Taxation of Real Estate Investment Trusts: State Tax Matters

Taxation of Real Estate Investment Trusts: State Tax Matters: "Effective for tax years ending on or after July 1, 2010, new law generally requires a defined captive real estate investment trust (REIT) to add back its federal dividends paid deduction, as well as requires a “captive REIT affiliated group” to file its Tennessee franchise/excise tax return on a combined basis. A captive REIT is generally defined as a federal income tax REIT under Internal Revenue Code Sec. 856(c)(1) that is not publicly traded and is 80% or more owned directly or indirectly by a single entity or individual. A captive REIT affiliated group includes any entity that is greater than 50% owned (directly or indirectly) by a captive REIT; although the law provides an exception for captive REITs owned directly or indirectly by a bank or bank holding company or a public REIT. Also, the federal dividends paid deduction add-back requirement does not apply to a captive REIT that is owned, directly or indirectly, by a bank or a bank holding company or a public REIT."