RegAlert2012-10-11 | CFTC Staff Letter 12-13Added · Updated
CFTC Staff Letter 12-13: Interpretation of the Definition of Commodity Pool under Section 1a(10) of the Commodity Exchange Act
The Division of Swap Dealer and Intermediary Oversight interprets the definition of a commodity pool under Section 1a(10) of the Commodity Exchange Act to exclude Real Estate Investment Trusts (REITs) that satisfy specific criteria. These criteria require the REIT to primarily derive income from real estate ownership and management, use derivatives solely to mitigate interest rate or currency fluctuations, and comply with all Internal Revenue Code requirements for REIT status, including the 75 percent and 95 percent income tests. The relief is self-effectuating for equity REITs that identify themselves as such on Form 1120-REIT or intend to do so, though the letter represents only the Division's view and does not excuse compliance with other applicable laws.
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U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5949
Facsimile: (202) 418-5547 gbarnett@cftc.gov
Division of Swap Dealer and
Intermediary Oversight
Gary Barnett
Director
CFTC Letter No. 12-13
Interpretation
October 11, 2012
Division of Swap Dealers and Intermediary Oversight National Association of Real Estate Investment Trusts 1875 I Street, NW, Suite 600 Washington, D.C. 20006 Re: Request for Interpretation of the Definition of “Commodity Pool” under Section 1a(10) of the Commodity Exchange Act Dear Mr. Edwards:
This is in response to your correspondence, dated September 4, 2012, to the Division of Swap Dealer and Intermediary Oversight (“Division”) of the Commodity Futures Trading Commission (“Commission”). You request an interpretation of the definition of “commodity pool” under Section 1a(10) of the Commodity Exchange Act (“CEA”), 1 such that real estate investment trusts (“REITs”) that hold income-producing real estate and engage in real estate management activities, including leasing and maintaining real estate, providing a variety of tenant services, and developing and redeveloping real estate (“equity REITs”) are not within the statutory definition of “commodity pool.” In support of your request for interpretative guidance, you provide information about the operations of equity REITs, as well as information about the restrictions imposed on REITs through the Internal Revenue Code (“IRC”). You state that the Internal Revenue Service (“IRS”) has defined the term equity REIT to be a REIT whose primary source of income is not derived from mortgage interest or fees. 2 You further state that the defining characteristic of equity REITs is that they acquire and develop their own properties and must primarily operate these properties rather than immediately reselling them. 3 Because of the requirements that
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Source: Commodity Futures Trading Commission — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works
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CFTC published 6 documents in the last 30 days. We email you each new one the day it's published.