Substitute Senate Bill No. 1205
Substitute Senate Bill No. 1205
PUBLIC ACT NO. 97-119
AN ACT CONCERNING THE CORPORATION BUSINESS TAX
TREATMENT OF DIVIDENDS RECEIVED FROM REAL ESTATE
INVESTMENT TRUSTS.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. Subsection (a) of section 12-217
of the general statutes is repealed and the
following is substituted in lieu thereof:
(a) (1) In arriving at net income as defined
in section 12-213, whether or not the taxpayer is
taxable under the federal corporation net income
tax, there shall be deducted from gross income,
(A) all items deductible under the [federal
corporation net income tax law] INTERNAL REVENUE
CODE effective and in force on the last day of the
income year except [(1)] (i) any taxes imposed
under the provisions of this chapter which are
paid or accrued in the income year and in the
income year commencing January 1, 1989, and
thereafter, any taxes in any state of the United
States or any political subdivision of such state,
or the District of Columbia, imposed on or
measured by the income or profits of a corporation
which are paid or accrued in the income year, and
[(2)] (ii) deductions for depreciation, which
shall be allowed as provided in subsection (b) of
this section, and (B) additionally, in the case of
a regulated investment company, the sum of [(1)]
(i) the exempt-interest dividends, as defined in
the [federal corporation net income tax law]
INTERNAL REVENUE CODE, and [(2)] (ii) expenses,
bond premium, and interest related to tax-exempt
income that are disallowed as deductions under the
[federal corporation net income tax law] INTERNAL
REVENUE CODE, and (C) in the case of a taxpayer
maintaining an international banking facility as
defined in the laws of the United States or the
regulations of the Board of Governors of the
Federal Reserve System, as either may be amended
from time to time, the gross income attributable
to the international banking facility, provided,
no expense or loss attributable to the
international banking facility shall be a
deduction under any provision of this section, and
(D) additionally, in the case of all taxpayers,
all dividends as defined in the [federal income
tax law] INTERNAL REVENUE CODE effective and in
force on the last day of the income year not
otherwise deducted from gross income, including
dividends received from a DISC or former DISC as
defined in Section 992 of the Internal Revenue
Code [of 1986, or any subsequent corresponding
internal revenue code of the United States, as
from time to time amended,] and dividends deemed
to have been distributed by a DISC or former DISC
as provided in Section 995 of said Internal
Revenue Code, other than thirty per cent of
dividends received from a domestic corporation in
which the taxpayer owns less than twenty per cent
of the total voting power and value of the stock
of such corporation. [; except no]
(2) NO deduction shall be allowed for [(1)]
(A) expenses related to dividends which are
allowable as a deduction or credit under the
[federal corporation net income tax law] INTERNAL
REVENUE CODE and [(2)] (B) federal taxes on income
or profits, losses of other calendar or fiscal
years, retroactive to include all calendar or
fiscal years beginning after January 1, 1935,
interest received from federal, state and local
government securities, if any such deductions are
allowed by the federal government.
(3) NOTWITHSTANDING ANY PROVISION OF THIS
SECTION TO THE CONTRARY, NO DIVIDEND RECEIVED FROM
A REAL ESTATE INVESTMENT TRUST SHALL BE DEDUCTIBLE
UNDER THIS SECTION BY THE RECIPIENT UNLESS THE
DIVIDEND IS: (A) DEDUCTIBLE UNDER SECTION 243 OF
THE INTERNAL REVENUE CODE; OR (B) RECEIVED BY A
QUALIFIED DIVIDEND RECIPIENT FROM A QUALIFIED REAL
ESTATE INVESTMENT TRUST AND, AS OF THE LAST DAY OF
THE PERIOD FOR WHICH SUCH DIVIDEND IS PAID,
PERSONS, NOT INCLUDING THE QUALIFIED DIVIDEND
RECIPIENT OR ANY PERSON THAT IS EITHER A RELATED
PERSON TO, OR AN EMPLOYEE OR DIRECTOR OF, THE
QUALIFIED DIVIDEND RECIPIENT, HAVE OUTSTANDING
CASH CAPITAL CONTRIBUTIONS TO THE QUALIFIED REAL
ESTATE INVESTMENT TRUST THAT, IN THE AGGREGATE,
EXCEED FIVE PER CENT OF THE FAIR MARKET VALUE OF
THE AGGREGATE REAL ESTATE ASSETS, VALUED AS OF THE
LAST DAY OF THE PERIOD FOR WHICH SUCH DIVIDEND IS
PAID, THEN HELD BY THE QUALIFIED REAL ESTATE
INVESTMENT TRUST. FOR PURPOSES OF THIS SECTION, A
"RELATED PERSON" IS AS DEFINED IN SUBDIVISION (7)
OF SUBSECTION (a) OF SECTION 12-217m, "REAL ESTATE
ASSETS" IS AS DEFINED IN SECTION 856 OF THE
INTERNAL REVENUE CODE, A "QUALIFIED DIVIDEND
RECIPIENT" MEANS A DIVIDEND RECIPIENT WHO HAS
INVESTED IN A QUALIFIED REAL ESTATE INVESTMENT
TRUST PRIOR TO APRIL 1, 1997, AND A "QUALIFIED
REAL ESTATE INVESTMENT TRUST" MEANS AN ENTITY THAT
BOTH WAS INCORPORATED AND HAD CONTRIBUTED TO IT A
MINIMUM OF FIVE HUNDRED MILLION DOLLARS WORTH OF
REAL ESTATE ASSETS PRIOR TO APRIL 1, 1997, AND
THAT ELECTS TO BE A REAL ESTATE INVESTMENT TRUST
UNDER SECTION 856 OF THE INTERNAL REVENUE CODE
PRIOR TO APRIL 1, 1998.
(4) Notwithstanding anything in this section
to the contrary, [(1)] (A) any excess of the
deductions provided in this section for any income
year commencing on or after January 1, 1973, over
the gross income for such year or the amount of
such excess apportioned to this state under the
provisions of section 12-218, shall be an
operating loss of such income year and shall be
deductible as an operating loss carry-over in each
of the five income years following such loss year,
provided the portion of such operating loss which
may be deducted as an operating loss carry-over in
any income year following such loss year shall be
limited to the lesser of (i) any net income
greater than zero of such income year following
such loss year, or in the case of a company
entitled to apportion its net income under the
provisions of section 12-218, the amount of such
net income which is apportioned to this state
pursuant thereto, or (ii) the excess, if any, of
such operating loss over the total of such net
income for each of any prior income years
following such loss year, such net income of each
of such prior income years following such loss
year for such purposes being computed without
regard to any operating loss carry-over from such
loss year allowed by this [sentence] SUBPARAGRAPH
and being regarded as not less than zero, and
provided, further, the operating loss of any
income year shall be deducted in any subsequent
year, to the extent available therefor, before the
operating loss of any subsequent income year is
deducted, and [(2)] (B) any net capital loss, as
defined in the [federal corporation net income tax
law] INTERNAL REVENUE CODE effective and in force
on the last day of the income year, for any income
year commencing on or after January 1, 1973, shall
be allowed as a capital loss carry-over to reduce,
but not below zero, any net capital gain, as so
defined, in each of the five following income
years, in order of sequence, to the extent not
exhausted by the net capital gain of any of the
preceding of such five following income years, and
[(3)] (C) any net capital losses allowed and
carried forward from prior years to income years
beginning on or after January 1, 1973, for federal
income tax purposes by companies entitled to a
deduction for dividends paid under the [federal
corporation net income tax law] INTERNAL REVENUE
CODE other than companies subject to the gross
earnings taxes imposed under chapters 211 and 212,
shall be allowed as a capital loss carry-over.
(5) This section shall not apply to a life
insurance company as defined in the [federal
income tax law] INTERNAL REVENUE CODE effective
and in force on the last day of the income year.
For purposes of this section, the unpaid loss
reserve adjustment required for nonlife insurance
companies under the provisions of Section
832(b)(5) of the Internal Revenue Code of 1986, or
any subsequent corresponding internal revenue code
of the United States, as from time to time
amended, shall be applied without making the
adjustment in Subparagraph (B) of said Section
832(b)(5).
Sec. 2. This act shall take effect from its
passage and shall be applicable to income years
commencing on or after January 1, 1997.
Approved June 6, 1997