If I understand it correctly, while the new Act allows REITs to own 100% of the stock of taxable subsidiaries, the Act still limits the total amount of profits that those subsidiaries can contribute to the parent. Therefore, while it would be OK for PZN to own all the stock of CCA, it will not work in our situation because OPCO would contribute too much profit.
Just a point of clarification, it may sound silly to say that OPCO would contribute too much profit to PZN when OPCO is losing money but please understand that if OPCO was paying "market" rates to PZN, OPCO would be handsomly profitable and PZN would be generating the losses.
It is particularly important to understand THAT as we get the occasional call to set OPCO free from PZN.
Without above-market lease payments from OPCO, and OPCO's ability to generate new business, PZN is a collection of prisons who's value declines each year as the leases slowly wind down. This is especially true given what doc's actions have done to our Balance Sheet this past year. That is why a combined PZN/OPCO "c" corp wouldn't earn 50 cents a share next year. If we had not done the REIT and instead simply merged PZN with CCA, our 2000 earnings would probably be close to $1.20/share.