This excerpt taken from the HST 8-K filed Mar 2, 2005.
Distribution of Earnings and Profits Attributable to C Corporation Taxable Years
A REIT will be taxed as though it did not make a REIT election if it has at the end of any taxable year any undistributed earnings and profits (E&P) that are attributable to a non-REIT C corporation taxable year, which includes all undistributed E&P of Host Marriotts predecessors. Accordingly, Host Marriott had until December 31, 1999 to distribute such E&P. In connection with the REIT conversion, Host Marriott declared dividends, consisting of cash, stock of Host Marriott, and stock of a subsidiary, Crestline Capital Corporation, or Crestline, intended to eliminate the substantial majority, if not all, of such E&P. To the extent, however, that any such E&P remained (the Acquired Earnings) and Host Marriott failed to distribute such Acquired Earnings prior to the end of 1999, Host Marriott would be disqualified as a REIT at least for 1999. If Host Marriott should be so disqualified for 1999, subject to the satisfaction by Host Marriott of certain deficiency dividend procedures described below in Annual Distribution Requirements Applicable to REITs and assuming that Host Marriott otherwise satisfies the requirements for qualification as a REIT, Host Marriott should qualify as a REIT for 2000 and thereafter. Host Marriott believes that the dividends it paid prior to December 31, 1999 were sufficient to distribute all of the Acquired Earnings as of December 31, 1999. However, there are uncertainties relating to both the estimate of the Acquired Earnings and the value of noncash consideration that Host Marriott distributed in connection with the REIT conversion. Accordingly, there can be no assurance this requirement was met.