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Internal Revenue Code, § 857. Taxation Of Real Estate Investment Trusts And Their Beneficiaries

I.R.C. § 857(a) Requirements Applicable To Real Estate Investment Trusts
The provisions of this part (other than subsection (d) of this section and subsection (g) of section 856) shall not apply to a real estate investment trust for a taxable year unless—
I.R.C. § 857(a)(1)
the deduction for dividends paid during the taxable year (as defined in section 561, but determined without regard to capital gains dividends) equals or exceeds—
I.R.C. § 857(a)(1)(A)
the sum of—
I.R.C. § 857(a)(1)(A)(i)
90 percent of the real estate investment trust taxable income for the taxable year (determined without regard to the deduction for dividends paid (as defined in section 561) and by excluding any net capital gain); and
I.R.C. § 857(a)(1)(A)(ii)
90 percent of the excess of the net income from foreclosure property over the tax imposed on such income by subsection (b)(4)(A); minus
I.R.C. § 857(a)(1)(B)
any excess noncash income (as determined under subsection (e)); and
I.R.C. § 857(a)(2)
either—
I.R.C. § 857(a)(2)(A)
the provisions of this part apply to the real estate investment trust for all taxable years beginning after February 28, 1986, or
I.R.C. § 857(a)(2)(B)
as of the close of the taxable year, the real estate investment trust has no earnings and profits accumulated in any non-REIT year.
For purposes of the preceding sentence, the term “non-REIT year” means any taxable year to which the provisions of this part did not apply with respect to the entity. The Secretary may waive the requirements of paragraph (1) for any taxable year if the real estate investment trust establishes to the satisfaction of the Secretary that it was unable to meet such requirements by reason of distributions previously made to meet the requirements of section 4981.
I.R.C. § 857(b) Method Of Taxation Of Real Estate Investment Trusts And Holders Of Shares Or Certificates Of Beneficial Interest
I.R.C. § 857(b)(1) Imposition Of Tax On Real Estate Investment Trusts
There is hereby imposed for each taxable year on the real estate investment trust taxable income of every real estate investment trust a tax computed as provided in section 11, as though the real estate investment trust taxable income were the taxable income referred to in section 11.
I.R.C. § 857(b)(2) Real Estate Investment Trust Taxable Income
For purposes of this part, the term “real estate investment trust taxable income” means the taxable income of the real estate investment trust, adjusted as follows:
I.R.C. § 857(b)(2)(A)
The deductions for corporations provided in part VIII (except section 248) of subchapter B (section 241 and following, relating to the deduction for dividends received, etc.) shall not be allowed.
I.R.C. § 857(b)(2)(B)
The deduction for dividends paid (as defined in section 561) shall be allowed, but shall be computed without regard to that portion of such deduction which is attributable to the amount excluded under subparagraph (D).
I.R.C. § 857(b)(2)(C)
The taxable income shall be computed without regard to section 443(b) (relating to computation of tax on change of annual accounting period).
I.R.C. § 857(b)(2)(D)
There shall be excluded an amount equal to the net income from foreclosure property.
I.R.C. § 857(b)(2)(E)
There shall be deducted an amount equal to the tax imposed by paragraphs (5) and (7) of this subsection, section 856(c)(7)(C), and section 856(g)(5) for the taxable year.
I.R.C. § 857(b)(2)(F)
There shall be excluded an amount equal to any net income derived from prohibited transactions.
I.R.C. § 857(b)(3) Capital Gains
I.R.C. § 857(b)(3)(A) Treatment Of Capital Gain Dividends By Shareholders
A capital gain dividend shall be treated by the shareholders or holders of beneficial interests as a gain from the sale or exchange of a capital asset held for more than 1 year.
I.R.C. § 857(b)(3)(B) Definition Of Capital Gain Dividend
For purposes of this part, a capital gain dividend is any dividend, or part thereof, which is designated by the real estate investment trust as a capital gain dividend in a written notice mailed to its shareholders or holders of beneficial interests at any time before the expiration of 30 days after the close of its taxable year (or mailed to its shareholders or holders of beneficial interests with its annual report for the taxable year); except that, if there is an increase in the excess described in subparagraph (A)(ii) of this paragraph for such year which results from a determination (as defined in section 860(e)), such designation may be made with respect to such increase at any time before the expiration of 120 days after the date of such determination. If the aggregate amount so designated with respect to a taxable year of the trust (including capital gain dividends paid after the close of the taxable year described in section 858) is greater than the net capital gain of the taxable year, the portion of each distribution which shall be a capital gain dividend shall be only that proportion of the amount so designated which such net capital gain bears to the aggregate amount so designated. For purposes of this subparagraph, the amount of the net capital gain for any taxable year which is not a calendar year shall be determined without regard to any net capital loss attributable to transactions after December 31 of such year, and any such net capital loss shall 1 be treated as arising on the 1st day of the next taxable year. To the extent provided in regulations, the preceding sentence shall apply also for purposes of computing the taxable income of the real estate investment trust.
1 See 1988 Amendment note below.
I.R.C. § 857(b)(3)(C) Treatment By Shareholders Of Undistributed Capital Gains
I.R.C. § 857(b)(3)(C)(i)
Every shareholder of a real estate investment trust at the close of the trust's taxable year shall include, in computing his long-term capital gains in his return for his taxable year in which the last day of the trust's taxable year falls, such amount as the trust shall designate in respect of such shares in a written notice mailed to its shareholders at any time prior to the expiration of 60 days after the close of its taxable year (or mailed to its shareholders or holders of beneficial interests with its annual report for the taxable year), but the amount so includible by any shareholder shall not exceed that part of the amount subjected to tax in paragraph (1) which he would have received if all of such amount had been distributed as capital gain dividends by the trust to the holders of such shares at the close of its taxable year.
I.R.C. § 857(b)(3)(C)(ii)
For purposes of this title, every such shareholder shall be deemed to have paid, for his taxable year under clause (i), the tax imposed by paragraph (1) on undistributed capital gain on the amounts required by this subparagraph to be included in respect of such shares in computing his long-term capital gains for that year; and such shareholders shall be allowed credit or refund as the case may be, for the tax so deemed to have been paid by him.
I.R.C. § 857(b)(3)(C)(iii)
The adjusted basis of such shares in the hands of the holder shall be increased with respect to the amounts required by this subparagraph to be included in computing his long-term capital gains, by the difference between the amount of such includible gains and the tax deemed paid by such shareholder in respect of such shares under clause (ii).
I.R.C. § 857(b)(3)(C)(iv)
In the event of such designation, the tax imposed by paragraph (1) on undistributed capital gain shall be paid by the real estate investment trust within 30 days after the close of its taxable year.
I.R.C. § 857(b)(3)(C)(v)
The earnings and profits of such real estate investment trust, and the earnings and profits of any such shareholder which is a corporation, shall be appropriately adjusted in accordance with regulations prescribed by the Secretary.
I.R.C. § 857(b)(3)(C)(vi)
As used in this subparagraph, the terms “shares” and “shareholders” shall include beneficial interests and holders of beneficial interests, respectively.
I.R.C. § 857(b)(3)(D) Coordination With Net Operating Loss Provisions
For purposes of section 172, if a real estate investment trust pays capital gain dividends during any taxable year, the amount of the net capital gain for such taxable year (to the extent such gain does not exceed the amount of such capital gain dividends) shall be excluded in determining—
I.R.C. § 857(b)(3)(D)(i)
the net operating loss for the taxable year, and
I.R.C. § 857(b)(3)(D)(ii)
the amount of the net operating loss of any prior taxable year which may be carried through such taxable year under section 172(b)(2) to a succeeding taxable year.
I.R.C. § 857(b)(3)(E) Certain Distributions
In the case of a shareholder of a real estate investment trust to whom section 897 does not apply by reason of the second sentence of section 897(h)(1) or subparagraph (A)(ii) or (C) of section 897(k)(2), the amount which would be included in computing long-term capital gains for such shareholder under subparagraph (A) or (C) (without regard to this subparagraph)—
I.R.C. § 857(b)(3)(E)(i)
shall not be included in computing such shareholder's long-term capital gains, and
I.R.C. § 857(b)(3)(E)(ii)
shall be included in such shareholder's gross income as a dividend from the real estate investment trust.
I.R.C. § 857(b)(3)(F) Undistributed Capital Gain
For purposes of this paragraph, the term “undistributed capital gain” means the excess of the net capital gain over the deduction for dividends paid (as defined in section 561) determined with reference to capital gain dividends only.
I.R.C. § 857(b)(4) Income From Foreclosure Property
I.R.C. § 857(b)(4)(A) Imposition Of Tax
A tax is hereby imposed for each taxable year on the net income from foreclosure property of every real estate investment trust. Such tax shall be computed by multiplying the net income from foreclosure property by the highest rate of tax specified in section 11(b).
I.R.C. § 857(b)(4)(B) Net Income From Foreclosure Property
For purposes of this part, the term “net income from foreclosure property” means the excess of—
I.R.C. § 857(b)(4)(B)(i)
gain (including any foreign currency gain, as defined in section 988(b)(1)) from the sale or other disposition of foreclosure property described in section 1221(a)(1) and the gross income for the taxable year derived from foreclosure property (as defined in section 856(e)), but only to the extent such gross income is not described in (or, in the case of foreign currency gain, not attributable to gross income described in) section 856(c)(3) other than subparagraph (F) thereof, over
I.R.C. § 857(b)(4)(B)(ii)
the deductions allowed by this chapter which are directly connected with the production of the income referred to in clause (i).
I.R.C. § 857(b)(5) Imposition Of Tax In Case Of Failure To Meet Certain Requirements
If section 856(c)(6) applies to a real estate investment trust for any taxable year, there is hereby imposed on such trust a tax in an amount equal to the greater of—
I.R.C. § 857(b)(5)(A)
the excess of—
I.R.C. § 857(b)(5)(A)(i)
95 percent of the gross income (excluding gross income from prohibited transactions) of the real estate investment trust, over
I.R.C. § 857(b)(5)(A)(ii)
the amount of such gross income which is derived from sources referred to in section 856(c)(2); or
I.R.C. § 857(b)(5)(B)
the excess of—
I.R.C. § 857(b)(5)(B)(i)
75 percent of the gross income (excluding gross income from prohibited transactions) of the real estate investment trust, over
I.R.C. § 857(b)(5)(B)(ii)
the amount of such gross income which is derived from sources referred to in section 856(c)(3),
multiplied by a fraction the numerator of which is the real estate investment trust taxable income for the taxable year (determined without regard to the deductions provided in paragraphs (2)(B) and (2)(E), without regard to any net operating loss deduction, and by excluding any net capital gain) and the denominator of which is the gross income for the taxable year (excluding gross income from prohibited transactions; gross income and gain from foreclosure property (as defined in section 856(e), but only to the extent such gross income and gain is not described in subparagraph (A), (B), (C), (D), (E), or (G) of section 856(c)(3)); long-term capital gain; and short-term capital gain to the extent of any short-term capital loss).
I.R.C. § 857(b)(6) Income From Prohibited Transactions
I.R.C. § 857(b)(6)(A) Imposition Of Tax
There is hereby imposed for each taxable year of every real estate investment trust a tax equal to 100 percent of the net income derived from prohibited transactions.
I.R.C. § 857(b)(6)(B) Definitions
For purposes of this part—
I.R.C. § 857(b)(6)(B)(i)
the term “net income derived from prohibited transactions” means the excess of the gain (including any foreign currency gain, as defined in section 988(b)(1)) from prohibited transactions over the deductions (including any foreign currency loss, as defined in section 988(b)(2)) allowed by this chapter which are directly connected with prohibited transactions;
I.R.C. § 857(b)(6)(B)(ii)
in determining the amount of the net income derived from prohibited transactions, there shall not be taken into account any item attributable to any prohibited transaction for which there was a loss; and
I.R.C. § 857(b)(6)(B)(iii)
the term “prohibited transaction" means a sale or other disposition of property described in section 1221(a)(1) which is not foreclosure property.
I.R.C. § 857(b)(6)(C) Certain Sales Not To Constitute Prohibited Transactions
For purposes of this part, the term “prohibited transaction" does not include a sale of property which is a real estate asset (as defined in section 856(c)(5)(B)) if—
I.R.C. § 857(b)(6)(C)(i)
the trust has held the property for not less than 2 years;
I.R.C. § 857(b)(6)(C)(ii)
aggregate expenditures made by the trust, or any partner of the trust, during the 2-year period preceding the date of sale which are includible in the basis of the property do not exceed 30 percent of the net selling price of the property;
I.R.C. § 857(b)(6)(C)(iii)
I.R.C. § 857(b)(6)(C)(iii)(I)
during the taxable year the trust does not make more than 7 sales of property (other than sales of foreclosure property or sales to which section 1033 applies), or
I.R.C. § 857(b)(6)(C)(iii)(II)
the aggregate adjusted bases (as determined for purposes of computing earnings and profits) of property (other than sales of foreclosure property or sales to which section 1033 applies) sold during the taxable year does not exceed 10 percent of the aggregate bases (as so determined) of all of the assets of the trust as of the beginning of the taxable year, or
I.R.C. § 857(b)(6)(C)(iii)(III)
the fair market value of property (other than sales of foreclosure property or sales to which section 1033 applies) sold during the taxable year does not exceed 10 percent of the fair market value of all of the assets of the trust as of the beginning of the taxable year, or
I.R.C. § 857(b)(6)(C)(iii)(IV)
the trust satisfies the requirements of subclause (II) applied by substituting “20 percent” for “10 percent” and the 3-year average adjusted bases percentage for the taxable year (as defined in subparagraph (G)) does not exceed 10 percent, or
I.R.C. § 857(b)(6)(C)(iii)(V)
the trust satisfies the requirements of subclause (III) applied by substituting “20 percent” for “10 percent” and the 3-year average fair market value percentage for the taxable year (as defined in subparagraph (H)) does not exceed 10 percent;
I.R.C. § 857(b)(6)(C)(iv)
in the case of property, which consists of land or improvements, not acquired through foreclosure (or deed in lieu of foreclosure), or lease termination, the trust has held the property for not less than 2 years for production of rental income; and
I.R.C. § 857(b)(6)(C)(v)
if the requirement of clause (iii)(I) is not satisfied, substantially all of the marketing and development expenditures with respect to the property were made through an independent contractor (as defined in section 856(d)(3)) from whom the trust itself does not derive or receive any income or a taxable REIT subsidiary.
I.R.C. § 857(b)(6)(D) Certain Sales Not To Constitute Prohibited Transactions
For purposes of this part, the term “prohibited transaction” does not include a sale of property which is a real estate asset (as defined in section 856(c)(5)(B)) if—
I.R.C. § 857(b)(6)(D)(i)
the trust held the property for not less than 2 years in connection with the trade or business of producing timber,
I.R.C. § 857(b)(6)(D)(ii)
the aggregate expenditures made by the trust, or a partner of the trust, during the 2-year period preceding the date of sale which—
I.R.C. § 857(b)(6)(D)(ii)(I)
are includible in the basis of the property (other than timberland acquisition expenditures), and
I.R.C. § 857(b)(6)(D)(ii)(II)
are directly related to operation of the property for the production of timber or for the preservation of the property for use as timberland,
do not exceed 30 percent of the net selling price of the property,
I.R.C. § 857(b)(6)(D)(iii)
the aggregate expenditures made by the trust, or a partner of the trust, during the 2-year period preceding the date of sale which—
I.R.C. § 857(b)(6)(D)(iii)(I)
are includible in the basis of the property (other than timberland acquisition expenditures), and
I.R.C. § 857(b)(6)(D)(iii)(II)
are not directly related to operation of the property for the production of timber, or for the preservation of the property for use as timberland,
do not exceed 5 percent of the net selling price of the property,
I.R.C. § 857(b)(6)(D)(iv)
I.R.C. § 857(b)(6)(D)(iv)(I)
during the taxable year the trust does not make more than 7 sales of property (other than sales of foreclosure property or sales to which section 1033 applies), or
I.R.C. § 857(b)(6)(D)(iv)(II)
the aggregate adjusted bases (as determined for purposes of computing earnings and profits) of property (other than sales of foreclosure property or sales to which section 1033 applies) sold during the taxable year does not exceed 10 percent of the aggregate bases (as so determined) of all of the assets of the trust as of the beginning of the taxable year, or
I.R.C. § 857(b)(6)(D)(iv)(III)
the fair market value of property (other than sales of foreclosure property or sales to which section 1033 applies) sold during the taxable year does not exceed 10 percent of the fair market value of all of the assets of the trust as of the beginning of the taxable year, or
I.R.C. § 857(b)(6)(D)(iv)(IV)
the trust satisfies the requirements of subclause (II) applied by substituting “20 percent” for “10 percent” and the 3-year average adjusted bases percentage for the taxable year (as defined in subparagraph (G)) does not exceed 10 percent, or
I.R.C. § 857(b)(6)(D)(iv)(V)
the trust satisfies the requirements of subclause (III) applied by substituting “20 percent” for “10 percent” and the 3-year average fair market value percentage for the taxable year (as defined in subparagraph (H)) does not exceed 10 percent,
I.R.C. § 857(b)(6)(D)(v)
in the case that the requirement of clause (iv)(I) is not satisfied, substantially all of the marketing expenditures with respect to the property were made through an independent contractor (as defined in section 856(d)(3)) from whom the trust itself does not derive or receive any income, or a taxable REIT subsidiary, and
I.R.C. § 857(b)(6)(D)(vi)
the sales price of the property sold by the trust is not based in whole or in part on income or profits, including income or profits derived from the sale or operation of such property.
I.R.C. § 857(b)(6)(E) Special Rules
In applying subparagraphs (C) and (D) the following special rules apply:
I.R.C. § 857(b)(6)(E)(i)
The holding period of property acquired through foreclosure (or deed in lieu of foreclosure), or termination of the lease, includes the period for which the trust held the loan which such property secured, or the lease of such property.
I.R.C. § 857(b)(6)(E)(ii)
In the case of a property acquired through foreclosure (or deed in lieu of foreclosure), or termination of a lease, expenditures made by, or for the account of, the mortgagor or lessee after default became imminent will be regarded as made by the trust.
I.R.C. § 857(b)(6)(E)(iii)
Expenditures (including expenditures regarded as made directly by the trust, or indirectly by any partner of the trust, under clause (ii)) will not be taken into account if they relate to foreclosure property and did not cause the property to lose its status as foreclosure property.
I.R.C. § 857(b)(6)(E)(iv)
Expenditures will not be taken into account if they are made solely to comply with standards or requirements of any government or governmental authority having relevant jurisdiction, or if they are made to restore the property as a result of losses arising from fire, storm or other casualty.
I.R.C. § 857(b)(6)(E)(v)
The term “expenditures” does not include advances on a loan made by the trust.
I.R.C. § 857(b)(6)(E)(vi)
The sale of more than one property to one buyer as part of one transaction constitutes one sale.
I.R.C. § 857(b)(6)(E)(vii)
The term “sale” does not include any transaction in which the net selling price is less than $10,000.
I.R.C. § 857(b)(6)(F) No Inference With Respect To Treatment As Inventory Property
The determination of whether property is described in section 1221(a)(1) shall be made without regard to this paragraph.
I.R.C. § 857(b)(6)(G) 3-year average adjusted bases percentage
The term “3-year average adjusted bases percentage” means, with respect to any taxable year, the ratio (expressed as a percentage) of—
I.R.C. § 857(b)(6)(G)(i)
the aggregate adjusted bases (as determined for purposes of computing earnings and profits) of property (other than sales of foreclosure property or sales to which section 1033 applies) sold during the 3 taxable year period ending with such taxable year, divided by
I.R.C. § 857(b)(6)(G)(ii)
the sum of the aggregate adjusted bases (as so determined) of all of the assets of the trust as of the beginning of each of the 3 taxable years which are part of the period referred to in clause (i).
I.R.C. § 857(b)(6)(H) 3-year average fair market value percentage
The term “3-year average fair market value percentage” means, with respect to any taxable year, the ratio (expressed as a percentage) of—
I.R.C. § 857(b)(6)(H)(i)
the fair market value of property (other than sales of foreclosure property or sales to which section 1033 applies) sold during the 3 taxable year period ending with such taxable year, divided by
I.R.C. § 857(b)(6)(H)(ii)
the sum of the fair market value of all of the assets of the trust as of the beginning of each of the 3 taxable years which are part of the period referred to in clause (i).
I.R.C. § 857(b)(6)(I) Sales Of Property That Are Not A Prohibited Transaction
In the case of a sale on or before the termination date, the sale of property which is not a prohibited transaction through the application of subparagraph (D) shall be considered property held for investment or for use in a trade or business and not property described in section 1221(a)(1) for all purposes of this subtitle. For purposes of the preceding sentence, the reference to subparagraph (D) shall be a reference to such subparagraph as in effect on the day before the enactment of the Housing Assistance Tax Act of 2008, as modified by subparagraph (G) as so in effect.
I.R.C. § 857(b)(6)(J) Termination Date
For purposes of this paragraph, the term “termination date” has the meaning given such term by section 856(c)(10).
I.R.C. § 857(b)(7) Income From Redetermined Rents, Redetermined Deductions, And Excess Interest
I.R.C. § 857(b)(7)(A) Imposition Of Tax
There is hereby imposed for each taxable year of the real estate investment trust a tax equal to 100 percent of redetermined rents, redetermined deductions, excess interest, and redetermined TRS service income.
I.R.C. § 857(b)(7)(B) Redetermined Rents
I.R.C. § 857(b)(7)(B)(i) In General
The term “redetermined rents” means rents from real property (as defined in section 856(d)) to the extent the amount of the rents would (but for subparagraph (F)) be reduced on distribution, apportionment, or allocation under section 482 to clearly reflect income as a result of services furnished or rendered by a taxable REIT subsidiary of the real estate investment trust to a tenant of such trust.
I.R.C. § 857(b)(7)(B)(ii) Exception For De Minimis Amounts
Clause (i) shall not apply to amounts described in section 856(d)(7)(A) with respect to a property to the extent such amounts do not exceed the one percent threshold described in section 856(d)(7)(B) with respect to such property.
I.R.C. § 857(b)(7)(B)(iii) Exception For Comparably Priced Services
Clause (i) shall not apply to any service rendered by a taxable REIT subsidiary of a real estate investment trust to a tenant of such trust if—
I.R.C. § 857(b)(7)(B)(iii)(I)
such subsidiary renders a significant amount of similar services to persons other than such trust and tenants of such trust who are unrelated (within the meaning of section 856(d)(8)(F)) to such subsidiary, trust, and tenants, but
I.R.C. § 857(b)(7)(B)(iii)(II)
only to the extent the charge for such service so rendered is substantially comparable to the charge for the similar services rendered to persons referred to in subclause (I).
I.R.C. § 857(b)(7)(B)(iv) Exception For Certain Separately Charged Services
Clause (i) shall not apply to any service rendered by a taxable REIT subsidiary of a real estate investment trust to a tenant of such trust if—
I.R.C. § 857(b)(7)(B)(iv)(I)
the rents paid to the trust by tenants (leasing at least 25 percent of the net leasable space in the trust's property) who are not receiving such service from such subsidiary are substantially comparable to the rents paid by tenants leasing comparable space who are receiving such service from such subsidiary, and
I.R.C. § 857(b)(7)(B)(iv)(II)
the charge for such service from such subsidiary is separately stated.
I.R.C. § 857(b)(7)(B)(v) Exception For Certain Services Based On Subsidiary's Income From The Services
Clause (i) shall not apply to any service rendered by a taxable REIT subsidiary of a real estate investment trust to a tenant of such trust if the gross income of such subsidiary from such service is not less than 150 percent of such subsidiary's direct cost in furnishing or rendering the service.
I.R.C. § 857(b)(7)(B)(vi) Exceptions Granted By Secretary
The Secretary may waive the tax otherwise imposed by subparagraph (A) if the trust establishes to the satisfaction of the Secretary that rents charged to tenants were established on an arms' length basis even though a taxable REIT subsidiary of the trust provided services to such tenants.
I.R.C. § 857(b)(7)(C) Redetermined Deductions
The term “redetermined deductions” means deductions (other than redetermined rents) of a taxable REIT subsidiary of a real estate investment trust to the extent the amount of such deductions would (but for subparagraph (F)) be decreased on distribution, apportionment, or allocation under section 482 to clearly reflect income as between such subsidiary and such trust.
I.R.C. § 857(b)(7)(D) Excess Interest
The term “excess interest” means any deductions for interest payments by a taxable REIT subsidiary of a real estate investment trust to such trust to the extent that the interest payments are in excess of a rate that is commercially reasonable.
I.R.C. § 857(b)(7)(E) Redetermined TRS Service Income
I.R.C. § 857(b)(7)(E)(i) In General
The term “redetermined TRS service income” means gross income of a taxable REIT subsidiary of a real estate investment trust attributable to services provided to, or on behalf of, such trust (less deductions properly allocable thereto) to the extent the amount of such income (less such deductions) would (but for subparagraph (F)) be increased on distribution, apportionment, or allocation under section 482.
I.R.C. § 857(b)(7)(E)(ii) Coordination With Redetermined Rents
Clause (i) shall not apply with respect to gross income attributable to services furnished or rendered to a tenant of the real estate investment trust (or to deductions properly allocable thereto).
I.R.C. § 857(b)(7)(F) Coordination With Section 482
The imposition of tax under subparagraph (A) shall be in lieu of any distribution, apportionment, or allocation under section 482.
I.R.C. § 857(b)(7)(G) Regulatory Authority
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this paragraph. Until the Secretary prescribes such regulations, real estate investment trusts and their taxable REIT subsidiaries may base their allocations on any reasonable method.
I.R.C. § 857(b)(8) Loss On Sale Or Exchange Of Stock Held 6 Months Or Less
I.R.C. § 857(b)(8)(A) In General
If—
I.R.C. § 857(b)(8)(A)(i)
subparagraph (B) or (D) of paragraph (3) provides that any amount with respect to any share or beneficial interest is to be treated as a long-term capital gain, and
I.R.C. § 857(b)(8)(A)(ii)
the taxpayer has held such share or interest for 6 months or less, then any loss on the sale or exchange of such share or interest shall, to the extent of the amount described in clause (i), be treated as a long-term capital loss.
I.R.C. § 857(b)(8)(B) Determination Of Holding Periods
For purposes of this paragraph, in determining the period for which the taxpayer has held any share of stock or beneficial interest—
I.R.C. § 857(b)(8)(B)(i)
the rules of paragraphs (3) and (4) of section 246(c) shall apply, and
I.R.C. § 857(b)(8)(B)(ii)
there shall not be taken into account any day which is more than 6 months after the date on which such share or interest becomes ex-dividend.
I.R.C. § 857(b)(8)(C) Exception For Losses Incurred Under Periodic Liquidation Plans
To the extent provided in regulations, subparagraph (A) shall not apply to any loss incurred on the sale or exchange of shares of stock of, or beneficial interest in, a real estate investment trust pursuant to a plan which provides for the periodic liquidation of such shares or interests.
I.R.C. § 857(b)(9) Time Certain Dividends Taken Into Account
For purposes of this title, any dividend declared by a real estate investment trust in October, November, or December of any calendar year and payable to shareholders of record on a specified date in such a month shall be deemed—
I.R.C. § 857(b)(9)(A)
to have been received by each shareholder on December 31 of such calendar year, and
I.R.C. § 857(b)(9)(B)
to have been paid by such trust on December 31 of such calendar year (or, if earlier, as provided in section 858).
The preceding sentence shall apply only if such dividend is actually paid by the company during January of the following calendar year.
I.R.C. § 857(c) Restrictions Applicable To Dividends Received From Real Estate Investment Trusts
I.R.C. § 857(c)(1) Section 243
For purposes of section 243 (relating to deductions for dividends received by corporations), a dividend received from a real estate investment trust which meets the requirements of this part shall not be considered a dividend.
I.R.C. § 857(c)(2) Section (1)(h)(11)
I.R.C. § 857(c)(2)(A) In General
In any case in which—
I.R.C. § 857(c)(2)(A)(i)
a dividend is received from a real estate investment trust (other than a capital gain dividend), and
I.R.C. § 857(c)(2)(A)(ii)
such trust meets the requirements of section 856(a) for the taxable year during which it paid such dividend,
then, in computing qualified dividend income, there shall be taken into account only that portion of such dividend designated by the real estate investment trust.
I.R.C. § 857(c)(2)(B) Limitation
The aggregate amount which may be designated as qualified dividend income under subparagraph (A) shall not exceed the sum of—
I.R.C. § 857(c)(2)(B)(i)
the qualified dividend income of the trust for the taxable year,
I.R.C. § 857(c)(2)(B)(ii)
the excess of—
I.R.C. § 857(c)(2)(B)(ii)(I)
the sum of the real estate investment trust taxable income computed under section 857(b)(2) for the preceding taxable year and the income subject to tax by reason of the application of the regulations under section 337(d) for such preceding taxable year, over
I.R.C. § 857(c)(2)(B)(ii)(II)
the sum of the taxes imposed on the trust for such preceding taxable year under section 857(b)(1) and by reason of the application of such regulations, and
I.R.C. § 857(c)(2)(B)(iii)
the amount of any earnings and profits which were distributed by the trust for such taxable year and accumulated in a taxable year with respect to which this part did not apply.
I.R.C. § 857(c)(2)(C) Notice To Shareholders
The amount of any distribution by a real estate investment trust which may be taken into account as qualified dividend income shall not exceed the amount so designated by the trust in a written notice to its shareholders mailed not later than 60 days after the close of its taxable year.
I.R.C. § 857(c)(2)(D) Qualified Dividend Income
For purposes of this paragraph, the term “qualified dividend income” has the meaning given such term by section 1(h)(11)(B).
I.R.C. § 857(d) Earnings And Profits
I.R.C. § 857(d)(1) In General
The earnings and profits of a real estate investment trust for any taxable year (but not its accumulated earnings) shall not be reduced by any amount which—
I.R.C. § 857(d)(1)(A)
is not allowable in computing its taxable income for such taxable year, and
I.R.C. § 857(d)(1)(B)
was not allowable in computing its taxable income for any prior taxable year.
I.R.C. § 857(d)(2) Coordination With Tax On Undistributed Income
A real estate investment trust shall be treated as having sufficient earnings and profits to treat as a dividend any distribution (other than in a redemption to which section 302(a) applies) which is treated as a dividend by such trust. The preceding sentence shall not apply to the extent that the amount distributed during any calendar year by the trust exceeds the required distribution for such calendar year (as determined under section 4981).
I.R.C. § 857(d)(3) Distributions To Meet Requirements Of Subsection (a)(2)(B)
Any distribution which is made in order to comply with the requirements of subsection (a)(2)(B)
I.R.C. § 857(d)(3)(A)
shall be treated for purposes of this subsection and subsection (a)(2)(B) as made from earnings and profits which, but for the distribution, would result in a failure to meet such requirements (and allocated to such earnings on a first-in, first-out basis), and
I.R.C. § 857(d)(3)(B)
to the extent treated under subparagraph (A) as made from accumulated earnings and profits, shall not be treated as a distribution for purposes of subsection (b)(2)(B) and section 858.
I.R.C. § 857(d)(4) Real Estate Investment Trust
For purposes of this subsection, the term “real estate investment trust” includes a domestic corporation, trust, or association which is a real estate investment trust determined without regard to the requirements of subsection (a).
I.R.C. § 857(d)(5) Special Rules For Determining Earnings And Profits For Purposes Of The Deduction For Dividends Paid
For special rules for determining the earnings and profits of a real estate investment trust for purposes of the deduction for dividends paid, see section 562(e)(1).
I.R.C. § 857(e) Excess Noncash Income
I.R.C. § 857(e)(1) In General
For purposes of subsection (a)(1)(B), the term “excess noncash income” means the excess (if any) of—
I.R.C. § 857(e)(1)(A)
the amount determined under paragraph (2) for the taxable year, over
I.R.C. § 857(e)(1)(B)
5 percent of the real estate investment trust taxable income for the taxable year determined without regard to the deduction for dividends paid (as defined in section 561) and by excluding any net capital gain.
I.R.C. § 857(e)(2) Determination Of Amount
The amount determined under this paragraph for the taxable year is the sum of—
I.R.C. § 857(e)(2)(A)
the amount (if any) by which—
I.R.C. § 857(e)(2)(A)(i)
the amounts includible in gross income under section 467 (relating to certain payments for the use of property or services), exceed
I.R.C. § 857(e)(2)(A)(ii)
the amounts which would have been includible in gross income without regard to such section,
I.R.C. § 857(e)(2)(B)
any income on the disposition of a real estate asset if—
I.R.C. § 857(e)(2)(B)(i)
there is a determination (as defined in section 860(e)) that such income is not eligible for nonrecognition under section 1031, and
I.R.C. § 857(e)(2)(B)(ii)
failure to meet the requirements of section 1031 was due to reasonable cause and not to willful neglect,
I.R.C. § 857(e)(2)(C)
the amount (if any) by which—
I.R.C. § 857(e)(2)(C)(i)
the amounts includible in gross income with respect to instruments to which section 860E(a) or 1272 applies, exceed
I.R.C. § 857(e)(2)(C)(ii)
the amount of money and the fair market value of other property received during the taxable year under such instruments, and
I.R.C. § 857(e)(2)(D)
amounts includible in income by reason of cancellation of indebtedness.
I.R.C. § 857(f) Real Estate Investment Trusts To Ascertain Ownership
I.R.C. § 857(f)(1) In General
Each real estate investment trust shall each taxable year comply with regulations prescribed by the Secretary for the purposes of ascertaining the actual ownership of the outstanding shares, or certificates of beneficial interest, of such trust.
I.R.C. § 857(f)(2) Failure To Comply
I.R.C. § 857(f)(2)(A) In General
If a real estate investment trust fails to comply with the requirements of paragraph (1) for a taxable year, such trust shall pay (on notice and demand by the Secretary and in the same manner as tax) a penalty of $25,000.
I.R.C. § 857(f)(2)(B) Intentional Disregard
If any failure under paragraph (1) is due to intentional disregard of the requirement under paragraph (1), the penalty under subparagraph (A) shall be $50,000.
I.R.C. § 857(f)(2)(C) Failure To Comply After Notice
The Secretary may require a real estate investment trust to take such actions as the Secretary determines appropriate to ascertain actual ownership if the trust fails to meet the requirements of paragraph (1). If the trust fails to take such actions, the trust shall pay (on notice and demand by the Secretary and in the same manner as tax) an additional penalty equal to the penalty determined under subparagraph (A) or (B), whichever is applicable.
I.R.C. § 857(f)(2)(D) Reasonable Cause
No penalty shall be imposed under this paragraph with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect.
I.R.C. § 857(g) Limitations On Designation Of Dividends
I.R.C. § 857(g)(1) Overall Limitation
The aggregate amount of dividends designated by a real estate investment trust under subsections (b)(3)(C) and (c)(2)(A) with respect to any taxable year may not exceed the dividends paid by such trust with respect to such year. For purposes of the preceding sentence, dividends paid after the close of the taxable year described in section 858 shall be treated as paid with respect to such year.
I.R.C. § 857(g)(2) Proportionality
The Secretary may prescribe regulations or other guidance requiring the proportionality of the designation of particular types of dividends among shares or beneficial interests of a real estate investment trust.
I.R.C. § 857(h) Cross Reference
For provisions relating to excise tax based on certain real estate investment trust taxable income not distributed during the taxable year, see section 4981.
(Added by Pub. L. 86-779, Sec. 10(a), Sept. 14, 1960, 74 Stat. 1006, and amended Pub. L. 88-272, title II, Sec. 201(d)(11), Feb. 26, 1964, 78 Stat. 32; Pub. L. 91-172, title V, Sec. 511(c)(3), Dec. 30, 1969, 83 Stat. 637; Pub. L. 93-625, Sec. 6(c), (d)(2)-(4), Jan. 3, 1975, 88 Stat. 2113, 2114; Pub. L. 94-455, title XIV, Sec. 1402(b)(1)(P), (2), title XVI, Sec. 1601(c), 1602(b), 1603(b), (c)(5), 1604(c)(2), (f)(3)(B), (j), (k)(2)(B), 1605(b)(2), 1606(a), (d), 1607(a), (b)(1)(A), (2), (3), title XIX, Sec. 1901(a)(112), (b)(1)(V), (33)(K), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1732, 1746-1748, 1750-1757, 1783, 1792, 1801, 1834; Pub. L. 95-600, title III, Sec. 301(b)(12), 362(d)(3), 363(b), title IV, Sec. 403(c)(3), Nov. 6, 1978, 92 Stat. 2822, 2851, 2852, 2868; Pub. L. 96-222, title I, Sec. 103(a)(1), Apr. 1, 1980, 94 Stat. 208; Pub. L. 96-223, title IV, Sec. 404(b)(8), Apr. 2, 1980, 94 Stat. 307; Pub. L. 97-34, title III, Sec. 302(c)(5), (d)(1), Aug. 13, 1981, 95 Stat. 273, 274; Pub. L. 98-369, div. A, title I, Sec. 16(a), 55(b), title X, Sec. 1001(b)(13), July 18, 1984, 98 Stat. 505, 572, 1011; Pub. L. 99-514, title VI, Sec. 612(b)(7), 661(b), 664, 665(a), (b)(1), 666, 668(b)(1)(A), (2), (3), Oct. 22, 1986, 100 Stat. 2251, 2300, 2303-2305, 2307, 2308;Pub. L. 100-647, title I, Sec. 1006(r), (s)(2), (4), (5), 1018(u)(28), Nov. 10, 1988, 102 Stat. 3418, 3419, 3591; Pub. L. 101-508, title XI, Sec. 11704(a)(37), Nov. 5, 1990, 104 Stat. 1388-520; Pub. L. 105-34, title XII, Sec. 1251(a), 1254, 1255(b), 1256, 1259, 1260, Aug. 5, 1997, 111 Stat 788; Pub. L. 105-206, title VI, Sec. 6012(g), July 22, 1998, 112 Stat 685; Pub. L. 106-170, title V, Sec. 532(c), 545, 556, 566, Dec. 17, 1999, 113 Stat 1860; Pub. L. 106-554, Sec. 311, Dec. 21, 2000, 114 Stat. 2763; Pub. L. 107-147, title IV, Sec. 413(a), 417(13), Mar. 9, 2002, 116 Stat. 21; Pub. L. 108-27, title III, Sec. 302(d), May 28, 2003, 117 Stat. 752; Pub. L. 108-311, title IV, Sec. 402(a)(5)(E), Oct. 4, 2004, 118 Stat. 1166; Pub. L. 108-357, title II, III, IV, Sec. 243, 321, 418(b), Oct. 22, 2004, 118 Stat. 1418; Pub. L. 109-135, title IV, Sec. 403(d)(3), 412(ii), Dec 21, 2005, 119 Stat. 2577; Pub. L. 110-172, Sec. 11(a)(17)(B), Dec. 29, 2007, 121 Stat. 2473; Pub. L. 110-246, title XV, Sec. 15311, 15315, June 18, 2008, 122 Stat. 1651; Pub. L. 110-289, div. C, title II, Sec. 3033, 3051, 3052, July 30, 2008, 122 Stat. 2654; Pub. L. 114-113, Div. Q, title III, Sec. 313, 316, 320, 321, 322, Dec. 18, 2015; Pub. L. 115-97, title I, Sec. 13001(b)(2)(K), Dec. 22, 2017, 131 Stat. 2054; Pub. L. 115-141, Div. U, title IV, Sec. 401(a)(148), Mar. 23, 2018, 132 Stat. 348.)
BACKGROUND NOTES
AMENDMENTS
2018--Subsec. (b)(6)(J). Pub. L. 115-141, Div. U, Sec. 401(a)(148), amended subpar. (J) by substituting ‘‘section 856(c)(10)” for ‘‘section 856(c)(8)’’.
2017--Subsec. (b)(3)(A)-(F). Pub. L. 115-97, Sec. 13001(b)(2)(K)(i), amended par. (3) by striking subpar. (A) and by redesignating subpar. (B)-(F) as subpar. (A)-(E), respectively. Before amendment, it read as follows:
“(A) Alternative Tax In Case Of Capital Gains.—If for any taxable year a real estate investment trust has a net capital gain, then, in lieu of the tax imposed by subsection (b)(1), there is hereby imposed a tax (if such tax is less than the tax imposed by such subsection) which shall consist of the sum of—
“(i) a tax, computed as provided in subsection (b)(1), on the real estate investment trust taxable income (determined by excluding such net capital gain and by computing the deduction for dividends paid without regard to capital gain dividends), and
“(ii) a tax determined at the rates provided in section 1201(a) on the excess of the net capital gain over the deduction for dividends paid (as defined in section 561) determined with reference to capital gains dividends only.”
Subsec. (b)(3)(C). Pub. L. 115-97, Sec. 13001(b)(2)(K)(ii), amended subpar. (C), as redesignated, by substituting “paragraph (1)” for “subparagraph (A)(ii)” in clause (i) and by substituting “the tax imposed by paragraph (1) on undistributed capital gain” for “the tax imposed by subparagraph (A)(ii)” in clauses (ii) and (iv).
Subsec. (b)(3)(E). Pub. L. 115-97, Sec. 13001(b)(2)(K)(iii), amended subpar. (E), as redesignated, by substituting “subparagraph (A) or (C)” for “subparagraph (B) or (D)”.
Subsec. (b)(3)(F). Pub. L. 115-97, Sec. 13001(b)(2)(K)(iv), amended par. (3) by adding a new subpar. (F).
2015--Subsec. (b)(3)(F). Pub. L. 114-113, Div. Q, Sec. 322(a)(2)(B),
Subsec. (b)(6)(C). Pub. L. 114-113, Div. Q, Sec. 313(b)(1), amended subpar. (C) by striking “and which is described in section 1221(a)(1)” in the matter preceding clause (i).
Subsec. (b)(6)(C)(iii). Pub. L. 114-113, Div. Q, Sec. 313(a)(1), amended clause (iii) by inserting “, or” at the end and by adding subclause (IV) and (V) before the semicolon at the end.
Subsec. (b)(6)(D)(v). Pub. L. 114-113, Div. Q, Sec. 321(a)(1), amended clause (v) by inserting “or a taxable REIT subsidiary” before the period at the end.
Subsec. (b)(6)(D). Pub. L. 114-113, Div. Q, Sec. 313(b)(1), amended subpar. (D) by striking “and which is described in section 1221(a)(1)” in the matter preceding clause (i).
Subsec. (b)(6)(D)(iv)(III). Pub. L. 114-113, Div. Q, Sec. 313(a)(3), amended clause (iv) by adding “or” at the end of subclause (III) and by adding subclauses (IV) and (V).
Subsec. (b)(6)(D)(v). Pub. L. 114-113, Div. Q, Sec. 321(a)(2), amended clause (v) by striking “, in the case of a sale on or before the termination date,”.
Subsec. (b)(6)(F). Pub. L. 114-113, Div. Q, Sec. 313(b)(2), amended subpar. (F). Before amendment, it read as follows:
“(F) Sales Not Meeting Requirements.—In determining whether or not any sale constitutes a “prohibited transaction” for purposes of subparagraph (A), the fact that such sale does not meet the requirements of subparagraph (C) or (D) shall not be taken into account; and such determination, in the case of a sale not meeting such requirements, shall be made as if subparagraphs (C), (D), and (E) had not been enacted.”
Subsec. (b)(6)(G)-(J). Pub. L. 114-113, Div. Q, Sec. 313(a)(2), amended par. (6) by redesignating subpar. (G) and (H) as subpar. (I) and (J), respectively, and by adding new subpar. (G) and (H).
Subsec. (b)(7)(A). Pub. L. 114-113, Div. Q, Sec. 321(b)(1), amended subpar. (A) by substituting “excess interest, and redetermined TRS service income” for “and excess interest”.
Subsec. (b)(7)(B)(i). Pub. L. 114-113, Div. Q, Sec. 321(b)(3), amended clause (i) by substituting “subparagraph (F)” for “subparagraph (E)”.
Subsec. (b)(7)(C). Pub. L. 114-113, Div. Q, Sec. 321(b)(3), amended subpar. (C) by substituting “subparagraph (F)” for “subparagraph (E)”.
Subsec. (b)(7)(E)-(G). Pub. L. 114-113, Div. Q, Sec. 321(b)(2), amended par. (7) by redesignating subpar. (E) and (F) as subpar. (F) and (G), respectively, and by adding new subpar. (E).
Subsec. (d)(1). Pub. L. 114-113, Div. Q, Sec. 320(a)(1), amended par. (1). Before being amended, it read as follows:
“(1) In General.— The earnings and profits of a real estate investment trust for any taxable year (but not its accumulated earnings) shall not be reduced by any amount which is not allowable in computing its taxable income for such taxable year. For purposes of this subsection, the term “real estate investment trust” includes a domestic corporation, trust, or association which is a real estate investment trust determined without regard to the requirements of subsection (a).”
Subsec. (d)(4), (5). Pub. L. 114-113, Div. Q, Sec. 320(a)(2), added par. (4) and (5).
Subsec. (g)-(h). Pub. L. 114-113, Div. Q, Sec. 316(a), redesignated subsec. (g) as subsec. (h) and added a new subsec. (g).
2008--Subsec. (b)(4)(B)(i).Pub. L. 110-289, Sec. 3033(a), amended clause (i). Before amendment, it read as follows:
“(i) gain from the sale or other disposition of foreclosure property described in section 1221(a)(1) and the gross income for the taxable year derived from foreclosure property (as defined in section 856(e)), but only to the extent such gross income is not described in subparagraph (A), (B), (C), (D), (E), or (G) of section 856(c)(3), over”.
Subsec. (b)(6)(B)(i). Pub. L. 110-289, Sec. 3033(b), amended clause (i). Before amendment, it read as follows:
“(i) the term “net income derived from prohibited transactions” means the excess of the gain from prohibited transactions over the deductions allowed by this chapter which are directly connected with prohibited transactions;”.
Subsec. (b)(6)(C). Pub. L. 110-289, Sec. 3051(a)(3), amended subpar. (C) by substituting “real estate asset (as defined in section 856(c)(5)(B)) and which is described in section 1221(a)(1) if” for “real estate asset as defined in section 856(c)(5)(B) if” in the matter preceding clause (i).
Subsec. (b)(6)(C)(i). Pub. L. 110-289, Sec. 3051(a)(1), amended clause (i) by substituting “2 years” for “4 years”.
Subsec. (b)(6)(C)(ii). Pub. L. 110-289, Sec. 3051(a)(2), amended clause (ii) by substituting “2-year period” for “4-year period”.
Subsec. (b)(6)(C)(iii). Pub. L. 110-289, Sec. 3052(1), amended clause (iii) by striking the semicolon at the end and by inserting “, or” and subclause (III).
Subsec. (b)(6)(C)(iv). Pub. L. 110-289, Sec. 3051(a)(1), amended clause (iv) by substituting “2 years” for “4 years”.
Subsec. (b)(6)(D). Pub. L. 110-289, Sec. 3051(a)(3), amended subpar. (D) by substituting “real estate asset (as defined in section 856(c)(5)(B)) and which is described in section 1221(a)(1) if” for “real estate asset as defined in section 856(c)(5)(B) if” in the matter preceding clause (i).
Subsec. (b)(6)(D)(i). Pub. L. 110-289, Sec. 3051(a)(1), amended clause (i) by substituting “2 years” for “4 years”.
Subsec. (b)(6)(D)(ii). Pub. L. 110-289, Sec. 3051(a)(2), amended clause (ii) by substituting “2-year period” for “4-year period”.
Subsec. (b)(6)(D)(iii). Pub. L. 110-289, Sec. 3051(a)(2), amended clause (iii) by substituting “2-year period” for “4-year period”.
Subsec. (b)(6)(D)(iv)(II). Pub. L. 110-289, Sec. 3052(2), amended clause (ii) by adding “or” at the end of subclause (II) and by adding subclause (III).
Subsec. (b)(6)(G). Pub. L. 110-289, Sec. 3051(b)(1), amended par. (6) by striking subpar. (G) and by redesignating subpar. (H)-(I) as subpar. (G)-(H), respectively. Before being struck, subpar. (G) read as follows:
“(G) Special Rules For Sales To Qualified Organizations.—
“(i) In General.—In the case of the sale of a real estate asset (as defined in section 856(c)(5)(B)) to a qualified organization (as defined in section 170(h)(3)) exclusively for conservation purposes (within the meaning of section 170(h)(1)(C)), subparagraph (D) shall be applied—
“(I) by substituting “2 years” for “4 years” in clause (i), and
“(II) by substituting “2-year period” for “4-year period” in clauses (ii) and (iii).
“(ii) Termination.—This subparagraph shall not apply to sales after the termination date.”
Subsec. (b)(6)(G). Pub. L. 110-289, Sec. 3051(b)(2), amended subpar. (G), as redesignated, by adding the following at the end: “For purposes of the preceding sentence, the reference to subparagraph (D) shall be a reference to such subparagraph as in effect on the day before the enactment of the Housing Assistance Tax Act of 2008, as modified by subparagraph (G) as so in effect.”
Subsec. (b)(3)(A)(ii). Pub. L. 110-246, Sec. 15311(c), amended clause (ii) by substituting “rates” for “rate”.
Subsec. (b)(6)(D)(v). Pub. L. 110-246, Sec. 15315(b), amended clause (v) by inserting “, or, in the case of a sale on or before the termination date, a taxable REIT subsidiary” after “any income”.
Subsec. (b)(6)(G). Pub. L. 110-246, Sec. 15315(a), amended par. (6) by adding subpar. (G).
Subsec. (b)(6)(H). Pub. L. 110-246, Sec. 15315(c), amended par. (6) by adding subpar. (H).
Subsec. (b)(6)(I). Pub. L. 110-246, Sec. 15315(d), amended par. (6) by adding subpar. (I).
2007--Subsec. (b)(8)(B).Pub. L. 110-172, Sec. 11(a)(17)(B), amended subpar. (B). Before amendment, it read as follows:
“(B) Determination of Holding Period— For purposes of this paragraph, the rules of paragraphs (3) and (4) of section 246(c) shall apply in determining the period for which the taxpayer has held any share of stock or beneficial interest; except that “1 year” shall be substituted for the number of days specified in subparagraph (B) of section 246(c)(3).”.
2005--Subsec. (b)(2)(E).Pub. L. 109-135, Sec. 403(d)(3), amended subpar. (E) by substituting “section 856(c)(7)(C), and section 856(g)(5)” for “section 856(c)(7)(B)(iii), and section 856(g)(1)”.
Subsec. (b)(6)(E). Pub. L. 109-135, Sec. 412(ii)(1), amended subpar. (E) by substituting “subparagraphs (C) and (D)” for “subparagraph (C)”.
Subsec. (b)(6)(F). Pub. L. 109-135, Sec. 412(ii)(2), amended subpar. (F) by substituting “subparagraph (C) or (D)” for “subparagraph (C) of this paragraph” and by substituting “subparagraphs (C), (D), and (E)” for “subparagraphs (C) and (D)”.
2004--Subsec. (b)(2)(E).Pub. L. 108-357, Sec. 243(f)(4), amended subpar. (E) by substituting “(7) of this subsection, section 856(c)(7)(B)(iii), and section 856(g)(1)” for “(7)”.
Subsec. (b)(3)(F). Pub. L. 108-357, Sec. 418(b), amended par. (3) by adding subpar. (F).
Subsec. (b)(5)(A)(i). Pub. L. 108-357, Sec. 243(e), amended clause (i) by substituting “95 percent” for “90 percent”.
Subsec. (b)(6)(D)-(E). Pub. L. 108-357, Sec. 321(a), amended par. (6) by redesignating subpar. (D) and (E) as subpar. (E) and (F) and by adding subpar. (D).
Subsec. (b)(7)(B)(ii)-(vii). Pub. L. 108-357, Sec. 243(c), amended subpar. (B) by striking clause (ii) and by redesignating clauses (iii) through (vii) as clauses (ii) through (vi), respectively. Prior to being struck, clause (ii) read as follows:
“(ii) Exception for certain amounts--Clause (i) shall not apply to amounts received directly or indirectly by a real estate investment trust--
“(I) for services furnished or rendered by a taxable REIT subsidiary that are described in paragraph (1)(B) of section 856(d), or
“(II) from a taxable REIT subsidiary that are described in paragraph (7)(C)(ii) of such section.”
Subsec. (c)(2). Pub. L. 108-311, Sec. 402(a)(5)(E), amended par. (2). Prior to amendment it read as follows:
“(2) Section 1(h)(11).--For purposes of section 1(h)(11) (relating to maximum rate of tax on dividends)--
“(A) rules similar to the rules of subparagraphs (B) and (C) of section 854(b)(1) shall apply to dividends received from a real estate investment trust which meets the requirements of this part, and
“(B) for purposes of such rules, such a trust shall be treated as receiving qualified dividend income during any taxable year in an amount equal to the sum of--
“(i) the excess of real estate investment trust taxable income computed under section 857(b)(2) for the preceding taxable year over the tax payable by the trust under section 857(b)(1) for such preceding taxable year, and
“(ii) the excess of the income subject to tax by reason of the application of the regulations under section 337(d) for the preceding taxable year over the tax payable by the trust on such income for such preceding taxable year.”
2003--Subsec. (c). Pub. L. 108-27, Sec. 302(d), amended subsec. (c). Prior to amendment it read as follows:
“(c) Restrictions applicable to dividends received from real estate investment trusts
“For purposes of section 243 (relating to deductions for dividends received by corporations), a dividend received from a real estate investment trust which meets the requirements of this part shall not be considered as a dividend.”
2002--Subsec. (b)(7)(B)(i).Pub. L. 107-147, Sec. 413(a)(1), amended clause (i) by substituting “to the extent the amount of the rents” for “the amount of which”.
Subsec. (b)(7)(B)(i). Pub. L. 107-147, Sec. 417(13), amended clause (i) by substituting “section 856(d)” for “subsection 856(d)”.
Subsec. (b)(7)(C). Pub. L. 107-147, Sec. 413(a)(2), amended subpar. (C) by substituting “to the extent the amount” for “if the amount”.
2000--Subsec. (b)(7)(B)(ii).Pub. L. 106-554, Sec. 311(b), amended clause (ii). Before amendment, it read as follows:
“(ii) EXCEPTION FOR CERTAIN SERVICES.--
“Clause (i) shall not apply to amounts received directly or indirectly by a real estate investment trust for services described in paragraph (1)(B) or (7)(C)(i) of section 856(d).”
1999--Subsec. (a)(1)(A).Pub. L. 106-170, Sec. 556(a), amended clauses (i) and (ii) by substituting “90 percent” for “95 percent (90 percent for taxable years beginning before January 1, 1980”.
Subsec. (b)(2)(E). Pub. L. 106-170, Sec. 545(b), amended subpar. (E) by substituting “paragraphs (5) and (7)” for “paragraph (5)”.
Subsec. (b)(4)(B)(i). Pub. L. 106-170, Sec. 532(c), amended clause (i) by substituting “section 1221(a)(1)” for “section 1221(1)”.
Subsec. (b)(5)(A)(i). Pub. L. 106-170, Sec. 556(b), amended clause (i) by substituting “90 percent” for “95 percent (90 percent in the case of taxable years beginning before January 1, 1980)”.
Subsec. (d)(3)(A). Pub. L. 106-170, Sec. 566(a)(2), amended subpar. (A). Before being amended, it read as follows:
“(A) shall be treated for purposes of this subsection and subsection (a)(2)(B) as made from the earliest earnings and profits accumulated in any taxable year to which the provisions of this part did not apply rather than the most recently accumulated earnings and profits, and”.
Subsec. (d)(3)(B). Pub. L. 106-170, Sec. 566(b), amended subpar. (B) by inserting “and section 858” before the period.
1998--Subsec. (d)(3)(A).Pub. L. 105-206, Sec. 6012(g), amended subpar. (A) by substituting “earliest earnings and profits accumulated in any taxable year to which the provisions of this part did not apply” for “earliest accumulated earnings and profits (other than earnings and profits to which subsection (a)(2)(A) applies)”.
1997--Subsec. (a)(2). Pub. L. 105-34, Sec. 1251(a)(1), struck out paragraph (2), which prior to read as follows:
“(2) the real estate investment trust complies for such year with regulations prescribed by the Secretary for the purpose of ascertaining the actual ownership of the outstanding shares, or certificates of beneficial interest, of such trust, and “.
Subsec. (a)(3). Pub. L. 105-34, Sec. 1251(a)(1), redesignated paragraph (3) as paragraph (2).
Subsec. (b)(3)(D). Pub. L. 105-34, Sec. 1254(a), redesignated paragraph (D) as paragraph (E) and inserted a new subparagraph (C).
Subsec. (b)(5). Pub. L. 105-34, Sec. 1255(b)(2), struck out “section 856(c)(7)” in paragraph (5) and inserted “section 856(c)(6), and struck out “section 856(c)(6)(B)” and inserted “section 856(c)(5)(B)” in subparagraph (C).
Subsec. (b)(6)(C)(iii). Pub. L. 105-34, Sec. 1260, struck out “(other than foreclosure property)” in subclauses (I) and (II) and inserted “(other than sales of foreclosure property or sales to which section 1033 applies)”.
Subsec. (b)(7)(A)(i). Pub. L. 105-34, Sec. 1254(b)(1), struck out “subparagraph (B)” and inserted “subparagraph (B) or (D)”.
Subsec. (d)(3). Pub. L. 105-34, Sec. 1256, Added at the end of subsection (d) a new paragraph.
Subsec. (e)(2)(B). Pub. L. 105-34, Sec. 1259(1), struck subpar. (B), struck out the period at the end of subparagraph (C), and inserted a comma. Before being struck, subpar. (B) read as follows:
“(B) in the case of a real estate investment trust using the cash receipts and disbursements method of accounting, the amount (if any) by which--
“(i) the amounts includible in gross income with respect to instruments to which section 1274 (relating to certain debt instruments issued for property) applies, exceed
“(ii) the amount of money and the fair market value of other property received during the taxable year under such instruments; plus”
Subsec. (e)(2)(C). Pub. L. 105-34, Sec. 1259(3), redesignated subparagraph (C) as amended by paragraph (2)) as subparagraph (B), and added new subparagraph (C) and (D) .
Subsec. 857(f). Pub. L. 105-34, Sec. 1251(a)(2), redesignated subsection (f) as subsection (g) and added a new subsection (f).
1990--Subsec. (b)(3)(C).Pub. L. 101-508 amended Pub. L. 100-647, Sec. 1018(u)(28). See 1988 Amendment note below.
1988--Subsec. (a). Pub. L. 100-647, Sec. 1006(s)(4), inserted at end ‘The Secretary may waive the requirements of paragraph (1) for any taxable year if the real estate investment trust establishes to the satisfaction of the Secretary that it was unable to meet such requirements by reason of distributions previously made to meet the requirements of section 4981.’
Subsec. (b)(3)(C). Pub. L. 100-647, Sec. 1018(u)(28), as amended by Pub. L. 101-508, substituted ‘such net capital loss shall’ for ‘such net capital loss such’.
Pub. L. 100-647, Sec. 1006(s)(2), substituted ‘the taxable income of the real estate investment trust’ for ‘real estate investment trust taxable income’.
Subsec. (b)(8). Pub. L. 100-647, Sec. 1006(s)(5), substituted ‘in October, November, or December’ for ‘in December’ and ‘in such a month’ for ‘in such month’ in introductory text, ‘on December 31 of such calendar year’ for ‘on such date’, in subpars. (A) and (B), and ‘during January’ for ‘before February 1’ in last sentence.
Subsec. (e)(2)(B)(i). Pub. L. 100-647, Sec. 1006(r), substituted ‘with respect to instruments’ for ‘as original issue discount on instruments’.
1986--Subsec. (a). Pub. L. 99-514, Sec. 661(b), struck out ‘and’ at end of par. (1), substituted ‘, and’ for the period at end of par. (2), and added par. (3) and last sentence.
Subsec. (a)(1)(B). Pub. L. 99-514, Sec. 664(a), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: ‘the sum of -
‘(i) the amount of any penalty imposed on the real estate investment trust by section 6697 which is paid by such trust during the taxable year; and
‘(ii) the net loss derived from prohibited transactions,’.
Subsec. (b)(2)(F). Pub. L. 99-514, Sec. 666(b)(2), struck out ‘and there shall be included an amount equal to any net loss derived from prohibited transactions’ after ‘prohibited transactions’.
Subsec. (b)(3)(C). Pub. L. 99-514, Sec. 668(b)(3), inserted at end ‘For purposes of this subparagraph, the amount of the net capital gain for any taxable year which is not a calendar year shall be determined without regard to any net capital loss attributable to transactions after December 31 of such year, and any such net capital loss such be treated as arising on the 1st day of the next taxable year. To the extent provided in regulations, the preceding sentence shall apply also for purposes of computing real estate investment trust taxable income.’
Pub. L. 99-514, Sec. 665(a)(2), (b)(1), inserted ‘(or mailed to its shareholders or holders of beneficial interests with its annual report for the taxable year)’, struck out last sentence which read as follows: ‘For purposes of this subparagraph, the net capital gain shall be deemed not to exceed the real estate investment trust taxable income (determined without regard to the deduction for dividends paid (as defined in section 561) for the taxable year).’
Subsec. (b)(3)(D). Pub. L. 99-514, Sec. 665(a)(1), added subpar. (D).
Subsec. (b)(6)(B)(ii). Pub. L. 99-514, Sec. 666(b)(1), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: ‘the term ‘net loss derived from prohibited transactions’ means the excess of the deductions allowed by this chapter which are directly connected with prohibited transactions over the gain from prohibited transactions; and'.
Subsec. (b)(6)(C)(ii). Pub. L. 99-514, Sec. 666(a)(2), substituted ‘30 percent’ for ‘20 percent’.
Subsec. (b)(6)(C)(iii). Pub. L. 99-514, Sec. 666(a)(1), amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: ‘during the taxable year the trust does not make more than 5 sales of property (other than foreclosure property); and’.
Subsec. (b)(6)(C)(v). Pub. L. 99-514, Sec. 666(a)(3), added cl. (v).
Subsec. (b)(8). Pub. L. 99-514, Sec. 668(b)(1)(A), added par. (8).
Subsec. (c). Pub. L. 99-514, Sec. 612(b)(7), which directed that ‘section 116 (relating to an exclusion for dividends received by individuals), and’ be struck out, was executed by striking out ‘section 116 (relating to an exclusion for dividends received by individuals) and’ before ‘section 243’ as the probable intent of Congress.
Subsec. (d). Pub. L. 99-514, Sec. 668(b)(2), amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows: ‘The earnings and profits of a real estate investment trust for any taxable year (but not its accumulated earnings and profits) shall not be reduced by any amount which is not allowable as a deduction in computing its taxable income for such taxable year. For purposes of this subsection, the term ‘real estate investment trust’ includes a domestic corporation, trust, or association which is a real estate investment trust determined without regard to the requirements of subsection (a).'
Subsecs. (e), (f). Pub. L. 99-514, Sec. 664(b), added subsec. (e) and redesignated former subsec. (e) as (f).
1984--Subsec. (b)(3)(B).Pub. L. 98-369, Sec. 1001(b)(13), substituted ‘6 months’ for ‘1 year’.
Subsec. (b)(7). Pub. L. 98-369, Sec. 55(b), substituted provisions relating to loss on sale or exchange of stock held 6 months or less for provisions which related to loss on sale or exchange of stock held 31 days or less.
Pub. L. 98-369, Sec. 1001(b)(13), substituted ‘6 months’ for ‘1 year’.
Subsec. (c). Pub. L. 98-369, Sec. 16(a), repealed amendments made by Pub. L. 97-34, Sec. 302(c). See 1981 Amendment note below.
1981--Subsec. (c). Pub. L. 97-34, Sec. 302(c)(5), (d)(1), provided for general amendment of subsec. (c) so as to include provisions relating to treatment for section 128 of this title, adjustments to gross income and aggregate interest received, and notice to shareholders, applicable to taxable years beginning after Dec. 31, 1984. Section 16(a) of Pub. L. 98-369, repealed section 302(c) of Pub. L. 97-34, and provided that this title shall be applied and administered as if section 302(c), and the amendments made by section 302(c), had not been enacted.
1980--Subsec. (b)(4)(A).Pub. L. 96-222 substituted provisions computing the tax on the net income from foreclosure property of every real estate investment trust by multiplying the net income from foreclosure property by the highest rate of tax specified in section 11(b) for provisions determining the tax on the net income from foreclosure of property of every real estate investment trust by applying section 11 to such income as if such income constituted the taxable income of a corporation taxable under section 11 and struck out provisions requiring that for purposes of the preceding sentence, the surtax exemption be zero.
Subsec. (c). Pub. L. 96-223 temporarily substituted ‘Limitations applicable to dividends received from real estate investment trusts’ for ‘Restrictions applicable to dividends received from real estate investment trusts’ in heading, designated existing provisions as par. (1), substituted ‘(1) Capital gain dividend. - For purposes of section 116 (relating to exclusion for dividends and interest received by individuals), a capital gain dividend (as defined in subsection (b)(3)(C)) received from a real estate investment trust shall not be considered a dividend’ for ‘For purposes of section 116 (relating to an exclusion for dividends received by individuals) and section 243 (relating to deductions for dividends received by corporations), a dividend received from a real estate investment trust which meets the requirements of this part shall not be considered as a dividend’ in par. (1) as so designated, and added pars. (2) to (6).
1978--Subsec. (b)(1). Pub. L. 95-600, Sec. 301(b)(12), substituted ‘a tax’ for ‘a normal tax and surtax’.
Subsec. (b)(3)(A)(ii). Pub. L. 95-600, Sec. 403(c)(3), substituted ‘a tax determined at the rate provided in section 1201(a) on’ for ‘a tax of 30 percent of’.
Subsec. (b)(3)(C). Pub. L. 95-600, Sec. 362(d)(3), substituted ‘section 860(e)’ for ‘section 859(c)’.
Subsec. (b)(6)(C) to (E). Pub. L. 95-600, Sec. 363(b), added subpars. (C) to (E).
1976--Subsec. (a). Pub. L. 94-455, Sec. 1604(j), (k)(2)(B), 1906(b)(13)(A), substituted ‘(other than subsection (d) of this section and subsection (g) of section 856)’ for ‘(other than subsection (d) of this section)’ in provisions preceding par. (1), in par. (1) redesignated existing subpars. (A) and (B) as cls. (i) and (ii), respectively, of subpar. (A), added subpar. (B), in both cls. (i) and (ii) of subpar. (A) as redesignated raised the percentage to 95 percent for taxable years beginning on and after Jan. 1, 1980, and, in cl. (i) of subpar. (A) as redesignated, inserted provision for the exclusion of net capital gain, and struck out ‘or his delegate’ after ‘Secretary’ in par. (2).
Subsec. (b)(1). Pub. L. 94-455, Sec. 1901(b)(1)(V), struck out provision that, for purposes of computing the normal tax under section 11, the taxable income and the dividends paid deduction of such real estate investment trust for the taxable year (computed without regard to capital gains dividends) would be reduced by the deduction provided by section 22 (relating to partially tax-exempt interest.
Subsec. (b)(2). Pub. L. 94-455, Sec. 1602(b)(2), 1603(c)(5), 1606(a), (d), 1607(b)(1)(A), (2), struck out subpar. (A) which provided for the exclusion of the excess, if any, of the net long-term capital gain over the net short-term capital loss, and subpar. (E) which prohibited the allowance of the net operating loss deduction provided in section 172, redesignated subpars. (B), (C), (D), and (F) as subpars. (A), (B), (C), and (D), respectively, added subpars. (E) and (F), and in subpar. (B) as redesignated substituted ‘subparagraph (D)’ for ‘paragraph (F)’ and struck out ‘shall be computed without regard to capital gains dividends and’ after ‘shall be allowed, but’.
Subsec. (b)(3)(A). Pub. L. 94-455, Sec. 1607(a), substituted provisions setting an alternative tax in case of capital gains under which, if for any taxable year, a real estate investment trust has a net capital gain, then, in lieu of the tax imposed by subsection (b)(1), there is imposed a tax (if such tax is less than the tax imposed by such subsection) to consist of the sum of a tax, computed as provided in subsection (b)(1), on the real estate investment trust taxable income (determined by excluding such net capital gain and by computing the deduction for dividends paid without regard to capital gain dividends), and a tax of 30 percent of the excess of the net capital gain over the deduction for dividends paid (as defined in section 561) determined with reference to capital gains dividends only, for provisions posing a tax for each taxable year determined as provided in section 1201(a), on the excess, if any, of the net long-term capital gain over the sum of the net short-term capital loss and the deduction for dividends paid (as defined in section 561) determined with reference to capital gains dividends only.
Subsec. (b)(3)(B). Pub. L. 94-455, Sec. 1402(b)(2), provided that ‘9 months’ would be changed to ‘1 year’.
Pub. L. 94-455, Sec. 1402(b)(1)(P), provided that ‘6 months’ would be changed to ‘9 months’ for taxable years beginning in 1977.
Subsec. (b)(3)(C). Pub. L. 94-455, Sec. 1601(c), 1607(b)(3), 1901(a)(112), (b)(33)(K), inserted ‘; except that, if there is an increase in the excess described in subparagraph (A)(ii) of this paragraph for such year which results from a determination (as defined in section 859(c)), such designation may be made with respect to such increase at any time before the expiration of 120 days after the date of such determination’ after ‘30 days after the close of its taxable year’, substituted ‘net capital gain’ for ‘excess of the net long-term capital gain over the net short-term capital loss’ in provision covering the portion of distributions which shall be capital gain dividends, inserted provision that the net capital gain be deemed not to exceed the real estate investment trust taxable income, and struck out provision which specified the source of deductions for dividends paid in the case of taxable years beginning before Jan. 1, 1975.
Subsec. (b)(4)(B)(i). Pub. L. 94-455, Sec. 1604(c)(2), inserted reference to subparagraph (G) of section 856(c)(3).
Subsec. (b)(5). Pub. L. 94-455, Sec. 1602(b)(1), added par. (5). Former par. (5) redesignated (7) and amended.
Subsec. (b)(6). Pub. L. 94-455, Sec. 1603(b), added par. (6).
Subsec. (b)(7). Pub. L. 94-455, Sec. 1402(b)(2), provided that ‘9 months’ would be changed to ‘1 year’.
Pub. L. 94-455, Sec. 1402(b)(1)(P), 1602(b)(1), redesignated par. (5) as (7) and provided that ‘6 months’ would be changed to ‘9 months’ for taxable years beginning in 1977.
Subsec. (d). Pub. L. 94-455, Sec. 1604(f)(3)(B), substituted ‘a domestic corporation, trust,’ for ‘a domestic unincorporated trust’.
Subsec. (e). Pub. L. 94-455, Sec. 1605(b)(2), added subsec. (e).
1975--Subsec. (a)(1). Pub. L. 93-625, Sec. 6(d)(2), incorporated existing par. (1) provisions in par. (1) introductory text and provisions designated as subpar. (A), substituted in subpar. (A) ‘(determined without regard to the deduction for dividends paid (as defined in section 561))’ for ‘(determined without regard to subsection (b)(2)(C))’, and added subpar. (B).
Subsec. (b)(2)(C). Pub. L. 93-625, Sec. 6(d)(4), provided for computation of deduction for dividends paid without regard to that portion of such deduction which is attributable to the amount excluded under subparagraph (F).
Subsec. (b)(2)(F). Pub. L. 93-625, Sec. 6(d)(3), added subpar. (F).
Subsec. (b)(4), (5). Pub. L. 93-625, Sec. 6(c), added par. (4) and redesignated former par. (4) as (5).
1969--Subsec. (b)(3)(A).Pub. L. 91-172, Sec. 511(c)(3)(A), substituted ‘determined as provided in section 1201(a), on’ for ‘of 25 percent of.’
Subsec. (b)(3)(C). Pub. L. 91-172, Sec. 511(c)(3)(B), inserted provision requiring for the purposes of the deduction for capital gains dividends paid, in the case of a taxable year beginning before Jan. 1, 1975, the deduction for dividends paid shall first be made from the amount subject to tax in accordance with section 1201(a)(1)(B), to the extent thereof, and then from the amount subject to tax in accordance with section 1201(a)(1)(A).
1964--Subsec. (c). Pub. L. 88-272 struck out ‘section 34(a) (relating to credit for dividends received by individuals),’ before ‘section 116’ and the comma before ‘and’.
EFFECTIVE DATE OF 2018 AMENDMENTS
Amendment by Pub. L. 115-141, Div. U, Sec. 401(a)(148), effective March 23, 2018.
EFFECTIVE DATE OF 2017 AMENDMENTS
Amendments by Pub. L. 115-97, Sec. 13001(b)(2)(K), effective for taxable years beginning after December 31, 2017.
EFFECTIVE DATE OF 2015 AMENDMENTS
Amendments by Pub. L. 114-113, Div. Q, Sec. 313(a), effective for taxable years beginning after the date of the enactment of this Act [Enacted: Dec. 18, 2015].
Amendments by Pub. L. 114-113, Div. Q, Sec. 313(b), effective as if included in section 3051 of the Housing Assistance Tax Act of 2008. Pub. L. 114-113, Div. Q, Sec. 313(c)(2) (B) provided that:
“(B) RETROACTIVE APPLICATION OF NO INFERENCE NOT APPLICABLE TO CERTAIN TIMBER PROPERTY PREVIOUSLY TREATED AS NOT INVENTORY PROPERTY.—The amendment made by subsection (b)(2) shall not apply to any sale of property to which section 857(b)(6)(G) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of this Act [Enacted: Dec. 18, 2015]) applies.
Amendments by Pub. L. 114-113, Div. Q, Sec. 316(a), effective for distributions in taxable years beginning after December 31, 2015.
Amendments by Pub. L. 114-113, Div. Q, Sec. 320(a), effective for taxable years beginning after the date of the enactment of this Act [Enacted: Dec. 18, 2015].
Amendments by Pub. L. 114-113, Div. Q, Sec. 321, effective for taxable years beginning after December 31, 2015.
Amendments by Pub. L. 114-113, Div. Q, Sec. 322(a)(2), effective on the date of enactment [Enacted: Dec. 18, 2015] and shall apply to–(A) any disposition on and after the date of the enactment of this Act, and (B) any distribution by a real estate investment trust on or after the date of the enactment of this Act which is treated as a deduction for a taxable year of such trust ending after such date.
EFFECTIVE DATE OF 2008 AMENDMENTS
Amendment by Sec. 3033(a) of Pub. L. 110-289 effective for gains recognized after the date of the enactment of this Act [Enacted: July 30, 2008].
Amendment by Sec. 3033(b) of Pub. L. 110-289 effective for gains and deductions recognized after the date of the enactment of this Act [Enacted: July 30, 2008].
Amendments by Sec. 3051 and 3052 of Pub. L. 110-289 effective for sales made after the date of the enactment of this Act [Enacted: July 30, 2008].
Amendment by Sec. 15311(c) of Pub. L. 110-246 effective for taxable years ending after the date of the enactment [Effective date: May 22, 2008]. Amendments by Sec. 15315 of Pub. L. 110-246 effective for dispositions in taxable years beginning after the date of the enactment of this Act [Effective date: May 22, 2008]. Note that the original provisions of Pub. L. 110-246 were enacted as Pub. L. 110-234 on May 22, 2008, but were repealed by Pub. L. 110-246, Sec. 4, effective May 22, 2008. Sec. 4 of Pub. L. 110-246 provided that:
“Sec. 4. Repeal of Duplicative Enactment.
“(a) In General.—The Act entitled ‘An Act to provide for the continuation of agricultural programs through fiscal year 2012, and for other purposes’ (H.R. 2419 of the 110th Congress), and the amendments made by that Act, are repealed, effective on the date of the enactment of that Act.
“(b) Effective Date.—Except as otherwise provided in this Act, this Act and the amendments made by this Act shall take effect on the earlier of—
“(1) the date of enactment of this Act [Enacted: June 18, 2008]; or
“(2) the date of the enactment of the Act entitled ‘An Act to provide for the continuation of agricultural programs through fiscal year 2012, and for other purposes’ (H.R. 2419 of the 110th Congress) [Enacted: May 22, 2008].”
Amendment by Sec. 11(a)(17)(B) of Pub. L. 110-172 effective on the date of the enactment of this Act [Enacted: Dec. 29, 2007].
EFFECTIVE DATE OF 2007 AMENDMENTS
Amendment by Sec. 11(a)(17)(B) of Pub. L. 110-172 effective on the date of the enactment of this Act [Enacted: Dec. 29, 2007].
EFFECTIVE DATE OF 2005 AMENDMENTS
Amendment by Sec. 403(d)(3) of Pub. L. 109-135 effective as if included in the provisions of the American Jobs Creation Act of 2004 [Pub. L. 108-357, Sec. 243] to which it relates.
Amendments by Sec. 412(ii) of Pub. L. 109-135 effective on the date of the enactment of this Act [Enacted: Dec. 21, 2005].
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendment by Sec. 243(c) and (e) of Pub. L. 108-357 effective for taxable years beginning after the date of the enactment of this Act [Enacted: Oct. 22, 2004].
Amendments by Sec. 243(d) of Pub. L. 108-357, as amended by Pub. L. 109-135, Sec. 403(d)(4), effective for transactions entered into after December 31, 20004.
Section 243(g) of Pub. L. 108-357, as amended byPub. L. 109-135, Sec. 403(d)(4), provided the following effective date for amendments by Sec. 243(f) of Pub. L. 108-357:
“(4) SUBSECTION (f)-
“(A) The amendment made by paragraph (1) of subsection (f) shall apply to failures with respect to which the requirements of subparagraph (A) or (B) of section 856(c)(7) of the Internal Revenue Code of 1986 (as added by such paragraph) are satisfied after the date of the enactment of this Act.
“(B) The amendment made by paragraph (2) of subsection (f) shall apply to failures with respect to which the requirements of paragraph (6) of section 856(c) of the Internal Revenue Code of 1986 (as amended by such paragraph) are satisfied after the date of the enactment of this Act.
“(C) The amendments made by paragraph (3) of subsection (f) shall apply to failures with respect to which the requirements of paragraph (5) of section 856(g) of the Internal Revenue Code of 1986 (as added by such paragraph) are satisfied after the date of the enactment of this Act.
“(D) The amendment made by paragraph (4) of subsection (f) shall apply to taxable years ending after the date of the enactment of this Act.
“(E) The amendments made by paragraph (5) of subsection (f) shall apply to statements filed after the date of the enactment of this Act [Enacted: Oct. 22, 2004].”
Amendment by Sec. 321(a) of Pub. L. 108-357 effective for taxable years beginning after the date of the enactment of this Act [Enacted: Oct. 22, 2004].
Pub. L. 108-357, Sec. 418(c), as amended by Pub. L. 109-135, Sec. 403(p)(2), provided that:
“(c) Effective Date- The amendments made by this section shall apply to--
“(1) any distribution by a real estate investment trust which is treated as a deduction for a taxable year of such trust beginning after the date of the enactment of this Act, and
“(2) any distribution by a real estate investment trust made after such date which is treated as a deduction under section 860 for a taxable year of such trust beginning on or before such date.”
Amendment by Sec. 402(a)(5)(E) of Pub. L. 108-311 effective as if included in the provisions of the Jobs and Growth Tax Relief Reconciliation Act of 2003 [Pub. L. 108-27, Sec. 302] to which it relates [effective: taxable years beginning after Dec. 31, 2002].
EFFECTIVE DATE OF 2003 AMENDMENTS
Amendment by Sec. 302(d) of Pub. L. 108-27 effective for taxable years beginning after December 31, 2002.
Sec. 302(f)(2) of Pub. L. 108-27, as amended byPub. L. 108-311, Sec. 402(a)(6), provided that:
“(2) Pass-thru Entities.--In the case of a pass-thru entity described in subparagraph (A), (B), (C), (D), (E), or (F) of section 1(h)(10) of the Internal Revenue Code of 1986, as amended by this Act, the amendments made by this section shall apply to taxable years ending after December 31, 2002; except that dividends received by such an entity on or before such date shall not be treated as qualified dividend income (as defined in section 1(h)(11) of such Code, as added by this Act).”
Sec. 303 (Sunset of Title) of Pub. L. 108-27, as amended by Sec. 102 of Pub. L. 109-222 and Sec. 102 of Pub. L. 111-312, and struck by Pub. L. 112-240, Sec. 102(a) (effective for taxable years beginning after Dec. 31, 2012), provided that: “All provisions of, and amendments made by, this title shall not apply to taxable years beginning after December 31, 2012, and the Internal Revenue Code of 1986 shall be applied and administered to such years as if such provisions and amendments had never been enacted.”
EFFECTIVE DATE OF 2002 AMENDMENTS
Amendments by Sec. 413(a) of Pub. L. 107-147 effective as if included in section 545 of the Tax Relief Act of 1999.
Amendment by Sec. 417(13) of Pub. L. 107-147 effective on the date of the enactment of this Act [enacted: Mar. 9, 2002].
EFFECTIVE DATE OF 2000 AMENDMENTS
Amendment by Sec. 311(b) of Pub. L. 106-554 effective as if included in the provisions of the Ticket to Work and Work Incentives Improvement Act of 1999 to which it relates [generally taxable years beginning after December 31, 2000].
EFFECTIVE DATE OF 1999 AMENDMENTS
Amendments by Sec. 532(c)(2) of Pub. L. 106-170 effective for any instruments held, acquired, or entered into, any transaction entered into, and supplies held or acquired on or after the date of the enactment of this Act [Enacted: Dec. 17, 1999].
Amendments by Sec. 545 of Pub. L. 106-170 effective for taxable years beginning after December 31, 2000.
Amendments by Sec. 556 of Pub. L. 106-170 effective for taxable years beginning after December 31, 2000.
Amendments by Sec. 566 of Pub. L. 106-170 effective for distributions after December 31, 2000.
EFFECTIVE DATE OF 1998 AMENDMENTS
Amendment by Sec. 6012(g) of Pub. L. 105-206 effective as if included in the Taxpayer Relief Act of 1997 to which it relates [Effective Date of Pub. L. 105-34, Sec. 1256: Taxable years beginning after Aug. 5, 1997].
EFFECTIVE DATE OF 1997 AMENDMENTS
Section 1263 of Pub. L. 105-34 provided that: “The amendments made by this part shall apply to taxable years beginning after the date of the enactment of this Act [enacted: Aug. 5, 1997].”
EFFECTIVE DATE OF 1988 AMENDMENTS
Section 1006(s)(5) of Pub. L. 100-647 provided that the amendment made by that section is effective with respect to dividends declared in 1988 and subsequent calendar years.
Amendment by sections 1006(r), (s)(2), (4) and 1018(u)(28) of Pub. L. 100-647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment relates, see section 1019(a) ofPub. L. 100-647, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 612(b)(7) of Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1986, see section 612(c) of Pub. L. 99-514, set out as a note under section 301 of this title.
Amendments by sections 661(b), 664, 665(a), (b)(1), and 666 of Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1986, see section 669(a) of Pub. L. 99-514, set out as a note under section 856 of this title.
Amendment by section 668(b)(1)(A), (2), (3) ofPub. L. 99-514 applicable to calendar years beginning after Dec. 31, 1986, see section 669(b) of Pub. L. 99-514, set out as a note under section 856 of this title.
EFFECTIVE DATE OF 1984 AMENDMENTS
Amendment by section 16(a) of Pub. L. 98-369 applicable to taxable years ending after Dec. 31, 1983, see section 18(a) ofPub. L. 98-369, set out as a note under section 48 of this title.
Amendment by section 55(b) of Pub. L. 98-369 applicable to losses incurred with respect to shares of stock and beneficial interest with respect to which the taxpayer's holding period begins after July 18, 1984, see section 55(c) of Pub. L. 98-369, set out as a note under section 852 of this title.
Amendment by section 1001(b)(13) of Pub. L. 98-369 applicable to property acquired after June 22, 1984, and before Jan. 1, 1988, see section 1001(e) of Pub. L. 98-369, set out as a note under section 166 of this title.
EFFECTIVE DATE OF 1980 AMENDMENTS
Amendment by Pub. L. 96-222 effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, Pub. L. 95-600, to which such amendment relates, see section 201 of Pub. L. 96-222, set out as a note under section 32 of this title.
EFFECTIVE AND TERMINATION DATES OF 1980 AMENDMENT
Amendment by Pub. L. 96-223 applicable with respect to taxable years beginning after Dec. 31, 1980, and before Jan. 1, 1982, see section 404(c) of Pub. L. 96-223, set out as a note under section 265 of this title.
EFFECTIVE DATE OF 1978 AMENDMENTS
Amendment by section 301(b)(12) of Pub. L. 95-600 applicable to taxable years beginning after Dec. 31, 1978, see section 301(c) of Pub. L. 95-600, set out as a note under section 11 of this title.
Amendment by section 362(d)(3) of Pub. L. 95-600 applicable with respect to determinations (as defined in section 860(e) of this title) after Nov. 6, 1978, see section 362(e) of Pub. L. 95-600, set out as an Effective Date note under section 860 of this title.
Amendment by section 363(b) of Pub. L. 95-600 applicable to taxable years ending after Nov. 6, 1978, see section 363(d) ofPub. L. 95-600, set out as a note under section 856 of this title.
Amendment by section 403(c)(3) of Pub. L. 95-600 effective on Nov. 6, 1978, see section 403(d)(3) of Pub. L. 95-600, set out as a note under section 528 of this title.
EFFECTIVE DATE OF 1976 AMENDMENTS
Section 1402(b)(1) of Pub. L. 94-455 provided that the amendment made by that section is effective with respect to taxable years beginning in 1977.
Section 1402(b)(2) of Pub. L. 94-455 provided that the amendment made by that section is effective with respect to taxable years beginning after Dec. 31, 1977.
Section 1608(a) of Pub. L. 94-455, as amended byPub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘The amendments made by section 1601 (enacting sections 859 and 6697 of this title and amending this section and sections 316, 381, 6422, 6503, and 6515 of this title) shall apply with respect to determinations (as defined in section 859(c) of the Internal Revenue Code of 1986 (formerly I.R.C. 1954)) occurring after the date of the enactment of this Act (Oct. 4, 1976). If the amendments made by section 1601 apply to a taxable year ending on or before the date of enactment of this Act:
‘(1) the reference to section 857(b)(3)(A)(ii) in sections 857(b)(3)(C) and 859(b)(1)(B) of such Code as amended, shall be considered to be a reference to section 857(b)(3)(A) of such Code, as in effect immediately before the enactment of this Act (Oct. 4, 1976), and
‘(2) the reference to section 857(b)(2)(B) in section 859(a) of such Code, as amended, shall be considered to be a reference to section 857(b)(2)(C) of such Code, as in effect immediately before the enactment of this Act (Oct. 4, 1976).’
For effective date of amendment by section 1602(b)(1), (2) of Pub. L. 94-455, see section 1608(b) of Pub. L. 94-455, set out as a Trust Not Disqualified in Certain Cases Where Income Tests Not Met note under section 856 of this title.
For effective date of amendment by sections 1603, 1604, and 1605 of Pub. L. 94-455, see section 1608(d) of Pub. L. 94-455, set out as a note under section 856 of this title.
Section 1608(c) of Pub. L. 94-455, as amended byPub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘The amendments made by sections 1606 and 1607 (amending this section and sections 46, 172, and 443 of this title) shall apply to taxable years ending after the date of the enactment of this Act (Oct. 4, 1976); except that in the case of a taxpayer which has a net operating loss (as defined in section 172(c) of the Internal Revenue Code of 1986 (formerly I.R.C. 1954)) for any taxable year ending after the date of enactment of this Act (Oct. 4, 1976) for which the provisions of part II of subchapter M of chapter 1 of subtitle A of such Code apply to such taxpayer, such loss shall not be a net operating loss carryback under section 172 of such Code to any taxable year ending on or before the date of enactment of this Act (Oct. 4, 1976).'
Amendment by section 1901(a)(112), (b)(1)(V), (33)(K) of Pub. L. 94-455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE OF 1975 AMENDMENTS
Amendment by Pub. L. 93-625 applicable to foreclosure property acquired after Dec. 31, 1973, see section 6(e) of Pub. L. 93-625, set out as a note under section 856 of this title.
EFFECTIVE DATE OF 1969 AMENDMENTS
Amendment by Pub. L. 91-172 applicable with respect to taxable years beginning after Dec. 31, 1969, see section 511(d) of Pub. L. 91-172, set out as an Effective Date note under section 1201 of this title.
EFFECTIVE DATE OF 1964 AMENDMENTS
Amendment by Pub. L. 88-272 applicable with respect to dividends received after Dec. 31, 1964, in taxable years ending after such date, see section 201(e) of Pub. L. 88-272, set out as a note under section 22 of this title.
EFFECTIVE DATE
Section applicable with respect to taxable years of real estate investment trusts beginning after Dec. 31, 1960, see section 10(k) of Pub. L. 86-779, set out as a note under section 856 of this title.
NORMALIZATION REQUIREMENTS
Section 13001(d) of Pub. L. 115-97 provided that:
“(d) NORMALIZATION REQUIREMENTS.—
“(1) IN GENERAL.—A normalization method of accounting shall not be treated as being used with respect to any public utility property for purposes of section 167 or 168 of the Internal Revenue Code of 1986 if the taxpayer, in computing its cost of service for ratemaking purposes and reflecting operating results in its regulated books of account, reduces the excess tax reserve more rapidly or to a greater extent than such reserve would be reduced under the average rate assumption method.
“(2) ALTERNATIVE METHOD FOR CERTAIN TAXPAYERS.—If, as of the first day of the taxable year that includes the date of enactment of this Act—
“(A) the taxpayer was required by a regulatory agency to compute depreciation for public utility property on the basis of an average life or composite rate method, and
“(B) the taxpayer's books and underlying records did not contain the vintage account data necessary to apply the average rate assumption method, the taxpayer will be treated as using a normalization method of accounting if, with respect to such jurisdiction, the taxpayer uses the alternative method for public utility property that is subject to the regulatory authority of that jurisdiction.
“(3) DEFINITIONS.—For purposes of this subsection—
“(A) EXCESS TAX RESERVE.—The term ‘‘excess tax reserve’’ means the excess of—
“(i) the reserve for deferred taxes (as described in section 168(i)(9)(A)(ii) of the Internal Revenue Code of 1986) as of the day before the corporate rate reductions provided in the amendments made by this section take effect, over
“(ii) the amount which would be the balance in such reserve if the amount of such reserve were deter- mined by assuming that the corporate rate reductions provided in this Act were in effect for all prior periods.
“(B) AVERAGE RATE ASSUMPTION METHOD.—The average rate assumption method is the method under which the excess in the reserve for deferred taxes is reduced over the remaining lives of the property as used in its regulated books of account which gave rise to the reserve for deferred taxes. Under such method, during the time period in which the timing differences for the property reverse, the amount of the adjustment to the reserve for the deferred taxes is calculated by multiplying—
“(i) the ratio of the aggregate deferred taxes for the property to the aggregate timing differences for the property as of the beginning of the period in question, by
(ii) the amount of the timing differences which reverse during such period.
“(C) ALTERNATIVE METHOD.—The ‘‘alternative method’’ is the method in which the taxpayer—
“(i) computes the excess tax reserve on all public utility property included in the plant account on the basis of the weighted average life or composite rate used to compute depreciation for regulatory purposes, and
“(ii) reduces the excess tax reserve ratably over the remaining regulatory life of the property.
“(4) TAX INCREASED FOR NORMALIZATION VIOLATION.—If, for any taxable year ending after the date of the enactment of this Act, the taxpayer does not use a normalization method of accounting for the corporate rate reductions provided in the amendments made by this section—
“(A) the taxpayer's tax for the taxable year shall be increased by the amount by which it reduces its excess tax reserve more rapidly than permitted under a normalization method of accounting, and
“(B) such taxpayer shall not be treated as using a normalization method of accounting for purposes of subsections (f)(2) and (i)(9)(C) of section 168 of the Internal Revenue Code of 1986.”
PERIOD FOR PROVIDING NOTICE TO SHAREHOLDERS
Section 402(a)(5)(F) of Pub. L. 108-311 provided that:
“(F) With respect to any taxable year of a regulated investment company or real estate investment trust ending on or before November 30, 2003, the period for providing notice of the qualified dividend amount to shareholders under sections 854(b)(2) and 857(c)(2)(C) of the Internal Revenue Code of 1986, as amended by this section, shall not expire before the date on which the statement under section 6042(c) of such Code is required to be furnished with respect to the last calendar year beginning in such taxable year.”
AMENDMENTS RELATED TO SECTION 5001 OF 1998 ACT
Sec. 4002(i)(2) of Pub. L. 105-277 provided that:
“(2) Subparagraphs (A)(i)(II), (A)(ii)(II), and (B)(ii) of section 1(h)(13) of the 1986 Code shall not apply to any distribution after December 31, 1997, by a regulated investment company or a real estate investment trust with respect to--
“(i) gains and losses recognized directly by such company or trust, and
“(ii) amounts properly taken into account by such company or trust by reason of holding (directly or indirectly) an interest in another such company or trust to the extent that such subparagraphs did not apply to such other company or trust with respect to such amounts.
“(B) Subparagraph (A) shall not apply to any distribution which is treated under section 852(b)(7) or 857(b)(8) of the 1986 Code as received on December 31, 1997.
“(C) For purposes of subparagraph (A), any amount which is includible in gross income of its shareholders under section 852(b)(3)(D) or 957(b)(30(D) of the 1986 Code after December 31, 1997, shall be treated as distributed after such date.
“(D)(i) For purposes of subparagraph (A), in the case of a qualified partnership with respect to which a regulated investment company meets the holding requirement of clause (iii)--
“(I) the subparagraphs referred to in subparagraphs (A) shall not apply to gains and losses recognized directly by such partnership for purposes of determining such company's distributive share of such gains and losses, and
“(II) such company's distributive share of such gains and losses (as so determined) shall be treated as recognized directly by such company.
“The preceding sentence shall apply only if the qualified partnership provides the company with written documentation of such distributive share as so determined.
“(ii) For purposes of clause (i), the term “qualified partnership” means, with respect to a regulated investment company, any partnership if--
“(I) the partnership is an investment company registered under the Investment Company Act of 1940.
“(II) the regulated investment company is permitted to invest in such partnership by reason of section 12(d)(1)(E) of such Act or an exemptive order of the Securities and Exchange Commission under such section, and
“(III) the regulated investment company and the partnership have the same taxable year.
“(iii) A regulated investment company meets the holding requirement of this clause with respect to a qualified partnership if (as of January 1, 1998)--
“(I) the value of the interests of the regulated investment company in such partnership is 35 percent or more of the value of such company's total assets, or
“(II) the value of the interests of the regulated investment company in such partnership and all other qualified partnerships is 90 percent or more of the value of such company's total assets.”