Welcome to the September 2025 issue of REIT Tax News. Below, we summarize five key developments impacting REITs this past quarter.
The One Big Beautiful Bill Act’s impact on REITs
On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law. Among its provisions, the OBBBA increases the permissible ownership of taxable REIT subsidiaries from 20 percent to 25 percent of a 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.
Notably, the OBBBA preserves the tax-deferred treatment of like-kind exchange rules under Section 1031, allowing REITs to continue deferring capital gains taxes when reinvesting in qualifying real estate. See our client alert on the OBBBA’s top five implications for REITs.
Personal income tax reform made permanent
The OBBBA made several individual tax provisions permanent that were previously set to expire at the end of 2025, including:
- Retention of the highest personal income tax rate at 37 percent
- Continuation of the Section 199A deduction, which allows individuals to deduct up to 20 percent of their ordinary REIT dividend income
As a result, the effective tax rate on ordinary REIT dividends for US individuals at the highest tax rate remains at 29.6 percent. However, this does not consider the net investment income tax of 3.8 percent and any applicable state income tax, which was not changed by the OBBBA.
IRS PLR 202530005: EV charging may qualify as REIT income
In Private Letter Ruling (PLR) 202530005, 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, not for personal vehicles. For more information, see PLR 202413004 and our July 2024 edition of REIT Tax News, addressing EV charging stations offered at no additional charge.
Proposed FIRPTA regulations may ease domiciliation for publicly traded foreign corporations
In Notice 2025-45, the IRS announced its intent to propose regulations under Sections 897(d) and (e) that would ease existing requirements under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). The proposed changes would allow publicly traded foreign corporations that are classified as US real property holding corporations to domicile to the US more easily through a tax-free “F” reorganization.
As a result, this change could facilitate access to US capital markets for these entities.
Possibility of a second 2025 tax bill
Despite the passage of the OBBBA, Congress is considering passage of another tax bill between now and the end of 2025, utilizing the FY2026 budget cycle’s reconciliation opportunity, which requires a simple majority in the Senate for passage.
Proposals that were included in earlier editions of the OBBBA, but ultimately excluded from the final law, have already resurfaced in initial conversations among tax writers, although their success will also depend upon Congress’s perception and ability to identify fiscally acceptable revenue offsets.
Some of the provisions currently being discussed include:
- The proposal for taxpayers to claim deductions under Section 199A for dividends from business development companies
- Increasing the Section 199A deduction to 23 percent
We will continue to monitor these developments and will provide updates as they become available.
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