June 30, 2020 - The COVID-19 pandemic has resulted in the imposition of safety measures by governments around the world, including that in Canada, to protect the health of their citizens. Similarly, businesses have imposed safety measures to protect their employees. These measures include restrictions on...
Proposed IRS Regulations Address “Good” REIT Assets
Industry has been awaiting guidance from the Internal Revenue Service on the definition of property that will qualify as “good REIT assets” under the Internal Revenue Code. On May 14, 2014, the government published an important set of proposed regulations, meant to “clarify” current law, and which generally would be applied to existing assets as of the end of the quarter following publication of the regulations in final form. The proposed regulations do not address all currently pending private ruling requests (such as those relating to file storage facilities), but provide a foundation and approach addressing many questions that arise in this area.
The preamble to the proposed regulations notes that guidance had been published in the form of revenue rulings through 1975, and thereafter in the form of private rulings, which technically, can be relied upon only by their recipients. Thus the proposed regulations are meant to provide general guidance to all taxpayers, and seem consistent with an approach that may limit issuance of future guidance in the form of private rulings.
To this end, the proposed regulations include the following as real property: land, inherently permanent structures, structural components, and certain intangible assets. The approach of the proposed rules is to consider such distinct assets as real estate only where they serve a predominantly passive (or utility-like) function (rather than enabling the conduct of an active business). The proposed rules also provide safe harbours for certain “inherently permanent” assets including billboards, transmission towers and lines, fuel storage tanks and pipelines, among others.
Beyond the safe harbours, the proposed regulations provide a list of factors to consider in determining whether a distinct asset will be considered real property, and provide 13 examples to illustrate application of those principals. Included as examples of good real estate assets are fruit trees, rights accompanying a marina’s boat slips, a massive indoor sculpture (that would be destroyed if moved), a cold storage warehouse, immovable space-lease partitions, solar-power generating systems dedicated to a particular adjacent or connected property leased to the same tenant that will use most of the power generated, most of a pipeline transmission system, cell tower land-use permits, and goodwill associated with the location of a landmarked hotel. Examples of assets not to be treated as real estate include movable bus shelters and space-lease partitions, parts of a solar energy generating site (for general use), meters and compressors used in connection with a pipeline, and a casino license.
The proposed regulations would not significantly expand the types of permissible assets REITs can hold, but would bring much needed clarity to an increasingly important area that has been marked by uncertainty.
June 25, 2020 - As governments attempt to support small businesses affected by the COVID-19 pandemic, Ontario has joined other provinces in introducing a moratorium on evictions of small business commercial tenants. Passed on June 18, 2020, the Protecting Small Business Act, 2020 temporarily prohibits...