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Private prison investors set for giant windfall from Trump tax bill

Prison firms that restructured as real estate investment trusts see substantial tax cut – more good news for those who benefit from increased incarceration

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Powered by Guardian.co.ukThis article titled “Private prison investors set for giant windfall from Trump tax bill” was written by Jamiles Lartey in New York, for theguardian.com on Thursday 28th December 2017 12.00 UTC

Individual investors in US private prisons are poised to collect their most lucrative earnings ever thanks to changes in the tax code signed by Donald Trump, continuing what has been a banner year for the industry since the 2016 election.

“It’s going to be great for the investors, banks and hedge funds that own shares in private prisons, and are dependent on increased incarceration and criminalization,” said Jamie Trinkle, campaign and research coordinator with the racial and economic justice coalition Enlace.

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.

“This tax act is of unprecedented benefit for reit investors,” said David Miller, a tax partner at Proskauer Rose. “I think reits will explode in popularity as a result of this act.”

With dividends of more than 0m paid out by the two major private prison companies in 2017, in theory, prison investors could see an additional m in dividend earnings next year, thanks to the GOP legislation. The actual figure will be lower than that, however, as some proportion of those shares are owned by institutional investors which are taxed differently from individuals. The exact breakdown between the two is not available in public filings.

Even without the new lower tax rate, the reit classification was already a huge boon to the private prison industry. 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%.

Lauren-Brooke Eisen, an attorney at the Brennan Center for Justice, said: “The way they are able to get away with that, is that they’re not allowed to keep a lot of cash on hand, they have to give it back to investors though dividends. But it allows them to have an incredibly low tax rate.”

According to Eisen, 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.

Oregon Democratic senator Ron Wyden, a ranking member on the finance committee, has called the use of the reit structure by prisons “unfair” and “unjust”. In 2016, after being pressed by Enlace, he introduced legislation to end such practices. The bill was reintroduced this year but it has yet to make it out of committee and is not likely to do so any time soon.

A CoreCivic representative told the Guardian that, in their view, “there are far more pressing matters for Congress to pursue” than the reit tax classifications. The Geo Group added they are “treated exactly the same as other real estate investment trusts without any special tax treatments or loopholes”. The point that activists make, though, is that treating prisons as real estate is a loophole.

A dramatic shift

Sixteen months ago, the outlook for private prisons seemed bleak: that was when the Obama Department of Justice announced it was phasing out their use. That announcement followed the release of a scathing government report, which concluded that private facilities were less safe than government-run ones.

The announcement only applied to the 18% of federal prisoners held in private facilities, not the 8% of state prisoners or 65% of immigration detainees held in private facilities. But it still signaled serious trouble. Corecivic and the Geo Group saw their stock prices plummet by about half and trading remained cratered until Trump’s surprise election victory.

By February, Trump’s first full month in office, it had become clear that the new administration would discontinue Obama’s efforts to shrink the size of the US prison population. One of Jeff Sessions’ first acts as attorney general was to undo the DoJ directive phasing out private prisons. That month the two companies each reached two-year stock highs.

The tax bill gift to private prison investors mirrors the cosy relationship Trump has had with the industry overall. After years elsewhere, in 2017 the Geo Group hosted its annual leadership conference at the Trump National Doral golf club in Miami. The company also gave nearly half a million dollars to Trump through his inauguration committee and Super Pacs. Shortly thereafter, it secured the administration’s first contract for an immigration detention center, a deal potentially worth millions.

Despite all that momentum, though, Jamie Trinkle at Enlace still sees a potential for organizers to stem the resurgence of private prisons. Divestment campaigns have successfully pulled more than bn out of banks (principally Wells Fargo) and other organizations that invest in the industry.

“Since the tax benefit goes directly to the investors, I think the divestment work actually becomes more important as a way to fight back and stop the flow of capital,” Trinkle said.

  • This piece was amended on 28 December 2017, to clarify the circumstances under which the Geo Group and Corecivic restructured as reits.

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DON LEMON CUTS MIC ON PANELIST

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CNN’s Don Lemon cut conservative radio host John Fredericks’ mic off during a panel discussion on President Trump’s reported comments criticizing immigrants coming to the US from what he called “shithole countries.”

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Donald Trump visit to London called off amid fears of mass protests

President will not now open new US embassy next month, with secretary of state Rex Tillerson likely to take his place

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Powered by Guardian.co.ukThis article titled “Donald Trump cancels London visit amid protest fears” was written by Heather Stewart Political editor, and David Smith in Washington, for The Guardian on Friday 12th January 2018 09.49 UTC

Donald Trump has cancelled a visit to Britain next month to open the new US embassy in London, amid fears of mass protests.

The president claimed on Twitter that the reason for calling off the trip was his displeasure at Barack Obama having sold the current embassy for “peanuts” and built a replacement for bn (£750m). “Bad deal,” he wrote.

But the embassy’s plan to move from Mayfair to Nine Elms in London was first reported in October 2008, when George W Bush was still president.

The London mayor, Sadiq Khan, said Trump had “got the message” that many Londoners staunchly opposed his policies and actions.

“It appears that President Trump got the message from the many Londoners who love and admire America and Americans but find his policies and actions the polar opposite of our city’s values of inclusion, diversity and tolerance,” Khan said on Friday.

“His visit next month would without doubt have been met by mass peaceful protests. This just reinforces what a mistake it was for Theresa May to rush and extend an invitation of a state visit in the first place.”

The prime minister invited Trump for a state visit when she became the first world leader to visit the president in the White House a year ago. Activists immediately pledged to stage protests and MPs have said they would not give the president the opportunity to address parliament.

Asked about Trump’s cancellation, a Downing Street spokesman repeated the government’s longstanding position that “an invitation has been extended and accepted, but no date has been set”.

The White House press secretary Sarah Sanders said: “The invitation was made and has been accepted we are still working to finalise a date.”

Instead of a state visit, it had been expected that Trump would make a brief, less formal “working visit” in February to cut the ribbon on the embassy in south-west London, and hold meetings with May. Officials had also been examining plans for the president to meet the Queen without the pomp of a full-blown state banquet.

Government sources suggested Washington had signalled that the secretary of state, Rex Tillerson, would instead open the embassy.

US secretary of state Rex Tillerson.
Rex Tillerson.

Trump confirmed on Twitter late on Thursday night that the trip was off. “Reason I canceled my trip to London is that I am not a big fan of the Obama Administration having sold perhaps the best located and finest embassy in London for “peanuts,” only to build a new one in an off location for 1.2 billion dollars,” he wrote just before midnight local time. “Bad deal. Wanted me to cut ribbon-NO!”

Citing security and environmental reasons, the US state department agreed to sell the current embassy building in Grosvenor Square to the Qatari Diar Real Estate Investment Co, which plans to turn it into a luxury hotel. Estimates put the site’s value at £500m before it was made a listed building, which would have diminished the value because of restrictions on development.

Embassy locations

British relations with the president hit a low late last year when May criticised his decision to retweet videos posted by the far-right extremist group Britain First.

Trump responded by tweeting directly to the prime minister that she should focus on tackling domestic terrorism.

The government was so concerned about his decision to share the videos that Britain’s ambassador to Washington, Sir Kim Darroch, took the rare step of raising the issue directly with the White House.

Trump’s ambassador to London, Woody Johnson, subsequently insisted: “The president and the prime minister have a very, very good relationship. I know the president admires and respects the prime minister greatly.”

May’s government has been keen to strike up a close relationship with the Trump administration despite his erratic behaviour, because of Britain’s desire to strike a swift trade deal with the world’s largest economy when it leaves the European Union.

Trump has sparked alarm among diplomats by repeatedly entering into Twitter spats with key public figures, including the North Korean leader, Kim Jong-un, to whom he recently boasted about the size of the US nuclear arsenal.

The White House has been rocked in recent days by the revelations in an explosive book, Fire and Fury, by the US journalist Michael Wolff, who suggested senior figures in the administration questioned the president’s fitness for office.

Asked about the revelations last weekend, May said she believed they were not serious, and Trump was a man making decisions “in the interests of the United States”.

Trump faced fresh criticism on Thursday night after the Washington Post reported that he had questioned planned changes to immigration rules, asking colleagues why the US had to welcome arrivals from “shithole countries”.

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North Korea: Trump open to talks but will apply ‘maximum pressure’

  • President wants talks ‘at the appropriate time, under the right circumstances
  • White House confirms details of phone call with South Korean leader
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Powered by Guardian.co.ukThis article titled “North Korea: Trump promises ‘peace through strength’ and denies strike plan” was written by Julian Borger in Washington Justin McCurry in Tokyo, for theguardian.com on Wednesday 10th January 2018 22.00 UTC

Donald Trump has promised “peace through strength” on the Korean peninsula, reportedly telling his South Korean counterpart that no US military action against Pyongyang is being contemplated while diplomacy is under way.

In a phone call with South Korea’s president, Moon Jae-in, on Wednesday, Trump expressed his openness to talks with North Korea “at the appropriate time, under the right circumstances” according to a short White House account of the meeting, which gave no further details. The Trump administration has previously sent mixed signals on its preconditions before beginning a dialogue with the regime.

Speaking at the White House, Trump shrugged off reports in the press suggesting his administration was considering punitive air strikes against North Korea to show it is serious about curbing Pyongyang’s development of nuclear and missile capabilities.

Stressing his commitment to military spending, Trump said: “We are going to have peace through strength.”

He added: “I think we’re going to have a long period of peace. I hope we do. We have certainly problems with North Korea but a lot of good talks are going on right now – a lot of good energy. I like it very much .”

According to a South Korean government spokesman, Trump promised Moon there would be no military action “of any kind” while the dialogue continued between the two Koreas. That dialogue restarted on Tuesday, after a break of two years, in talks in the border village of Panmunjoin, which resulted in North Korean regime agreeing to send a delegation to next month’s Winter Olympics in Pyeongchang.

Moon briefed Trump on the Panmunjoin talks and went out of his way to thank Trump for his policy of imposing “maximum pressure” on North Korea.

“I think President Trump deserves big credit for bringing about the inter-Korean talks, and I want to show my gratitude,” he told reporters in Seoul. “It could be the result of US-led sanctions and pressure.”

In his version of his conversation with Moon, Trump also emphasised his owned role in creating conditions for the talks to occur.

“He’s very thankful for what we’ve done. It was so reported today that … without our attitude, that would have never happened,” Trump told reporters. “Who knows where it leads. Hopefully, it will lead to success for the world – not just for our country, but for the world. And we’ll be seeing over the next number of weeks and months what happens.”

In their telephone conversation on Wednesday, Trump also told Moon that vice-president Mike Pence would lead the US delegation to the Olympic Games, the White House said.

En route to South Korea, Pence will also travel to Alaska to review ballistic missile defense facilities, the White House said.

Moon’s praise for Trump is being seen as an attempt to ease US concerns that the recent thaw in cross-border ties could drive a wedge between Seoul and Washington.

On Tuesday, North Korea agreed to send a large delegation to the Games, which open in Pyeongchang on 9 February. The two sides also agreed to hold military talks in an attempt to prevent an accidental conflict on the peninsula.

While Moon has been more open to the idea of engagement than either of his two conservative predecessors, he said Seoul and Washington shared a common aim: the denuclearisation of the Korean peninsula.

“This initial round of talks is for the improvement of relations between North and South Korea,” he said. “Our task going forward is to draw North Korea to talks aimed at the denuclearisation of the North. That is our basic stance, and that will never be given up.”

He added: “We cannot say talks are the sole answer. If North Korea engages in provocations again or does not show sincerity in resolving this issue, the international community will continue applying strong pressure and sanctions.”

Moon said he was open to meeting his counterpart, Kim Jong-un, but he would not engage in “talks for the sake of talks”.

“To hold a summit, the right conditions must be created and certain outcomes must be guaranteed,” he said.

Lee Woo-young, a professor at the University of North Korean Studies in Seoul, said Moon had been right to praise Trump.

“By doing that, he can help the US build logic for moving toward negotiations and turning around the state of affairs in the future, so when they were ready to talk to the North, they can say the North came out of isolation because the sanctions were effective,” he said.

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