08 LC 18
7293S
House
Bill 447 (COMMITTEE SUBSTITUTE)
By:
Representative O`Neal of the
146th
A
BILL TO BE ENTITLED
AN ACT
AN ACT
To
amend Title 48 of the Official Code of Georgia Annotated, relating to revenue
and taxation, so as to provide for conformity with the federal treatment of
dividends received from real estate investment trusts and regulated investment
companies; to provide for definitions; to disallow expenses paid to certain real
estate investment trusts; to provide an effective date; to provide for
applicability; to repeal conflicting laws; and for other purposes.
BE
IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
SECTION
1.
Title
48 of the Official Code of Georgia Annotated, relating to revenue and taxation,
is amended in subsection (b) of Code Section 48-7-21, relating to taxation of
corporations, by revising paragraph (8) and adding two new paragraphs to read as
follows:
"(8)
There shall be subtracted from taxable income dividends received
by:
(A)
A corporation from sources outside the United States as defined in the Internal
Revenue Code of 1986. For purposes of this subparagraph, dividends received by
a corporation from sources outside of the United States shall include amounts
treated as a dividend and income deemed to have been received under provisions
of the Internal Revenue Code of 1986 by such corporation if such amounts could
have been subtracted from taxable income under this paragraph, had such amounts
actually been received. Amounts to be subtracted under this subparagraph shall
include the following, as defined by the Internal Revenue Code of
1986:
(i)
Qualified electing fund income;
(ii)
Subpart F income; and
(iii)
Income attributable to an increase in United States property by a controlled
foreign corporation.
The
amount subtracted under this subparagraph shall be reduced by any expenses
directly attributable to the dividend income; and
(B)
Corporations from affiliated corporations within the United States, when the
corporation receiving the dividends is engaged in business in this state and is
subject to the payment of taxes under the income tax laws of this state, to the
extent that the dividends have been included in net income under this Code
section. Dividends from affiliates shall be reduced by any expenses directly
attributable to the dividend income.
Dividends
received directly or indirectly from a real estate investment trust, as defined
and provided for in sections 856 through 859 of the Internal Revenue Code of
1986, or from a regulated investment company, as defined and provided for in
sections 851 through 855 of the Internal Revenue Code of 1986, shall not be
included as part of any dividends received deduction otherwise available under
this Code section."
"(15)
There shall be added to taxable income any amount deducted in arriving at
federal taxable income under the Internal Revenue Code of 1986 to the extent
such deduction is attributable to a dividend received directly or indirectly
from a real estate investment trust, as defined and provided for in sections 856
through 859 of the Internal Revenue Code of 1986, or from a regulated investment
company, as defined and provided for in sections 851 through 855 of the Internal
Revenue Code of 1986. The commissioner is authorized to prescribe forms and
promulgate rules and regulations deemed necessary in order to effectuate this
paragraph.
(16)
Georgia taxable income shall be adjusted as provided in Code Section
48-7-28.4."
SECTION
2.
Said
article is further amended in subsection (b) of Code Section 48-7-27, relating
to computation of taxable net income, by adding a new paragraph to read as
follows:
"(12)
Georgia taxable income shall be adjusted as provided in Code Section
48-7-28.4."
SECTION
3.
Said
article is further amended by adding a new Code section to read as
follows:
"48-7-28.4.
(a)
As used in this Code section, the term:
(1)
'Captive real estate investment trust' means any real estate investment trust,
unless the real estate investment trust is either:
(A)
A publicly traded real estate investment trust; or
(B)
A qualified real estate investment trust as defined in this Code
section.
(2)
'Dividends paid deduction' means the deduction for dividends paid which is
allowed pursuant to Sections 561 through 565 and Sections 856 through 859 of the
Internal Revenue Code of 1986.
(3)
'Qualified real estate investment trust' means any real estate investment trust
other than a real estate investment trust of which more than fifty percent of
the voting power or value of the beneficial interests or shares are owned or
controlled, directly or indirectly through one or more related members, by a
single entity, which single entity is also:
(A)
Subject to the provisions of Subchapter C of Chapter 1 of Subtitle A of the
Internal Revenue Code of 1986 and not exempt from federal income tax pursuant to
the provisions of Section 501 of the Internal Revenue Code of 1986;
and
(B)
Not a real estate investment trust as defined in this Code section or a
qualified real estate investment trust subsidiary as defined under Section
856(i) of the Internal Revenue Code of 1986.
(4)
'Real estate investment trust' means an entity that has elected such status and
meets the requirements of Section 856 of the Internal Revenue Code of
1986.
(5)
'Related member' means the same as is defined in Code Section
48-7-28.3.
(b)
For purposes of computing its Georgia taxable net income under Code Sections
48-7-21 and 48-7-27, a taxpayer shall add back all expenses and costs directly
or indirectly paid, accrued, or incurred to a captive real estate investment
trust. Such expenses and costs shall be added before the income is apportioned
or allocated as provided by Code Section 48-7-31.
(c)
The commissioner shall have the authority to reverse in whole or in part the
adjustments required in subsection (b) of this Code section when the taxpayer
and the commissioner agree in writing to the application or use of an
alternative method of apportionment under subparagraph (d)(2)(E) of Code Section
48-7-31, Code Section 48-7-31.1, or Code Section 48-7-35. Nothing in this Code
section shall be construed to limit or negate the commissioner´s authority
otherwise to enter into agreements and compromises otherwise allowed by
law.
(d)(1)
For purposes of this subsection, the term:
(A)
'Allocated or apportioned, or both' shall not mean the amount of income that is
subject to allocation or apportionment, or both. Rather, it means the amount
that is arrived at after applying the allocation and apportionment rules of a
state as defined in subparagraph (B) of this paragraph. A tax or the portion of
a tax, which is or would be imposed regardless of the amount of the income,
shall not be considered to be a tax on or measured by the income of the captive
real estate investment trust, a related member, or the taxpayer.
(B)
'State' means a state in the United States of America, including the District of
Columbia, but does not include those states under whose laws the taxpayer files
with the captive real estate investment trust or a related member, or the
captive real estate investment trust files with another related member, a
combined income tax report or return, a consolidated income tax report or
return, or any other report or return where such report or return is due because
of the imposition of a tax on, or measured by, income and where such combined
income tax report or return, consolidated income tax report or return, or other
report or return results in the elimination of the tax effects from transactions
directly or indirectly between the taxpayer and the captive real estate
investment trust or a related member.
(2)
The amount of the adjustment required by subsection (b) of this Code section
shall be reduced, but not below zero, to the extent the corresponding expenses
and costs are received as income in an arm´s length transaction by the
captive real estate investment trust and:
(A)
To the extent such income is not reduced by the dividends paid deduction, and to
the extent such income is allocated or apportioned, or both, to and taxed by
Georgia or another state that imposes a tax on or measured by the income of the
captive real estate investment trust; or
(B)
To the extent the dividend deriving from such income, paid directly or
indirectly by the captive real estate investment trust to the taxpayer or a
related member, is allocated or apportioned, or both, to and taxed by Georgia or
another state that imposes a tax on or measured by the income of the taxpayer or
such related member.
(3)
In claiming the exception allowed by this subsection, the taxpayer shall
disclose on such taxpayer´s return, with respect to the captive real estate
investment trust or the related member, the name, the federal identification
number, the name of each state, the amount of the expenses and costs allocated
or apportioned to and taxed by each state, and such other information as the
commissioner may prescribe.
(e)
Nothing in this Code section shall require a taxpayer to add to such
taxpayer´s Georgia taxable net income more than once any amount of expenses
and costs that the taxpayer pays, accrues, or incurs to a captive real estate
investment trust.
(f)
Nothing in this Code section shall be construed to limit or negate the
commissioner´s authority to make adjustments under Code Section
48-7-58.
(g)
The adjustment required by this Code section shall apply to a corporation that
files a separate return with Georgia and to the separate taxable income
computation of each member of a Georgia consolidated return.
(h)
In addition to other penalties imposed by this title, the penalty for failure to
make the adjustment required by this Code section shall be 10 percent of the
additional tax that results because of this Code section. The commissioner may
waive this penalty pursuant to the provisions of Code Section
48-2-43.
(i)
The commissioner is authorized to prescribe forms and promulgate rules and
regulations deemed necessary in order to effectuate this Code
section."
SECTION
4.
This
Act shall become effective upon this Act´s approval by the Governor or upon
its becoming law without such approval and shall be applicable to all taxable
years beginning on or after January 1, 2008.
SECTION
5.
All
laws and parts of laws in conflict with this Act are repealed.