On September 27, the Trump administration and the Republican leadership in the House and Senate released a document called the “Unified Framework for Fixing Our Broken Tax Code” (the “Framework”), which lays out the core principles that are intended to guide the push for tax reform this fall and winter. The Framework updates the 2016 “Better Way Forward on Tax Reform,” commonly known as the “Blueprint.” The impact of the Blueprint on REITs was discussed by Jonathan Talansky and Pete Genzin February. While much of the Framework focuses on individual tax changes, there are also a number of important provisions

pertaining to business tax that could have an impact on REITs. Here are a few highlights:

Tax Rates. The Framework includes a maximum 20% tax rate for corporations and a 25% maximum tax rate on the business income of “small and family-owned businesses” that are operated as passthroughs. At this point, it is not clear whether that quoted language is just puffery or if there will be any kind of size limit on the 25% passthrough income rate. While neither of these provisions will directly apply to REITs, they are nonetheless important to REITs because the effect ive tax rate on alternative investment structures helps define the value of a REIT’s effective exemption from corporate tax. In other words, as the tax imposed on a regular C corporation goes down, the value of a REIT’s ability to not pay that tax goes down as well. On the individual side, the maximum tax rate is currently slated to be 35%, although the Framework leaves open the possibility of adding a higher rate bracket. The Framework does not explicitly address the current 20% tax rate on long-term capital gains (which also applies to capital gain dividends from REITs and all dividends from C corporations), which may indicate that the rate will remain unchanged, although there is uncertainty on this point.