Colo. Code Regs. 39-22-652
Current through Register Vol. 47, No. 23, December 10, 2024
Rule 39-22-652 - Definitions(1)Federal Transactions.(a) A transaction described in either § 39-22-652(5)(a) (federal listed transaction) or (7) (federal reportable transaction), C.R.S., is a "Federal Transaction" for purposes of these rules if: (i) the taxpayer is required by federal law to file an IRS Form 8886, or a successor form, or amendment to such form with respect to the transaction, and(ii) files or is included in, or is required to file or be included in, a Colorado income tax return, including a consolidated and/or combined Colorado income tax return and such Colorado tax return reflects a Colorado Tax Benefit deriving from such transaction.(2)Colorado Listed Transactions.(a) For purposes of a Colorado Listed Transaction, the following terms apply: (i) A captive real estate investment trust ("REIT") or captive regulated investment company ("RIC") is referred to in these rules as a "Captive Entity."(ii) A more than fifty percent beneficial owner includes any entity that is controlled by the more than fifty percent beneficial owner of a Captive Entity, any of which, individually or collectively, is referred to in these rules as the "Owner."(iii) "Transaction" for purposes of a Colorado Listed Transaction includes, but is not limited to: (1) a transaction by which the Owner creates or acquires a controlling interest in a Captive Entity, or(2) transactions by, among, or between the Owner and Captive Entity, and includes dividend distributions by the Captive Entity to or from an Owner, management service fees charged by or to an Owner to or from a Captive Entity, rental payments paid to a captive REIT by an Owner, loans by or to the Owner to or by the Captive Entity and repayment of those loans, interest payments paid by or to a Captive Entity to or from the Owner, and capital contributions to the Captive Entity by the Owner.(iv) "Colorado Tax Benefit" is a tax consequence that may reduce a taxpayer's Colorado income tax liability by affecting the amount, timing character, or source of any item of income, gain, expense, loss, or credit, including deductions, exclusions from gross income, nonrecognition of gain, tax credits, adjustments (or absence of adjustments to the basis in property, or status as an entity exempt from federal or state income taxation. A Colorado Tax Benefit includes a tax benefit applied at the federal level or to another state's income tax or other similar tax, but the consequence of which flows through to reduce Colorado income tax liability. (b) A transaction described in either § 39-22-652(5)(b) or (c), C.R.S. is a "Colorado Listed Transaction" for purposes of these rules if: (i) it is a transaction between the Owner and Captive Entity, and(ii) the Owner or Captive Entity files, or is included in, or is required to file or be included in, a Colorado income tax return, including a consolidated and/or combined Colorado income tax return and such Colorado tax return reflects a Colorado Tax Benefit. An Owner, Captive Entity, and a material advisor do not have a disclosure obligation under subsections 653 or 656 of these rules with respect to a Colorado Listed Transaction if such income tax return does not reflect a Colorado Tax Benefit.(c)Example. Retail Store operates a retail business in a building owned by Captive REIT and is located in Colorado. The commercial domicile of Captive REIT is in Delaware. Retail Store pays rent to Captive REIT. Captive REIT distributes rental income received from Retail Store to Corporation A, which redistributes the income as a stock dividend to Holding Company. Holding Company has the controlling interest in both Retail Store and Corporation A and its commercial domicile is in Delaware. Corporation A has the controlling interest in Captive REIT and its commercial domicile is in Bermuda. Corporation A is not required to file a Colorado income tax return and is not includable in a Colorado combined income tax return because it does not have more than twenty percent of its property in the United States. See, § 39-22-303(8), C.R.S. Retail Store's Colorado taxable income is reduced by the rental payments made to Captive REIT. Holding Company receives a Colorado Tax Benefit because the tax consequence of its ownership of controlling interests in Captive REIT, Corporation A, and Retail Store is the reduction of Colorado income tax otherwise due by Holding Company's group retail operation in Colorado. Retail Store also receives a Colorado Tax Benefit because its Colorado taxable income is reduced by its rental payments to Captive REIT.Colorado Register, Vol 37, No. 14. July 25, 2014, effective 8/14/201437 CR 18, September 25, 2014, effective 10/15/201437 CR 19, October 10,2014, effective 10/30/201437 CR 22, November 25, 2014, effective 12/16/201438 CR 04, February 25, 2015, effective 3/17/201538 CR 07, April 10, 2015, effective 4/30/201538 CR 11, June 10, 2015, effective 6/30/201538 CR 22, November 25, 2015, effective 12/15/201538 CR 24, December 25, 2015, effective 1/14/201638 CR 24, December 25, 2015, effective 1/19/201639 CR 01, January 10, 2016, effective 1/30/201639 CR 16, August 25, 2016, effective 9/14/201640 CR 08, April 25, 2017, effective 5/15/201740 CR 12, June 25, 2017, effective 7/15/201740 CR 16, August 25, 2017, effective 9/14/201740 CR 23, December 10, 2017, effective 1/1/201841 CR 14, July 25, 2018, effective 8/14/201841 CR 20, October 25, 2018, effective 11/14/201842 CR 02, January 25, 2019, effective 12/18/201842 CR 02, January 25, 2019, effective 12/18/2018, expires 4/17/201942 CR 06, March 25, 2019, effective 4/14/201943 CR 04, February 25, 2020, effective 3/16/202043 CR 13, July 10, 2020, effective 6/2/202043 CR 17, September 10, 2020, effective 9/30/202044 CR 03, February 10, 2021, effective 3/2/202144 CR 07, April 10, 2021, effective 4/30/202144 CR 08, April 25, 2021, effective 5/15/202145 CR 01, January 10, 2022, effective 1/30/202245 CR 04, February 25, 2022, effective 3/17/202245 CR 05, March 10, 2022, effective 3/30/202246 CR 11, June 10, 2023, effective 5/2/202346 CR 09, May 10, 2023, effective 5/30/2023