Kilroy Realty Announces 2023 Tax Treatment of Its Dividend Distributions

Rhea-AI Summary

Kilroy Realty Corporation (KRC) announced the 2023 tax treatment of its dividend distributions, with total dividend distributions per share of common stock to be classified for income tax purposes. The company provided specific figures for taxable ordinary dividends, qualified dividends, total capital gain distribution, unrecaptured Section 1250 gain, return of capital, and Section 199A dividends. The announcement also included additional information pursuant to Treasury Regulation §1.1061-6(c), encouraging stockholders to consult with their tax advisors for specific tax treatment.

Insights

Tax Expert

Kilroy Realty Corporation's announcement on the tax treatment of its dividend distributions is a critical piece of information for shareholders. The classification of dividends affects how they are taxed, which in turn influences the after-tax return on investment. The majority of the distributions are classified as Taxable Ordinary Dividend, with a very small portion labeled as Total Qualified Dividend and Total Capital Gain Distribution. The distinction between these categories is significant for tax purposes. Qualified dividends are typically taxed at a lower rate than ordinary income, while capital gains can be taxed at different rates depending on the holding period of the investment.

Furthermore, the Unrecaptured Section 1250 Gain is a specific type of gain related to depreciation recapture on sold depreciable real estate, which is taxed at a maximum rate of 25%. The Section 199A Dividends, which are part of the Tax Cuts and Jobs Act, allow individual taxpayers to deduct up to 20% of REIT dividends, reducing their taxable income. It is important for shareholders to recognize that these tax treatments can significantly affect the net value they receive from their investments.

Lastly, the information provided under Treasury Regulation §1.1061-6(c) pertains to the allocation of gains for investors subject to the carried interest rules. This is particularly relevant for investment managers who may have different tax implications under Section 1061, which pertains to the taxation of carried interest.

Financial Analyst

The tax treatment of Kilroy Realty Corporation's dividends can have implications for the company's stock performance. Investors often look for stocks with favorable tax treatments, such as those offering qualified dividends or returns of capital, as these can enhance the after-tax yield of their investments. In this case, the significant portion of the dividend being classified as Taxable Ordinary Dividend might be less attractive to investors in higher tax brackets, potentially impacting the stock's appeal to income-focused investors.

Moreover, the return of capital component, albeit small, effectively reduces the investor's cost basis in the stock, which could have capital gains implications when the stock is sold. Investors might view this favorably as it defers tax liability. Additionally, the absence of Three-Year Distributive Share Amount indicates that there are no long-term capital gains distributed, which could have been taxed at a lower rate, thus affecting the attractiveness of the dividend from a tax perspective.

It is also essential to consider the timing of the dividend distributions. Dividends paid out in January are attributed to the following year's tax filing, which can influence an investor's tax planning strategy. Overall, understanding these nuances is crucial for investors when assessing the total return of their Kilroy Realty Corporation stock holdings.

LOS ANGELES--(BUSINESS WIRE)-- Kilroy Realty Corporation (NYSE: KRC, "Kilroy") announced today the 2023 tax treatment of its dividend distributions. The company's total dividend distributions per share of common stock (CUSIP #49427F108) are to be classified for income tax purposes as follows:

Record Date	Payable Date	Total Distribution per Share	Total Distribution Attributable to 2023	2023 Taxable Ordinary Dividend	2023 Total Qualified Dividend (1)	2023 Total Capital Gain Distribution	2023 Unrecaptured Section 1250 Gain (2)	2023 Return of Capital	2023 Section 199A Dividends (3)
12/30/2022	1/11/2023	$.5400000	$.5400000	$.5220068	$.0002006	$.0006441	-	$ .0173491	$ .5218062
3/31/2023	4/12/2023	.5400000	.5400000	.5220068	.0002006	.0006441	-	.0173491	.5218062
6/30/2023	7/12/2023	.5400000	.5400000	.5220068	.0002006	.0006441	-	.0173491	.5218062
9/29/2023	10/11/2023	.5400000	.5400000	.5220068	.0002006	.0006441	-	.0173491	.5218062

	(1)		Total Qualified Dividend is a subset of, and is included in, the Taxable Ordinary Dividend amount.
	(2)		Unrecaptured Section 1250 Gain is a subset of, and is included in, the Total Capital Gain Distribution amount.
	(3)		The Tax Cuts and Jobs Act enacted on December 22, 2017 generally allows a deduction for individuals equal to 20% of ordinary dividends distributed by a REIT (excluding capital gain dividends and qualified dividend income). Section 199A Dividends is a subset of, and is included in, the Taxable Ordinary Dividend amount.
	(4)		Additional Information Pursuant to Treasury Regulation §1.1061-6(c):
			One-Year Distributive Share Amount: $ 0.0025764 or 100% of the total capital gain distribution to shareholders for tax year ended December 31, 2023. To determine your share of the Company’s one-year distributive share amount, multiply the dollar amount of your reportable 2023 capital gain dividend from the Company (the amount shown in Box 2a of the Company’s 2023 Form 1099-DIV) by 100%. Three-Year Distributive Share Amount: $0. The remaining capital gain dividends, if any, are Section 1231 gains and therefore not considered for purposes of Section 1061.

The dividend distributions made to holders of record as of December 29, 2023 and paid on January 10, 2024 are considered 2024 dividend distributions for federal income tax purposes.

Stockholders are encouraged to consult with their tax advisors as to their specific tax treatment for Kilroy Realty Corporation common distributions.

About Kilroy Realty Corporation

Kilroy Realty Corporation (NYSE: KRC, the “company”, “Kilroy”) is a leading U.S. landlord and developer, with operations in San Diego, Greater Los Angeles, the San Francisco Bay Area, the Pacific Northwest and Austin, Texas. The company has earned global recognition for sustainability, building operations, innovation and design. As pioneers and innovators in the creation of a more sustainable real estate industry, the company’s approach to modern business environments helps drive creativity and productivity for some of the world’s leading technology, entertainment, life science and business services companies.

The company is a publicly traded real estate investment trust (“REIT”) and member of the S&P MidCap 400 Index with more than seven decades of experience developing, acquiring and managing office, life science and mixed-use projects.

As of September 30, 2023, Kilroy’s stabilized portfolio totaled approximately 16.3 million square feet of primarily office and life science space that was 86.2% occupied and 87.5% leased. The company also had more than 1,000 residential units in Hollywood and San Diego, which had a quarterly average occupancy of 92.7%. In addition, the company had two in-process life science redevelopment projects with total estimated redevelopment costs of $80.0 million, totaling approximately 100,000 square feet, and two in-process development projects with an estimated total investment of $1.6 billion, totaling approximately 1.6 million square feet of office and life science space. The in-process development and redevelopment office and life science space is 32% leased.

A Leader in Sustainability and Commitment to Corporate Social Responsibility

Kilroy has a longstanding commitment to sustainability and continues to be a recognized leader in our sector. For over a decade, the company and its sustainability initiatives have been recognized with numerous honors, including being listed on the Dow Jones Sustainability World Index, earning the GRESB five star rating and being named a sector and regional leader in the Americas. Other honors have included the Nareit Leader in the Light Award, being named ENERGY STAR Partner of the Year and receiving the ENERGY STAR highest honor of Sustained Excellence.

Kilroy is proud to have achieved carbon neutral operations across our portfolio since 2020. The company’s portfolio was 70% LEED certified and 44% Fitwel certified, and 65% of eligible properties were ENERGY STAR certified as of September 30, 2023.

A significant part of the company’s foundation is its commitment to enhancing employee growth, satisfaction and wellness while maintaining a diverse and thriving culture. For the fourth year in a row, the company has been named to Bloomberg’s Gender Equality Index, which recognizes companies committed to supporting gender equality through policy development, representation, and transparency.

More information is available at http://www.kilroyrealty.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current expectations, beliefs and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results and events may vary materially from those indicated or implied in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in the forward-looking statements, including, among others: global market and general economic conditions, including periods of heightened inflation, and their effect on our liquidity and financial conditions and those of our tenants; adverse economic or real estate conditions generally, and specifically, in the States of California, Texas and Washington; risks associated with our investment in real estate assets, which are illiquid, and with trends in the real estate industry; defaults on or non-renewal of leases by tenants; any significant downturn in tenants’ businesses, including bankruptcy, lack of liquidity or lack of funding and the impact labor disruptions or strikes, such as episodic strikes in the entertainment industry, may have on our tenants’ businesses; our ability to re-lease property at or above current market rates; reduced demand for office space, including as a result of remote working and flexible working arrangements that allow work from remote locations other than the employer's office premises; costs to comply with government regulations, including environmental remediation; the availability of cash for distribution and debt service and exposure to risk of default under debt obligations; increases in interest rates and our ability to manage interest rate exposure; changes in interest rates and the availability of financing on attractive terms or at all, which may adversely impact our future interest expense and our ability to pursue development, redevelopment and acquisition opportunities and refinance existing debt; a decline in real estate asset valuations, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing, and which may result in write-offs or impairment charges; significant competition, which may decrease the occupancy and rental rates of properties; potential losses that may not be covered by insurance; the ability to successfully complete acquisitions and dispositions on announced terms; the ability to successfully operate acquired, developed and redeveloped properties; the ability to successfully complete development and redevelopment projects on schedule and within budgeted amounts; delays or refusals in obtaining all necessary zoning, land use and other required entitlements, governmental permits and authorizations for our development and redevelopment properties; increases in anticipated capital expenditures, tenant improvement and/or leasing costs; defaults on leases for land on which some of our properties are located; adverse changes to, or enactment or implementations of, tax laws or other applicable laws, regulations or legislation, as well as business and consumer reactions to such changes; risks associated with joint venture investments, including our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers; environmental uncertainties and risks related to natural disasters; and our ability to maintain our status as a REIT. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect our business and financial performance, see the factors included under the caption “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2022 and our other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information and speak only as of the dates on which they are made. We assume no obligation to update any forward-looking statement made in this press release that becomes untrue because of subsequent events, new information or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240116485609/en/

Eliott Trencher

EVP, Chief Financial Officer

and Chief Investment Officer

(310) 481-8587

or

Bill Hutcheson

SVP, Investor Relations and Capital Markets

(415) 778-5678

Source: Kilroy Realty Corporation

FAQ

What is the ticker symbol for Kilroy Realty Corporation?

The ticker symbol for Kilroy Realty Corporation is KRC.

What is the 2023 tax treatment of dividend distributions announced by Kilroy Realty Corporation?

Kilroy Realty Corporation announced the 2023 tax treatment of its dividend distributions, with total dividend distributions per share of common stock to be classified for income tax purposes.

What are the specific figures provided by Kilroy Realty Corporation for the dividend distributions?

Kilroy Realty Corporation provided specific figures for taxable ordinary dividends, qualified dividends, total capital gain distribution, unrecaptured Section 1250 gain, return of capital, and Section 199A dividends.

What additional information was included in the announcement by Kilroy Realty Corporation?

The announcement included additional information pursuant to Treasury Regulation §1.1061-6(c), encouraging stockholders to consult with their tax advisors for specific tax treatment.