WES MOORE, Governor Ch. 478
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Chapter 478
(Senate Bill 968)
AN ACT concerning
Income Tax – Captive Real Estate Investment Trusts – Alterations
FOR the purpose of altering the definition of “captive REIT” for purposes of a certain
addition modification under the Maryland income tax in the amount of the federal
dividends paid deduction for captive real estate investment trusts to exclude, under
certain circumstances, corporations, trusts, or associations owned or controlled by
certain qualified foreign entities and certain trusts owned or controlled by a listed
Australian property trust; and generally relating to an addition modification under
the Maryland income tax for captive real estate investment trusts.
BY repealing and reenacting, with amendments,
Article – Tax – General
Section 10–306.2
Annotated Code of Maryland
(2022 Replacement Volume)
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND,
That the Laws of Maryland read as follows:
Article – Tax – General
10–306.2.
(a) (1) In this section[:] THE FOLLOWING WORDS HAVE THE MEANINGS
INDICATED.
[(1)] (2) (I) [“captive] “CAPTIVE REIT” means a corporation, trust, or
association:
[(i)] 1. that is considered a real estate investment trust for the
taxable year under § 856 of the Internal Revenue Code;
[(ii)] 2. that is not regularly traded on an established securities
market; and
[(iii)] 3. OF WHICH more than 50% of the voting power or value of
the beneficial interests or shares [of which], at any time during the last half of the taxable
year, is owned or controlled, directly or indirectly, by a single entity that is subject to the
provisions of Subchapter C of Chapter 1 of the Internal Revenue Code[; and].
Ch. 478 2023 LAWS OF MARYLAND
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[(2)] (II) [“captive] “CAPTIVE REIT” does not include:
[(i)] 1. a corporation, trust, or association [more than 50% of the
voting power or value of the beneficial interests or shares] of which, at any time during
which the corporation, trust, or association satisfies [item (1)(iii) of this subsection]
SUBPARAGRAPH (I)3 OF THIS PARAGRAPH , MORE THAN 50% OF THE VOTING POWER
OR VALUE OF THE BENE FICIAL INTERESTS OR SHARES OF THE CORPOR ATION,
TRUST, OR ASSOCIATION is owned or controlled, directly or indirectly, by:
[1.] A. a real estate investment trust other than a real
estate investment trust described in [item (1) of this subsection] SUBPARAGRAPH (I) OF
THIS PARAGRAPH ;
[2.] B. a person exempt from taxation under § 501 of the
Internal Revenue Code; [or]
[3.] C. a listed Australian property trust, OR AN ENTITY
ORGANIZED AS A TRUST IN WHICH A LISTED AUSTRALIAN PROPERTY T RUST OWNS
OR CONTROLS , DIRECTLY OR INDIRECT LY, 75% OR MORE OF THE VOTIN G POWER OR
VALUE OF THE BENEFIC IAL INTERESTS OR SHA RES OF THE TRUST ; or
D. A QUALIFIED FOREIGN ENTITY; OR
[(ii)] 2. subject to regulations that the Comptroller adopts, a real
estate investment trust that is intended to become regularly traded on an established
securities market and that satisfies the requirements of § 856(a)(5) and (6) of the Internal
Revenue Code by reason of § 856(h)(2) of the Internal Revenue Code.
(3) “QUALIFIED FOREIGN ENT ITY” MEANS A CORPORATION , TRUST,
ASSOCIATION, OR PARTNERSHIP THAT IS ORGANIZED UNDER T HE LAWS OF A
FOREIGN GOVERNMENT A ND:
(I) AT LEAST 75% OF THE TOTAL ASSET V ALUE OF THE ENTITY
AT THE CLOSE OF THE ENTITY’S TAXABLE YEAR IS REPR ESENTED BY REAL ESTA TE
ASSETS, AS DEFINED IN § 856 OF THE INTERNAL REVENUE CODE, CASH AND CASH
EQUIVALENTS , AND UNITED STATES GOVERNMENT SEC URITIES;
(II) 1. IS NOT SUBJECT TO TA X ON AMOUNTS DISTRIB UTED
TO THE ENTITY’S BENEFICIAL OWNERS ; OR
2. IS EXEMPT FROM ENTIT Y–LEVEL TAXATION ;
(III) ON AN ANNUAL BASIS , DISTRIBUTES AT LEAST 85% OF THE
TAXABLE INCOME OF TH E ENTITY, AS COMPUTED IN THE J URISDICTION IN WHICH WES MOORE, Governor Ch. 478
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THE ENTITY IS ORGANI ZED, TO THE HOLDERS OF TH E SHARES OR CERTIFIC ATES OF
THE BENEFICIAL INTER ESTS OF THE ENTITY ;
(IV) 1. OF WHICH NOT MORE TH AN 10% OF THE VOTING
POWER OR VALUE OF TH E BENEFICIAL INTERES TS OR SHARES OF THE ENTITY IS
OWNED OR CONTROLLED DIR ECTLY, INDIRECTLY, OR CONSTRUCTIVELY BY A
SINGLE ENTITY OR IND IVIDUAL; OR
2. THE BENEFICIAL INTER ESTS OR SHARES OF TH E
ENTITY ARE REGULARLY TRADED ON AN ESTABLI SHED SECURITIES MARK ET; AND
(V) THE ENTITY IS ORGANI ZED IN A FOREIG N COUNTRY THAT
HAS A TAX TREATY WIT H THE UNITED STATES GOVERNMENT .
(b) In addition to the modifications under §§ 10–305 through 10–306.1 of this
subtitle, an amount equal to the amount of the dividends paid deduction allowed under the
Internal Revenue Code for the taxable year is added to federal taxable income to determine
the Maryland modified income of a captive REIT.
(c) For purposes of this section, the constructive ownership rules prescribed
under § 318(a) of the Internal Revenue Code, as modified by § 856(d)(5) of the Internal
Revenue Code, shall apply in determining the ownership of stock, assets, or net profits of
any person.
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July
1, 2023, and shall be applicable to all taxable years beginning after December 31, 2022.
Approved by the Governor, May 8, 2023.