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December 3, 2021

IRS reinstates temporary reduction in required cash distributions to shareholders of public REITS and RICs

The IRS in Revenue Procedure 2021-53 has temporarily reduced from 20% to 10% the minimum amount of cash in cash-stock distributions that publicly-offered real estate investment trusts (REITs) and regulated investment companies (RICs) must distribute to shareholders. The new requirement applies to distributions declared on or after November 1, 2021 and on or before June 30, 2022.

In general, REITs and RICs must distribute 90% of taxable income annually as dividends. Unlike cash, stock distributions to shareholders generally do not qualify as dividends under IRC Section 301. Under IRC Section 305(b), however, stock distributions will qualify as IRC Section 301 dividends if the shareholders can elect to receive up to all of the distribution either in cash or in stock of equivalent value.

Revenue Procedure 2017-45 created a safe harbor for publicly-offered REITs and RICs so their stock distributions qualify for IRC Section 301 if they offer shareholders an election to receive part or all of a distribution in cash or in stock of equivalent value, provided the total cash component of the distribution is at least 20%. The value of the stock received by any shareholder in lieu of cash is considered equal to the amount of cash that could have been received instead.

In 2020, the IRS modified this safe harbor in Revenue Procedure 2020-19 to reduce the minimum required aggregate amount of cash in a cash-stock distribution to 10% in order to allow these entities to maintain enhanced liquidity during the COVID-19 pandemic (see Tax Alert 2020-1235). This modification was effective for distributions declared on or after April 1, 2020 and on or before December 31, 2020.

The IRS said in Revenue Procedure 2021-53 that it was reducing the safe harbor to 10% again for the same reasons.


Like the previous safe harbor modification granted by the IRS in Revenue Procedure 2020-19, the temporary reduction of the minimum cash requirement for REIT and RIC distributions in Revenue Procedure 2021-53 is welcome relief for publicly-offered REITs and RICs. The modification, like Revenue Procedure 2017-45, provides a safe harbor only for publicly-offered REITs and RICs, although the policy rationale for distinguishing between public and private REITs and RICs is unclear. Presumably, as in Revenue Procedure 2017-45, Revenue Procedure 2021-53 treats stock that a shareholder receives from a dividend reinvestment plan as received in exchange for cash received in the distributions.


Contact Information
For additional information concerning this Alert, please contact:
Real Estate Group
   • Mark Kirshenbaum (
   • David Miller (
   • Sarah Ralph (
   • Andrea Whiteway (
   • Kristy L Woolf (