On November 30, 2021, the IRS issued Revenue Procedure 2021-53, which temporarily allows publicly offered RICs and REITs to make distributions that are treated as dividends of up to 90% stock and the remainder in cash. Revenue Procedure 2020-19 closely follows the format of similar guidance issued during the 2008
“Passthrough Deduction” Regulations for RICs Finalized with No Major Changes
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.
New Guidance Allows Publicly-Offered REITs and RICs to Issue up to 90% of Qualifying Dividends in the REIT or RIC’s Own Stock Through the End of the Year.
On May 4, 2020, the IRS issued Revenue Procedure 2020-19, which temporarily allows a publicly-offered REIT or RIC to pay as much as 90% of a distribution in its own stock (rather than cash or other property) and still have the entire amount treated as a dividend for US federal income tax purposes. As a result, the distribution will qualify for purposes of the REIT or RIC’s dividend distribution requirement and the dividend paid deduction, so long as certain requirements are satisfied. Revenue Procedure 2020-19 closely follows the format of similar guidance issued during the 2008 financial crisis and applies to distributions declared on or after April 1, 2020, and on or before December 31, 2020.
Covid-19: Tax Considerations for REITs
This blog post summarizes some of the tax considerations for REITs that have arisen in light of COVID-19, the resulting economic downturn, the Coronavirus Aid, Relief, and Economic Securities (“CARES”) Act, and the Families First Coronavirus Response Act (the “FFCRA”).
The Effects of the Tax Cuts and Jobs Act on Real Estate
On Friday December 22, 2017, President Trump signed into law H.R.1, commonly referred to as the Tax Cuts and Jobs Act (TCJA). This is the most sweeping change to the U.S. federal income tax laws in over three decades, and it will have an effect on every U.S. taxpayer, including…