Kilroy Tax Executive Says Tangible Property Regulations Major Change for REIT

Mike Stauffer, vice president of taxes at Kilroy Realty Corp. (NYSE: KRC), joined REIT.com for a video interview during REITWise 2015: NAREIT’s Law, Accounting and Finance Conference held in Phoenix.

Stauffer commented that the biggest change Kilroy has had to deal with in recent years concerns tangible property regulations issued by the Internal Revenue Service (IRS).

The regulations, which are effective for tax years beginning on or after Jan. 1, 2014, provide guidance for taxpayers as to how they should account for expenditures related to tangible property. Prior to the new regulations, taxpayers were forced to comply with a patchwork of IRS guidance and Tax Court decisions, according to Stauffer.

Stauffer said the regulations “cause us to go back and look at our capitalization policies and our expense policies in the past and determine what we want them to be in the future. We’re spending quite a bit of time trying to get that right.”

Meanwhile, Stauffer said customary services, or those services customarily furnished in connection with the rental of real property, are among the issues that most concern REIT tax directors.

“There are the ones that we know about, that we’re always looking to stay on track with,” Stauffer said. At the same time, Kilroy is looking at providing new services and “ways to make our tenants happy.”

Joint ventures are another area of concern for REIT tax directors, according to Stauffer. “We’re looking to make sure we understand our rights within those joint ventures to make sure there’s nothing they can do to mess us up from a REIT perspective,” he said.

Stauffer also noted that views are changing concerning what constitutes "good income" for REITs: “As the world’s changing our business is changing…with that comes new challenges on making sure we’re getting that answer right.