It will make a dent in your tax bill, trust me:
"Growing recognition of ‘real estate’ cuts firms’ tax bills" by Jack Newsham | Globe Correspondent August 17, 2014
To the untrained eye, the steel racks Iron Mountain uses to store documents and electronic records look like the shelves in any old warehouse.
But as the Internal Revenue Service sees it, those racks are actually real estate, just like an office building or a parcel of land. The tax agency ruled in June that the Boston company can reorganize as a real estate investment trust, or REIT, providing a tax savings of $130 million to $150 million annually.
Iron Mountain’s move is part of a trend that has seen the number of publicly traded REITs rise more than 50 percent to 209 from 136 in 2008, according to the National Association of REITs. In addition to the tax savings for the company, those stocks have become popular on Wall Street for their healthy dividends.
Then things are all right-$ide up.
In recent years, the IRS has said crops on agricultural land, an off-shore oil platform, gas pipelines, billboards, and the powerful electrical and air conditioning systems used by Internet data centers all qualify as “real property,” making their owners eligible to form real estate trusts and cut their tax bills. In 2011, the most recent year for which data is available, there were nearly 1,700 private REITs, in addition to those traded in stock markets.
“Fifty years ago, when we talked about real estate, we talked about office buildings and the elevators inside of them,” said Martin Sullivan, the chief economist at Tax Analysts, a Virginia publisher of tax news and commentary. Today “all bets are off. There is no dividing line between real estate and anything else.”
A private corrections company became a REIT last year on the grounds its prison cells were real property and that its armed guards provided a service for its “government tenants,” similar to a doorman serving the residents of an apartment tower. The year before, Penn National Gaming created a REIT to own 17 of its 26 casinos and racetracks, and now its real estate entity is more valuable on Wall Street than Penn itself.
Penn officials could not be reached for comment Friday.
REITs have become particularly popular during the economic recovery as investors gyrate toward stocks that pay high dividends. Under federal law, REITs are required to distribute 90 percent of their profits to stockholders, which helps them reduce or eliminate their tax liability.
“Because of the recession and the desire for steady yield, REITs all of a sudden have become hot,” said Kelly Kogan, a tax attorney and REIT specialist. “You have everyone and their mother saying, ‘OK, I wanna be a REIT.’”
Last month when Iron Mountain announced its long-sought REIT conversion would happen, the company’s stock jumped 17 percent. And in 2012, the GEO Group, the country’s second-largest operator of private prisons, distributed $350 million to shareholders as part of changing to a REIT.
There are barriers and disadvantages to becoming a REIT. It is time-consuming and costly for the company. Moreover, REITS have to operate under rules that may be too restrictive or cumbersome for some companies, and the dividend payouts limit the profits companies can reinvest.
But a Republican leader in the House of Representatives wants to block the rush to form REITs. With the surge in real estate trusts costing the US government billions in lost tax payments, Representative Dave Camp of Michigan, who chairs the House Ways and Means Committee, has drafted a massive tax reform bill that would reverse past IRS rulings and outlaw many REIT conversions.
“The REIT rules were not intended to facilitate erosion of the corporate tax base,” the Ways and Means Committee said in a document accompanying a draft of the tax proposal.
That is why he was served a subpoena by the SEC.
By law, REITs must generate three-fourths of their income from real estate. And in addition to land and buildings, the IRS has said that real property can include “inherently permanent structures” and their “structural components.”
By that definition, then, the IRS has said “steel racking structures” Iron Mountain uses to store its customers’ records, the framing that attaches billboards to buildings, trees used in timber harvest, and towers used to hold cellphone antennas all qualify as real property.
The IRS declined requests for comment. In 2012, the tax agency told the Wall Street Journal that “sometimes newly developed assets” meet the definition of real estate, and approving those REIT conversions “should not be confused with a relaxation of the standards themselves.”
But Camp’s legislation would limit the types of assets that would qualify as real estate....
But, but, but.... Republicans are the bad guys.
The proposal would also explicitly exclude trees used in timber harvests from real property. Weyerhaeuser Co., one of the nation’s largest owners of timberland and makers of wood and paper products, became a REIT in 2010. Weyerhaeuser declined to comment.
Oh, he pi$$ed off that plunderer of forests like he is some sort of.... environmentalists?
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In a statement, Iron Mountain spokeswoman Melissa Mahoney declined to comment on the proposed legislation, but said the company sees “no controversy” in declaring its racking to be real property.
“Our steel racking structures are permanent and integral to our buildings,” said Mahoney. “The IRS agreed and they are the authority.”
Leaves me feeling melancholy.
It’s unclear whether Camp’s proposal, if enacted, would force Iron Mountain or other non-traditional trusts to revert back to being corporations because their property would no longer qualify as real estate. Camp’s office declined to comment, but the language in the Ways and Means proposal suggests those companies would lose their tax-free REIT status.
“That’s the dilemma of changing course midstream,” said Ed Glazer, a tax attorney at Boston law firm Goodwin Procter who has analyzed Camp’s proposal.
Glazer said Congress could either force some REITs to convert back, a hugely disruptive process, or allow those companies to retain their tax advantage, which is also problematic.
I'll bet that bill gets camped out in committee.
“When Congress has tried to do that in the past, that raises all kinds of fairness issues — giving some companies an advantage over other companies in that business,” Glazer said.
The Congressional Joint Committee on Taxation estimates that Camp’s restrictions on REITs would generate around $7.5 billion in tax revenue over the next 10 years.
Not much at all.
Camp’s proposal is a long way from becoming law. Glazer expected it would undergo changes before the Ways and Means committee formally submits it as legislation.
Robert Willens, a tax and accounting specialist widely followed on Wall Street, argued that the IRS had not overreached in defining real estate, but rather simply applied those definitions to structures and technologies that didn’t exist when REITs were created in 1960....
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Another green mon$ter:
"Bid to expand medical marijuana business faces federal hurdles" by Dave Philipps | New York Times August 24, 2014
WRAY, Colo. — Behind a tall curtain of corn that hides its real cash crop from prying eyes, the Stanley family is undertaking an audacious effort to expand its medical marijuana business to a national market.
For years, the five Stanley brothers, who sell a nonintoxicating strain of cannabis that has gained national attention as a treatment for epilepsy, have grown medical marijuana in greenhouses, under tight state and federal regulations.
But this year, they are not only growing marijuana outdoors by the acre, they also plan to ship an oil extracted from their plants to other states.
The plan would seem to defy a federal prohibition on the sale of marijuana products across state lines. But the Stanleys have justified it with a simple semantic swap: They now call their crop industrial hemp, based on its low levels of THC, the psychoactive ingredient in marijuana.
“The jump to industrial hemp means we can serve thousands of people instead of hundreds,” said Jared Stanley, 27, who wore muddy Carhartts and a rainbow friendship bracelet as he knelt down to prune his plants.
Colorado, which has legalized the sale of marijuana for recreational and medical use, has accepted the new designation. But the real question is whether the federal government will go along. If it does, the impact would be significant, opening the door to interstate sales not just by the Stanleys, but possibly by scores of other medical cannabis growers across the country.
But if it does not, the Stanley brothers could be shut down by federal agents.
So far, the Drug Enforcement Administration is offering few clues, insisting in public statements that while it is willing to allow marijuana sales in states that have legalized the drug, it might step in if growers try to sell beyond state borders.
“Any chemical that comes from the plant is still a controlled substance,” said Dawn Dearden, an agency spokeswoman. “When we get into hemp, it gets a little squishy, but it still is illegal.”
The Stanleys’ quest to ship their oil to other states highlights the fraught marijuana legal landscape where state and federal laws conflict and federal agencies can have divergent policies, leaving laws sometimes enforced, and sometimes not.
“This is the mode we will be in for some time,” said Sam Kamin, a law professor at the University of Denver who studies cannabis law. “As marijuana becomes more legal in more states for more purposes, the tension with the federal law will become more pronounced.”
The hazy legality of hemp can be seen in products like hemp granola and shampoo, which are allowed to fill health food store shelves even though they technically violate federal drug laws. All those products are made from imported hemp, which has generally been permitted into the country so long as it has less than 0.3 percent THC.
If the Stanleys ship their oil, industry watchers say, it will be the first time in decades anyone has tried to sell domestic hemp nationwide.
Is it meant to conflate the two and end the indu$try for good?
In recent years, hundreds of families with children who have epilepsy have moved to Colorado to try oil made from the Stanleys’ shrubby strain, which they call Charlotte’s Web. The national Epilepsy Foundation has called for it to be available to all patients, although formal research into its effectiveness remains scant. There is a nationwide waiting list of more than 9,000, which the brothers hope to eliminate by expanding their crop from small greenhouses into vast hemp fields.
“We are hoping the enforcement agencies have bigger fish to fry and don’t want to take a bunch of medicine away from sick kids,” Stanley said. “But if they are going to do it, we’re all in. If you are going to be locked up, it’s a thing worth getting locked up for.”
The brothers, who had a Christian upbringing in conservative Colorado Springs, started a small medical marijuana business in 2008 after seeing the relief it brought to a relative sick with cancer.
Don't believe your lying eyes.
At first, they grew mostly marijuana high in THC that packed a serious psychoactive punch.
On the side, they experimented with breeding plants low in THC but high in another cannabinoid known as cannabidiol, or CBD, which scientific studies suggested was a powerful antiinflammatory that a handful of small studies showed might have potential as a treatment for certain neurological conditions, including seizures and Huntington’s disease.
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Having a hard time keeping my focus:
"Brookline residents urge state to strip medical marijuana company’s license" by Kay Lazar and Shelley Murphy | Globe Staff August 21, 2014
More than 100 Brookline residents are urging state regulators to strip a medical marijuana company of its provisional license to operate because its leaders “violated the public trust,” according to a letter sent Tuesday to the state health department, governor, state lawmakers and town’s Board of Selectmen.
I hope I cleared up the confusion regarding how I felt about the issue.
The state last week put New England Treatment Access Inc.’s licenses on hold, after the Globe reported that its executive director, Kevin Fisher, wrongly claimed on the dispensary applications that he had a college degree.
(Blog editor coughs out exhale)
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Fisher resigned his position with New England Treatment last weekend, and the company assured state regulators he would have no further role in its operations.
But some Brookline residents said the damage has been done.
That is heroin, not pot.
Their letter to state leaders notes that two prominent individuals listed in the company’s winning applications, former US representative Barney Frank and scientist Raphael Mechoulam, an Israeli biochemist known for his marijuana research, have since left the company. That, they said, “raised real concerns that [state regulators] were misled into believing that Congressman Frank and Dr. Mechoulam would have an ongoing role in the company.”
It's only legal so certain intere$ts can benefit.
Frank was listed in the application as director of government and community relations, “responsible for addressing relationship-building opportunities with elected and appointed officials, and the community at large.” Mechoulam was listed as director of science and research, “responsible for discovering palliative applications for cannabis-derived products.”
A company spokeswoman said Wednesday that both departures were reported to state regulators March 20.
Fisher said in an interview with the Globe earlier this month that the company was forced to drop Mechoulam after learning that a background check could potentially take months because he is an Israeli citizen — possibly jeopardizing or delaying its application.
Frank told the Globe he signed on to help the dispensary deal with only one issue — neighborhood opposition in Brookline. Frank has been a longtime supporter of legalizing marijuana and represented Brookline in Congress. But when the organization didn’t use a letter he wrote the town, he resigned in March — saying he didn’t want to get paid to do nothing.
Since when?
One Brookline resident who still has faith in New England Treatment is Democratic state Representative Frank Smizik.
“Because this guy lied about his college education doesn’t mean they aren’t going to do a good job,” Smizik said.
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Brookline’s bylaws require companies seeking to open a marijuana dispensary to receive a license from the town’s Board of Selectmen. But the board’s chairman, Ken Goldstein, said Wednesday that New England Treatment is likely to encounter problems, even if the state allows it to proceed.
“There was a lot of support in Brookline for the idea of medical marijuana in general,” Goldstein said. Letters from the town’s administrator and public health director supporting the idea of a dispensary in Brookline were included in New England Treatment’s license application to the state last November.
“But credibility is at the heart of the licensing process for this proposal,” Goldstein added. “And I have some very serious concerns about the credibility of this applicant after the revelations.”
So which company I$ getting the contract?
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Serious concerns about credibility there, too.
Related: Judge rejects medical marijuana licensing injunction
They must have Good Chemi$try!
City clears TD Garden on allegations from concert
You can still go clubbing.
The green mon$ter from the $ea:
"Future of Export-Import Bank on ropes; Republicans in Congress want to kill the Export-Import Bank. Supporters say the federal agency helps US business compete in the global economy" by Jack Newsham | Globe Correspondent August 24, 2014
The Export-Import Bank — Ex-Im, for short — is a federal agency that for the past 80 years has been the primary means of government support for US companies trying to expand into overseas markets. Providing credit, insurance, and other services, the bank in 2013 alone helped over 3,000 US businesses export $46 billion in goods and services.
But the future of the Export-Import Bank is now at the center of another battle in Congress as Republicans, who control the House of Representatives, threaten to dismantle the program after the bank’s operating authority expires at the end of next month. Once again, the debate focuses on government’s role in the economy as Republicans argue that the Ex-Im bank’s activities amount to corporate welfare and are best left to private financial firms.
The outcome will affect scores of Massachusetts companies that use the Export-Import Bank to gain and expand overseas sales. Since 2007, the bank says, it has helped 160 Massachusetts companies export $4 billion worth of products. Most are small businesses.
The example is "six of 24 employees that owe their jobs to international sales [and they] hope to add four a year" -- meaning no one in America is buying things.
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The Export-Import Bank was created by President Franklin D. Roosevelt in 1934 as a way to create jobs when the nation, mired in the Great Depression, desperately needed them. Banks, worried about their survival, were reluctant to extend the credit that companies needed to sell overseas, since the complex international trading system of the time could tie up even the simplest deals for months.
Looking back through history and the New Deal begins to look like a Bad Deal. The fact that the history books say otherwise really raises a red flag. Even the flag$hip of Social Security has been looted.
To expedite the process, the Ex-Im Bank would essentially front payments to US sellers on behalf of foreign buyers, then collect — with interest — when the money came through. The system not only accelerated trade and put more Americans to work, but also supported itself.
Today, the Ex-Im Bank offers more services, like insurance for transactions and multiyear loan terms. It usually ends the year with a surplus from the fees and interest it charges, which it turns over to the Treasury. Last year, the Ex-Im Bank returned $1 billion.
Yeah, somehow the US government, and by extension taxpayers, always make out on these corporate tax subsidies and bailouts.
But some congressional Republicans and libertarian analysts say the Ex-Im Bank isn’t worth it. They’ve accused it of “crony capitalism” for helping well-connected corporations like Boeing, which was involved in more than a third of long-term financing deals the bank made in its last fiscal year. While Ex-Im says nearly 90 percent of its clients are small businesses, the bank’s critics point out that most of the money — 80 percent — goes to large corporations, such as Boeing Co., the Chicago aerospace company.
Related: Begging Boeing
In a television appearance, House majority leader Kevin McCarthy said he sided with critics who have accused the bank of “crony capitalism” for helping giant businesses more than small ones. “I think Ex-Im Bank is one that government does not have to be involved in,” said McCarthy, a California Republican. “The private sector can do it.”
McCarthy, through a spokesman, declined to comment further.
I've heard enough.
Other top Republicans, including House Financial Services Committee chairman Jeb Hensarling of Texas, also have called for an end to the bank. They say the bank’s surplus is more a product of accounting gimmicks than business activity, and the risks of big losses remain.
And who do you think will be bailing them out?
Opponents add that support from the Ex-Im Bank does not always lead to success.
WHAT?
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Despite company failures and other problems that can derail repayment of loans, the Export-Import Bank has a delinquency rate, 0.24 percent, that is less than third of the rate for private lenders. Business groups, including traditional allies of Republican politicians, have come out in support of the Export-Import Bank.
Meaning it is benefiting big bu$ine$$.
An executive from the US Chamber of Commerce called the bank “indispensable” in an opinion piece published in Roll Call, a Washington publication that focuses on Congress. The US Chamber was one of 865 trade organizations to sign a letter in June calling on Congress to reauthorize the Ex-Im Bank.
Another reason to get rid of it.
Brian Gilmore, an executive vice president of the Associated Industries of Massachusetts, said exporters he had spoken to were befuddled by Republican opposition to the bank.
Not me; it's called principle.
He added that many Massachusetts companies may not receive direct funding from the Ex-Im Bank, but they benefit by supplying products and services to larger companies that do get support and increase sales overseas.
It's the urinary trickle, now ripple, effect. 1% got you looking in a different direction, don't they?
Exports play an important role in the Massachusetts economy. The more than $25 billion a year in goods that local companies sell in foreign markets each year supports 70,000, or about one in four manufacturing jobs in Massachusetts, according to Alan Clayton-Matthews, an economics professor at Northeastern University.
In an interview, Export-Import Bank Chairman Fred Hochberg said creating jobs was the bank’s top priority....
That's where I stopped reading it.
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Also see: Export-Import Bank chairman fends off criticism
Just recycling the $ame old $hit.
