Compilation of Rules and Regulations of the State of Georgia › Department 560 - RULES OF DEPARTMENT OF REVENUE › Chapter 560-7 - INCOME TAX DIVISION › Subject 560-7-3 - SUBSTANTIVE REGULATIONS › Rule 560-7-3-.04 - Captive Real Estate Investment Trust Expenses and Costs

Current through Rules and Regulations filed through June 27, 2024
(1)
Purpose.
The purpose of this
				regulation is to provide guidance with regard to the administration of O.C.G.A.
				§
									48-7-28.4, which requires the taxpayer to add back certain captive real estate investment
				trust (REIT) expenses and costs. For purposes of this regulation, such expenses
				and costs shall be referred to as captive REIT costs and the captive real
				estate investment trust shall be referred to as the captive REIT.
(2)
General Guidelines.
The
				Department requires all direct and indirect captive REIT costs to be added back
				to income prior to claiming an exception to the addback adjustment. Any person
				that paid, accrued, or incurred such captive REIT costs must complete Form
				IT-REIT.
(3)
Direct
				and
Indirect Expenses.
If an expense that is paid, accrued,
				or incurred by a taxpayer is related, directly or indirectly, to a captive REIT
				cost paid, accrued, or incurred, directly or indirectly, by or for any other
				related member, it is an indirect captive REIT cost and as such is required to
				be added back as provided in O.C.G.A. §
									48-7-28.4.
				For example:
(a) Corporation C is a captive
				REIT with respect to Corporations A and B. Corporation A is a Georgia taxpayer
				that pays rent to Corporation B. Corporation B makes captive REIT cost payments
				to Corporation C. To the extent the captive REIT costs which Corporation B pays
				to Corporation C are directly or indirectly included in the rent Corporation A
				pays to Corporation B, the direct captive REIT costs of Corporation B are
				considered to be indirect captive REIT costs of Corporation A. As such, for
				purposes of O.C.G.A. §
										48-7-28.4, Corporation A is deemed to indirectly pay captive REIT costs to Corporation C
				that are subject to the addback adjustment.
(b) Corporation C is a captive REIT with
				respect to Corporations A and B. Corporation A is a Georgia taxpayer that
				purchases products from Corporation B. Corporation B makes captive REIT cost
				payments to Corporation C. To the extent the captive REIT costs which
				Corporation B pays to Corporation C are directly or indirectly included in the
				costs of the products or services Corporation A purchases from Corporation B,
				the direct captive REIT costs of Corporation B are considered to be indirect
				captive REIT costs of Corporation A. As such, for purposes of O.C.G.A. §
										48-7-28.4, Corporation A is deemed to indirectly pay captive REIT costs to Corporation C
				that are subject to the addback adjustment.
(c) Corporation C is a captive REIT with
				respect to Corporations A and B. Corporation A is a Georgia taxpayer that pays
				a management fee to Corporation B. Corporation B makes captive REIT cost
				payments to Corporation C. To the extent the captive REIT costs which
				Corporation B pays to Corporation C are directly or indirectly included in the
				costs of the management services Corporation A purchases from Corporation B,
				the direct captive REIT costs of Corporation B are considered to be indirect
				captive REIT costs of Corporation A. As such, for purposes of O.C.G.A. §
										48-7-28.4, Corporation A is deemed to indirectly pay captive REIT costs to Corporation C
				that are subject to the addback adjustment.