Georgia Income tax / Franchise tax: New rule implements recently enacted captive REIT legislation

New Rule 560-7-3-.04, Ga. Dept. of Rev. (eff. 11/4/09). A new rule provides guidance with regard to the "effective administration" of new law [H.B. 379; See State Tax Matters, Issue 2009-21], which relates to the disallowance of expenses paid to certain captive real estate investment trusts (REITs).

Applicable to taxable years beginning on or after January 1, 2010, new law requires corporations and individuals to add back all expenses and costs directly or indirectly paid, accrued, or incurred to defined captive REITs.

The new rule requires all such direct and indirect captive REIT costs to be added back to income prior to claiming any exceptions to this "addback" adjustment, and specifies that any person that paid, accrued, or incurred such captive REIT costs must complete Georgia "Form IT-REIT." Examples are provided to demonstrate the rule's application to various fact patterns.