REIT Tax News - December 2025

On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law. Specific to REITs, the act makes two key updates:

• TRS. The OBBBA increases the limit on the value of taxable REIT subsidiary (TRS) securities a REIT may hold from 20 percent to 25 percent of the REIT’s total assets. This change may benefit REITs operating in sectors such as data centers, cold storage, and timber, which often rely on taxable REIT subsidiaries for their operations and investments.


• 199A. The OBBBA makes permanent the section 199A deduction for ordinary REIT dividends and other pass-through business income. While earlier versions of the bill proposed increasing the deduction rate, the final OBBBA retains the 20-percent rate first enacted under the Tax Cuts and Jobs Act of 2017.

For more, please see our client alert on the OBBBA’s top five implications for REITs.

In response to numerous comment letters submitted by taxpayers, the US Treasury reversed its prior “domestic C-corporation look-through rule.” This change generally restores prevailing industry practice prior to 2024, where taxpayers self-created domestically controlled REITs by having a domestic C-corporation hold a majority interest in a REIT. Under the proposed regulations, a domestic C-corporation, excluding REITs and regulated investment companies (RICs), is treated as a non-look-through person in all cases. In particular, the proposed regulations reverse the prior rule that came into effect on April 25, 2024. For more information, please see our recent client alert.

In Private Letter Ruling (PLR) 20253005, the Internal Revenue Service (IRS) held that a REIT may charge tenants for electricity used at electric vehicle (EV) charging stations (potentially including a markup) provided that offering EV stations is customary for similar properties in the area. This income will be treated as qualifying REIT income.

However, this treatment only applies to electricity used for tenant business equipment (e.g., commercial delivery fleets or forklifts), not for personal vehicles. For more information, please see PLR 202413004 and our July 2024 edition of REIT Tax News, addressing EV charging stations offered at no additional charge.

In PLR 202538013, the IRS concluded that a REIT taxpayer (Taxpayer) may make a consent dividend under section 565 in its year of liquidation. The Taxpayer was acquired pursuant to a merger, and immediately thereafter, adopted a plan of liquidation. The Taxpayer’s debt exceeded its total adjusted basis in its assets. As this debt in excess of basis likely would have generated significant taxable income upon liquidation, the Taxpayer’s income for its final tax year would have exceeded the Taxpayer’s dividends paid deduction without a consent dividend. After reviewing the legislative history, the IRS ruled that Congress did not intend to impose a general restriction on a section 565 consent dividend in the liquidation year. This is the third ruling from the IRS on this issue after PLR 201202014 and PLR 201103001. 

In PLR 202510011 and PLR 202510012, the IRS ruled that payments made by airlines for the use of airport terminal space are qualifying REIT income. In each instance, the REIT provided only services that are customarily rendered in connection with the rental of space in airport terminals and did not provide any services that are tailored to any particular airline.