The House of Representatives approved legislation yesterday including provisions that would remove the tax advantages of spinning off corporate real estate into a separate, publicly traded real estate investment trust, the New York Times reported today. The end of such tax-free spinoffs will generate $1.9 billion in additional tax revenue in the coming years, the Joint Committee on Taxation has estimated. These spinoffs have been a popular tactic of activist investors who have pushed companies to unlock cash by separating themselves from their real estate holdings. Publicly traded REITs own property or mortgages and are not taxed so long as they pass most of their income on to shareholders. Companies that own a lot of real estate — mall operators, restaurant chains and even casinos — have looked at a spinoff to a real estate investment trust as a way of getting a higher value for those properties and using the cash to pay off debt. There have been 15 tax-free REIT spinoffs since 2010, including five last year and three this year, for a total of $21.6 billion, according to FactSet.
