NAREIT Welcomes Changes To Treatment Of REITs

by Glen Shapiro, LawAndTax-News.com, New York

28 October 2004

The National Association of Real Estate Investment Trusts (NAREIT) on Tuesday welcomed several REIT-specific provisions contained in the corporate tax reform bill signed into law by President Bush last Friday, commending them as a "common-sense improvement of the federal government’s REIT rules".

According to NAREIT, the provisions were originally part of the REIT Improvement Act (RIA), and were included in the conference report for the American Jobs Creation Act of 2004, which received Congressional approval earlier this month.

The NAREIT-supported RIA provisions which made their way into the recently signed American Jobs Creation Act included: the removal of a discriminatory barrier to foreign investors buying publicly listed REIT stock; clarification and correction of some issues surrounding the REIT Modernization Act of 1999; and the provision of new IRS powers to allow the tax authority to impose monetary penalties for reasonable cause violations of REIT tax tests in lieu of the loss of REIT status.

The Association went on to explain that the measures contained in the new law conform filing guidelines and tax consequences for overseas REIT investors who own less than 5% of a publicly traded US REIT with those of overseas investors in other US equities.

“The barrier has had the unfortunate effect of dissuading some overseas investment in US REIT stocks,” explained NAREIT senior vice president and general counsel, Tony M. Edwards. “Its removal means that investors in US REITs who reside in the United Kingdom or Japan, for example, will be treated no differently than when they buy stock in other US corporations.”

Recommended