Electric vehicle charging stations. Premium amenities. Flexible storage arrangements. For storage-focused real estate investment trusts (REITs), modern tenant expectations continue to evolve, along with the related tax questions.
On July 25, 2025, the IRS issued Private Letter Ruling (PLR) 202530005, providing important clarity on how income from storage facilities, EV charging, utilities, and ancillary services fits within the REIT gross income tests. While the ruling applies only to the taxpayer who requested it, the guidance offers valuable insight into how REITs can grow revenue without risking REIT qualification.
For REIT leaders balancing innovation with compliance, the message is simple: careful structuring is important.
Why This IRS Ruling Matters for Storage REITs
Storage and industrial REITs increasingly rely on value-added services to stay competitive. However, providing extra services, especially when separately charged, can raise concerns about impermissible tenant services income (ITSI), which might threaten REIT status if not appropriately managed.
This ruling clarifies how REITs can modernize their offerings while maintaining qualifying income, provided they structure services properly and understand the roles of taxable REIT subsidiaries (TRSs) or independent contractors.
For investors and operators assessing real estate investment strategies, increased regulatory certainty fosters more assured long-term planning.
Key Takeaways from PLR 202530005
Storage Fees Still Qualify as Rental Income
The IRS confirmed that rent paid for reserved storage space qualifies as “rents from real property,” even when space is not individually designated. This flexibility allows REITs to offer substitutable or nearby storage options without jeopardizing qualifying income, an essential operational advantage for multi-location portfolios.
EV Charging and Utility Markups Can Still Qualify
Fees for EV charging, including typical electricity markups, qualify as rental income when aligned with market practices. The IRS considers these charges similar to traditional utilities, reinforcing that EV infrastructure does not automatically activate ITSI when properly arranged.
This guidance supports REITs in investing in sustainability and tenant convenience, enabling them to continue modernizing without unnecessary tax exposure.
Amenities Require Careful Structuring
Facilities such as restrooms, showers, and weigh stations don’t generate ITSI when:
- Provided regularly, and
- Included in the total storage fees
However, when REITs charge separate fees for amenities or services, those activities must be performed through a TRS or an independent contractor to remain compliant. This distinction emphasizes the importance of evaluating how services are priced and delivered across properties.
TRS and Independent Contractor Use Remains Critical
The ruling reiterates that services such as equipment stacking, inspections, and repairs do not establish ITSI when provided by a TRS or independent contractor. Additionally, rental income from long-term leases to a TRS remains qualifying, even if the TRS subleases space on a short-term basis.
Without proper structuring, these revenue streams can expose REITs to compliance risk, which is one of the downsides that investors and operators monitor closely.
What This Means for REIT Owners and Investors
PLR 202530005 doesn’t alter the law, but it provides a clearer roadmap for storage and industrial REITs seeking to expand services without sacrificing tax efficiency. For many REITs, the ruling supports:
- Greater confidence in providing EV charging and modern amenities
- Enhanced revenue diversification
- Greater certainty about qualifying income classification.
At a time when investors are carefully assessing real estate investment opportunities amid changing regulations and market pressures, this clarity enhances the long-term outlook for well-structured REIT portfolios.
Practical Next Steps for REIT Decision-Makers
REITs managing storage and industrial properties should seize this opportunity to:
- Review how services and amenities are currently organized.
- Confirm which amenities are standard and included in the rent.
- Evaluate whether separately charged services should be transferred to a TRS or an independent contractor.
- Evaluate if current arrangements comply with IRS guidance.
Because private letter rulings only apply to the requesting taxpayer, REITs with complex or unique arrangements should consult their tax advisor or obtain their own ruling to minimize uncertainty.
Bottom Line
PLR 202530005 confirms that storage REITs can update their services (e.g., EV charging, improved amenities) without risking compliance issues when appropriately structured. For owners, operators, and investors, the ruling offers a more straightforward path to growth in a competitive market. Our real estate tax advisors can help you evaluate income streams, structure services, and apply this guidance to your portfolio with confidence. Connect with a member of our team to learn more.
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