WASHINGTON, DC–The Internal Revenue Service published regulations Tuesday morning updating a law passed by Congress in December that limited the ability of companies to form REITs.
Essentially what the IRS has done is close a window — or loophole depending on your perspective — that the law left open. In the December legislation, Congress said that a company involved in a tax-free spin-off could not elect to become a REIT until the 10th anniversary of the spin-off. But the regulation said nothing about the corporation engaging in a conversion transaction, such as by merging with an existing REIT.
That route has now been closed down by the IRS regulations, which go into effect starting today. The Wall Street Journal first reported the new regulations on Tuesday.
One interpretation of the new rules is that Colony Capital, NorthStar Realty Finance and NorthStar Asset Management's $58 billion proposed equity REIT, would not allowed, tax expert Robert Willens of Robert Willens LLC told GlobeSt.com.
Ditto JBG Cos.' proposed acquisition of New York REIT, which is separately under fire from one of New York REIT's shareholders, depending on how JBG Cos. is structured, Willens said.
Come back tomorrow as we further explore the new regulation and its impact.
WASHINGTON, DC–The Internal Revenue Service published regulations Tuesday morning updating a law passed by Congress in December that limited the ability of companies to form REITs.
Essentially what the IRS has done is close a window — or loophole depending on your perspective — that the law left open. In the December legislation, Congress said that a company involved in a tax-free spin-off could not elect to become a REIT until the 10th anniversary of the spin-off. But the regulation said nothing about the corporation engaging in a conversion transaction, such as by merging with an existing REIT.
That route has now been closed down by the IRS regulations, which go into effect starting today. The Wall Street Journal first reported the new regulations on Tuesday.
One interpretation of the new rules is that Colony Capital, NorthStar Realty Finance and NorthStar Asset Management's $58 billion proposed equity REIT, would not allowed, tax expert Robert Willens of Robert Willens LLC told GlobeSt.com.
Ditto JBG Cos.' proposed acquisition of
Come back tomorrow as we further explore the new regulation and its impact.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
