Break Offering Flexibility for REITs Included in Senate Tax Bill

The version of the giant tax bill the Senate approved Tuesday reinstates a provision aimed at providing real estate investment trusts with greater flexibility.

The Senate bill eases what’s known as the taxable REIT subsidiary asset test: The change would allow REITs to own as much as 25% of their assets in a taxable subsidiary, up from the current 20%, while maintaining their status as a REIT and thus providing tax benefits to their investors.

Many REITs establish taxable subsidiaries to hold certain investments or provide certain services to tenants of REIT-owned properties—such as landscaping, cleaning, and child care—that wouldn’t ...