Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
More Companies Change Business Designation for Tax Purposes
Author: Scarinci Hollenbeck, LLC
Date: May 3, 2013
Key Contacts
Back
A growing number of companies across a variety of industries are changing their business designations in an effort to lower their liability under federal tax law.
The New York Times exclusively reported on this increasingly common scenario, in which corporations that operate in several sectors – including prisons, casinos and infrastructure – are classifying themselves as Real Estate Investment Trusts (REITs) to reduce or eliminate their tax bills. The trust was traditionally associated with funds the solely hold real estate, but in recent years, the Internal Revenue Service has been expanding the definition of what qualifies as real estate. General REIT qualifying rules require that they do no business, and only own real estate. However, the IRS is increasingly allowing more companies to divide up aspects of their businesses that don’t correspond with real estate. As a result, more corporations are gaining permission from the tax agency to convert to REITs.
Most recently, Corrections Corp. of America, which owns and operates 44 prisons and detention centers, and Penn National Gaming, which operates 22 casinos, were granted permission from the IRS to change their designation under tax law, the Times reports. Many analysts say this trend will only intensify in the coming years as corporations seek out strategies to avoid paying high taxes.
“I’ve been in this business for 30 years, and I’ve never seen the interest in REIT conversions as high as it is today,” Robert O’Brien, head of the real estate practice at Deloitte & Touche, told the Times.
An analyst at Wall Street firm Jeffries also commented on the scenario, saying it’s “not a far stretch to envision REITs concentrated in railroads, highways, mines, landfills, vineyards, farmland or any other ‘immovable’ structure that generates revenues,” according to the news source.
While some analysts may feel that the heavier use of REITs to lower tax liability may allow corporations to skirt their tax responsibilities, there appear to be few obstacles that may slow the growth of this strategy.
- Practices: Tax and Trusts & Estates, Estate & Trust Litigation, Real Property Tax Strategies, Sophisticated Estate Planning & Wealth Preservation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
How to Effectively Use Contracts to Manage Risk
Key provisions in your contracts, including those relating to indemnification, insurance, and defense, are essential to contract risk management. While sometimes considered “boilerplate,” these provisions play a pivotal role when determining which party is responsible for certain costs and liabilities. They must always be negotiated and drafted carefully. Indemnification Clauses Businesses should never overlook the […]
Author: George McGowan
Understanding Portability for Estate and Gift Tax
Portability of estate and gift tax enables a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. So, if one spouse doesn’t utilize their full exemption, the surviving spouse can effectively double their exemption amount with regard to estate tax liability. For married couples, portability offers a […]
Author: Marc J. Comer
Pet Trusts in New Jersey and New York: A Practical Estate Planning Tool
For many of us, pets are more than companions—they are members of the family. Yet they are often overlooked or inadequately provided for when it comes to estate planning. A pet trust offers a legally enforceable way to ensure that your animal continues to receive proper care if you become incapacitated or pass away. As […]
Author: Marc J. Comer
How Can Trusts Be Used in Business Succession?
For many New Jersey business owners, a closely held company represents decades of work, financial investment, and personal sacrifice. Trusts in business succession planning are one of the most effective tools for protecting that value, allowing founders to control how and when the business passes to the next generation while reducing the risk of disputes, […]
Author: George McGowan
Read Before You Sign: IT Contract Pitfalls Every NJ Business Should Know
In today’s digital economy, New Jersey businesses of all sizes rely heavily on technology vendors, software providers, cloud platforms, and managed IT services. Whether your company is purchasing software, migrating data to the cloud, engaging a cybersecurity consultant, or entering into a long-term managed services agreement, a careful IT contract review can have significant operational, […]
Author: George McGowan
New York NDA Requirements for Businesses
Non-disclosure agreements (NDAs) remain a critical tool for protecting sensitive business information. However, New York NDA requirements have evolved, and businesses must ensure these agreements are carefully drafted to remain enforceable. In a competitive market like New York City, NDAs are commonly used to protect proprietary information, client relationships, and strategic plans. At the same […]
Author: Dan Brecher
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.