Third, if Regency Centers Corporation has (i) net income from the sale or other
disposition of foreclosure property (which is, in general, property acquired by Regency Centers Corporation by foreclosure or otherwise on default of a loan secured by the property) which is held primarily for sale to customers in the
ordinary course of business or (ii) other non-qualifying net income from foreclosure property, it will be subject to tax on such income at the highest corporate rate.
Fourth, if Regency Centers Corporation has net income from prohibited transactions (which are, in general, certain sales or other
dispositions of property held primarily for sale to customers in the ordinary course of business other than foreclosure property), such income will be subject to a 100% tax.
Fifth, if Regency Centers Corporation fails to satisfy either the 75% gross income test or the 95% gross income test discussed below, but
still maintains its qualification as a REIT because other requirements are met, Regency Centers Corporation will pay a 100% tax on (1) the gross income attributable to the greater of the amount by which Regency Centers Corporation fails,
respectively, the 75% or 95% gross income test, multiplied, in either case, by (2) a fraction intended to reflect Regency Centers Corporations profitability.
Sixth, if Regency Centers Corporation fails, in more than a de minimis fashion, to satisfy one or more of the asset tests for any quarter of a
taxable year, but nonetheless continues to qualify as a REIT because Regency Centers Corporation qualifies under certain relief provisions, it may be required to pay a tax of the greater of $50,000 or a tax computed at the highest corporate rate on
the amount of net income generated by the assets causing the failure from the date of failure until the assets are disposed of or it otherwise returns to compliance with the asset test.
Seventh, if Regency Centers Corporation fails to satisfy one or more of the requirements for REIT qualification (other than the income tests
or the asset tests), it nevertheless may avoid termination of its REITs election in such year if the failure is due to reasonable cause and not due to willful neglect, but it would also be required to pay a penalty of $50,000 for each failure
to satisfy the REIT qualification requirements.
Eighth, if Regency Centers Corporation should fail to distribute during each calendar
year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income for such year, and (iii) any undistributed taxable income from prior years, it will be subject to a 4% non-deductible excise tax on the excess of such required distribution over the amounts actually distributed.
Ninth, Regency Centers Corporation will be subject to a 100% penalty tax on some payments it receives (or on certain expenses deducted by a
taxable REIT subsidiary) if arrangements among Regency Centers Corporation, its tenants, and its taxable REIT subsidiaries are not comparable to similar arrangements among unrelated parties.
Tenth, if Regency Centers Corporation acquires any asset from a C corporation (that is, a corporation generally subject to full corporate
level tax) in a transaction in which the basis of the asset in Regency Centers Corporations hands is determined by reference to the basis of the asset (or any other property) in the hands of the C corporation, and it recognizes gain on the
disposition of such asset during the 5-year period (or such other period as may be provided from time to time in the Code and Treasury Regulations) beginning on the date on which such asset was
acquired by it, then, to the extent of such propertys built-in gain (the excess of the fair market value of such property at the time of acquisition by it over the adjusted basis in
the property at such time), such gain will be subject to tax at the highest regular corporate rate applicable. The rule described above with respect to the recognition of built-in gain
will apply assuming that an election is not made pursuant to Section 1.337(d)-7 of the Treasury Regulations to treat the asset as having been sold by the C corporation for fair market value
immediately before the acquisition by it.
Eleventh, Regency Centers Corporation may elect to retain and pay income tax on our net
long-term capital gain. In that case, a U.S. shareholder would be taxed on its proportionate share of our undistributed long-term capital gain (to the extent that we made a timely designation of such gain to the shareholders) and would receive a
credit or refund for its proportionate share of the tax we paid. A non-U.S. shareholder would be taxed in the manner described below in U.S. Taxation of
Non-U.S. Shareholders.
Twelfth, Regency Centers Corporation may be required to pay monetary
penalties to the IRS in certain circumstances, including if we fail to meet record-keeping requirements intended to monitor our compliance with rules relating to the composition of a REITs shareholders.
In addition, Regency Centers Corporation owns interests in multiple taxable REIT subsidiaries and may acquire securities in additional taxable
REIT subsidiaries in the future. Each taxable REIT subsidiary is treated as a separate entity for federal income tax purposes and is taxed on its income at regular corporate rates, although its results are consolidated with those of the Company for
financial reporting purposes. Moreover, notwithstanding our status as a REIT, we may also have to pay certain state and local income taxes, because not all states and localities treat REITs in the same manner that they are treated for U.S. federal
income tax purposes.
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