Technology firms are increasingly looking to convince the government that they are, in fact, in the real estate business, according to the Wall Street Journal. If a firm can ditch its corporate tax status and become a non-taxed real estate investment trust, it stands to save millions in taxes.
American Tower, a cellphone tower operating firm, could save as much as $400 million per year by 2017, according to analysts, due to its new REIT tax status. Another tech firm, Equinix, and Iron Mountain, a data storage company, are both expected to save some $150 million a year in taxes as REITs.
However, some actual real estate executives worry that the tax dodge could cause a backlash in Washington, at a time when REIT profits are strong. The total market value of REITs rose to $451 billion in 2011 — up from just $9 billion in 1990, according to National Association of Real Estate Investment Trusts data cited by the Journal.
“The real-estate companies correctly are nervous about this phenomenon,” Kenneth Rosen, a real-estate economics consultant and former hedge fund manager, said. “The more it looks like a tax loophole, the more likely it is to affect them negatively.” [WSJ] – Christopher Cameron