ore.) and House Ways and Means Committee Chairman Jason Smith (R-Mo.) released a bill, the “Tax Relief for American Families and Workers Act of 2024” (“TRAFA” or the “bill”). All of the provisions in the bill are taxpayer favorable, except
In 2021, the Corporate Transparency Act was enacted into U.S. federal law as part of a multinational effort to rein in the use of entities to mask illegal activity, including proposed rules (effective January 1, 2024) requiring certain types of entities to file a report identifying the entity’s beneficial owners
On May 2, 2023, the Department of the Treasury and Internal Revenue Service (“IRS”) issued proposed Treasury Regulations (REG-124064-19) that would, in certain cases, terminate the application of Section 367(d)[1] when intangible property is repatriated back to the United States. The proposed Regulations represent a taxpayer-favorable position for taxpayers that have considered repatriating intangible property to the United States but are concerned about the possibility of excessive taxation under current tax law.
On December 28, 2022, the Internal Revenue Service (the “IRS”) and the Treasury Department released proposed regulations (the “Proposed Regulations”) under sections 892 and 897 of the Internal Revenue Code (the “Code”).[1] If finalized as proposed, the Proposed Regulations would prevent a non-U.S. person from investing through a wholly-owned U.S. corporation in order to cause a real estate investment trust (“REIT”) to be “domestically controlled”. The ability of a non-U.S. person to invest through a U.S. corporation to cause a REIT to be domestically controlled had been approved in a private letter ruling, and is a structure that is widely used. The Proposed Regulations would also apply to existing REITs that rely on a non-U.S. owned U.S. corporation for their domestically-controlled status, and suggest that the IRS could attack such a structure under current law (i.e., even if the Proposed Regulations are not finalized).
The Proposed Regulations also clarify that in determining a REIT’s domestically controlled status, a foreign partnership would be looked through and “qualified foreign pension funds” (“QFPFs”) and entities that are wholly owned by one or more QFPFs (“QCEs”) would be treated as foreign persons. Lastly, the Proposed Regulations also provide a helpful set of rules for sovereign wealth fund investors that indirectly invest in U.S. real estate.
Tax-exempt organizations, while not generally subject to tax, are subject to tax on their “unrelated business taxable income” (“UBTI”). One category of UBTI is debt-financed income; that is, a tax-exempt organization that borrows money directly or through a partnership and uses that money to make an investment is generally subject
On March 28, 2022, the Biden Administration released the Fiscal Year 2023 Budget, and the “General Explanations of the Administration’s Fiscal Year 2023 Revenue Proposals,” which is commonly referred to as the “Green Book.” The Green Book summarizes the Administration’s tax proposals contained in the Budget. The Green Book is
On March 28, 2022, the Biden Administration proposed changes to the taxation of real property.
Restrict Deferral of Gain for Like-Kind Exchanges under Section 1031
The Biden Administration has proposed to limit the gain that can be deferred under a like-kind exchange of real estate under section 1031 to $500,000/year
On June 24, 2020, the Internal Revenue Service (the “IRS”) and the U.S. Department of Treasury (“Treasury”) issued final regulations (the “Final Regulations”) on the application of the “passthrough deduction” under Section 199A[1] to regulated investment companies (“RICs”) that receive dividends from real estate investment trusts (“REITs”). The Final Regulations broadly allow a “conduit” approach, through which RIC shareholders who would have been able to benefit from the deduction on a dividend directly received from a REIT can take the deduction on their share of such dividend received by the RIC, so long as the shareholders meet the holding period requirements for their shares in the RIC. This confirms the approach of proposed regulations issued in February 2019 (the “Proposed Regulations”), on which RICs and their shareholders were already able to rely. Additionally, the preamble to the Final Regulations (the “Preamble”) notes that the IRS and Treasury continue to decline to extend conduit treatment to qualified publicly traded partnership (“PTP”) income otherwise eligible for the deduction. Please read the remainder of this post for background, a description of the technical provisions of the Final Regulations, and a brief discussion of policy issues discussed in the Preamble.