Combination rules for REITs and RICs

# (a)

Captive REITs and captive RICs will always be included in a combined report under article 9-A, unless they are required to be included in a combined report under article 33.
(1)(i) For purposes of determining under which article of the Tax Law a captive REIT or a captive RIC is to be combined, the rules in section 1515 will be applied first. If such captive REIT or such captive RIC is not required to be included in a combined report under article 33, then it will be included in a combined report pursuant to the rules included in section 210-C and further described in Subpart 6-2 of this Subchapter.
(ii) A captive REIT or captive RIC is required to be included in a combined return under article 33 in either of these circumstances:
(a) When the corporation that directly owns or controls more than 50% of the voting power of the capital stock of the captive REIT or captive RIC is a life insurance corporation subject to tax or required to be included in a combined return under article 33; or, if this condition in this clause is not satisfied, then

# (b)

When the closest controlling stockholder of the captive REIT or captive RIC is a life insurance corporation subject to tax or required to be included in a combined return under article 33.

# (c)

The term “closest controlling stockholder” means the corporation that indirectly owns or controls over 50% of the voting power of the capital stock of a captive REIT or captive RIC, is subject to tax under section 1501 or article 9-A or is required to be included in a combined return under article 33 or a combined report under article 9-A, and is the fewest tiers of corporations away in the ownership structure from the captive REIT or captive RIC.

# (d)

Examples.

(2) If a captive REIT owns the stock of a qualified REIT subsidiary (QRS), as defined in IRC section 856(i)(2), then the QRS must be included in any combined report required to be made by such REIT.
(b) A non-captive REIT must be included in a combined report under article 9-A with its qualified REIT subsidiary. All other non-captive REITs are prohibited from being included in a combined report under article 9-A.
(c) In the case of a combined report including a captive REIT, or a captive RIC:

# (1)

such captive REIT or such captive RIC must be included in the computation of the combined capital base;

# (2)

intercompany dividends paid by such captive REIT to another member of the combined group are not eliminated in the computation of combined taxable income if the combined group is utilizing the subtraction for small thrifts and qualified community banks that maintain a captive REIT under section 208(9)(t);

# (3)

the adjustments required by section 1503 will not include the deduction for dividends paid by such captive RIC to any member of the affiliated group that includes the corporation that directly or indirectly owns over 50% of such RIC’s voting stock; and

# (4)

taxable income shall be computed without regard to the deduction for dividends paid by such captive REIT or such captive RIC to any member of the affiliated group that includes the corporation that directly or indirectly owns over 50% of such captive REIT’s or such captive RIC’s voting stock. For purposes of this subdivision, “affiliated group” has the same meaning as in IRC section 1504, but without regard to the exceptions provided for in IRC section 1504(b).