Company: IIPR
Filing Date: 2025-02-21
Form Type: S-3ASR
Source: 0001104659-25-016184
Chunk: 79

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-21
Form: S-3ASR
Chunk 79
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 stockholders in that year. In such event, to the extent of our current or accumulated earnings
and profits, all distributions to stockholders would be taxable as ordinary income. Subject to certain limitations of the U.S. federal
income tax laws, corporate stockholders might be eligible for the dividends received deduction and stockholders taxed at individual rates
might be eligible for the reduced U.S. federal income tax rate of 20% on such dividends. Unless we qualified for relief under specific
statutory provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which
we ceased to qualify as a REIT. We cannot predict whether in all circumstances we would qualify for such statutory relief.

Taxation of Our Operating Partnership

Our Operating Partnership currently is treated
as a partnership for U.S. federal income tax purposes.

Under the Code, a partnership generally is not
subject to U.S. federal income tax, but is required to file a partnership tax information return each year. In general, the character
of each partner’s share of each item of income, gain, loss, deduction, credit, and tax preference is determined at the partnership
level. Each partner is then allocated a distributive share of such items in accordance with the partnership agreement and is required
to take such items into account in determining such partner’s income. Each partner includes such amount in income for any taxable
year of the partnership ending within or with the taxable year of the partner, without regard to whether the partner has received or
will receive any cash distributions from the partnership. Cash distributions, if any, from a partnership to a partner generally are not
taxable unless and to the extent they exceed the partner’s basis in its partnership interest immediately before the distribution.
Any amounts in excess of such tax basis will generally be treated as a sale or exchange of such partner’s interest in the partnership.

For purposes of the REIT income and asset tests,
we are treated as receiving or holding our proportionate share of our Operating Partnership’s income and assets, respectively.
We control, and intend to continue to control, our Operating Partnership and intend to operate it consistently with the requirements
for our qualification as a REIT.

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The Bipartisan Budget Act of 2015 changed the
rules applicable to U.S. federal income tax audits of partnerships. Under the new rules (which generally are effective for
taxable years beginning after December 31, 2017), among other changes and