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April 19, 2010
Multistate Tax Commission Conference Call to Discuss Revised Captive REIT Add-Back Statute
The Multistate Tax Commission (MTC)'s Income & Franchise Tax Uniformity Subcommittee will hold a teleconference call on Thursday, April 22, 2010, at 2:30 p.m. EST to discuss a revised
proposed model captive REIT statute that would require that a taxpayer add back to taxable income expenses paid to a related "captive REIT." The definition of captive REIT is largely the same as that contained in its
current model captive REIT statute. To join the call, dial 1-888-809-4012 and enter Conference Code "101912" followed by the "#" sign. NAREIT has worked closely with MTC staff and largely supports the curent draft statute. You may also
contact the MTC's Bruce Fort with comments prior to the call at
bfort@mtc.gov. For more details,
click here.
Tennessee Considering Disallowing DPD; Limitation to Captive REITs Likely, But "Captive" Definition Unclear
Pending in the Tennessee General Assembly is legislation,
S.B. 3901, that would require an add-back of the dividends paid deduction (DPD) as well as taxes under Internal Revenue Code Section 857(b)(2)(E) for all REITs. We understand that the Tennessee Department of Revenue (DOR) intends to
limit this legislation to captive REITs. The legislation also would require combined reporting of a captive REIT group. At this time, it appears that Tennessee's current definition of captive REIT (generally a REIT owned more than 90% by a
"taxpayer") is broader than most states' definition of captive REIT. It is not clear how this proposal would affect the REITs owned by some NAREIT members. For example, it appears that the proposal may not affect lower-tier REITs of
publicly traded REITs provided the publicly traded REIT is a Tennessee taxpayer because the upper-tier REIT would continue to be entitled to a DPD in Tennessee. NAREIT is advocating for Tennessee's adoption of the MTC's current captive
REIT definition if this legislation is adopted. The Senate Tax Standing Committee of Finance, Ways and Means is expected to hold a hearing on this legislation tomorrow, April 20, 2010.
California Considers Legislation That Would "Split Rolls" of Business and Residential Property Taxpayers – Virtually Repealing Proposition 13 for Publicly Traded Businesses
Legislation sponsored by California Assembly member Tom Ammiano (D),
AB 2492, was recently amended by the sponsor to impose a "change of ownership split roll property tax," virtually repealing Proposition 13 for businesses. The bill generally would do the following: a) specify that when ownership
interests are transferred, the real property directly or indirectly owned by that legal entity would have changed ownership in proportion to that portion of the ownership interests in the legal entity that were transferred; b) provide that
a change of ownership for a legal entity would have occurred when over 50% of the ownership interests in that company have been transferred (as specified in the legislation); c) establish a rebuttable presumption that, as of January 1,
2011, and on January 1 of each third fiscal year thereafter, all of the real property owned by a publicly traded company in the state would have gone undergone a change of ownership; and, d) impose penalties of $2,500 or 25% of the value
of the property for each willful misstatement regarding a change of ownership.
A publicly traded company would be able to rebut the presumption by: a) a statement certifying under penalty of perjury that real property directly or indirectly owned by the company in the county has not undergone a change of ownership;
or, b) demonstrating by a preponderance of evidence that the real property directly or indirectly owned by the company in the county has not undergone a change of ownership.
A number of NAREIT members joined a wide variety of business interests, including the California Chamber, the National Federation of Independent Business, the International Council of Shopping Centers, and others in sending an
opposition letter arranged by the California Taxpayers Association (Cal-Tax), of which NAREIT is a member. (Due to time constraints involving distribution of the letter, NAREIT was unable to join this particular effort in time for its
distribution, but NAREIT does oppose the legislation.) If you are interested in future opposition efforts, please contact Michele Pielsticker of Cal-Tax at
michele@caltax.org.
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