Equinix (EQIX) Comments on REIT Conversion, Expects Delay
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As previously disclosed by Equinix, Inc. (Nasdaq: EQIX), as part of its planned conversion to a real estate investment trust (“REIT”), Equinix is seeking a private letter ruling (“PLR”) from the U.S. Internal Revenue Service (“IRS”). Equinix’s PLR request has multiple components, and the conversion to a REIT will require favorable rulings from the IRS on numerous technical tax issues, including classification of Equinix’s data center assets as qualified real estate assets. Equinix filed its PLR request with the IRS in the fourth quarter of 2012.
The IRS has recently informed Equinix that the IRS has convened an internal working group to study what constitutes "real estate" for purposes of the REIT provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and that, pending the completion of the study, the IRS is unlikely to issue PLRs on what constitutes real estate for REIT purposes.
Equinix cannot predict when the IRS working group will complete its study or what the outcome of the study will be. However, Equinix continues to believe, based on both existing legal precedent and the fact that other data center companies currently operate as REITs, that its data center assets constitute real estate for REIT purposes.
While Equinix anticipates that the formation of the IRS working group to study this issue may delay receipt of its requested PLR from the IRS, Equinix continues to move forward on its plan to convert to a REIT, including changing our method of depreciating data center assets for tax purposes, planning for legal restructuring and enterprise reporting system upgrades and ongoing engagement of appropriate REIT advisors. At this time, Equinix does not expect the potential delay in receiving a PLR as a result of the new IRS working group will delay Equinix’s plan to elect REIT status for the taxable year beginning January 1, 2015.
The IRS has recently informed Equinix that the IRS has convened an internal working group to study what constitutes "real estate" for purposes of the REIT provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and that, pending the completion of the study, the IRS is unlikely to issue PLRs on what constitutes real estate for REIT purposes.
Equinix cannot predict when the IRS working group will complete its study or what the outcome of the study will be. However, Equinix continues to believe, based on both existing legal precedent and the fact that other data center companies currently operate as REITs, that its data center assets constitute real estate for REIT purposes.
While Equinix anticipates that the formation of the IRS working group to study this issue may delay receipt of its requested PLR from the IRS, Equinix continues to move forward on its plan to convert to a REIT, including changing our method of depreciating data center assets for tax purposes, planning for legal restructuring and enterprise reporting system upgrades and ongoing engagement of appropriate REIT advisors. At this time, Equinix does not expect the potential delay in receiving a PLR as a result of the new IRS working group will delay Equinix’s plan to elect REIT status for the taxable year beginning January 1, 2015.
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