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Captive Real Estate Investment Trusts

A Real Estate Investment Trust (REIT) is subject to the Maryland income tax when the REIT has taxable income at the federal level, as computed on Federal Form 1120-REIT, that is taxed on the REIT's federal return.  In addition a Captive REIT may have a Maryland income tax liability even if that entity does not have a federal income tax liability on its federal return. A Captive REIT is also required to report a Maryland addition modification for the amount of its federal dividends paid deduction. The addition modification is reported on line 2f of the  Maryland Form 500 Corporation Income Tax return.       

Maryland law defines a captive REIT as a corporation, trust or association that is:

  • A REIT under 856 of the Internal Revenue Code;
  • Not regularly traded on an established securities market; and
  • More than 50 percent of the voting power or value of the beneficial interests or shares of which is owned or controlled, indirectly or directly, at any time during the last half of the tax year by a single entity that is subject to the provisions of Subchapter C of Chapter 1 of the Internal Revenue Code.

A captive REIT under Maryland law does not include any of the following entities:

  • A REIT that does not meet the three conditions specified for a captive REIT as discussed above.
  • A person who is exempt from taxation under 501 of the Internal Revenue Code.
  • A listed Australian property trust.
  • A REIT that is, subject to regulations adopted by the Comptroller, intended to become regularly traded on an established securities market and meets the requirements of 856(a)(5) and (6) of the Internal Revenue Code by reason of 856(h)(2) of the Internal Revenue Code.

 

For more information, see Chapter 584, Acts of 2007 and Chapter 583, Acts of 2007.



 
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