Sullivan
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Update
In its May 29, 2026 letter to the IRS in response to Notice 2026-23, Nareit offered suggestions regarding regulatory guidance to be placed on the 2026-27 IRS Priority Guidance Plan (2026-27 PGP). Nareit urged the IRS and Treasury Department to provide guidance that certain data center construction-related assets — such as advance deposits for materials, prepayments, and construction-in-progress accounts — qualify as acceptable assets under REIT asset tests. In arguing that this guidance is critical, Nareit cited Sullivan & Worcester LLP's memorandum as offering a detailed technical explanation on the topic. 

Ameek Ashok PondaCameron CosbySarah Wellings and Paul Decker co-authored a new memorandum titled "Selected REIT Tax Issues in Constructing a Data Center" on May 26, 2026. As investment in digital infrastructure accelerates, developers and investors are facing increasingly complex REIT Tax considerations tied to data center construction. This memorandum provides an analysis for treating deposits and soon-to-be-affixed materials and components as, respectively, “cash items” and “real property” under the REIT rules and calls on the Treasury and IRS to issue confirmatory guidance.