Sullivan
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Updates

On April 18, 2024, Ameek Ashok Ponda, with assistance from Paul DeckerSarah Wellings and Connie Lee, submitted a comment letter to the Internal Revenue Service (IRS) regarding his recommendations for the 2024-2025 Priority Guidance Plan, pursuant to Notice 2024-28, I.R.B. 2024-13 (the “Sullivan Comment Letter”).  The Sullivan Comment Letter incorporated a March 2024 thought piece (updated from time to time) published by Ameek, Paul, Sarah and Connie, titled "Enabling REITs to Deploy Renewable Energy: Toward a Workable Legal Standard."

In its May 30, 2025 letter to the IRS in response to Notice 2024-28, Nareit agreed with the analysis and recommendation of the Sullivan Comment Letter with respect to the 2024-25 IRS Priority Guidance Plan that the IRS issue precedential guidance that (i) confirms that the revenue generated by a real estate investment trust (a “REIT”) providing electricity to its tenants from energy that is produced onsite does not constitute Section 856(d)(7)(A) “impermissible tenant service income” and (ii) enables a REIT to deploy energy infrastructure during periods of ramp up or tenant vacancies pursuant to an “appropriate in size” for the building (or other property) legal standard.

In its May 29, 2026 letter to the IRS in response to Notice 2026-23, Nareit repeated its agreement with the analysis and recommendation in the Sullivan Comment Letter.  Nareit also noted that some REITs currently generate energy onsite for tenant usage through solar panels, and more recently, there has been discussion regarding the possibility of powering data centers with nuclear power generated onsite.