M
onty Bennett's efforts to cut costs at his struggling hotel empire may be violating federal tax law, according to a union representing hotel workers. To qualify for coveted tax exemptions, real estate investment trusts (REITs) must follow specific rules, including not operating the properties they own. However, UNITE HERE Local 11 claims that Ashford Inc.'s two REITs, Ashford Hospitality Trust and Braemar Hotels & Resorts, are being managed by Remington Hospitality, a company controlled by Bennett.

    In a letter to California's Attorney General and Franchise Tax Board, the union argues that this active involvement in operations contradicts the REIT status. "Ashford can't have it both ways," said Local 11 president Kurt Peterson. "They can't claim to be passive investment vehicles and then engage in hands-on management." Ashford spokesperson Laken Rapier disputed these claims, stating that both REITs comply with all applicable laws and have been reviewed by the IRS.

    The union points to a tax code provision that considers income from managing or operating property owned by a REIT as "impermissible tenant income." They also cite excerpts from earnings calls highlighting the close relationships between Remington and the REITs. The union is asking for an investigation into whether Ashford Hospitality Trust and Braemar Hotels & Resorts should be classified as REITs.

    This comes on the heels of a proxy battle launched by New York investor Blackwells to oust Bennett from Braemar Hotels & Resorts, which ended in a truce after both sides traded heated attacks online. Meanwhile, Ashford has been struggling with debt and delisted its stock to save money. A $410 million loan backed by 17 hotels was transferred to special servicing due to imminent default.