Iron Mountain, Equinix Say IRS Resumes REIT Rulings

Iron Mountain Inc. and Equinix Inc., two technology companies seeking to convert to real estate investment trusts, rose after saying the U.S. Internal Revenue Service is proceeding with evaluating their eligibility.

The IRS said yesterday that it will resume issuing rulings on the definition of real estate for purposes of REIT conversions, Iron Mountain said in a regulatory filing. The agency is “actively resuming work” on Equinix’s request and will respond in due course, that company said separately.

The IRS has been evaluating whether nontraditional real estate businesses should qualify as REITs, which are subject to lower taxes and pay higher dividends than other companies. Equinix, which runs data centers and Iron Mountain, which rents storage space and maintains paper and electronic records, have tumbled since disclosing the review. Today’s stock jump suggests that investors believe the conversions eventually will go through, said Robert Willens, a tax and accounting consultant.

“It seems unlikely, based on the wording of the 8-Ks, that the IRS has changed its views on who qualifies for REIT status and on what constitutes real estate assets,” Willens, president of Robert Willens LLC in New York, said in an e-mail. “The stocks will really pop when and if the rulings sought are actually issued.”

Boston-based Iron Mountain climbed 5.8 percent to $30.15, after a 7.7 percent jump yesterday. Equinix rose 3.3 percent to $167.61 today. The companies’ shares have fallen 12 percent and 18 percent, respectively, since June 6, the day before the IRS study was disclosed.

Completed Review

In a statement today, the IRS said it has completed its review of REIT requests for assets other than land, buildings and structures. The review was designed “to ensure a uniform and consistent approach to addressing the definition of REIT real property.”

The agency is “ready to resume ruling on these requests consistent with existing law,” regulations and previously published guidance, according to the statement. Federal law prohibits the IRS from commenting publicly on individual companies and taxpayers.

“Equinix continues to implement its plan to convert to a REIT,” the Redwood City, California-based company said in a filing today. The company doesn’t expect the delay to date to push back its plan to elect REIT status for the taxable year beginning in 2015.

Iron Mountain said it is moving forward with other aspects of its conversion plan to ensure readiness for REIT status for the 2014 tax year.

(Updates with closing share prices in fifth paragraph.)
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