18 March 2026 • 1 minute read

REIT Tax News - March 2026

Welcome to the March 2026 issue of REIT Tax News. Below, we summarize three key developments impacting REITs this past quarter.

Proposed Senate bill aims to repeal RIDEA structures for healthcare REITs

In 2007, Congress passed the REIT Investment Diversification and Empowerment Act (RIDEA) to allow healthcare REITs to participate more directly in the business of senior housing and care facilities. On February 11, 2026, Senator Elizabeth Warren reintroduced legislation that would repeal key aspects of RIDEA as part of a bill aimed at “getting private equity out of health care.” Senator Ed Markey introduced similar legislation in October 2025. At this time, it is uncertain whether the proposed legislation, or a similar bill, will be signed into law.

PLR 202601013: Interest rate swaps will not generate gross income for REITs

In Private Letter Ruling (PLR) 202601013, the Internal Revenue Service (IRS) ruled that income from interest rate swaps hedging variable-rate financing does not constitute gross income for purposes of the 75-percent and 95-percent gross income tests under Section 856(c)(2) and (3). The ruling confirmed that “counteracting hedges” (i.e., swaps entered to economically terminate existing hedges without substantial breakage costs) also qualify for exclusion under Section 856(c)(5)(J)(i). The taxpayer represented that the hedging transactions at issue satisfied Section 1221(a)(7) identification requirements and that the notional amounts did not exceed the underlying indebtedness (i.e., there was no “over-hedging”).

Section 892 proposed regulations: Impact on REIT joint ventures

Many sovereign wealth funds rely on Section 892 as their primary tax planning strategy when structuring United States real estate investments.

On December 15, 2025, the US Department of the Treasury published proposed regulations under Section 892 that could impact sovereign wealth funds’ US investments, including co-investments in US real estate through joint ventures that use a private REIT structure.

Notably, the proposed regulations contain an example suggesting that a sovereign wealth fund may have effective control, and hence may be denied Section 892 tax benefits, if the sovereign wealth fund has veto rights relating to dividend distributions, material capital expenditures, sales of new equity interests, and the operating budget. For more information on the proposed regulations, please see this previous DLA Piper alert.

The Real Estate Roundtable’s comment letter on the proposed regulations requests grandfathering for existing structures and clearer safe harbors. In response to industry concerns, Robert Scarborough, special counsel in the IRS Office of Associate Chief Counsel (International), stated in an article from Tax Notes that “we will ensure that the proposed regulations, to the extent they are finalized, will not have any retroactive effect.”

Meet the team

DLA Piper’s National REIT Tax team will be in attendance at Nareit’s REITwise 2026 Educational Conference, which will be held from March 24–26, 2026 in Hollywood, Florida. Partner and Co-Chair, National REIT Tax practice Shiukay Hung (New York) will be speaking on a panel on March 24, 2026 at 1:15pm ET.