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Clinton sewing up loopholes
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January 29, 1998: 9:00 a.m. ET
Administration proposal targets 'paired share' tax structure in reform package
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NEW YORK (CNNfn) - President Clinton reportedly is proposing a set of initiatives to close corporate tax loopholes including revising the so-called "paired share" status that has helped fuel aggressive expansion by qualifying real estate investment trusts (REITs).
The proposals are expected to be included in a $23 billion revenue-raising packaged Clinton will unveil next week, the Wall Street Journal reported Thursday. The administration's real estate proposal would raise only about $100 million over five years.
The "paired share" tax structure permits qualifying REITs to both own and manage their properties, thereby lowering their corporate tax obligations. The strategy was outlawed by the Tax Reform Act of 1984 but five REITs were grandfathered to allow them to operate under the tax status.
Since then, those REITs (which include Starwood Lodging Trust and Patriot American Hospitality Inc.) have taken advantage of the "paired share" structure to help finance a string of high-profile acquisitions.
Under the president's proposal, the administration hopes to establish an effective date to close expansion of such entities. The proposal doesn't attempt to close them down entirely.
The administration hopes the Treasury will work with Congress to set what one aide described as a "generous" effective date, allowing all pending deals to clear before the limits take effect, the Journal reported.
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