Public Storage 2014 Annual Report Download - page 29

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of the outstanding shares of any class or series of preferred or equity shares, in either case
unless a specific exemption is granted by our Board. These limits could discourage,
delay or prevent a transaction involving a change in control of our company not approved
by our Board.
x Similarly, current provisions of our declaration of trust and powers of our Board could
have the same effect, including (1) limitations on removal of trustees in our declaration of
trust, (2) restrictions on the acquisition of our shares of beneficial interest, (3) the power
to issue additional common shares, preferred shares or equity shares on terms approved
by the Board without obtaining shareholder approval, (4) the advance notice provisions
of our bylaws and (5) the Board’s ability under Maryland law, without obtaining
shareholder approval, to implement takeover defenses that we may not yet have and to
take, or refrain from taking, other actions that could have the effect of delaying, deterring
or preventing a transaction or a change in control.
If we failed to qualify as a REIT, we would have to pay substantial income taxes.
REITs are subject to a range of complex organizational and operational requirements. A
qualifying REIT does not generally incur federal income tax on its net income that is distributed to its
shareholders. Our REIT status is also dependent upon the ongoing REIT qualification of PSB as a result of
our substantial ownership interest in it. We believe that we are organized and have operated as a REIT and
we intend to continue to operate to maintain our REIT status.
There can be no assurance that we qualify or will continue to qualify as a REIT. The highly
technical nature of the REIT rules, the ongoing importance of factual determinations, the possibility of
unidentified issues in prior periods or changes in our circumstances, all could adversely affect our ability to
comply. For any taxable year that we fail to qualify as a REIT and statutory relief provisions did not apply,
we would be taxed at the regular federal corporate rates on all of our taxable income and we also could be
subject to penalties and interest. We would generally not be eligible to seek REIT status again until the
fifth taxable year after the first year of our failure to qualify. Any taxes, interest and penalties incurred
would reduce the amount of cash available for distribution to our shareholders or for reinvestment and
would adversely affect our earnings, which could have a material adverse effect.
We may pay some taxes, reducing cash available for shareholders.
Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal,
foreign, state and local taxes on our income and property. Since January 1, 2001, certain corporate
subsidiaries of the Company have elected to be treated as “taxable REIT subsidiaries” for federal income
tax purposes, and are taxable as regular corporations and subject to certain limitations on intercompany
transactions. If tax authorities determine that amounts paid by our taxable REIT subsidiaries to us are not
reasonable compared to similar arrangements among unrelated parties, we could be subject to a 100%
penalty tax on the excess payments, and ongoing intercompany arrangements could have to change,
resulting in higher ongoing tax payments. To the extent the Company is required to pay federal, foreign,
state or local taxes or federal penalty taxes due to existing laws or changes thereto, we will have less cash
available for distribution to shareholders. In addition, certain local and state governments have imposed a
tax on self-storage rent which, while in most cases is paid by our customers, increases the cost of self-
storage rental to our customers and can negatively impact our revenues. Other local and state governments
may impose a self-storage rent tax in the future.
We are exposed to ongoing litigation and other legal and regulatory actions, which may divert
management’s time and attention, require us to pay damages and expenses or restrict the operation
of our business.
We are subject to the risk of legal claims and proceedings and regulatory enforcement actions in
the ordinary course of our business and otherwise, and we could incur significant liabilities and substantial