An Act To Reestablish Fairness in Corporate Taxation by Taxing Real Estate Investment Trusts
Maine Legislature, Session 123, LD 2074
Committee: Taxation
Sponsors: DUCHESNE, PERRY, BERRY, EBERLE, PILON, PINGREE, PIOTTI, WATSON
Amends: 5 MRSA §6203, 36 MRSA §5102, 36 MRSA §5122, 36 MRSA §5209-A

Legislative Document 
No. 2074 
H.P.1458 
House of Representatives, December 21,2007 
An Act To Reestablish Fairness in Corporate Taxation by Taxing 
Real Estate Investment Trusts 
(EMERGENCY) 
Approved for introduction by a majority of the Legislative Council pursuant to Joint Rule 
203. 
Received by the Clerk of the House on December 19,2007. Referred to the Committee on 
Taxation pursuant to Joint Rule 308.2 and ordered printed pursuant to Joint Rule 401. 
Presented by Representative DUCHESNE of Hudson. 
Cosponsored by Senator PERRY of Penobscot and 
7I1~frl.1T!~ 
MILLICENT M. MacFARLAND 
Clerk 
Representatives: BERRY of Bowdoinham, EBERLE of South Portland, PILON of Saco, 
PINGREE of North Haven, PIOTTI of Unity, WATSON of Bath. 
Printed on reeye leLi paper 
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Emergency preamble. Whereas, acts and resolves of the Legislature do not 
become effective until 90 days after adjournment unless enacted as emergencies; and 
Whereas, real estate investment trusts have become increasingly more prevalent in 
Maine; and 
Whereas, capital gains by these r:cal estate investment trusts are not taxed at the 
entity level in Maine; and 
Whereas, this legislation would tax real estate investment trusts at the corporate 
rate; and 
Whereas, due to the change in taxing policy proposed by this legislation, time is 
needed to provide notice to members of real estate investment trusts to prepare and plan 
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for the change; and 
Whereas, in the judgment of the Legislature, these facts create an emergency within 
the meaning of the Constitution of Maine and require the following legislation as 
immediately necessary for the preservation of the public peace, health and safety; now, 
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therefore, 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 5 MRSA §6203, sub-§l, as amended by PL 1993, c. 728, §4, is further 
amended to read: 
1. Fund established. There is established the Land for Matne's Future Fund that is 
administered by the board. The Land for Maine's Future Fund consists of the proceeds 
from the sale of any bonds authorized for the purposes set forth in subsection 3, revenue 
from the tax imposed on real estate investment trusts pursuant to Title 36, section 5208 
and any funds received as contributions from private .and public sources for those 
purposes. The Land for Maine's Future Fund must be held separate and apart from all 
other money, funds and accounts. Eligible investment earnings credited to the assets of 
the Land for Maine's Future Fund become part of the assets of that fund. Any balance 
remaining in the Land for Maine's Future Fund at the end of any fiscal year must be 
carried fotv.'ard for the next fiscal year. 
Sec. 2. 36 MRSA §5102~ Sl'Ib-§3-A is enacted to read: 
3-A. Real estate investment trust. "Real estate investment trust" means a real estate 
investment trust as defined in the Code, Section 856. 
Sec. 3. 36 MRSA §5122, sub-§l,~, as amended by PL 2007, c. 437, § 16, is 
further amended to read: 
X. 
An amount equal to the taxpayer's federal deduction relating to income 
attributable to domestic production activities claimed in accordance with Section 102 
of the federal American Jobs Creation Act of 2004, Public Law 108-357; ill'ld 
Page I -123LR3279(Ol)-1 
Sec. 4. 36 MRSA §5122, sub-§l, ~, as enacted by PL 2007, c. 437, § 17 and 
affected by §22, is amended to read: 
Y. Any amount of allowable deduction claimed for federal purposes in accordance 
with the election under Section 642(g) of the Code that is also used to determine the 
taxable estate for purposes of calculating the Maine estate tax under chapter 575~; and 
Sec. 5. 36 MRSA §5122, sub-§l, ~Z is enacted to read: 
Z. For income tax years beginning on or after January 1, 2008, all items of loss, 
deduction and other expense of a real estate investment trust subject to the tax 
imposed by section 5208, to the extent that those items are passed through to the 
taxpayer for federal income tax purposes, including, if the real estate investment trust 
is an S corporation, the taxpayer's pro rata share and, if the real estate investment trust 
is a partnership or limited liability company, the taxpayer's distributive share. An 
addition may not be made under this paragraph for any losses recognized on the 
disposition by a taxpayer of an ownership interest in a real estate investment trust. 
Sec. 6. 36 MRSA §5122,. sub-§2, ~, as enacted by PL 2007, c. 466, Pt. A, §68 
and affected by § 70, is amended to read: 
Y. 
The portion of contributions to a qualified tuition program established under 
Section 529 of the Code up to $250 per designated beneficiary. This deduction may 
not be claimed on returns when federal adjusted gross income exceeds $100,000 for 
returns with a filing status of single or married filing separately or $200,000 for 
returns with a filing status of married joint or head of household; aM 
Sec. 7. 36 MRSA §Sl22,. sub-§2, 'Z,. as enacted by PL 2007, c. 466, Pt. A, §69, 
is amended to read: 
Z. For income tax years beginning on or after January 1,2006, to the extent included 
in federal adjusted gross income and not otherwise removed from Maine taxable 
income, an amount equal to the total of capital gains and ordinary income resulting 
from depreciation recapture determined in accordance with the Code, Sections 1245 
and 1250 that is realized upon the sale of property certified as multifamily affordable 
housing property by the Maine State Housing Authority in accordance with Title 30-
A, section 4722, subsection 1, paragraph AA~; and 
Sec. 8. 36 MRSA §5122, sub-§2, ~AA is enacted to read: 
AA. For income tax years beginning on or after January 1, 2008, all items of income, 
gain, interest, dividends, royalties and other income of a real estate investment trust 
subject to the tax imposed by section 5208, to the extent that those items are passed 
through to the taxpayer for federal income tax purposes, including, if the real estate 
investment trust is an S corporation, the taxpayer's pro rata share and, if the real estate 
investment trust is a partnership or limited liability company, the taxpayer's 
distributive share. A subtraction may not be made under this paragraph for: 
(1) Any dividends or other distributions with respect to a taxpayer's ownership 
interest in a real estate investment trust; and 
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(2) Any gain recognized on the disposition by the taxpayer of an ownership 
interest in· a real estate investment trust. 
Sec. 9. 36 MRSA §S200-A, sub-§l, W, as amended by PL 2005, c. 12, Pt. P, §8, 
is further amended to read: 
P. 
The amount of the loan repayment included in the credit base of the recruitment 
credit under section 5219-V to the ~xtent that the contribution has been used to adjust 
federal taxable income; aRt! 
Sec. 10. 36 MRSA §S200-A, sub-§l, ,S, as enacted by PL 2005, c. 12, Pt. P, §9 
and affected by § I 0, is amended to read: 
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lOS. 
An amollnt equal to the taxpayer's federal deduction relating to income 
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attributable to domestic production activities claimed in accordance with Section 102 
of the federal American Jobs Creation Act of 2004, Public Law 108-357~; and 
Sec. II. 36 MRSA §S2GO-A, sub-§I, ~ 
is enacted to read: 
T. For income tax years beginning on or after January I, 2008, all items of loss, 
deduction and other expense of a real estate investment trust su bject to the tax 
imposed by section 5208, to the extent that those items are passed through to the 
taxpayer for federal income tax purposes, including, ifthe real estate investment trust 
is an S corporation, the taxpayer's pro rata share and, tfthe real estate investment trust 
is a partnership or limited liability company, the taxpayer's distributive share. An 
addition may not be made under this paragraph for any losses recognized on the 
disposition by 11 taxpayer of an ownership interest in a real estate investment trust. 
Sec. 12. 36 MRSA §5209-A, sub-§2, ~~ as amended by PL 2005, c. 644, §9, is 
further amended to Tead: 
P. 
For income tax years beginning on or after January 1,2015, the gain Attributable 
to the sale of sustainably managed, eligible timberlm1ds as calculated pursuant to this 
paragraph. 
(I) 
As used in this paragraph, unless the context otherwise indicates, the 
following terms have the following meanings. 
(a) "Cmmnercial harvesting" or "commercially harvested" means the 
harvesting of forest products that have commercial value. 
(b) "Eligible timberlands" means land of.at least 10 acres located in 
the State aru::l used primarily for the growth of trees to be commercially 
harvested. 
Land that would otherwise be included within this 
definition may nache excluded because of: 
(i) Use of the land for multiple public recreation activities; 
(ii) 
Statutory or governmental restrictions that prevent commercial 
harvesting of trees or require a primary use of the land other than 
commercial harvesting; 
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(iii) Deed restrictions, restrictive covenants or organizational charters 
that prevent commercial harvesting of trees or require a primary use of 
land other than commercial harvesting and that were effective prior to 
January 1, 1982; or 
(iv) Past or present multiple use for mineral exploration. 
(c) 
"Forest products that have commercial value" means logs, 
pulpwood, veneer, bolt wood, wood chips, stud wood, poles, pilings, 
biomass, fuel wood, Christmas trees, maple syrup, nursery products 
used for ornamental purposes., wreaths, bough material or cones or 
other seed products. 
(d) "Sustainably managed" means: 
(i) A forest management and harvest plan, as defined in section 573, 
subsection 3-A, has been prepared for the eligible timberlands and has 
been in effect for the entire time period used to compute the amount of 
the subtraction modification under this paragraph; and 
(ii) 
The taxpayer has received a written statement from a licensed 
forester certifying that, as of the time of the sale, the eligible timberlands 
have been managed in accordance with the plan under subdivision (i) 
during that period. 
(2) To the extent included in the taxpayer's taxable income under the laws of the 
United States, the taxable income of the taxpayer under the laws of the United 
States must be decreased by: 
(a) For eligible timberlands held by the taxpayer for at least a IO-year 
period beginning on or after January 1, 2005 but less than an II-year 
period beginning on or after January 1, 2005, 1115 of the gain 
recognized on the sale of the eligible timberlands; 
(b) For eligible timberlands held by the taxpayer for at least an 11-
year period beginning on or after January 1, 2005 but less than a 12-
year period beginning on or after January 1, 2005, 2115 of the gain 
recognized on the sale of the eligible timberlands; 
(c) For eligible timberlands held by the taxpayer for at least a 12-year 
period beginning on or after January 1, 2005 but less than a 13-year 
period beginning on or after January 1, 2005, 115 of the gain 
recognized on the sale of the eligible timberlands; 
(d) For eligible timberlands held by the taxpayer for at least a 13-year 
period beginning on or after January 1,2005 but less than a 14-year 
period beginning on or after January 1, 2005, 4115 of the gain 
recognized on the sale of the eligible timberlands; 
(e) For eligible timberlands held by the taxpayer for at least a I4-year 
period beginning on or after January 1, 2005 but less than a IS-year 
period beginning on or after January 1, 2005, 113 of the gam 
recognized on the sale of the eligible timberlands; 
(f) For eligible timberlands held by the taxpayer for at least a IS-year 
period beginning on or after January 1, 2005 but less than a I6-year 
period beginning on or after January 1, 2005, 2/5 of the gain 
recognized on the sale of the eligible timberlands; 
(g) For eligible timberlands held by the taxpayer for at least a I6-year 
period beginning on or after January 1, 2005 but less than a I7-year 
period beginning on or after January 1, 2005, 7115 of the gain 
recognized on the sale of the eligible timberlands; 
(h) For eligible timberlands held by the taxpayer for at least a 17-year 
period beginning on or after January 1, 2005 but less than an I8-year 
period beginning on or after January 1, 2005, 8115 of the gain 
recognized on the sale of the eligible timberlands; 
(i) For eligible timberlands held by the taxpayer for at least an 18-
year period beginning on or after January I, 2005 but le<;s than a 19-
year period beginning on or after January 1, 2005, 3/5 of the gain 
recognized on the sale of the eligible timberlands; 
(j) For eligible timberlands held by the taxpayer for at least a I9-year 
period beginning on or after January I, 2005 but less than a 20-year 
period beginning on or after January 1, 2005, 2/3 of the gain 
recognized on the sale of the eligible timberlands; 
(k) For eligible timberlands held by the taxpayer for at least a 20-year 
period beginning on or after January I, 2005 but less than a 21-year 
period beginning on or after January 1, 2005, 11115 of the gain 
recognized on the sale of the eligible timberlands; 
(1) For eligible timberlands held by the taxpayer for at least a 2 I-year 
period beginning on or after January I, 2005 but less than a 22-year 
period beginning on or after January 1, 2005, 4/5 of the gain 
recognized on the sale of the eligible timberlands; 
(m) For eligible timberlands held by the taxpayer for at least a 22-
year period beginning on or after January 1, 2005 but less than a 23-
year period beginning on or after January 1, 2005, 13115 of the gain 
recognized on the sale of the eligible timberlands; 
(n) For eligible timberlands held by the taxpayer for at least a 23-year 
period beginning on or after January I, 2005 but less than a 24-year 
period beginning on or after January 1, 2005, 14115 of the gain 
recognized on the sale of the eligible timberlands; or 
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(0) For eligible timberlands held by the taxpayer for at least a 24-year 
period 
beginning on or after January 1, 2005, all of the gain 
recognized on the sale of the eligible timberlands. 
(3) Taxpayers claiming this credit must attach a sworn statement from a forester 
licensed pursuant to Title 32, chapter 76 that the timberlands for which the credit 
is claimed have been managed sustainably. 
For the purposes of this 
subparagraph, "sustainably" means that the timberlands for which the credit is 
claimed have been managed to protect soil productivity and to maintain or 
improve stand productivity and timber quality; known occurrences of threatened 
or endangered species and rare or exemplary natural communities; significant 
wildlife habitat and essential wildlife habitat; and water quality, wetlands and 
riparian zones.Upon request ofthe State Tax Assessor, the Director ofthe Bureau 
of Forestry within the Department of Conservation may provide assistance in 
determining whether timberlands for which the credit is claimed have been 
managed sustainably. When assistance is requested under this subparagraph, the 
director or the director's designee may enter and examine the timberlands for the 
purpose of determining whether the timberlands have been managed sustainably. 
In the case of timberlands owned by an entity that is treated as a pass-through entity 
for income tax purposes, the land must be treated as eligible timberland if ownership 
and use of the land by the pass-through entity satisfies the requirements of this 
paragraph. If the owner of the eligible timberlands is an S corporation, the taxpayer 
must subtract the owner's pro rata share of the gain. If the owner of the timberlands 
is a partnership or limited liability company taxed as a partnership, the taxpayer must 
subtract the taxpayer's distributive share of the gain, subject to the percentage 
limitations provided in this paragraph. 
This modification may not reduce Maine taxable income to less than zero. To the 
extent this modification results in Maine taxable income that is less than zero for the 
taxable year, the excess negative modification amount may be carried fOTWard and 
applied as a subtraction modification for up to 10 taxable years. The entire amount of 
the excess negative modification must be carried to the earliest of the taxable years to 
which, by reason of this subsection, the negative modification may be carried and 
then to each of the other taxable years to the extent the unused negative modification 
is not used for a prior taxable year. Earlier carry-forward modifications must be used 
before newer modifications generated in later years; ilfld 
Sec. 13. 36 MRSA §S200-A, sub-§2, ~Q, as enacted by PL 2005, c. 644, §10, is 
amended to read: 
Q. 
For income tax years beginning on or after January I, 2006, to the extent 
included in federal taxable income and not otherwise removed from Maine taxable 
income. an amount equal to the total of capital gains and ordinary income resulting 
from depreciation recapture determined in accordance with the Code, Sections 1245 
and 1250 that is realized upon the sale of property certified as multifamily affordable 
housing property by the Maine State Housing Authority in accordance with Title 30-
A, section 4722, subsection 1, paragraph AA~; and 
Sec. 14. 36 MRSA §S200-A, sub-§2, ~ 
is enacted to read: 
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R. For income tax years beginning on or after January I, 2008, all items of income, 
gain, interest, dividends, royalties and other income of a real estate investment trust 
subject to the tax imposed by section 5208, to the extent that those items are passed 
through to the taxpayer for federal income tax purposes, including, if the real estate 
investment trust is an S corporation, the taxpayer's pro rata share and, if the real estate 
investment trust is a partnership or limited liability company, the taxpayer's 
distributive share. A subtraction may not be made under this paragraph for: 
(I) Any dividends or other distributions with respect to a taxpayer's ownership 
interest in a real estate investment trust; and 
(2) Any gain recognized on the disposition by the taxpayer of an ownership 
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interest in a real estate investment trust. 
S«. 15. 36 MRSA c. 820 is enacted to read: 
CHAPTER 820 
REAL EST A TE INVESTMENT TRUSTS 
§5208. Tax 011 real estate investment trusts 
t. Definitions. As used in this chapter, unless the context otherwise indicates, the 
foHowing terms have the following meanings. 
A. "Capital asset" means a capital asset as defined in the Code, Section 1221 located 
in Maine and held by a real estate investment trust. 
B. "Tangible capital asset" means, without limitation, one of the following capital 
assets: 
( I ) Real estate; 
(2) Buildings; and 
(3) Motor vehicles. 
2. Tax imposed. A tax is imposed for each calendar year or fiscal vear ending during 
that calendar year on a real estate investment trust to the extent that the real estate 
investment trust recognizes gain upon the sale or exchange of a tangible capital asset 
during the tax year. The real estate investment trust shall pay a tax on the total net 
recognized gain resulting from the sale or exchange of a tangible capital asset that 
occurred during the tax year at the following rates. 
If the income is: 
Not over $25,000 
Greater than 
$25,000 
but not over 
$75,000 
Greater than 
$75,000 
but 
not over 
$250,000 
Greater than $250,000 
The tax is: 
3.5% of the income 
$875 plus 7.93% of the excess over 
$25,000 
$4,840 plus 8.33% of the excess over 
$75,000 
$19,418 plus 8.93% of the excess over 
$250,000 
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3. Treatment of sale or exchange. For purposes of this section, the loss or gain on 
the sale or exchange of a tangible capital asset must be handled according to this 
subsection. 
A. If the sale or exchange of a tangible capital asset results in a total net recognized 
loss in the tax year, the real estate investment trust: 
( I) May not carry forward or carry back the loss; and 
(2) Is not entitled to a refund of any portion of the loss. 
B. Gain realized from a sale or exchange of a tangible capital asset is reportable in 
this State even if recognition of the gain is deferred and regardless of the deferral 
mechanism. 
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4. Installment sale. Gain realized from an installment sale, as defined in the Code, 
Section 453, of a tangible capital asset must be reported, and the corresponding tax 
imposed by subsection 2 must be paid as the payments are received.· 
5. Transfer. Gain realized on the transfer of a tangible capital asset must be treated 
according to this subsection. 
A. 
The gain realized on the transfer of a tangible capital asset in a like-kind 
exchange, as described in the Code, Section 1031, must be reported, and the 
corresponding tax imposed by subsection 2 must be paid if and when the gain is 
recognized for federal income tax purposes. 
B. 
The gain realized on the transfer of a tangible capital asset in an involuntary 
conversion, as defined in the Code, Section 1033, must be reported, and the 
corresponding tax imposed by subsection 2 must be paid jf and when the gain is 
recognized for federal income tax purposes. 
6. Credit for tax on sale of excluu:tge of capital asset by real estate investment 
trust. If a real estate investment trust is subject to the tax imposed under subsection 2 in a 
tax year, there is allowed a nonrefundable credit against the taxes imposed in chapter 805 
or chapter 807 for that same tax year. The credit may be claimed only if: 
A. The income giving rise to the tax liability under chapter 805 or chapter 807 for 
the tax year is directly attributable to the net gain recognized from the sale or 
exchange of a tangible capital asset; and 
B. The real estate investment trust paid tax on that net recognized gain as provided 
for in subsection 2. 
The credit is limited in amount to the tax liability imposed in subsection 2. The credit 
may not be used to offset or reduce the Maine tax liability of any other affiliated entity. 
The credit may not be carried forward or carried back. 
7. Use of revenue. The State Tax Assessor annually shall certify the taxes, less any 
credit or refund, collected pursuant to this section to the State Controller. The State 
Controller, no later than 30 days following receipt of the certification, shall transfer the 
certified amount to the Land for Maine's Future Fund established in Title 5, section 6203. 
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8. Rulemaking. The bureau shall adopt routine technical rules, as defined in Title 5, 
chapter 375, subchapter 2-A, and publish forms to carry out the purposes of this section, 
including ensuring that the credit allowed in subsection 6 is accurately claimed. 
Sec. 16. Application. This Act applies to tax years beginning on or after January 
1,2008. 
Emergency clause. 
In view of the emergency cited \0 the preamble, this 
legislation takes effect when approved. 
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SUMMARY 
Under current law, real estate investment trusts, or "REITs," which are a type of 
corporation that invests in real estate, are not taxed at the corporate or entity level, 
although distributions from the REIT are taxable income to participants in the REIT. 
This bill taxes REITs at the corporate level at the same rate as other corporations are 
taxed in Maine. Revenue generated by this tax is dedicated to the Land for Maine's 
Future Fund. The bill also amends current law to require an individual to modify that 
individual's taxable income based on any items of loss or gain by the REIT that are 
passed through the REIT to the individual. 
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