Company: IIPR
Filing Date: 2025-02-21
Form Type: S-3ASR
Source: 0001104659-25-016184
Chunk: 77

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-21
Form: S-3ASR
Chunk 77
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 4% nondeductible excise tax on the excess of such required distribution over the amounts we actually distribute. |

We may elect to retain and pay income tax on
the net long term capital gain we recognize in a taxable year. See the section above entitled “— Taxation of U.S. Holders.”
If we so elect, we will be treated as having distributed any such retained amount for purposes of the REIT distribution requirements
and the 4% nondeductible excise tax described above.

We intend to make timely distributions in the
future sufficient to satisfy the annual distribution requirements and to avoid corporate income tax and the 4% nondeductible excise tax.
It is possible that, from time to time, we may experience timing differences between the actual receipt of cash, including distributions
from our subsidiaries, and actual payment of deductible expenses and the inclusion of that income and deduction of such expenses in arriving
at our REIT taxable income. As a result of the foregoing, we may have less cash than is necessary to make distributions to our stockholders
that are sufficient to avoid corporate income tax and the 4% nondeductible excise tax imposed on certain undistributed income or even
to meet the annual distribution requirements. In such a situation, we may need to borrow funds or issue additional stock, or, if possible,
pay dividends consisting, in whole or in part, of our stock or debt securities.

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Under certain circumstances, we may be able to
correct a failure to meet the distribution requirement for a year by paying “deficiency dividends” to our stockholders in
a later year. We may include such deficiency dividends in our deduction for dividends paid for the earlier year. Although we may be able
to avoid income tax on amounts distributed as deficiency dividends, we will be required to pay interest and may be required to pay a
penalty to the Service based upon the amount of any deduction we take for deficiency dividends.

Sale-Leaseback Transactions

Some of our investments have been, and may in
the future be, in the form of sale-leaseback transactions whereby we purchase real estate properties and lease them back to the seller.
We normally intend to treat these transactions as real estate purchases and true leases for federal income tax purposes. However, depending
on the terms of any specific transaction, the Service might take the position that the transaction is not a sale-leaseback but is more
properly treated in some other manner. In the event of