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Private Prison Investors To Make Financial Windfall From GOP Tax Plan

“It’s going to be great for the investors, banks and hedge funds that own shares in private prisons."

Intended or otherwise, the Republican tax reform bill that takes effect next year will be a boon for investors in the private prison industry - an industry already thriving amid increased incarceration rates in the United States.

According to the Guardian,

Under the new GOP law, investments in so-called “real estate investment trusts” (reits) will see a 25% reduction in tax, from 39.6% down to 29.6%.

Corecivic, formerly Corrections Corporation of America (CCA), and the Geo Group, which together own more than 80% of private prison beds in the US, both restructured as reits in 2013 after a private letter ruling by the Obama Administration IRS green-lit the change.

Even before the tax plan lowered rates, prison companies reaped a mighty benefit from the loophole allowing them to claim reit status:

Before converting to a reit in 2013, Corecivic was subject to a 36% corporate tax rate. After the reorganization, it reported paying an effective tax rate in the first quarter of 2015 of just 3%.

...

According to [Lauren-Brooke Eisen, an attorney at the Brennan Center for Justice], prison companies have essentially argued that renting out cells to the government is the equivalent of charging a tenant rent, thus making such business primarily a real estate venture. In her new book, Inside Private Prisons, Eisen examines the way this classification has boosted industry earnings.

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