Tax Bill Includes Windfall for Private Prison Investors

In 2013, the two dominant American private prison firms, Corecivic and the Geo Group, restructured as so-called “real estate investment trusts,” known as REITs. Under the GOP tax bill, taxes paid on REITs investments by individuals will be cut 25 percent.

Individual investors in U.S. private prisons are poised to collect their most lucrative earnings ever thanks to changes in the tax code signed by President Trump, continuing what has been a banner year for the industry since the 2016 election, reports the Guardian. “It’s going to be great for the investors, banks and hedge funds that own shares in private prisons, and are dependent on increased incarceration and criminalization,” said Jamie Trinkle of the racial and economic justice coalition Enlace. Under the new GOP law, investments in so-called “real estate investment trusts” (REITs) will see a 25 percent reduction in tax, from 39.6 percent down to 29.6 percent.

Corecivic and the Geo Group, which together own more than 80 percent of private prison beds in the U.S., both restructured as reits in 2013. “This tax act is of unprecedented benefit for reit investors,” said David Miller, a tax partner at Proskauer Rose. “I think reits will explode in popularity as a result of this act.” Prison investors could see an additional $50 million in dividend earnings next year, thanks to the GOP legislation. Even without the new lower tax rate, the reit classification was already a huge boon to the private prison industry. Before converting to a reit in 2013, Corecivic was subject to a 36 percent corporate tax rate. After the reorganization, it reported paying an effective tax rate in the first quarter of 2015 of just 3 percent.