This is a just a quick note that proposed Treasury regulations were issued under Section 162(m) that reverses a series of private letter rulings previously granted to UPREITs.  Under the proposed Treasury regulations, the $1mm deduction limitation under Section 162(m) would apply with respect to compensation that a publicly-traded REIT's covered employee receives from an operating partnership for services he or she provided on behalf of such operating partnership.  The proposed Treasury regulation is applied by potentially disallowing a REIT's distributive share of any compensation deduction arising from compensation the covered employee received from the REIT's operating partnership.  As a result, at least from a Section 162(m) perspective, compensation paid to a covered employee by an operating partnership should now be vetted and analyzed at the REIT level.

A more detailed analysis of the proposed Treasury regulations was drafted over the holidays by my partners Kendal A. Sibley and George C. Howell, III in the attached Client Alert entitled "Unexpected Provision in Proposed Section 162(m) Regulations May Affect Compensation Deductibility for UPREITs."

Other aspects of the proposed Treasury regulations will be set forth in upcoming posts!