Company: IIPR
Filing Date: 2025-02-26
Form Type: 424B5
Source: 0001104659-25-017454
Chunk: 111

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-26
Form: 424B5
Chunk 111
---
 “Failure to Qualify” below.

Provided we continue to qualify for taxation
as a REIT, we generally will not be subject to U.S. federal income tax on the taxable income that we distribute to our stockholders because
we will be entitled to a deduction for dividends that we pay. Such tax treatment avoids the “double taxation,” or taxation
at both the corporate and stockholder levels, that generally results from owning stock in a corporation. In general, income generated
by a REIT is taxed only at the stockholder level if such income is distributed by the REIT to its stockholders. However, we will be subject
to U.S. federal income tax in the following circumstances:

| · | We will be subject to U.S. federal corporate income                                                                                     
 tax on any REIT taxable income, including net capital gain, that we do not distribute to our stockholders during, or within a specified 
 time period after, the calendar year in which the income is earned.                                                                     |

| · | We will be subject to tax, at the highest U.S. federal                                                                               
 corporate income tax rate (currently 21%), on net income from the sale or other disposition of property acquired through foreclosure 
 (“foreclosure property”) that we hold primarily for sale to customers in the ordinary course of business, and other non-qualifying   
 income from foreclosure property.                                                                                                    |

| · | We will be subject to a 100% tax on net income from                                                                         
 “prohibited transactions,” which are, in general, sales or other dispositions of property, other than foreclosure property, 
 that we hold primarily for sale to customers in the ordinary course of business.                                            |

| · | If we fail to satisfy one or both of the 75% gross                                                                  
 income test or the 95% gross income test, as described below under “— Gross Income Tests,” but nonetheless maintain 
 our qualification as a REIT because we meet certain other requirements, we will be subject to a 100% tax on:        |

| · | the greater of the amount by which we fail the 75%                            
 gross income test or the 95% gross income test, in either case, multiplied by |

| · | a fraction intended to reflect our profitability. |

| · | If we fail to distribute during a calendar year at                                                                             
 least the sum of: (1) 85% of our REIT ordinary income for the year, (2) 95% of our REIT capital gain net income