Private-prison companies keep winning, and they have U.S. taxpayers to thank.
Not only are Americans footing the bill for detaining thousands of border-crossers, the Internal Revenue Service allows CoreCivic Inc. and GEO Group Inc. to legally avoid paying taxes on their gains.
Those gains are substantial. A dollar placed on CoreCivic the day before President Donald Trump’s 2016 election, with dividends reinvested, would be worth $2.02 today. For GEO, $1.83.
A big part of the success stems from Trump’s plan to spend nearly $2.8 billion next year expanding immigrant detention capacity by 30 percent from 2017. The funding would support an average daily population of 52,000, about the size of Saginaw, Michigan. More than 70 percent of undocumented immigrants were held in private prisons last year, according to nonprofit group In the Public Interest.
Savvy use of the tax code plays a role, too. CoreCivic and GEO, the biggest U.S. prison companies, are classified as real estate investment trusts. That means almost all their profits from property-related operations are tax free as long as they’re distributed to shareholders through dividends.
“We are very pleased with our second-quarter operating results and with our forecast for the balance of the year,” GEO Chief Executive Officer George Zoley told analysts last week.
The tax rules incentivize CoreCivic and GEO to build and lease detention facilities rather than only manage them. They’re doing just that.
Prison Ownership
Boca Raton, Florida-based GEO owned or leased 102 prisons in the U.S. last year, up from 65 in 2013, when it became a REIT.
CoreCivic, based in Nashville, Tennessee, reduced managed-only contracts to seven last year from 16 in 2013, the year it also became a REIT. Facilities it owns and manages or leases grew to 82 from 53.