What's Happening?
RSM US LLP, a leading provider of audit, tax, and consulting services, emphasizes the growing importance of state and local tax (SALT) planning for real estate investment trusts (REITs). Historically, SALT considerations have been secondary to federal
tax issues and asset performance in investment strategies. However, as states expand their tax regimes, REITs face increased exposure to various taxes, including franchise, gross receipts, and sales taxes. This can significantly impact returns across the investment lifecycle. RSM advises that SALT planning should occur early in the investment process to avoid unexpected liabilities and optimize tax structures. The firm also notes the complexity of state taxation, which varies widely across jurisdictions, making standardized assumptions risky.
Why It's Important?
The emphasis on SALT planning is crucial for REITs as it can affect their financial performance and strategic decisions. With states seeking new revenue sources, REITs must navigate a complex tax landscape that can erode portfolio returns. Early and proactive SALT planning can provide a strategic advantage by preserving long-term value and minimizing tax liabilities. This shift in focus highlights the need for REITs to integrate comprehensive tax strategies into their investment planning, which can influence capital allocation and operational decisions.
