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Law Firm Submits Comments on Proposed Cloud Transaction Regs

OCT. 24, 2019

Law Firm Submits Comments on Proposed Cloud Transaction Regs

DATED OCT. 24, 2019
DOCUMENT ATTRIBUTES
  • Institutional Authors
    Sullivan & Worcester LLP
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Tax Analysts Document Number
    2019-41080
  • Tax Analysts Electronic Citation
    2019 TNTF 210-18
[Editor's Note:

For the entire letter, including attachments, see the PDF version.

]

October 24, 2019

Internal Revenue Service
CC:PA:LPD:PR (REG-130700-14)
Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044

Re: Proposed Regulations, sections 1.861-18 and -19 (REG-130700-14): Classification of Cloud Transactions and Transactions Involving Digital Content

Ladies and Gentlemen:

I am responding to the request for comments on the proposed regulations under Section 861 of the Internal Revenue Code, REG-130700-14, published on August 14, 2019 and corrected on October 2, 2019 (the “Proposed Regulations”). Thank you for this opportunity to comment.

The Proposed Regulations are a welcome articulation of legal principles as applied to modern business models, including cloud transactions, and they represent an excellent first draft. However, I believe that the Proposed Regulations can be improved in five significant respects, as discussed below and as reflected in my proposed markup of the Proposed Regulations (attached as Exhibit A).

The five comments below and the attached exhibits reflect my own view of the applicable federal income tax issues as a practitioner and commentator on federal income tax law, and do not represent the views of my law firm, any client, any law school at which I teach, or any other person or organization. The intent behind these five comments is not to impact the application of the Proposed Regulations to standard cloud transactions between social media, streaming, or e-commerce companies (such as Facebook, Amazon, Netflix, and Google (“FANG”)) on the one hand, and their consumers or subscribers on the other hand. Instead, the comments are intended to pare back the Proposed Regulations so that they do not inadvertently apply to infrastructure providers who lease and otherwise make available real property and other infrastructure to FANG and similar commercial tenants.

I. Nonapplicability to sections outside of intended scope

First, the Proposed Regulations on cloud transactions (Proposed Regulations section 1.861-19) purport to be limited in application to only specific portions of the Internal Revenue Code of 1986, as amended (the “Code”), viz.: subchapter N of chapter 1; sections 59A, 245A, 250, 267A, 367, 404A, 482, 679, and 1059A; chapters 3 and 4; sections 842 and 845 (to the extent involving a foreign person); and transfers to foreign trusts not covered by section 679. The Proposed Regulations on digital content (Proposed Regulations section 1.861-18) purport to have a similar scope. However, according to the preamble, the Proposed Regulations interpret and apply principles under Code section 7701(e), a section which potentially applies throughout all of chapter 1 of the Code. As the next three comments in this letter discuss, lease-versus-service principles have been interpreted and applied differently in parts of the Code that are not within the scope of the Proposed Regulations.

Code section 7701(e)(6) provides the Treasury and the Internal Revenue Service (the “Service”) with the authority to “prescribe such regulations as may be necessary or appropriate to carry out the provisions of this subsection.” Under this grant of legislative authority, Treasury regulations may selectively apply Code section 7701(e) interpretations to specific parts of section 1 of the Code yet not to others.1 Accordingly, it would be helpful to have an explicit disclaimer in the preamble and in the application section of the Proposed Regulations that any purported interpretation and application of Code section 7701(e) principles in the Proposed Regulations do not apply outside of the intended scope of the Proposed Regulations, and thus for example do not apply to (and have no bearing on) lease-versus-service determinations under other chapter 1 provisions such as Code sections 163(j), 469, 512(b)(3), 542, 851-860, 7704, etc.2

II. Relevance and primacy of real estate location

Second, the implicit factual premise for many of the Proposed Regulations' examples is that the underlying real estate component is not explicitly or implicitly specified by the contractual relationship and is otherwise inconsequential to that contractual relationship. This premise should be made explicit, lest the examples be susceptible to an overbroad reading that impinges on long-established legal principles and business models regarding the rental of real estate in tandem with the rental of personal property.

For example, consider the case of an accountant, architect, or lawyer who provides services cross-border: although that professional must occupy some real estate somewhere, and although that real estate occupancy may represent a significant part of the professional's direct costs in delivering performance, it is nevertheless the case that the professional's underlying real estate component is not explicitly or implicitly specified by the contractual relationship and is in fact inconsequential to that contractual relationship. This “old economy” example is apposite to cloud transactions where the underlying real estate component is not explicitly or implicitly specified by the contractual relationship and is otherwise inconsequential to that contractual relationship, and the Proposed Regulations reach the right conclusions in respect of such fact patterns.

In contrast, however, there are a variety of co-location, space hosting, fiber supply, and cloud transactions where the customer contract specifies or contemplates performance at particular real estate (e.g., a building, a campus, or a real estate network), or where particular real estate is otherwise consequential to that relationship, in order to address the customer's needs around latency, redundancy, reliability, or security. Examples of these location-based arrangements include:

  • a customer so sensitive to distance (and the attendant latency that accompanies distance on account of the limited speed of light) that it wants its cloud transactions hosted within a particular data center or within a particular geography, in order to be as close as possible to other platforms, such as science or defense platforms;

  • a customer so sensitive to geographical diversification of its infrastructure access that it wants its cloud transactions hosted in diverse geographies away from the customer's primary business location, in order to be as insulated as possible from location-based risks such as natural disasters or terrorism;

  • a customer so sensitive to reliability and continuous availability of its infrastructure access (including the reliability of the underlying real estate) that it wants its cloud transactions hosted only in a particular data center network; and

  • a customer so sensitive to security of its infrastructure access (including physical security of the underlying real estate) that it wants its cloud transactions hosted in one of the provider's secure locations where only the provider's cleared security personnel have physical access.

As the old cliché goes, the three most important considerations in real estate are location, location, and location. Because real estate location is the economic driver in all of the above arrangements, the essence of each of the above contractual relationships is real estate access and occupancy, which is consistent with a rental relationship, and the related personal property assets (whether accessed/occupied on an exclusive basis or on a shared basis) are part of that overall real estate rental relationship.3 The resulting rental treatment of realty and tangential personalty is in accord with established legal precedent in various sections of the Code, as well as in established business and investment models of various taxpayers, including tax-exempt organizations, REITs, and individual investors subject to the passive activity loss rules, as discussed below and as illustrated by the examples in Exhibit B.4 Any temporary or final regulations dealing with cloud transactions containing a significant real estate component should therefore recognize and give proper weight to the real estate component.5

III. Economic possession is more important than physical possession

Third, the Proposed Regulations devote much attention to the physical possession and control of cloud infrastructure assets, while downplaying or ignoring the economic possession and control of such assets. This is fundamentally in error, because physical possession is significantly less relevant to this class of infrastructure assets. In particular, assets have value based on how they are used and deployed. Assets that are primarily physical (a shovel, a desk, a broom, etc.) have value based on who physically possesses and controls them. By contrast, cloud infrastructure assets (e.g., a computer or a server) have value based on who economically possesses and controls them, which requires having the access to and control over the assets' usage and capacity. For many cloud infrastructure assets, particularly those rented on a multi-tenanted, shared-access basis, ranging for example from servers to long-distance fiber lines, the infrastructure provider may have physical possession and control, but one or more customers have economic possession and control; that is, the customers have access to the assets to send instructions and otherwise control the assets so as to “use up” their capacity, which is really where the value in such assets resides. These rental principles are particularly salient when the access to the cloud infrastructure asset is provided in tandem with an overall real estate rental, as discussed in the above data center examples. Thus, it is incorrect to say that a customer has no possession and control over cloud infrastructure assets simply because it does not have physical possession and control, when in fact it has the form of possession and control (i.e., economic possession and control) that is most salient to the subject assets.6

Fairly applying the concept of economic possession and control, i.e., alongside and with at least as much weight as the concept of physical possession and control, necessitates certain changes to the operative principles in Proposed Regulations § 1.861-19(c) and the examples in Proposed Regulations § 1.861-19(d), all as reflected in the attached Exhibit A. For example, the customer has neither physical possession and control nor economic possession and control in most of the examples presented in Proposed Regulations § 1.861-19(d), and thus no changes are needed. But as for Example 1 in Proposed Regulations § 1.861-19(d)(1), Example 2 in Proposed Regulations § 1.861-19(d)(2), and Example 8 in Proposed Regulations § 1.861-19(d)(8), each provides the customer with significant to exclusive use of the designated servers, and thus the customers have economic possession and control that must be addressed both in context and with a more nuanced analysis. In these three examples, I recommend that other contextual factors become controlling, particularly the fact that the physical location of the servers is not a significant factor in the customer relationship between Corp A and Corp B. Cumulatively, these other factors then lead to the same final answer: the described transaction represents the provision of services rather than a lease of property. In brief, I recommend that the Proposed Regulations put the two types of possession and control — physical and economic — on a more equal and balanced footing, while keeping in mind that other factors (such as the presence of underlying real estate access) will be highly probative to dispositive where one party does not have both types of possession and control.

IV. Enumerated factors should be applied more realistically

Fourth, I have one comment that is not included in the attached Exhibit A markup of the Proposed Regulations but which may be among the most important of all.7 I believe that some of the factors enumerated in Proposed Regulations § 1.861-19(c)(2) as “demonstrating that a cloud transaction is classified as the provision of services rather than a lease of property” are misapplied and/or overemphasized in that (as drafted and applied) the factors seem to sweep in multi-tenanted, shared-access rental arrangements. For example, the factor identified in Proposed Regulations § 1.861-19(c)(2)(iv) (which my markup moves to -19(c)(2)(v))8 is a factor that applies to most real estate landlords and other lessors of multi-tenanted property, because such lessors by definition must have “integrated operations” (including maintenance, replacement, and rental-related services) extending beyond the mere net lease of property in order to remain competitive in the leasing marketplace.9 Thus, this factor, which is not one of the statutory factors enumerated in Code section 7701(e)(1), adds little if anything to the lease-versus-service determination.

Similarly, two statutory factors enumerated in Code section 7701(e)(1)(E) and (F), which are then replicated in the negative in Proposed Regulations § 1.861-19(c)(2)(vii) and (ix)10 (and which my markup moves to -19 (ix) and (xi)), ignore the fact that shared rental arrangements for real property (and associated personal property) are legion throughout the Code. These two factors contend that if the provider uses the property to provide significant services for more than one entity or if the total contract price substantially exceeds the rental value of the property, then the contractual relationship is more likely a provision of services. Yet there are plenty of examples of multi-tenanted property (real and/or personal) throughout section 1 of the Code that are treated as leases and not services; by way of illustration but not limitation, Exhibit B provides a detailed list of administrative pronouncements by the Service analyzing such real-world business models of multi-tenanted assets.

More conceptually, the economic reality is that there is often more than one rental price for an asset, in that an asset owner can sometimes realize higher aggregate rents by renting out smaller amounts of capacity in a “retail” model rather than larger amounts in a “wholesale” model. This business reality in fact underlies almost all of the examples enumerated in Exhibit B and undercuts the lease-versus-service predictive value of these two factors, particularly in a case where human services have not been added to the mix in any significant measure. More telling, even if the asset provider reserves part of the asset's capacity for its own use in a service business, this does not dictate that the asset provider's contractual relationship with a lessee-customer is for the provision of services rather than a rental. For example, consider a boat repair business that owns a portable generator which it uses on weekdays for its boat repair activities and for selling excess electricity to the grid, but which also leases the portable generator on a long-term basis for weekend use to a nonprofit, religious organization. The fact that the generator is primarily used by the boat repair business to provide significant services to others should have zero impact on the treatment of its weekend use as a rental.

Along the same lines, Proposed Regulations § 1.861-19(c)(2)(viii) (which my markup moves to -19(c)(2)(x)),11 which is also not specifically enumerated in Code section 7701(e)(1), is another problematic factor, in that it treats pricing based on the level of the customer's use rather than the mere passage of time as indicative of services rather than a lease. However, even low-tech uses (such as leasing access to shared land areas or leasing building lobby space for an ATM machine) clearly provide for rent based on the level of use, and the fact that the analysis in the Proposed Regulations is performed on cloud transactions instead of physical transactions should not alter the well-established principle that revenues under long-term rental arrangements can be based on volume of use (e.g., so-called “percentage rent”) rather than mere lapse of time. That is, it is both commonplace and commercially sensible for a landlord to charge a tenant an amount of rent that is based on the amount or the volume of a tenant's actual or expected access to and use of common areas or other shared occupancy real estate (and tangential personalty), as decades of private letter rulings demonstrate.12

In short, the four enumerated factors discussed above that purport to militate toward services rather than rental, which factors are enumerated in Proposed Regulations § 1.861-19(c) and then superficially applied in Proposed Regulations § 1.861-19(d), fail to account for the complexity of many multi-tenanted rental relationships. A better approach may be to give these four factors less-to-no weight in the analysis, or perhaps relegate them to a secondary-and-less-impactful list of factors.

V. Landlord services are consistent with rental relationships

My last comment is in many ways a continuation of my prior comments,13 but one that is directed squarely toward a fundamental premise of the Proposed Regulations that each transaction be “classified solely as either a lease of property or a provision of services”.14 This “all-or-nothing” or “either/or” approach simply does not reflect the reality of landlord/multi-tenant relationships, which customarily include both the provision of property and the provision of related services. Thus, for example, within the REIT industry and pursuant to leases and other occupancy agreements, landlords lease out to multiple tenants applicable real estate (and related personalty), and provide both customary and cutting-edge services to those tenants pursuant to such leases and occupancy agreements;15 this same point is equally true for leasing by other landlords such as tax-exempt entities16 and publicly traded partnerships.17

Much of the difficulty with the Proposed Regulations stems from the application of this false “all-or-nothing” dichotomy, in that typical landlord-provided services at multi-tenanted facilities become a “tail” that “wags away” (and obscures) the underlying rental relationship. If instead the Proposed Regulations accept the commercial reality that rental relationships (particularly multi-tenanted rental relationships) include landlord-provided services, and accordingly apply whatever cross-border treatment the Treasury and the Service think best to handle the components of the overall rental-plus-services relationship, then these Proposed Regulations would conform more closely to the way that other Code sections treat such rental arrangements. For example, a REIT may earn service revenues related to its real estate rental relationship without repercussion for purposes of Code section 856 (provided that, in the case of cutting-edge services, the REIT subcontracts out such services either to a third party contractor or to a taxable C corporation subsidiary).18 Of course, any bifurcation approach would require a fundamental rethinking of the scope, framework and architecture of the Proposed Regulations; but adopting such a bifurcation approach would align the Proposed Regulations with how other Code sections have treated rental-plus-service relationships over the decades.

VI. Conclusion

Each of the five comments above (as supported by the attached exhibits) represents an infirmity with the current draft of the Proposed Regulations, and adopting the various measures advocated herein would address those infirmities. I thus request that changes addressing these five comments should be adopted prior to the Proposed Regulations being finalized.

Thank you again for the opportunity to comment on the Proposed Regulations. Please feel free to contact me if you would like to discuss the attached comments or otherwise have any questions.

Respectfully submitted,

Ameek Ashok Ponda
Direct line:617-338-2443
aponda@sullivanlaw.com
Sullivan & Worcester
Boston, MA

Attachment 

FOOTNOTES

1Additional authority for this approach may also be grounded in section 7805(a) of the Code, a general grant by Congress of regulatory authority over the Code. Courts generally have applied a highly deferential standard of review to properly issued regulations, according them “controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.” Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844 (1984). The Supreme Court ruled that Chevron deference applies to tax regulations in Mayo Found. v. United States, 562 U.S. 44 (2011), and that the Administrative Procedures Act (“APA”) requires any administrative action undertaken under the authority of a regulatory project to be subject to the APA's notice-and-comment procedures and to have the reasoning underlying such regulations explicitly documented in the regulatory record. After all, “courts cannot perform executive duties, or treat them as being performed, when they have been neglected.” United States v. McLean, 95 U.S. 750, 753 (1878). This project thus presents an opportunity to add substance to the regulatory mandate in section 7701(e)(6) and also to prevent the Proposed Regulations from being applied inappropriately.

2In total, some 46 different provisions in chapter 1 of the Code explicitly use the term “rent”. Also, varying section 7701 definitions are currently deployed in the federal income tax law to suit the particularized purposes of varying Code sections. For example, disregarded entities under the federal “check-the-box regulations” in Treasury Regulations sections 301.7701-1 through 301.7701-3 are nevertheless regarded as corporations for purposes of employment taxes, as prescribed by Treasury Regulations section 301.7701-2(c)(2)(iv)(B) (generally, “an entity that is disregarded as an entity separate from its owner for any purpose under this section is treated as a corporation with respect to [employment] taxes”). See Brian E. Hammell, Caroline A. Kupiec, and Ameek Ashok Ponda, “'Cogito, Ergo Sum': Is That Disregarded Entity In Fact Regarded?”, J. Passthrough Ent. (CCH) 53, 55 (July-August 2019), available at http://sitepilot06.firmseek.com/client/sullivan/www/assets/htmldocuments/JPTE_22-04_Hammell-Kupiec-Ponda.pdf.

3See, e.g., Code sections 512(b)(3)(A)(ii) and 856(d)(1)(C).

4Some arrangements may more appropriately be handled through the use of contracts styled as licenses or even as service contracts rather than as leases, but they still relate to the use of space rather than the performance of services and should be treated as rental arrangements, not services arrangements. This may be illustrated by the many sections of the Code that adopt a very expansive definition of the term “rental activity” that includes arrangements not designated as leases. For example, Treasury Regulations § 1.469-1T(e)(3)(i) provides:

Except as otherwise provided in this paragraph (e)(3), an activity is a rental activity for a taxable year if —

(A) During such taxable year, tangible property held in connection with the activity is used by customers or held for use by customers; and

(B) The gross income attributable to the conduct of the activity during such taxable year represents (or, in the case of an activity in which property is held for use by customers, the expected gross income from the conduct of the activity will represent) amounts paid or to be paid principally for the use of such tangible property (without regard to whether the use of the property by customers is pursuant to a lease or pursuant to a service contract or other arrangement that is not denominated a lease).

See also Dirico v. Comm'r, 139 T.C. 396, 408-09 (2012) (licenses of space are rental activities under Code section 469); PLR 201423011 (Feb. 20, 2014) (taxpayer's use of agreements labeled as “master service agreements”, “service agreements”, or similar titles granting “customers” a license to use specific space nevertheless generated rents from real property under Code section 856, because "[a]lthough the labels are different, [these agreements] grant the tenants the same rights they would have under a traditional lease”). For a recent case concerning section 469 and the definition of leasing, see Eger v. United States, 124 AFTR 2d 2019-5717 (RIA) (N.D. Cal. 2019) (in which the gating question was whether a leasing arrangement should be evaluated using the standards that apply between the landlord and its intermediaries or between the landlord and the end users; the court decided to use the standards that apply between the landlord and the end users and disregard the intermediaries).

5A different, “super factor” approach to this issue would be to specifically exclude from the definition of “cloud transaction” in Proposed Regulations §1.861-19(b) any transactions in which the physical location of the property used in the transaction is either specified in the contract or consequential to the customer relationship. Yet another approach would be to employ a multi-tier system, such as the theoretical three-tier system proposed by the Organization for Economic Co-operation and Development (“OECD”) in its “Secretariat Proposal for a 'Unified Approach' under Pillar One” (issued on October 9. 2019), under which a share of deemed residual profit is allocated to market jurisdictions under a new taxing right but another share is allocated to traditionally-taxed functions, which would include the use of real property and rental space as well as related personalty and rental-related services, with a dispute prevention and resolution mechanism to be implemented to resolve disputes between the claims of various jurisdictions over these two different methods. See the OECD Public Consultation Document on this proposed approach, available at https://www.oecd.org/tax/beps/public-consultation-document-secretariat-proposal-unified-approach-pillar-one.pdf.

6For example, the city of Chicago, Illinois applies a personal property tax to “nonpossessory computer leases” that it deems are used within the city of Chicago but are located outside the city. It defines a “nonpossessory computer lease” as “a nonpossessory lease [previously defined as 'a lease or rental wherein use but not possession of the personal property is transferred'] in which the customer obtains access to the provider's computer and uses the computer and its software to input, modify, or retrieve data or information, in each case without the intervention (other than de minimus intervention) of personnel action on behalf of the provider. . . . In the case of a nonpossessory computer lease, the location of the terminal or other device by which a user accesses the computer shall be deemed to be the place of lease or rental and the place of use of the computer for purposes of the tax imposed[.]” See City of Chicago, “Personal Property Lease Transaction Tax Ruling #12” (June 9, 2015), available at https://www.chicago.gov/content/dam/city/depts/rev/supp_info/TaxRulingsandRegulations/LeaseTaxRuling12-06092015.pdf; City of Chicago, “Information Bulletin: Nonpossessory Computer Leases”, available at https://www.chicago.gov/content/dam/city/depts/rev/supp_info/ TaxSupportingInformation/TransTax/nfoBulletinNonpossessoryComputerLeases.pdf. Accordingly, this Chicago tax is applied based on economic possession and control, not physical possession and control, as discussed in this section.

7Addressing this fourth comment would require significantly more edits to the Proposed Regulations, and the resulting redline would overwhelm and obscure the more surgical changes described in the prior three comments. For that reason, I have not marked up the Proposed Regulations to reflect this fourth comment, but I would be happy to do so upon request.

8“The property is a component of an integrated operation in which the provider has other responsibilities, including ensuring the property is maintained and updated[.]”

9See Paul W. Decker, David H. Kaplan, & Ameek Ashok Ponda, Non-Customary Services Furnished by Taxable REIT Subsidiaries, 148 Tax Notes 413 (July 27, 2015), available at https://www.sullivanlaw.com/assets/htmldocuments/B1910892.pdf, for a history of landlord activities beyond the mere lease of property and their treatment under Code section 856.

10(vii): “The provider uses the property concurrently to provide significant services to entities unrelated to the customer[.]”; (ix): “The total contract price substantially exceeds the rental value of the property for the contract period[.]”

11“The provider's fee is primarily based on a measure of work performed or the level of the customer's use rather than the mere passage of time[.]”

12See, e.g., PLR 201907001 (Nov. 16, 2018) (tenants share access to pipeline and to storage area, in which tenant goods are commingled, and each tenant pays for its own volume of use); PLR 201151013 (Sept. 13, 2011) (where landlord and tenant share access to surface, tenant pays landlord a rental charge based on the volume and amount of use by tenant of the surface, citing Vest v. Comm'r, 481 F.2d 238 (5th Cir. 1973), cert. denied); PLR 200428019 (Mar. 25, 2004) (warehouse REIT leased generally nondedicated storage space to food manufacturers, distributors, and retailers; all or substantially all of the leased space was shared by multiple tenants, such that tenants typically did not have reserved storage locations within a particular facility; finally, rents were based on the amount of space that customers used, which relates closely with storage volume (cubic footage)); PLR 200052031 (Sept. 29, 2000) (tenant pays landlord a rental charge based on the number of times that tenant's automated teller machine located in the lobby of landlord's building, i.e., a common area of the building, is accessed); and PLR 200052021 (Sept. 28, 2000) (where landlord and tenant share access to surface, tenant pays landlord a rental charge on the volume of use by tenant, measured as the amount of timber severed). See also PLR 201250008 (Aug. 31, 2012) (where landlord and tenant share access to surface, tenant pays landlord a rental charge based on the amount of damage to the surface caused by tenant, which is a proxy for tenant's volume of use of the surface) and PLR 201250003 (Sept. 6, 2012) (on an oil drilling platform, rental charges are apportioned to tenants based on amount of production handling capacity used).

13I separated this discussion from the previous comment and saved it for last, because the comment also appears to be a “super factor” that might require a fundamental rethinking of the scope, framework and architecture of the Proposed Regulations. As with my fourth comment, this fifth comment is not included in the Exhibit A markup because that would require significant edits to the Proposed Regulations, and the resulting redline would overwhelm and obscure the more surgical changes described in the first three comments.

14Preamble to the Proposed Regulations, “Explanation of Provisions”, section I.B.1. The Preamble continues as follows:

Certain cloud transactions may have characteristics of both a lease of property and the provision of services. Such transactions are generally classified in their entirety as either a lease or a service, and not bifurcated into a lease transaction and a separate services transaction.

This standard is then included in Proposed Regulations § 1.861-19(c)(1):

A cloud transaction is classified solely as either a lease of computer hardware, digital content (as defined in § 1.861-18(a)(3)), or other similar resources, or the provision of services, taking into account all relevant factors[.]

15See Code section 856(d) and Rev. Rul. 2002-38, 2002-2 C.B. 4, and the approved REIT leasing models described in Exhibit B. See also Decker, Kaplan, and Ponda, supra note 9, at 414, for a discussion of a REIT landlord's responsibilities:

As demonstrated by the requirements above, a REIT's primary function under the code is to hold and lease [out] real property for occupancy. As with all landlords, REITs must also provide a variety of related services to their tenants.

16See Code section 512(b)(3) and Treasury Regulations § 1.512(b)-1(c), and the approved tax-exempt leasing models described in Exhibit B.

17See Code section 7704(d), and the approved publicly traded partnership leasing models described in Exhibit B.

18See supra note 15.

END FOOTNOTES

DOCUMENT ATTRIBUTES
  • Institutional Authors
    Sullivan & Worcester LLP
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Tax Analysts Document Number
    2019-41080
  • Tax Analysts Electronic Citation
    2019 TNTF 210-18
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