26 USC 4981 - Excise tax on undistributed income of real estate investment trusts

U.S Code last checked for updates: May 06, 2024

§ 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) 1

 See References in Text note below.

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

(d)

Time for payment of tax

(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

(B)

Reduction for net ordinary loss

(C)

Net ordinary loss

(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, § 1605(a), Oct. 4, 1976, 90 Stat. 1754; amended Pub. L. 99–514, title VI, § 668(a), Oct. 22, 1986, 100 Stat. 2306; Pub. L. 100–647, title I, § 1006(s)(1), (3), Nov. 10, 1988, 102 Stat. 3418.)

cite as: 26 USC 4981