Company: IIPR
Filing Date: 2025-02-21
Form Type: S-3ASR
Source: 0001104659-25-016184
Chunk: 78

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-21
Form: S-3ASR
Chunk 78
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 a successful recharacterization, we would not be entitled to claim the depreciation
deductions available to an owner of the property. In addition, the recharacterization of one or more of these transactions might cause
us to fail to satisfy the asset tests or the gross income tests described above based upon the asset we would be treated as holding or
the income we would be treated as having earned, and such failure could result in our failing to qualify as a REIT. Alternatively, the
amount or timing of income inclusion or the loss of depreciation deductions resulting from the recharacterization might cause us to fail
to meet the distribution requirement described above for one or more taxable years absent the availability of the deficiency distribution
procedure or might result in a larger portion of our distributions being treated as ordinary distribution income to our stockholders.

Recordkeeping Requirements

We must maintain certain records in order to
qualify as a REIT. In addition, to avoid a monetary penalty, we must request, on an annual basis, information from our stockholders designed
to disclose the actual ownership of our outstanding shares, and we must maintain a list of those persons failing or refusing to comply
with such request as part of our records. A stockholder that fails or refuses to comply with such request is required by the Treasury
Regulations to submit a statement with its tax return disclosing the actual ownership of our stock and other information. We intend to
comply with these requirements.

Failure to Qualify as a REIT

If we fail to satisfy 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