MD
Maryland Senate Bill SB968

Maryland 2023 Regular Session

Maryland Senate Bill SB968 Compare Versions

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1- WES MOORE, Governor Ch. 478
21
3-– 1 –
4-Chapter 478
5-(Senate Bill 968)
62
7-AN ACT concerning
3+EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
4+ [Brackets] indicate matter deleted from existing law.
5+ Underlining indicates amendments to bill.
6+ Strike out indicates matter stricken from the bill by amendment or deleted from the law by
7+amendment.
8+ *sb0968*
89
9-Income Tax – Captive Real Estate Investment Trusts – Alterations
10+SENATE BILL 968
11+Q3 3lr2434
1012
11-FOR the purpose of altering the definition of “captive REIT” for purposes of a certain
12-addition modification under the Maryland income tax in the amount of the federal
13-dividends paid deduction for captive real estate investment trusts to exclude, under
14-certain circumstances, corporations, trusts, or associations owned or controlled by
15-certain qualified foreign entities and certain trusts owned or controlled by a listed
16-Australian property trust; and generally relating to an addition modification under
17-the Maryland income tax for captive real estate investment trusts.
13+By: Senators King and Elfreth
14+Introduced and read first time: February 28, 2023
15+Assigned to: Rules
16+Re–referred to: Budget and Taxation, March 3, 2023
17+Committee Report: Favorable with amendments
18+Senate action: Adopted
19+Read second time: March 13, 2023
1820
19-BY repealing and reenacting, with amendments,
20- Article – Tax – General
21-Section 10–306.2
22- Annotated Code of Maryland
23- (2022 Replacement Volume)
21+CHAPTER ______
2422
25- SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND,
26-That the Laws of Maryland read as follows:
23+AN ACT concerning 1
2724
28-Article – Tax – General
25+Income Tax – Captive Real Estate Investment Trusts – Alterations 2
2926
30-10–306.2.
27+FOR the purpose of altering the definition of “captive REIT” for purposes of a certain 3
28+addition modification under the Maryland income tax in the amount of the federal 4
29+dividends paid deduction for captive real estate investment trusts to exclude, under 5
30+certain circumstances, corporations, trusts, or associations owned or controlled by 6
31+certain qualified foreign entities and certain trusts owned or controlled by a listed 7
32+Australian property trust; and generally relating to an addition modification under 8
33+the Maryland income tax for captive real estate investment trusts. 9
3134
32- (a) (1) In this section[:] THE FOLLOWING WORDS HAVE THE MEANINGS
33-INDICATED.
35+BY repealing and reenacting, with amendments, 10
36+ Article – Tax – General 11
37+Section 10–306.2 12
38+ Annotated Code of Maryland 13
39+ (2022 Replacement Volume) 14
3440
35- [(1)] (2) (I) [“captive] “CAPTIVE REIT” means a corporation, trust, or
36-association:
41+ SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 15
42+That the Laws of Maryland read as follows: 16
3743
38- [(i)] 1. that is considered a real estate investment trust for the
39-taxable year under § 856 of the Internal Revenue Code;
44+Article – Tax – General 17
4045
41- [(ii)] 2. that is not regularly traded on an established securities
42-market; and
46+10–306.2. 18
4347
44- [(iii)] 3. OF WHICH more than 50% of the voting power or value of
45-the beneficial interests or shares [of which], at any time during the last half of the taxable
46-year, is owned or controlled, directly or indirectly, by a single entity that is subject to the
47-provisions of Subchapter C of Chapter 1 of the Internal Revenue Code[; and].
48- Ch. 478 2023 LAWS OF MARYLAND
48+ (a) (1) In this section[:] THE FOLLOWING WORDS HAVE THE MEANINGS 19 2 SENATE BILL 968
4949
50-– 2 –
51- [(2)] (II) [“captive] “CAPTIVE REIT” does not include:
5250
53- [(i)] 1. a corporation, trust, or association [more than 50% of the
54-voting power or value of the beneficial interests or shares] of which, at any time during
55-which the corporation, trust, or association satisfies [item (1)(iii) of this subsection]
56-SUBPARAGRAPH (I)3 OF THIS PARAGRAPH , MORE THAN 50% OF THE VOTING POWER
57-OR VALUE OF THE BENE FICIAL INTERESTS OR SHARES OF THE CORPOR ATION,
58-TRUST, OR ASSOCIATION is owned or controlled, directly or indirectly, by:
51+INDICATED. 1
5952
60- [1.] A. a real estate investment trust other than a real
61-estate investment trust described in [item (1) of this subsection] SUBPARAGRAPH (I) OF
62-THIS PARAGRAPH ;
53+ [(1)] (2) (I) [“captive] “CAPTIVE REIT” means a corporation, trust, or 2
54+association: 3
6355
64- [2.] B. a person exempt from taxation under § 501 of the
65-Internal Revenue Code; [or]
56+ [(i)] 1. that is considered a real estate investment trust for the 4
57+taxable year under § 856 of the Internal Revenue Code; 5
6658
67- [3.] C. a listed Australian property trust, OR AN ENTITY
68-ORGANIZED AS A TRUST IN WHICH A LISTED AUSTRALIAN PROPERTY T RUST OWNS
69-OR CONTROLS , DIRECTLY OR INDIRECT LY, 75% OR MORE OF THE VOTIN G POWER OR
70-VALUE OF THE BENEFIC IAL INTERESTS OR SHA RES OF THE TRUST ; or
59+ [(ii)] 2. that is not regularly traded on an established securities 6
60+market; and 7
7161
72- D. A QUALIFIED FOREIGN ENTITY; OR
62+ [(iii)] 3. OF WHICH more than 50% of the voting power or value of 8
63+the beneficial interests or shares [of which], at any time during the last half of the taxable 9
64+year, is owned or controlled, directly or indirectly, by a single entity that is subject to the 10
65+provisions of Subchapter C of Chapter 1 of the Internal Revenue Code[; and]. 11
7366
74- [(ii)] 2. subject to regulations that the Comptroller adopts, a real
75-estate investment trust that is intended to become regularly traded on an established
76-securities market and that satisfies the requirements of § 856(a)(5) and (6) of the Internal
77-Revenue Code by reason of § 856(h)(2) of the Internal Revenue Code.
67+ [(2)] (II) [“captive] “CAPTIVE REIT” does not include: 12
7868
79- (3) “QUALIFIED FOREIGN ENT ITY” MEANS A CORPORATION , TRUST,
80-ASSOCIATION, OR PARTNERSHIP THAT IS ORGANIZED UNDER T HE LAWS OF A
81-FOREIGN GOVERNMENT A ND:
69+ [(i)] 1. a corporation, trust, or association [more than 50% of the 13
70+voting power or value of the beneficial interests or shares] of which, at any time during 14
71+which the corporation, trust, or association satisfies [item (1)(iii) of this subsection] 15
72+SUBPARAGRAPH (I)3 OF THIS PARAGRAPH , MORE THAN 50% OF THE VOTING POWER 16
73+OR VALUE OF THE BENE FICIAL INTERESTS OR SHARES OF THE CORPOR ATION, 17
74+TRUST, OR ASSOCIATION is owned or controlled, directly or indirectly, by: 18
8275
83- (I) AT LEAST 75% OF THE TOTAL ASSET V ALUE OF THE ENTITY
84-AT THE CLOSE OF THE ENTITY’S TAXABLE YEAR IS REPR ESENTED BY REAL ESTA TE
85-ASSETS, AS DEFINED IN § 856 OF THE INTERNAL REVENUE CODE, CASH AND CASH
86-EQUIVALENTS , AND UNITED STATES GOVERNMENT SEC URITIES;
76+ [1.] A. a real estate investment trust other than a real 19
77+estate investment trust described in [item (1) of this subsection] SUBPARAGRAPH (I) OF 20
78+THIS PARAGRAPH ; 21
8779
88- (II) 1. IS NOT SUBJECT TO TA X ON AMOUNTS DISTRIB UTED
89-TO THE ENTITY’S BENEFICIAL OWNERS ; OR
80+ [2.] B. a person exempt from taxation under § 501 of the 22
81+Internal Revenue Code; [or] 23
9082
91- 2. IS EXEMPT FROM ENTIT Y–LEVEL TAXATION ;
83+ [3.] C. a listed Australian property trust, OR AN ENTITY 24
84+ORGANIZED AS A TRUST IN WHICH A LISTED AUSTRALIAN PROPERTY T RUST OWNS 25
85+OR CONTROLS , DIRECTLY OR INDIRECT LY, 75% OR MORE OF THE VOTIN G POWER OR 26
86+VALUE OF THE BENEFICIAL INTERESTS OR SHARES OF THE TRU ST; or 27
9287
93- (III) ON AN ANNUAL BASIS , DISTRIBUTES AT LEAST 85% OF THE
94-TAXABLE INCOME OF TH E ENTITY, AS COMPUTED IN THE J URISDICTION IN WHICH WES MOORE, Governor Ch. 478
88+ D. A QUALIFIED FOREIGN ENTITY; OR 28
9589
96-– 3 –
97-THE ENTITY IS ORGANI ZED, TO THE HOLDERS OF TH E SHARES OR CERTIFIC ATES OF
98-THE BENEFICIAL INTER ESTS OF THE ENTITY ;
90+ [(ii)] 2. subject to regulations that the Comptroller adopts, a real 29
91+estate investment trust that is intended to become regularly traded on an established 30
92+securities market and that satisfies the requirements of § 856(a)(5) and (6) of the Internal 31
93+Revenue Code by reason of § 856(h)(2) of the Internal Revenue Code. 32
94+ SENATE BILL 968 3
9995
100- (IV) 1. OF WHICH NOT MORE TH AN 10% OF THE VOTING
101-POWER OR VALUE OF TH E BENEFICIAL INTERES TS OR SHARES OF THE ENTITY IS
102-OWNED OR CONTROLLED DIR ECTLY, INDIRECTLY, OR CONSTRUCTIVELY BY A
103-SINGLE ENTITY OR IND IVIDUAL; OR
10496
105- 2. THE BENEFICIAL INTER ESTS OR SHARES OF TH E
106-ENTITY ARE REGULARLY TRADED ON AN ESTABLI SHED SECURITIES MARK ET; AND
97+ (3) “QUALIFIED FOREIGN ENT ITY” MEANS A CORPORATION , TRUST, 1
98+ASSOCIATION, OR PARTNERSHIP THAT IS ORGANIZED UNDER THE LAWS OF A 2
99+FOREIGN GOVERNMENT A ND: 3
107100
108- (V) THE ENTITY IS ORGANI ZED IN A FOREIG N COUNTRY THAT
109-HAS A TAX TREATY WIT H THE UNITED STATES GOVERNMENT .
101+ (I) AT LEAST 75% OF THE TOTAL ASSET V ALUE OF THE ENTITY 4
102+AT THE CLOSE OF THE ENTITY’S TAXABLE YEAR IS REPR ESENTED BY REAL ESTA TE 5
103+ASSETS, AS DEFINED IN § 856 OF THE INTERNAL REVENUE CODE, CASH AND CASH 6
104+EQUIVALENTS , AND UNITED STATES GOVERNMENT SEC URITIES; 7
110105
111- (b) In addition to the modifications under §§ 10–305 through 10–306.1 of this
112-subtitle, an amount equal to the amount of the dividends paid deduction allowed under the
113-Internal Revenue Code for the taxable year is added to federal taxable income to determine
114-the Maryland modified income of a captive REIT.
106+ (II) 1. IS NOT SUBJECT TO TA X ON AMOUNTS DISTRIB UTED 8
107+TO THE ENTITY’S BENEFICIAL OWNERS ; OR 9
115108
116- (c) For purposes of this section, the constructive ownership rules prescribed
117-under § 318(a) of the Internal Revenue Code, as modified by § 856(d)(5) of the Internal
118-Revenue Code, shall apply in determining the ownership of stock, assets, or net profits of
119-any person.
109+ 2. IS EXEMPT FROM ENTIT Y–LEVEL TAXATION ; 10
120110
121- SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July
122-1, 2023, and shall be applicable to all taxable years beginning after December 31, 2022.
111+ (III) ON AN ANNUAL BASIS , DISTRIBUTES AT LEAST 85% OF THE 11
112+TAXABLE INCOME OF TH E ENTITY, AS COMPUTED IN THE J URISDICTION IN WHICH 12
113+THE ENTITY IS ORGANI ZED, TO THE HOLDERS OF TH E SHARES OR CERTIFIC ATES OF 13
114+THE BENEFICIAL INTER ESTS OF THE ENTITY ; 14
123115
124-Approved by the Governor, May 8, 2023.
116+ (IV) 1. OF WHICH NOT MORE TH AN 10% OF THE VOTING 15
117+POWER OR VALUE OF THE BENEFICIAL INTER ESTS OR SHARES OF TH E ENTITY IS 16
118+OWNED OR CONTROLLED DIRECTLY, INDIRECTLY, OR CONSTRUCTIVELY BY A 17
119+SINGLE ENTITY OR IND IVIDUAL; OR 18
120+
121+ 2. THE BENEFICIAL INTER ESTS OR SHARES OF TH E 19
122+ENTITY ARE REGULARLY TRADED ON AN ESTABLI SHED SECURITIES MARKET; AND 20
123+
124+ (V) THE ENTITY IS ORGANI ZED IN A FOREIGN COU NTRY THAT 21
125+HAS A TAX TREATY WIT H THE UNITED STATES GOVERNMENT . 22
126+
127+ (b) In addition to the modifications under §§ 10–305 through 10–306.1 of this 23
128+subtitle, an amount equal to the amount of the dividends paid deduction allowed under the 24
129+Internal Revenue Code for the taxable year is added to federal taxable income to determine 25
130+the Maryland modified income of a captive REIT. 26
131+
132+ (c) For purposes of this section, the constructive ownership rules prescribed 27
133+under § 318(a) of the Internal Revenue Code, as modified by § 856(d)(5) of the Internal 28
134+Revenue Code, shall apply in determining the ownership of stock, assets, or net profits of 29
135+any person. 30
136+
137+ SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take e ffect July 31
138+1, 2023, and shall be applicable to all taxable years beginning after December 31, 2022. 32
139+
140+
141+