Company: IIPR
Filing Date: 2025-02-21
Form Type: S-3ASR
Source: 0001104659-25-016184
Chunk: 62

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-21
Form: S-3ASR
Chunk 62
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a TRS. Generally, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs.

Unlike a qualified REIT subsidiary, the separate
existence of a TRS is not ignored for U.S. federal income tax purposes and a TRS is a fully taxable corporation subject to U.S. federal
corporate income tax on its earnings. We will not be treated as holding the assets of any TRS or as receiving the income earned by any
TRS. Rather, we will treat the stock issued by any TRS as an asset and will treat any dividends paid to us from any TRS as income. This
treatment may affect our compliance with the gross income tests and asset tests.

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Restrictions imposed on REITs and their TRSs
are intended to ensure that TRSs will be subject to appropriate levels of U.S. federal income taxation. These restrictions limit the
deductibility of interest paid or accrued by a TRS to its parent REIT and impose a 100% excise tax on transactions between a TRS and
its parent REIT or the REIT’s tenants that are not conducted on an arm’s-length basis, such as any redetermined rents, redetermined
deductions, excess interest or redetermined TRS service income. In general, redetermined rents are rents from real property that are
overstated as a result of any services furnished to any of our tenants by a TRS of ours, redetermined deductions and excess interest
represent any amounts that are deducted by a TRS of ours for amounts paid to us that are in excess of the amounts that would have been
deducted based on arm’s length negotiations, and redetermined TRS service income is income of a TRS that is understated as a result
of services provided to us or on our behalf. Rents we receive will not constitute redetermined rents if they qualify for certain safe
harbor provisions contained in the Code. Dividends paid to us from a TRS, if any, will be treated as dividend income received from a
corporation. The foregoing treatment of TRSs may reduce the cash flow generated by us and our subsidiaries in the aggregate and our ability
to make distributions to our stockholders and may affect our compliance with the gross income tests and asset tests.

A TRS generally may be used by a REIT to undertake
indirect