The release is not a financial results update, but it does give a few concrete metrics tied to the company’s REIT status and tax exposure.
The company said it elected REIT treatment beginning with its short taxable year ending Dec. 31, 2009, and said it believes it has operated in a way that allows it to remain qualified. If it does qualify, it generally avoids U.S. federal income tax on income it distributes, but several specific tax charges still apply in certain cases.
Those charges include:
- A tax on any taxable income, including net capital gain, that it does not distribute in the year earned or within the allowed period after year-end.
- A tax at the highest corporate rate on income from foreclosure property and other non-qualifying foreclosure-property income.
- A 100% tax on income from sales of property held primarily for sale to customers.
- A 100% tax on income tied to failed gross income tests if the company still qualifies as a REIT through other rules.
- A penalty of the greater of $50,000 or the corporate tax rate on net income from non-qualifying assets if asset tests are missed by more than a de minimis amount, assuming the failure is corrected within six months.
- A $50,000 penalty for each non-gross-income, non-asset-test REIT qualification failure caused by reasonable cause rather than willful neglect.
- A 4% nondeductible excise tax if it fails to distribute at least 85% of REIT ordinary income, 95% of REIT capital gain net income, and any undistributed taxable income from earlier periods.
- A 100% excise tax on non-arm’s-length transactions with taxable REIT subsidiaries.
The release also says the company has received a private letter ruling from the IRS on certain hedging matters, but not on other issues discussed in the filing.
On ownership rules, the company said it believes it has “always had sufficient diversity of ownership” to satisfy the REIT tests requiring at least 100 beneficial owners and no more than 50% of shares owned by five or fewer individuals during the last half of the taxable year. It also said its charter restricts stock ownership and transfers to help maintain that status. As a result of these announcements, the company's shares have moved 0.87% on the market, and are now trading at a price of $16.27. For more information, read the company's full 8-K submission here.
