Company: IIPR
Filing Date: 2025-02-26
Form Type: 424B5
Source: 0001104659-25-017454
Chunk: 134

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-26
Form: 424B5
Chunk 134
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 one or more requirements
for REIT qualification, other than the gross income tests and the asset tests, we could avoid disqualification if our failure is due
to reasonable cause and not to willful neglect and we pay a penalty of $50,000 for each such failure. In addition, there are relief
provisions for a failure of the gross income tests and asset tests, as described in “— Gross Income Tests” and “—
Asset Tests.”

If we fail to qualify as a REIT in any taxable
year, and no relief provision applies, we would be subject to U.S. federal income tax and any applicable alternative minimum tax (for
taxable years beginning before January 1, 2018) on our taxable income at regular corporate rates. In calculating our taxable income
in a year in which we fail to qualify as a REIT, we would not be able to deduct amounts paid out to stockholders. In fact, we would not
be required to distribute any amounts to 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