Revenue Procedure modifies taxable stock distribution safe harbor

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May 2020

Overview

The IRS on May 4 released Revenue Procedure 2020-19, temporarily modifying Revenue Procedure 2017-45. Revenue Procedure 2020-19 provides temporary relief for publicly offered real estate investment trusts (REITs) and regulated investment companies (RICs) in response to the COVID-19 pandemic. 

Revenue Procedure 2017-45 provides a safe harbor under which, if certain requirements are met, a distribution of cash and stock by a publicly offered REIT or RIC may be treated as a dividend that qualifies for the dividends paid deduction. Accordingly, such a distribution will aid the REIT or RIC in meeting its distribution requirement. Revenue Procedure 2020-19 temporarily modifies Revenue Procedure 2017-45 by providing a lower threshold for the relative amount of cash compared to stock that must be distributed for the distribution to meet the safe harbor to be treated as a dividend.

The takeaway

In light of the impact of the current economic situation on REITs’ and RICs’ liquidity, a publicly offered REIT or publicly offered RIC may find Revenue Procedure 2020-19’s temporary modification of Revenue Procedure 2017-45 helpful in meeting its distribution requirement while retaining needed cash. A REIT or  a RIC concerned about meeting its distribution requirement should consult with its tax advisor to discuss whether a distribution that meets the requirements of Revenue Procedure 2017-45, as modified by Revenue Procedure 2020-19, is an appropriate avenue to manage its liquidity and, if it chooses to make such a distribution, how to meet those requirements.

SEE ALSO

For coverage of Revenue Procedure 2017-45 and more detail on the requirements of the safe harbor to treat distributions of cash and stock as a dividend eligible for the dividends paid deduction, see PwC Tax Insight, Understanding IRS guidance on stock distributions by publicly offered REITs and RICs


Revenue Procedures 2008-682009-152010-122017-45, and 2020-19.

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Derek Cain

Partner, M&A Tax, PwC US

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