EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*sb0968*
SENATE BILL 968
Q3 3lr2434
By: Senators King and Elfreth
Introduced and read first time: February 28, 2023
Assigned to: Rules
A BILL ENTITLED
AN ACT concerning 1
Income Tax – Captive Real Estate Investment Trusts – Alterations 2
FOR the purpose of altering the definition of “captive REIT” for purposes of a certain 3
addition modification under the Maryland income tax in the amount of the federal 4
dividends paid deduction for captive real estate investment trusts to exclude, under 5
certain circumstances, corporations, trusts, or associations owned or controlled by 6
certain qualified foreign entities and certain trusts owned or controlled by a listed 7
Australian property trust; and generally relating to an addition modification under 8
the Maryland income tax for captive real estate investment trusts. 9
BY repealing and reenacting, with amendments, 10
Article – Tax – General 11
Section 10–306.2 12
Annotated Code of Maryland 13
(2022 Replacement Volume) 14
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 15
That the Laws of Maryland read as follows: 16
Article – Tax – General 17
10–306.2. 18
(a) (1) In this section[:] THE FOLLOWING WORDS HAVE THE MEANINGS 19
INDICATED. 20
[(1)] (2) (I) [“captive] “CAPTIVE REIT” means a corporation, trust, or 21
association: 22
[(i)] 1. that is considered a real estate investment trust for the 23 2 SENATE BILL 968
taxable year under § 856 of the Internal Revenue Code; 1
[(ii)] 2. that is not regularly traded on an established securities 2
market; and 3
[(iii)] 3. OF WHICH more than 50% of the voting power or value of 4
the beneficial interests or shares [of which], at any time during the last half of the taxable 5
year, is owned or controlled, directly or indirectly, by a single entity that is subject to the 6
provisions of Subchapter C of Chapter 1 of the Internal Revenue Code[; and]. 7
[(2)] (II) [“captive] “CAPTIVE REIT” does not include: 8
[(i)] 1. a corporation, trust, or association [more than 50% of the 9
voting power or value of the beneficial interests or shares] of which, at any time during 10
which the corporation, trust, or association satisfies [item (1)(iii) of this subsection] 11
SUBPARAGRAPH (I)3 OF THIS PARAGRAPH, MORE THAN 50% OF THE VOTING POWER 12
OR VALUE OF THE BENE FICIAL INTERESTS OR SHARES OF THE CORPOR ATION, 13
TRUST, OR ASSOCIATION is owned or controlled, directly or indirectly, by: 14
[1.] A. a real estate investment trust other than a real 15
estate investment trust described in [item (1) of this subsection] SUBPARAGRAPH (I) OF 16
THIS PARAGRAPH ; 17
[2.] B. a person exempt from taxation under § 501 of the 18
Internal Revenue Code; [or] 19
[3.] C. a listed Australian property trust, OR AN ENTITY 20
ORGANIZED AS A TRUST IN WHICH A LISTED AUSTRALIAN PROPERTY T RUST OWNS 21
OR CONTROLS , DIRECTLY OR INDIRECT LY, 75% OR MORE OF THE VOTIN G POWER OR 22
VALUE OF THE BENEFIC IAL INTERESTS OR SHA RES OF THE TRUST ; or 23
D. A QUALIFIED FOREIGN EN TITY; OR 24
[(ii)] 2. subject to regulations that the Comptroller adopts, a real 25
estate investment trust that is intended to become regularly traded on an established 26
securities market and that satisfies the requirements of § 856(a)(5) and (6) of the Internal 27
Revenue Code by reason of § 856(h)(2) of the Internal Revenue Code. 28
(3) “QUALIFIED FOREIGN ENT ITY” MEANS A CORPORATION , TRUST, 29
ASSOCIATION, OR PARTNERSHIP THAT IS ORGANIZED UNDER T HE LAWS OF A 30
FOREIGN GOVERNMENT A ND: 31
(I) AT LEAST 75% OF THE TOTAL ASSET VALUE OF THE ENTITY 32
AT THE CLOSE OF THE TAXABLE YEAR IS REPR ESENTED BY REAL ESTA TE ASSETS, AS 33
DEFINED IN § 856 OF THE INTERNAL REVENUE CODE, CASH AND CASH 34 SENATE BILL 968 3
EQUIVALENTS , AND UNITED STATES GOVERNMENT SEC URITIES; 1
(II) 1. IS NOT SUBJECT TO TAX O N AMOUNTS DISTRIBUTE D 2
TO THE ENTITY’S BENEFICIAL OWNERS ; OR 3
2. IS EXEMPT FROM ENTITY –LEVEL TAXATION ; 4
(III) ON AN ANNUAL BASIS , DISTRIBUTES AT LEAST 85% OF THE 5
TAXABLE INCOME OF THE ENTITY, AS COMPUTED IN THE J URISDICTION IN WHICH 6
THE ENTITY IS ORGANI ZED, TO THE HOLDERS OF THE SHARES OR CERTIF ICATES OF 7
THE BENEFICIAL INTERESTS OF THE ENTITY; 8
(IV) 1. OF WHICH NOT MORE TH AN 10% OF THE VOTING 9
POWER OR VALUE OF TH E BENEFICIAL INTERES TS OR SHARES OF THE ENTITY IS 10
OWNED OR CO NTROLLED DIRECTLY , INDIRECTLY, OR CONSTRUCTIVELY BY A 11
SINGLE ENTITY OR IND IVIDUAL; OR 12
2. THE BENEFICIAL INTER ESTS OR SHARES OF TH E 13
ENTITY ARE REGULARLY TRADED ON AN ESTABLI SHED SECURITIES MARK ET; AND 14
(V) THE ENTITY IS ORGANI ZED IN A FOREIGN COU NTRY THAT 15
HAS A TAX TREATY WIT H THE UNITED STATES GOVERNMENT . 16
(b) In addition to the modifications under §§ 10–305 through 10–306.1 of this 17
subtitle, an amount equal to the amount of the dividends paid deduction allowed under the 18
Internal Revenue Code for the taxable year is added to federal taxable income to determine 19
the Maryland modified income of a captive REIT. 20
(c) For purposes of this section, the constructive ownership rules prescribed 21
under § 318(a) of the Internal Revenue Code, as modified by § 856(d)(5) of the Internal 22
Revenue Code, shall apply in determining the ownership of stock, assets, or net profits of 23
any person. 24
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July 25
1, 2023, and shall be applicable to all taxable years beginning after December 31, 2022. 26