Recent legislation has revised the statutory net worth formula of the corporate excise for qualified Real Estate Investment Trusts (REITs) that are intangible property corporations. St. 2005, c. 163, § 22, codified at G.L. c. 63, § 30(9). A qualified REIT is a domestic or foreign corporation that both qualifies as a REIT under section 856 of the Internal Revenue Code (as the Code is defined at G.L. c. 63, § 30(16)), and that is required to file with the Securities and Exchange Commission annual and other reports as specified in Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended. The net worth of a qualified REIT, whether a domestic business corporation taxable under G.L. c. 63, § 32(a)(1), or a foreign business corporation taxable under G.L. c. 63, § 39(a)(1), is measured by multiplying the book value of the REIT's total assets minus its liabilities on the last day of its taxable year by a fraction, the numerator of which is the book value of the REIT's tangible assets situated in Massachusetts on the last day of its taxable year that are not subject to local taxation plus the amount of its intangible assets on the last day of its taxable year allocable to Massachusetts, and the denominator of which is the book value of the total assets of the REIT on that same date. The further definition of intangible assets allocable to Massachusetts and other applicable rules and definitions are set out in G.L. c. 63, § 30(9). The legislation is effective for tax years ending on or after August 9, 2004. St. 2005, c. 163, § 66.

The new statutory net worth formula for qualified REITs that are intangible property corporations will often change the tax liabilities of these entities for tax years ending on or after August 9, 2004 from those liabilities calculated under prior law. Affected taxpayers should amend their returns to apply the new formula, using existing procedures for amending returns and applying for abatements. Current procedures for filing amended returns/applications for abatement are available on the Department of Revenue's website, www.mass.gov/dor. Taxpayers may also consult Administrative Procedures 605 and 627. The statute of limitations at G.L. c. 62C, § 37 applies to such applications for abatement.

 

/s/Alan LeBovidge
Alan LeBovidge
Commissioner of Revenue

 

AL:MTF:dt

May 9, 2006

TIR 06-6