Section 10A-10-1.21

Income tax.

(a) A real estate investment trust shall be subject to the tax imposed by Section 40-18-31, provided, that for purposes of Section 40-18-33, the "net income" of a real estate investment trust shall mean "real estate investment trust taxable income" as defined in 26 U.S.C. Section 857 as in effect from time to time.

(b) Solely for purposes of conforming federal law with Alabama law, the "net income" of a real estate investment trust determined pursuant to subsection (a) shall be further adjusted as follows:

(1) The deduction for intercorporate dividends received under Section 40-18-35(a) (7), shall not be allowed.

(2) The deduction for dividends paid, as defined in 26 U.S.C. Section 561, shall be allowed but (i) shall be computed without regard to that portion of the deduction which is attributable to the amount equal to the net income from foreclosure property as defined in 26 U.S.C. Section 857, and (ii) shall be limited by the provisions of Section 40-18-35(c). The dividends received deduction for dividends received from a Captive REIT shall be limited as provided in Section 40-18-35(a)(7)d.

(3) The net income shall be computed without regard to application by Section 40-18-13, or 26 U.S.C. Section 443(b), relating to computation of tax on change of annual accounting period.

(4) There shall be deducted an amount equal to the tax imposed for the taxable year by 26 U.S.C. Section 857(b) (5), as in effect from time to time.

(5) There shall be excluded an amount equal to any net income derived from prohibited transactions as defined in 26 U.S.C. Section 857, and no deduction shall be allowed for the federal tax equal to 100 percent of the net income derived from the prohibited transactions.

(c) In computing the tax imposed by this section, "qualified REIT subsidiaries" of a real estate investment trust shall be treated in accordance with 26 U.S.C. Section 856(i), as amended, from time to time, and the rulings and regulations adopted hereunder.

(d) For purposes of determining the source of income from distributions of a real estate investment trust to its shareholders, the income shall not be construed to arise from sources within Alabama merely because the title and ownership of the real estate investment trust property or the evidence thereof is vested in a real estate investment trust organized under this chapter.

(e) The Commissioner of Revenue shall adopt the rulings and regulations necessary to conform the treatment of real estate investment trusts to the applicable provisions of Title 26 of the United States Code, as amended from time to time.

(Acts 1995, No. 95-628, p. 1317, §21; Act 2008-543, p. 1175, §1; §10-13-21; amended and renumbered by Act 2009-513, p. 967, §308.)