(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 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.
References in Text
Subsection (b)(3)(A) of section 857, referred to in subsec. (c)(1)(B), was repealed and subsection (b)(3)(B) was redesignated (b)(3)(A) by Pub. L. 115–97, title I, §13001(b)(2)(K)(i), Dec. 22, 2017, 131 Stat. 2096.
Amendments
1988—Subsec. (c)(1)(A). Pub. L. 100–647, §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, §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.
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