Tax offerings for the real estate industry
Real estate investment trusts (REITs), private equity funds and other real estate owners and operators must competitively source and qualify investments, structure funds and effectively develop and operate their properties. From attracting initial capital to facilitating a successful exit, virtually every real estate-related decision and transaction has tax implications. To identify issues and deal breakers early on, real estate investors require in-depth due diligence from a tax perspective.
Deloitte can help.
Do you have the in-house resources to keep up with rapid changes in the tax landscape? How well-equipped is your tax department to handle emerging U.S. and international tax issues?
You should be familiar with how strategic investment structuring can impact federal, state and foreign income taxes — and therefore impact after-tax yield. And, of course, timely and accurate tax compliance is critical for complying with regulations, including, in the case of REITS, maintaining favorable tax status.
The Deloitte difference
In our work with leading REITs, private equity funds, and other real estate owners and operators, our clients describe a number of considerations that impact their operations today from a tax perspective. Among the most notable are:
- Tax due diligence
- Structuring investments and transactions, at home and abroad
- Tax compliance in an era of increasing complexity
- Adjusting to a challenging economic environment
These issues have both tax compliance and planning implications that should not be ignored. And these focus areas are made even more complex due to new tax rules and much higher rates effective in 2013, the prospect of tax reform, and an evolving menu of tax planning ideas and solutions. Although addressing them all can be a tough balancing act, doing so may uncover hidden value for your organization.
Tax due diligence
As you evaluate real estate investments, does your tax department have the personnel and resources to identify critical tax related issues, opportunities, and deal-breakers sooner rather than later?
If, like many companies in the real estate industry, you find your resources stretched, you may benefit from the financial and tax due diligence experience, the global scope, and the world-class credentials of Deloitte. We know how to work with REITs, private equity funds, and other real estate investors as they competitively source and qualify investment opportunities.
We provide companies with the strength of a multidisciplinary team. If you are investing internationally, our global network of member firms can help you become familiar with foreign geographies, meet with local professionals, understand business practices, and — in certain circumstances — provide support as you evaluate potential investments or joint venture partners.
Structuring investments and transactions
REITs and private equity investors structure their investments for a variety of stakeholders, such as individuals, foreign parties, including sovereigns and tax exempt institutions. How can you structure them to efficiently address the costs associated with income, asset, and transfer taxes and their impact on after-tax yield?
Choosing the appropriate investment structure and design is critical. This may involve a model that integrates finance and tax in order to reduce tax costs for the funds and its investors. Real estate firms must also carefully evaluate how to recycle capital. This may include strategic use of like-kind exchange transactions, and other tax efficient exit strategies.
Tax compliance in an era of increasing complexity: Adjusting to a challenging climate
Do you have the in-house personnel and resources to keep up with rapidly changing tax regulations? REITs and funds need to file reports in a timely, accurate fashion — not only with the regulatory authorities but with their investors. We can support you as you address these obligations. We also offer knowledge of the latest global, national, and local tax issues and accounting standards that may impact your approach.
If you manage a REIT, Deloitte also can help you understand the requirements for protecting your tax status. Based upon our experience working in this specialized sector, we know the rules with which you need to comply to maintain favorable tax status and we can advise you on the appropriate actions.
Foreign investment in real estate
Introduction to the Taxation of Foreign Investment in U.S. Real Estate
Real estate is very much a tax-driven industry. As a result, changes in U.S. tax policy have an impact on the relative attractiveness of real estate as an investment class for non-U.S. investors. Increases to the U.S. tax rates on capital gains, the taxation of the disposition of real estate and U.S. tax reporting requirements are often cited as examples of policies that create obstacles to investment. Over the years, real estate organizations in the United States have offered proposals that would provide some relief and have sought clarification of existing rules. These efforts have met with various degrees of success. For example, in recent years there have been numerous improvements and clarifications to tax rules governing the operations of Real Estate Investment Trusts (REITs). Additionally, the taxation of certain transactions involving the origination and modification of indebtedness has been somewhat relaxed as a response to the concerns of the impact of taxes on an already distressed economy.
Although there was not much legislative activity in 2013, examples of regulatory activity and tax policy proposals are impacting inbound investment. It is important that investors have an understanding of the tax rules currently in place in order to effectively develop a U.S. real estate strategy.
The attachment is an introduction to some of the more significant tax issues that should be considered by non-U.S. investors in this regard.
Deloitte’s integrated approach brings added value to our clients
To remain competitive in today’s real estate marketplace, companies need to tax-efficiently source investments, structure the acquisition and ownership vehicles, and comply with tax reporting requirements. Deloitte offers an integrated approach to client services. Our clients have access to real estate and tax specialists who understand their challenges and issues. Our professionals are active in the industry and recognized for their thought leadership.
Our strengths include:
- A solid and sustained track record in tax advisory services to the real estate industry
- A national team of real estate industry veterans dedicated solely to REITs, private equity funds, and other real estate owners and operators
- The deep resources of one of the largest tax practices in the United States
- Tax services that range from general tax compliance support to tax technical niche services
- Access to the specialized and extensive resources of Deloitte, its U.S. affiliates, and the member firms of Deloitte Touche Tohmatsu Limited and their affiliates