• by Erik Sass  @eriksass1, April 25, 2014

Lamar Advertising and CBS Outdoor have both received approval from the IRS for their proposed conversions to real estate investment trusts (REITs), clearing the way for the conversions to proceed by the end of this year. The switch to REITs should allow the outdoor advertising companies to substantially reduce their federal tax burdens.
 
Lamar reported the regulatory approval on Thursday of this week, following the IRS ruling that the sale of outdoor advertising space qualifies as rental income from real estate, satisfying one of the main conditions for consideration as an REIT.
Lamar expects to be able to convert itself into REIT in time for the 2014 tax year.
 
The IRS rendered a similar decision regarding CBS Outdoor last week. CBS Outdoor is planning to convert to an REIT as part of its recent spinoff from CBS Corp., which in turn followed the sale of CBS Outdoor’s international business. In late March, CBS Outdoor went public with an IPO that raised $560 million with the sale of 20 million shares in the newly independent company; the REIT conversion is the last step in the planned corporate makeover.   
 
Companies can qualify as REITs if their business is based primarily on real estate holdings and they also distribute at least 90% of their annual taxable income to investors through dividends.
 
Lamar -- whose property, plant and equipment across the U.S. is worth $3 billion -- first revealed it was considering converting itself into an REIT in August 2012 and submitted a formal request to the IRS in November 2012. The process has subsequently slowed due to heightened regulatory scrutiny of REIT applications by Lamar, CBS and other companies.

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