Company: IIPR
Filing Date: 2025-02-21
Form Type: S-3ASR
Source: 0001104659-25-016184
Chunk: 57

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-21
Form: S-3ASR
Chunk 57
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 in which we identify such failure, we will pay a tax with respect 
 to such failure equal to the greater of $50,000 or the highest U.S. federal corporate income tax rate (currently 21%) multiplied  
 by the net income from the nonqualifying assets during the period in which we failed to satisfy the asset tests.                  |

| · | If we fail to satisfy one or more requirements for                                                                                
 REIT qualification, other than the gross income tests and the asset tests, and such failure is due to reasonable cause and not to 
 willful neglect, we will be required to pay a penalty of $50,000 for each such failure.                                           |

| · | We will be subject to a 100% excise tax on transactions     
 with a TRS that are not conducted on an arm’s-length basis. |

| · | We may be required to pay monetary penalties to the                                                                               
 Service in certain circumstances, including if we fail to meet recordkeeping requirements intended to monitor our compliance with 
 rules relating to the composition of a REIT’s stockholders, as described below in “— Requirements for Qualification.”             |

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| · | the amount of gain that we recognize at the time of 
 the sale or disposition, and                        |

| · | the amount of gain that we would have recognized if 
 we had sold the asset at the time we acquired it.   |

| · | The earnings of our subsidiary entities that are C                                  
 corporations, including TRSs, will be subject to U.S. federal corporate income tax. |

In addition, we may be subject to a variety of
taxes, including payroll taxes and state, local and foreign income, property and other taxes on our assets and operations. We also could
be subject to tax in situations and on transactions not presently contemplated.

Requirements for Qualification as a REIT

A REIT is a corporation, trust or association
that satisfies each of the following requirements:

| (1) | It is managed by one or more trustees or directors; |

| (2) | Its beneficial ownership is evidenced by transferable                              
 shares of stock, or by transferable shares or certificates of beneficial interest; |

| (3) | It would be taxable as a domestic corporation, but                   
 for Sections 856 through 860 of the Code, i.e., the REIT provisions; |

| (4) | It is neither a financial institution nor an insurance                     
 company subject to special provisions