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), amended subpar. (F) by inserting “or subparagraph (A)(ii)
or
(C) of section 897(k)(2)” after “897(h)(1)”.
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.”