§ 4981. — Excise tax on undistributed income of real estate investment trusts.
[Laws in effect as of January 7, 2003]
[Document not affected by Public Laws enacted between
January 7, 2003 and December 19, 2003]
[CITE: 26USC4981]
TITLE 26--INTERNAL REVENUE CODE
Subtitle D--Miscellaneous Excise Taxes
CHAPTER 44--QUALIFIED INVESTMENT ENTITIES
Sec. 4981. Excise tax on undistributed income of real estate
investment trusts
(a) Imposition of tax
There is hereby imposed a tax on every real estate investment trust
for each calendar year equal to 4 percent of the excess (if any) of--
(1) the required distribution for such calendar year, over
(2) the distributed amount for such calendar year.
(b) Required distribution
For purposes of this section--
(1) In general
The term ``required distribution'' means, with respect to any
calendar year, the sum of--
(A) 85 percent of the real estate investment trust's
ordinary income for such calendar year, plus
(B) 95 percent of the real estate investment trust's capital
gain net income for such calendar year.
(2) Increase by prior year shortfall
The amount determined under paragraph (1) for any calendar year
shall be increased by the excess (if any) of--
(A) the grossed up required distribution for the preceding
calendar year, over
(B) the distributed amount for such preceding calendar year.
(3) Grossed up required distribution
The grossed up required distribution for any calendar year is
the required distribution for such year determined--
(A) with the application of paragraph (2) to such taxable
year, and
(B) by substituting ``100 percent'' for each percentage set
forth in paragraph (1).
(c) Distributed amount
For purposes of this section--
(1) In general
The term ``distributed amount'' means, with respect to any
calendar year, the sum of--
(A) the deduction for dividends paid (as defined in section
561) during such calendar year (but computed without regard to
that portion of such deduction which is attributable to the
amount excluded under section 857(b)(2)(D)), and
(B) any amount on which tax is imposed under subsection
(b)(1) or (b)(3)(A) of section 857 for any taxable year ending
in such calendar year.
(2) Increase by prior year overdistribution
The amount determined under paragraph (1) for any calendar year
shall be increased by the excess (if any) of--
(A) the distributed amount for the preceding calendar year
(determined with the application of this paragraph to such
preceding calendar year), over
(B) the grossed up required distribution for such preceding
calendar year.
(3) Determination of dividends paid
The amount of the dividends paid during any calendar year shall
be determined without regard to the provisions of section 858.
(d) Time for payment of tax
The tax imposed by this section for any calendar year shall be paid
on or before March 15 of the following calendar year.
(e) Definitions and special rules
For purposes of this section--
(1) Ordinary income
The term ``ordinary income'' means the real estate investment
trust taxable income (as defined in section 857(b)(2)) determined--
(A) without regard to subparagraph (B) of section 857(b)(2),
(B) by not taking into account any gain or loss from the
sale or exchange of a capital asset, and
(C) by treating the calendar year as the trust's taxable
year.
(2) Capital gain net income
(A) In general
The term ``capital gain net income'' has the meaning given
such term by section 1222(9) (determined by treating the
calendar year as the trust's taxable year).
(B) Reduction for net ordinary loss
The amount determined under subparagraph (A) shall be
reduced by the amount of the trust's net ordinary loss for the
taxable year.
(C) Net ordinary loss
For purposes of this paragraph, the net ordinary loss for
the calendar year is the amount which would be net operating
loss of the trust for the calendar year if the amount of such
loss were determined in the same manner as ordinary income is
determined under paragraph (1).
(3) Treatment of deficiency distributions
In the case of any deficiency dividend (as defined in section
860(f))--
(A) such dividend shall be taken into account when paid
without regard to section 860, and
(B) any income giving rise to the adjustment shall be
treated as arising when the dividend is paid.
(Added Pub. L. 94-455, title XVI, Sec. 1605(a), Oct. 4, 1976, 90 Stat.
1754; amended Pub. L. 99-514, title VI, Sec. 668(a), Oct. 22, 1986, 100
Stat. 2306; Pub. L. 100-647, title I, Sec. 1006(s)(1), (3), Nov. 10,
1988, 102 Stat. 3418.)
Amendments
1988--Subsec. (c)(1)(A). Pub. L. 100-647, Sec. 1006(s)(3), inserted
``(but computed without regard to that portion of such deduction which
is attributable to the amount excluded under section 857(b)(2)(D)''
after ``such calendar year''.
Subsec. (e)(2). Pub. L. 100-647, Sec. 1006(s)(1), amended par. (2)
generally, designating existing provisions as subpar. (A) and adding
subpars. (B) and (C).
1986--Pub. L. 99-514 substituted ``Excise tax on undistributed
income of real estate investment trusts'' for ``Excise tax based on
certain real estate investment trust taxable income not distributed
during the taxable year'' as section catchline and amended text
generally. Prior to amendment text read as follows: ``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.''
Effective Date of 1988 Amendment
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of 1986,
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of
Pub. L. 100-647, set out as a note under section 1 of this title.
Effective Date of 1986 Amendment
Amendment by Pub. L. 99-514 applicable to calendar years beginning
after Dec. 31, 1986, see section 669(b) of Pub. L. 99-514, set out as a
note under section 856 of this title.
Section Referred to in Other Sections
This section is referred to in section 857 of this title.
