Fundamental Thesis of REITs Should Continue Under Tax Reform, Sullivan & Worcester Partner Says

Ameek Ponda, tax partner at Sullivan & Worcester LLP, joined for a video interview at REITWise 2017: NAREIT’s Law, Accounting & Finance Conference in La Quinta, California.

Ponda described 2016 as a “momentous year” in terms of REIT taxation developments.

Passage of the PATH Act at the end of 2015 brought in some “very helpful legislative changes,” including expanded opportunities for foreign investors in U.S. REITs, he said.

The PATH Act also produced tighter rules for REIT spinoffs and taxable REIT subsidiaries (TRS) ownership, Ponda noted. The past year also saw the Internal Revenue Service (IRS) finalize their rules on what it means to be real property. “There were no surprises there,” Ponda said. The rules became effective for 2017 and add “a great deal of clarity and structure,” he added.

Ponda stressed that REITs do have to pay close attention to tax reform. Most people believe that the fundamental thesis of REITs – in which retail investors participate in professional real estate management and ownership - should remain under tax reform.

“The idea of letting the little guy invest in REITs, that continues,” Ponda said.

Ponda added that once the House of Representatives’ tax reform blueprint provides more detail on how non-REIT public companies and real estate partnerships are going to be treated, it will become more apparent how REITs will fare.