CBS Outdoor Americas Inc. Will Convert to a REIT (with Nugent Comment)

CBS Corp. recently announced that the IRS will permit CBS Outdoor Americas Inc. ("Outdoor") to convert to a real estate investment trust ("REIT"), which will receive more favorable tax treatment. Earlier this month, Outdoor completed an IPO, distributing 19% of its stock, and CBS plans to distribute its remaining Outdoor stock to CBS shareholders in a tax-free split-off later this year.

Nugent Comment: A company generally can qualify as a REIT, which normally is taxed only at the shareholder level, if its business is based primarily on real estate holdings and it distributes at least 90% of its annual taxable income to investors through dividends.In June 2013, the IRS temporarily suspended ruling on REIT conversions so that the IRS could evaluate whether nontraditional real estate businesses should be permitted to qualify as REITs. The IRS resumed its ruling process last November. Tax reform proposals introduced by House Ways Means Committee Chairman Dave Camp, if adopted, would prohibit companies from electing REIT status for 10 years after a tax-free spin-off or split-off.

See: Joint Committee on Taxation Explanation of Tax Reform Act of 2014.Related news: Camp Draft Tax Reform Proposal Would Tax Carried Interests as Ordinary Income and Mark-to-Market Financial Derivatives (February 28, 2014).