U.S. Congress members urged Treasury Secretary Jacob Lew to deny Caesars Entertainment Corp. a favorable tax ruling relating to the casino operator's plan to create a trust to own its hotels and resorts, saying that doing so would amount to a taxpayer subsidy, Reuters reported yesterday. Lawmakers said in a May 26 letter to Lew that Caesars' plans to reorganize its bankrupt main operating unit into a casino operator and creditor-controlled real estate investment trust (REIT) abuses the unit's original intent of allowing small investors to diversify into real estate. Caesars put the unit into bankruptcy early last year. The proposed REIT spinoff provides favorable tax treatment and such trusts are more highly valued by investors, increasing the recovery for creditors who are owed $18 billion. The company last year applied for what is known as a private letter ruling from the Internal Revenue Service to confirm that the REIT would be treated as a tax-free separation. Caesars has warned that if it fails to get tax-free status it could incur significant liabilities which could undermine the value of the reorganization. "The REIT would effectively shelter a considerable portion of the casinos' profits, thus functioning as a taxpayer-funded subsidy to one of the largest casino companies in the U.S. and its private equity owners," said the letter.
