This exception was included in the final regulations.
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How come leases from a local government or an Indian tribal government do not need to be at “market” terms?
How come leases from a local government or an Indian tribal government do not need to be at “market” terms?
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Leases from local governments and Indian tribes are typically for purposes other than the generation of income, such as IDA benefits. The regulations acknowledge the idea that sovereign instrumentalities need to keep fee title ownership of the property to satisfy the rules surrounding tax breaks and other key incentives for investing in a certain area. In these scenarios, property leases will almost never be at arm's length.
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