
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[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.
