Private Prison Companies Find Loophole to Avoid Taxes

Wednesday, April 24, 2013
Damon Hininger, President and CEO of CCA

An obscure tax loophole intended for real estate trusts is now being used by private prison companies and other businesses to avoid paying federal taxes.


Real estate investment trusts (REIT) were created during the Eisenhower administration to help companies that concentrate their business in real estate holdings by reducing or even eliminating the payment of corporate taxes. Typical REITs are companies that own shopping centers, malls, office buildings, apartments and mortgages. But now Corrections Corporation of America (CCA) is using REIT status as a “golden ticket” to reduce its tax bill.


CCA, which owns and operates 44 prisons and detention centers, and another private prison operator, the Geo Group, have successfully argued to the Internal Revenue Service that the money they collect from governments for holding prisoners is similar to rent, thus qualifying them as an REIT.


CCA expects to save $70 million in tax payments for this year—at a time when federal agencies are cutting billions from their budgets due to Washington’s fiscal problems. The IRS’s loosening of restrictions on REITs has led to other companies claiming they are real estate trusts, including casinos, owners of cell phone towers and data storage companies.

-Noel Brinkerhoff, David Wallechinsky


To Learn More:

Restyled as Real Estate Trusts, Varied Businesses Avoid Taxes (by Nathaniel Popper, New York Times)

Private Prison Company Muscles into Law Enforcement, Creating Occupants for Its Prisons (by Matt Bewig, AllGov)

Private Prison Company to Demand 90% Occupancy (by Noel Brinkerhoff and David Wallechinsky, AllGov)

Private Prison Industry Helped Create Anti-Immigrant Law in Arizona (by Noel Brinkerhoff and David Wallechinsky, AllGov)


DDearborn 10 years ago
Hmmm tax loop holes are NOT protected by the Constitution and the Bill of Rights. It is a pity indeed that every time another of these grossly unjust and incredibly expense (to the working tax payers of course) loop holes is found Congress and the White House not to mention the IRS are no where to be found And yet when it comes to finding new ways to whittle away our Constitutional rights Congress and the White House are all over it. Strangly enough they are often all over it BEFORE it happens. How is that by the way? All it would take is Obama and the stroke of his pen to order the IRS to close the loophole. There are many ways for him to do this. Of course the Congress could actually do something besides shredding the Bill of Rights and put a stop to this and literally thousands more loop holes in the code. But they never do. This is of course the very essence of economic tyranny at its worst. After all the working class is not allowed this give away.

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