Public Law 94-455.94th Congress

26 USC 4981.

26 USC 275.

26 USC 857.

26 USC 6161.

26 USC 6211.

26 USC 6212.

SEC. 1605. EXCISE TAX.

(a) IMPOSITION OF TAX.-Subtitle D (relating to miscellaneous excise taxes) is amended by adding at the end thereof the following new chapter:

"CHAPTER 44-REAL ESTATE INVEST

MENT TRUSTS

"Sec. 4981. Excise tax based on certain real estate investment trust taxable income not distributed during the taxable year.

"SEC. 4981. EXCISE TAX BASED ON CERTAIN REAL ESTATE INVESTMENT TRUST TAXABLE INCOME NOT DISTRIBUTED DURING THE TAXABLE YEAR.

"Effective with respect to taxable years beginning after December 31, 1979, there is hereby imposed on each real estate investment trust for the taxable year a tax equal to 3 percent of the amount (if any) by which 75 percent of the real estate investment trust taxable income (as defined in section 857(b)(2), but determined without regard to section 857 (b) (2) (B), and by excluding any net capital gain for the taxable year) exceeds the amount of the dividends paid deduction (as defined in section 561, but computed without regard to capital gains dividends as defined in section 857 (b) (3) (C) and without regard to any dividend paid after the close of the taxable year) for the taxable year. For purposes of the preceding sentence, the determination of the real estate investment trust taxable income shall be made by taking into account only the amount and character of the items of income and deduction as reported by such trust in its return for the taxable year."

(b) TECHNICAL AMENDMENTS.—

(1) Paragraph (6) of section 275 (a) (relating to denial of deduction for certain taxes) is amended by striking out "and chapter 43." and inserting in lieu thereof ", chapter 43, and chapter 44."

(2) Section 857 (relating to taxation of real estate investment trusts and their beneficiaries) is amended by adding at the end thereof the following new subsection:

"(e) 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."

(3) Section 6161 (b) (1) relating to extensions of time for payment of tax), as amended by this Act, is amended by striking out "42 or 43" and inserting in lieu thereof "42, 43, or 44". The second sentence of section 6161 (b) is amended by striking out "or chapter 43" and inserting in lieu thereof "43, or 44”. (4) Section 6211 (defining deficiency) is amended

(A) by striking out "and 43" in subsection (a) and inserting in lieu thereof "43, and 44",

(B) by striking out "or 43" in subsection (a) and inserting in lieu thereof "43, or 44", and

(5) Section 6212 (relating to notice of deficiency) is amended(A) by striking out "or 43" in subsection (a) and inserting in lieu thereof “43, or 44",

(B) by striking out "or chapter 43" in subsection (b) (1) and inserting in lieu thereof "chapter 43, or chapter 44",

26 USC 4971.

(C) by striking out "chapter 43, and this chapter" in sub- Ante, p. 1754. section (b) (1) and inserting in lieu thereof "chapter 43, chapter 44, and this chapter", and

(D) by striking out "of chapter 43 tax for the same taxable years," in subsection (c) (1) and inserting in lieu thereof "of chapter 43 tax for the same taxable years, of chapter 44 tax for the same taxable years,”.

(6) Section 6213 (a) (relating to restrictions applicable to defi- 26 USC 6213. ciencies and petition to Tax Court) is amended by striking out

"or 43" and inserting in lieu thereof "43, or 44".

(7) Section 6214 (relating to determinations by Tax Court) is 26 USC 6214. amended

(A) by striking out "or 43" in the heading of subsection (c) and inserting in lieu thereof "43, or 44", and

(B) by striking out "or 43" each place it appears in subsection (c) and inserting in lieu thereof "43, or 44", and

(8) Section 6344 (a) (1) (relating to cross references) is 26 USC 6344. amended by striking out "or 43" and inserting in lieu thereof "43,

or 44".

(9) Section 6512 (relating to limitations in case of petition to 26 USC 6512. Tax Court) is amended by striking out "or 43" each place it

appears and inserting in lieu thereof "43, or 44".

(10) Section 6601 (c) (relating to suspension of interest in cer- 26 USC 6601. tain income, etc. tax cases) is amended by striking out in the head

ing thereof "or 43" and inserting in lieu thereof "43, or 44".

(11) Section 7422 (relating to civil actions for refund) is 26 USC 7422. amended by striking out "or 43" in subsection (e) and inserting

in lieu thereof "43, or 44".

is amended by adding at the end thereof the following:

"Chapter 44. Real estate investment trusts."

SEC. 1606. ALLOWANCE OF NET OPERATING LOSS CARRYOVER.

(a) ALLOWANCE OF DEDUCTION.-Section 857 (b) (2) (relating to 26 USC 857. real estate investment trust taxable income) is amended by striking

out subparagraph (E) and by redesignating subparagraph (F) as

subparagraph (D).

(b) YEARS TO WHICH LOSS MAY BE CARRIED.-Section 172(b) (1) 26 USC 172. (relating to years to which a net operating loss may be carried) is amended by inserting after subparagraph (D) thereof the following:

"(E) In the case of a taxpayer which has a net operating loss for any taxable year for which the provisions of part II of subchapter M (relating to real estate investment trusts) apply to such taxpayer, such loss shall not be a net operating loss carryback to any taxable year preceding the taxable year of such loss and shall be a net operating loss carryover to each of the 8 taxable years following the taxable year of such loss, except, in the case of a net operating loss for a taxable year ending before January 1, 1976, such loss shall not be carried to the 6th, 7th, or 8th taxable year following the taxable year of such loss unless part II of subchapter M applied to the 26 USC 856. taxpayer for the taxable year to which the loss is carried and for all intervening taxable years following the year of loss.

26 USC 856.

26 USC 172.

26 USC 857.

26 USC 46.

A net operating loss shall not be carried back to a taxable year for which part II of subchapter M applied to the taxpayer."

(c) DETERMINATION OF THE AMOUNT OF THE NET OPERATING LOSs AND THE CARRYOVER.-Section 172(d) (relating to modifications in computing net operating loss) is amended by adding a new paragraph (7) at the end thereof, to read as follows:

"(7) In the case of any taxable year for which part II of subchapter M (relating to real estate investment trusts) applies to the taxpayer

(A) the net operating loss for such taxable year shall be computed by taking into account the adjustments described in section 857(b) (2) (other than the deduction for dividends paid described in section 857 (b) (2) (B)); and

"(B) where such taxable year is a 'prior taxable year' referred to in paragraph (2) of subsection (b), the term 'taxable income' in such paragraph shall mean 'real estate investment trust taxable income' (as defined in section 857 (b) (2))."

(d) CONFORMING AMENDMENT.-Subparagraph (B) of section 857 (b)(2) (relating to real estate investment trust taxable income), as redesignated by section 1607 (b) of this Act, is amended by striking out "subparagraph (F)" and inserting in lieu thereof "subparagraph (D)".

SEC. 1607. ALTERNATIVE TAX IN CASE OF CAPITAL GAINS.

(a) ALTERNATIVE TAX.-Section 857 (b) (3) (A) (relating to imposition of tax on capital gain) is amended to 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 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."

(b) CONFORMING AMENDMENTS.—

(1) (A) Section 857 (b) (2) (relating to method of taxation of real estate investment trust taxable income) is amended by deleting subparagraph (A) and redesignating subparagraphs (B), (C), and (D) as subparagraphs (A), (B), and (C), respectively.

(B) Subsection (e) (2) of section 46 (relating to investment credit) is amended

(i) by striking out "857(b) (2) (C)" in subparagraph (B) and inserting in lieu thereof "857(b) (2) (B)", and

(ii) by inserting "determined without regard to any deduction for capital gains dividends (as defined in section 857(b) (3) (C)) and by excluding any net capital gain" immediately before the period at the end of the last sentence thereof.

(C) Section 443 (e) (5) (relating to cross references) is amended by striking out "857(b) (2) (D)" and inserting in lieu thereof "857 (b) (2) (C)".

26 USC 443.

(2) Subparagraph (B) of section 857 (b) (2) (relating to real 26 USC 857. estate investment trust taxable income), as redesignated by paragraph (1) of this subsection, is amended by striking out "shall be computed without regard to capital gains dividends and".

(3) Section 857(b) (3) (C) (relating to definition of capital gain dividend) is amended by inserting after the second sentence thereof the following: "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).”

SEC. 1608. EFFECTIVE DATE FOR TITLE.

(a) DEFICIENCY DIVIDEND PROCEDURES.-The amendments made by section 1601 shall apply with respect to determinations (as defined in section 859 (c) of the Internal Revenue Code of 1954) occurring after the date of the enactment of this Act. 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, 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.

(b) TRUST NOT DISQUALIFIED IN CERTAIN CASES WHERE INCOME TESTS NOT MET.-The amendment made by section 1602 shall apply to taxable years of real estate investment trusts beginning after the date of the enactment of this Act. In addition, the amendments made by section 1602 shall apply to a taxable year of a real estate investment trust beginning before the date of the enactment of this Act if, as the result of a determination (as defined in section 859 (c) of the Internal Revenue Code of 1954) with respect to such trust occurring after the date of the enactment of this Act, such trust for such taxable years does not meet the requirements of section 856(c) (2) or section 856 (c) (3), or of both such sections, of such Code as in effect for such taxable year. In any case, the amendment made by section 1602 (a) requiring a schedule to be attached to the income tax return of certain real estate investment trusts shall apply only to taxable years of such trusts beginning after the date of the enactment of this Act. If the amendments made by section 1602 apply to a taxable year ending on or before the date of enactment of this Act, the reference to paragraph (2) (B) in section 857(b) (5) of such Code, as amended, shall be considered to be a reference to paragraph (2) (C) of section 857(b) of such Code, as in effect immediately before the enactment of this Act. (c) ALTERATIVE TAX AND NET OPERATING LOss.-The amendments made by sections 1606 and 1607 shall apply to taxable years ending after the date of the enactment of this Act, 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 1954) for any taxable year ending after the date of enactment of this Act for which the provisions of

26 USC 859

note.

Anie, p. 1742.

26 USC 856

note.

Ante, p. 1747.

26 USC 857 note.

26 USC 856.

26 USC 856

note.

Ante, p. 1742.

Ante, p. 1751.

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.

(d) OTHER AMENDMENTS.—

(1) Except as provided in paragraphs (2) and (3), the amendments made by sections 1603, 1604, and 1605 shall apply to taxable years of real estate investment trusts beginning after the date of the enactment of this Act.

(2) If, as a result of a determination (as defined in section 859 (c) of the Internal Revenue Code of 1954), occurring after the date of enactment of this Act, with respect to the real estate investment trust, such trust does not meet the requirement of section 856 (a) (4) of the Internal Revenue Code of 1954 (as in effect before the amendment of such section by this Act) for any taxable year beginning on or before the date of the enactment of this Act, such trust may elect, within 60 days after such determination in the manner provided in regulations prescribed by the Secretary of the Treasury or his delegate, to have the provisions of section 1603 (other than paragraphs (1), (2), (3), and (4) of section 1603 (c)) apply with respect to such taxable year. Where the provisions of section 1603 apply to a real estate investment trust with respect to any taxable year beginning on or before the date of the enactment of this Act

(A) credit or refund of any overpayment of tax which results from the application of section 1603 to such taxable year shall be made as if on the date of the determination (as defined in section 859 (c) of the Internal Revenue Code of 1954) 2 years remained before the expiration of the period of limitation prescribed by section 6511 of such Code on the filing of claim for refund for the taxable year to which the overpayment relates,

(B) the running of the statute of limitations provided in section 6501 of such Code on the making of assessments, and the bringing of distraint or a proceeding in court for collection, in respect of any deficiency (as defined in section 6211 of such Code) established by such a determination, and all interest, additions to tax, additional amounts, or assessable penalties in respect thereof, shall be suspended for a period of 2 years after the date of such determination, and

(C) the collection of any deficiency (as defined in section 6211 of such Code) established by such determination and all interest, additions to tax, additional amounts, and assessable penalties in respect thereof shall, except in cases of jeopardy, be stayed until the expiration of 60 days after the date of such determination.

No distraint or proceeding in court shall be begun for the collection of an amount the collection of which is stayed under subparagraph (C) during the period for which the collection of such amount is stayed.

(3) Section 856(g) (3) of the Internal Revenue Code of 1954, as added by section 1604 of this Act, shall not apply with respect to a termination of an election, filed by a taxpayer under section 856 (c) (1) of such Code on or before the date of the enactment of this Act, unless the provisions of part II of subchapter M of chapter 1 of subtitle A of such Code apply to such taxpayer for a taxable year ending after the date of the enactment of this Act for which such election is in effect.

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Public Law 94-455.94th Congress: Tax Reform Act of 1976