What REITs Should Know About Section 163(j) Interest Limitation

Mark Van Deusen, principal at Deloitte, participated in a video interview at Nareit’s REITwise: 2019 Law, Accounting & Finance Conference in San Antonio.

Van Deusen moderated a panel at REITwise about emerging tax issues for REITs. He said that since most public REITs have relatively low leverage, they don’t need to worry about the interest limitation under new section 163(j). However, REITs should be aware that the way the limitation is calculated will change in 2022.

“The government has attempted in the proposed regulations under 163(j) to create some rules that would be helpful for REITs,” he said, including a “safe harbor” to allow them to qualify for the real property trade or business election.

Van Deusen also said the 20 percent deduction for pass-through income was the biggest issue REITs faced after last year’s tax reform; and going forward, REITs should be prepared to face a “tsunami of regulatory guidance” clarifying outstanding issues related to tax reform through the end of the year.