Innovative Industrial Properties Announces Tax Treatment of 2023 Distributions

Rhea-AI Summary

Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) has announced the tax treatment of its 2023 distributions, detailing the total distribution per share, allocable to 2023, taxable ordinary dividend, return of capital, long-term capital gain, unrecaptured Section 1250 gain, and Section 199A dividend for both common stock and 9.00% Series A Cumulative Redeemable Preferred Stock. The common stock distribution with a record date of December 29, 2023, will be a split-year distribution, with $0.83 allocable to 2023 for federal income tax purposes and $0.99 allocable to 2024 for federal income tax purposes. Stockholders are encouraged to consult with their personal tax advisors for specific tax treatment of IIP's distributions.

Tax Advisor

Understanding the tax implications of dividend distributions is critical for investors in determining the after-tax return on their investments. The announcement from Innovative Industrial Properties, Inc. indicates that the entirety of its 2023 distributions for both common and preferred stock is classified as taxable ordinary dividends, with no portions attributed to return of capital or long-term capital gains. This has significant tax consequences, as ordinary dividends are taxed at the individual's income tax rate, which could be higher than the preferential rates applied to qualified dividends or long-term capital gains.

For investors, this classification means a potentially higher tax liability, especially for those in upper income brackets. Furthermore, the split-year allocation for the December distribution requires attention, as it affects tax filings for two different tax years. Investors should be aware of their individual tax situations and consult with tax professionals to optimize their after-tax income from these investments.

Financial Analyst

The announcement by Innovative Industrial Properties regarding the tax treatment of its distributions can influence investor sentiment and stock performance. The high proportion of distributions classified as ordinary dividends could be indicative of the company's operational cash flow stability. However, it is essential to analyze the company's financial health and dividend payout ratio to assess the sustainability of these distributions.

Investors typically favor returns of capital or qualified dividends due to their favorable tax treatment. Therefore, the lack of capital gains distributions may make the stock less attractive to tax-sensitive investors. Analysts should closely monitor the company's financial performance and future guidance to gauge the potential impact on its stock price and investor demand.

Dividend Policy Expert

The nature of Innovative Industrial Properties' dividend distributions reflects its dividend policy and underlying business strategy. Companies that pay dividends solely as ordinary income might be signaling consistent revenue generation, which is reassuring for income-focused investors. However, the absence of capital gains distributions could suggest that the company is reinvesting less in growth or asset appreciation strategies, which might be a point of consideration for growth-oriented investors.

It is also noteworthy that the company did not incur any foreign taxes, indicating its operations are likely confined to domestic markets or structured in a way to minimize foreign tax exposure. This simplifies the tax situation for U.S. investors but may also reflect the company's limited international diversification. The split-year distribution is a strategic tax move that could be beneficial for managing the company's cash flow and tax planning.

SAN DIEGO--(BUSINESS WIRE)-- Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) today announced the tax treatment of its 2023 distributions as follows:

Security Description: Common Stock
CUSIP: 45781V101
Ticker Symbol: IIPR

Record Date	Payable Date	Total Distribution Per Share	Allocable to 2023	Taxable Ordinary Dividend	Return of Capital	Long-Term Capital Gain	Unrecaptured Section 1250 Gain(1)	Section 199A Dividend(2)
12/30/2022	01/13/2023	$1.800000	$1.470000	$1.470000	$0.000000	$0.000000	$0.000000	$1.470000
03/31/2023	04/14/2023	$1.800000	$1.800000	$1.800000	$0.000000	$0.000000	$0.000000	$1.800000
06/30/2023	07/14/2023	$1.800000	$1.800000	$1.800000	$0.000000	$0.000000	$0.000000	$1.800000
09/29/2023	10/13/2023	$1.800000	$1.800000	$1.800000	$0.000000	$0.000000	$0.000000	$1.800000
12/29/2023	01/12/2024	$1.820000	$0.830000	$0.830000	$0.000000	$0.000000	$0.000000	$0.830000
	Totals	$9.020000	$7.700000	$7.700000	$0.000000	$0.000000	$0.000000	$7.700000

Security Description: 9.00% Series A Cumulative Redeemable Preferred Stock
CUSIP: 45781V200
Ticker Symbol: IIPR PR A

Record Date	Payable Date	Total Distribution Per Share	Allocable to 2023	Taxable Ordinary Dividend	Return of Capital	Long-Term Capital Gain	Unrecaptured Section 1250 Gain(1)	Section 199A Dividend(2)
03/31/2023	04/14/2023	$0.562500	$0.562500	$0.562500	$0.000000	$0.000000	$0.000000	$0.562500
06/30/2023	07/14/2023	$0.562500	$0.562500	$0.562500	$0.000000	$0.000000	$0.000000	$0.562500
09/29/2023	10/13/2023	$0.562500	$0.562500	$0.562500	$0.000000	$0.000000	$0.000000	$0.562500
12/29/2023	01/12/2024	$0.562500	$0.562500	$0.562500	$0.000000	$0.000000	$0.000000	$0.562500
	Totals	$2.250000	$2.250000	$2.250000	$0.000000	$0.000000	$0.000000	$2.250000

(1)		These amounts are a subset of, and included in, Long-Term Capital Gain amounts.
(2)		These amounts are a subset of, and included in, Taxable Ordinary Dividend amounts.

The common stock distribution with a record date of December 29, 2023 will be a split-year distribution, with $0.83 allocable to 2023 for federal income tax purposes and $0.99 allocable to 2024 for federal income tax purposes.

As previously disclosed by IIP on January 26, 2023 in its press release announcing the tax treatment of 2022 dividends, the common stock distribution with a record date of December 30, 2022 was a split-year distribution, with $0.33 allocable to 2022 for federal income tax purposes and $1.47 allocable to 2023 for federal income tax purposes, and the 9.00% Series A Cumulative Redeemable Preferred Stock distribution with a record date of December 30, 2022 was allocable entirely to 2022 for federal income tax purposes.

IIP did not incur any foreign taxes in 2023. Stockholders are encouraged to consult with their personal tax advisors as to their specific tax treatment of IIP’s distributions.

About Innovative Industrial Properties

Innovative Industrial Properties, Inc. is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated cannabis facilities. Innovative Industrial Properties, Inc. has elected to be taxed as a real estate investment trust, commencing with the year ended December 31, 2017. Additional information is available at www.innovativeindustrialproperties.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240126622212/en/

David Smith

Chief Financial Officer

Innovative Industrial Properties, Inc.

(858) 997-3332

Source: Innovative Industrial Properties, Inc.

What is the ticker symbol for Innovative Industrial Properties, Inc.?

The ticker symbol for Innovative Industrial Properties, Inc. is IIPR.

What is the tax treatment announcement by Innovative Industrial Properties, Inc. for 2023 distributions?

Innovative Industrial Properties, Inc. announced the tax treatment for its 2023 distributions, specifying the total distribution per share, taxable ordinary dividend, return of capital, long-term capital gain, unrecaptured Section 1250 gain, and Section 199A dividend for both common stock and 9.00% Series A Cumulative Redeemable Preferred Stock.

What is the record date for the common stock distribution with a split-year allocation for 2023 and 2024 federal income tax purposes?

The record date for the common stock distribution with a split-year allocation for 2023 and 2024 federal income tax purposes is December 29, 2023.

What should stockholders do regarding the tax treatment of IIP's distributions?

Stockholders are encouraged to consult with their personal tax advisors for specific tax treatment of IIP's distributions.