GOODWIN 33 • REIT dividends through mutual funds. Although the statutory language does not extend the 20% rate to REIT dividends earned through mutual funds, Treasury should have the authority to do so by regulation (and hopefully will). OTHER TCJA PROVISIONS • Lower corporate rate. The TCJA lowers the US federal corporate income tax rate to a flat 21% for both ordinary income and capital gains and repeals the corporate alternative minimum tax. While the reduced rate is a welcome reduction in the US tax costs of structures that incorporate taxable US corporations, including taxable REIT subsidiaries, we do not expect the reduced rate to cause any fundamental shift in how investments into US real property are structured. In the fund context, non-US investors who invested through taxable corporate “blockers” before the TCJA are still likely to desire levered corporate blocker structures to shelter FIRPTA, ECI and tax return filings, and US taxable and tax-exempt investors are still likely to invest into US real property through partnerships and REITs because investing through corporate blockers generally will create more tax cost for those investors, just as they did before the TCJA. REITs will continue to require taxable REIT subsidiaries for dealer investments, impermissible tenants services, and certain other investments such as hotels and qualified health care facilities because those activities cannot be performed by the REIT directly, and they will benefit from the reduced corporate tax rate. • UBTI calculated separately for each business. For a tax exempt organization with more than one unrelated trade or business, this provision requires that unrelated business taxable income be computed separately with respect to each trade or business. A net operating loss deduction is allowed only with respect to a trade or business from which the loss arose. Only positive UBTI, if any, for each separate business is aggregated to determine an organization’s overall UBTI. The use of a net operating loss arising in a taxable year beginning before January 1, 2018 will be grandfathered (i.e., usable against income generated by another business). • Like-kind exchanges. Section 1031 like-kind exchange treatment now applies only to real property, the only category of section 1031 transactions to escape unscathed. Thus, like-kind exchanges remain an important tax planning tool for real estate transactions. Under the TCJA, the like kind exchange rules no longer apply to related personal property to the real estate. Therefore, the exchange of any appreciated personal property will result in gain. For REITs, such gain would be non-qualifying income for both the 95% and 75% gross income tests. • No change to UBTI rules applicable to government plans. The final version of the TCJA does not subject government pension plans to tax on UBTI. • 100% bonus depreciation. The TCJA increases the bonus depreciation percentage from 50% to 100% for property acquired and placed in service after September 27, 2017 and before 2023 and expands the kind of property covered by bonus depreciation. These percentages phase down to 80%, 60%, 40% and 20%, respectively, for property placed in service in 2023, 2024, 2025 and 2026. Under prior law, the deduction was permitted only if the taxpayer was the first user of the property; the TCJA removed that requirement, allowing a taxpayer to claim the deduction for both new and used property that it acquires, subject to certain anti-abuse rules. However, as previously noted, bonus depreciation is generally not available in certain cases to a taxpayer that decides to avoid the limitations on interest deductibility through the real property trade or business exception. • Limitations on excess business losses. “Excess business losses” of non-corporate taxpayers are disallowed for 2018 through 2025. An “excess business loss” is the amount, if any, by which (i) the taxpayer’s aggregate deductions attributable to trades or businesses exceed (ii) the taxpayer’s aggregate gross income or gain attributable to trades or businesses plus $250,000 (or $500,000 in the case of a joint return), which dollar amounts are indexed for inflation in subsequent taxable years. Any disallowed excess business loss will be treated as a net operating loss carryover. In the case of partnerships and S corporations, the limitation is applied at the partner level. • Corporate NOL limitations. NOLs that arise in taxable years beginning after December 31, 2017 may no longer be carried back, but can be carried forward indefinitely. Such NOL carryforwards also may only be used to offset 80% of a corporation’s taxable income. • Other Interest Expense Limitations. The TCJA imposes additional limitations on the deductibility of interest that likely will not be of general application to real estate investing but could come into play in some structures that include non-US entities or non- US investors and should be part of any structuring or compliance checklist. • Base erosion: A new base erosion rule requires any US taxable corporation (REITs are excluded) with average annual receipts of at least $500 million to