On October 4, 2024, the Internal Revenue Service (the “IRS”) released Private Letter Ruling 202440007, which concluded that the lack of income and assets in the first taxable year of an entity that had elected to be treated as a real estate investment trust (“REIT”) did not cause the entity

Muhyung (Aaron) Lee
Muhyung (Aaron) Lee is a partner in the Tax Department. Aaron works predominantly on U.S. federal corporate, partnership and international tax matters that include advising on mergers and acquisitions, fund formation, financial products and financing transactions.
Before joining Proskauer, Aaron was an associate at Davis Polk & Wardwell LLP in New York. Before attending law school he worked in finance at Société Générale and Bank of America Merrill Lynch.
California FTB Releases Updated Proposed Regulations on Market-Based Sourcing Rules – Implications for Asset Managers
On September 13, 2024, California’s Franchise Tax Board (“FTB”) released updated proposed regulations (“Draft Regulations”), which would amend the rules regarding market-based sourcing for sales other than sales of tangible personal property. These proposed rules would have a significant effect on professional service providers, including asset managers. The Draft Regulations…
California Franchise Tax Board (FTB) to Apply Market-Based Sourcing Rules to Nonresident Directors of California Based Corporations
On Monday, September 9, 2024, the California FTB approved proposed amendments to California’s personal income tax code.
This proposed rule would impose California income tax on non-resident/non-employee corporate directors receiving fees for services performed outside of California if the corporation has a commercial domicile in California (presumably because the corporation…
Final Regulations on Domestically Controlled REITs
- Introduction
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…
New Proposed Regulations Would Impact the Determination of Domestically Controlled REIT and Structures for Sovereign Wealth Funds’ US Real Estate Investments
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.
Senator Manchin Announces That He Will Not Support the Build Back Better Act – Where Things Stand Now
Today, December 19, 2021, Senator Joe Manchin (D., W.Va.) said that he opposes the Build Back Better Act, which effectively prevents its passage. While there are no immediate prospects for the Build Back Better Act to become law, future tax acts tend to draw upon earlier proposals. With a view…
Treasury’s Green Book Provides Details on the Biden Administration’s Tax Plan
On May 28, 2021, the Biden Administration released the Fiscal Year 2022 Budget, and the “General Explanations of the Administration’s Fiscal Year 2022 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…
Tax Provisions of the American Families Plan
On Wednesday, April 28th, the White House announced the American Families Plan, the “human capital” infrastructure proposal. The American Families Plan would spend $1.8 trillion, including $800 billion in tax cuts over ten years, offset by $1.5 billion in new taxes over the same period. This blog…
Comparison of the Biden Administration and Senate Finance Committee International Tax Proposals
On March 31, 2021, the Biden administration released a factsheet for the “Made in America Tax Plan”. On April 5, 2021, Senate Finance Chair Ron Wyden (D-Ore.) and Senators Sherrod Brown (D-Ohio) and Mark Warner (D-Va.) released “Overhauling International Taxation: A framework to invest in the American people by…
The Made in America Tax Plan: The Biden Administration Outlines its Tax Reform Proposals
On March 31, 2021, the White House released a factsheet describing the “American Jobs Plan”, a $2.3 trillion proposal for infrastructure spending that also contains certain significant tax credits, and the “Made in America Tax Plan”, a tax proposal that would generate revenue to pay for the American Jobs Plan…