NY Times: How private prisons (CCA) are re-characterized as REITs to dodge taxes

[Faryn Balyncd]

A small but growing number of American corporations, operating in businesses as diverse as private prisons, billboards and casinos, are making an aggressive move to reduce — or even eliminate — their federal tax bills. . . . They are declaring that they are not ordinary corporations at all. Instead, they say, they are something else: special trusts that are typically exempt from paying federal taxes.

The trust structure has been around for years but, until recently, it was generally used only by funds holding real estate. Now, the likes of the Corrections Corporation of America, which owns and operates 44 prisons and detention centers across the nation, have quietly received permission from the Internal Revenue Service to put on new corporate clothes and, as a result, save many millions on taxes. . . . The Corrections Corporation, which is making the switch, expects to save $70 million in 2013. Penn National Gaming, which operates 22 casinos, including the M Resort Spa Casino in Las Vegas, recently won approval to change its tax designation, too.

Changing from a standard corporation to a real estate investment trust, or REIT — a designation signed into law by President Dwight D. Eisenhower — has suddenly become a hot corporate trend. One Wall Street analyst has characterized the label as a “golden ticket” for corporations. . . . . When they were created in 1960, they were meant to be passive investment vehicles, like mutual funds, that buy up a broad portfolio of real estate — whether shopping malls, warehouses, hospitals or even timberland — and derive almost all of their income from those holdings. One of the bedrock principles — and the reason for the tax exemption — was that the trusts do not do any business other than owning real estate. . . .


http://www.nytimes.com/2013/04/22/business/restyled-as-real-estate-trusts-varied-businesses-avoid-taxes.html?ref=todayspaper&_r=1&

So. . . While we're contemplating using "chained CPI" induced tax bracket creep to jack up the taxes on the middle class while it simultaneously steals their SS, we are granting prison & casino corporations the right to avoid paying taxes based on the fiction that they are simply a passive real estate investment vehicle.

What's next?

[xchrom]

1. du rec. nt

[Scuba]

2. K-Y Jelly recommended for the rest of us.

[CrispyQ]

3. I can't remember ever being so disgusted with my government.

I no longer believe we'll get change via the ballot box. Our electoral process is too corrupt & compromised.

on edit: The same goddamned prisons that want guaranteed occupancy rates & lobby Congress for draconian laws to lock up the citizens.

[nineteen50]

5. The Soviet Union

did not fall because of Reagan it fell because of corruption and cronyism. We still haven't figured that out and we are following their footsteps.

[valerief]

9. We know that. We can't fight the men with guns who protect the 1%. nt

[nineteen50]

4. I thought

privatizing prisons was to save taxpayers money now they need special tax breaks?

[Purrfessor]

6. If corporations can be classified as people, people should be able to classify themselves as...

real estate. This would allow the breadwinner of the family to rent him or herself out to an entity as real estate and collect rent in the form of monetary payment. The remaining members of the family are then classified as shareholders and the money collected by the breadwinner is then distributed to the shareholders who are then free to use the money as they wish.

We just need to apply to the IRS and get clearance to call ourselves an REIT and then we can avoid income taxes.

[Faryn Balyncd]

7. right on!

[KittyWampus]

13. Brilliant.

[Faryn Balyncd]

16. "...other casino operators...looking at making similar moves...could also open the door..."

"Mr. O’Brien, at Deloitte & Touche, said he has been talking with other casino operators that are looking at making similar moves. The ruling could also open the door for restaurant companies like McDonald’s and retailers like J. C. Penney to follow a similar route, though neither company has indicated it is considering such a move. "

http://www.nytimes.com/2013/04/22/business/restyled-as-real-estate-trusts-varied-businesses-avoid-taxes.html?pagewanted=2&_r=1&ref=todayspaper

[valerief]

8. Media meme--The Beauty of Feudalism. nt

[AzDar]

10. K & R & ...

[IDemo]

11. chained CPI

As housing becomes unaffordable, debtor's prison will be the easy substitute.

[progressoid]

12. Not to worry. Our elected officials will fix this problem post haste.

[BadgerKid]

14. Bottom line is that's it's OK to double-tax SS recipients but not REIT-based companies.

REITs themselves don't pay taxes, but shareholders/owners do. REIT must within 6 months of their latest rolling fiscal year pay out at least 90% of their earnings.

[xtraxritical]

15. Here's what Wikipedia says about REITs...

"The rules for federal income taxation of REITs are found primarily in Part II (sections 856 through 859) of Subchapter M of Chapter 1 of the Internal Revenue Code. Because a REIT is entitled to deduct dividends paid to its owners, a REIT may avoid incurring all or part of its liabilities for U.S. federal income tax. To qualify as a REIT, an organization makes an "election" to do so by filing a Form 1120-REIT with the Internal Revenue Service, and by meeting certain other requirements. The purpose of this designation is to reduce or eliminate corporate tax, thus avoiding double taxation of owner income. In return, REITs are required to distribute at least 90% of their taxable income into the hands of investors."

http://en.wikipedia.org/wiki/Real_estate_investment_trust

I'm not sure what to make of it, do "owners" have higher tax rates than corporations? Also, there are mutual funds and etf's that specialize in REIT's for small investors.

[woo me with science]

17. K&R