§237-16.5  Tax on written real propertyleases; deduction allowed.  (a)  This section relates to the leasing ofreal property by a lessor to a lessee.  There is hereby levied, and shall beassessed and collected annually, a privilege tax against persons engaging orcontinuing within the State in the business of leasing real property toanother, equal to four per cent of the gross proceeds or gross income receivedor derived from the leasing; provided that where real property is subleased bya lessee to a sublessee, the lessee, as provided in this section, shall beallowed a deduction from the amount of gross proceeds or gross income receivedfrom its sublease of the real property.  The deduction shall be in the amountallowed under this section.

All deductions under this section and the nameand general excise tax number of the lessee's lessor shall be reported on thegeneral excise tax return.  Any deduction allowed under this section shall onlybe allowed with respect to leases and subleases in writing and relating to thesame real property.

(b)  The lessee shall obtain from its lessor acertificate, in the form as the department shall prescribe, certifying that thelessor is subject to tax under this chapter on the gross proceeds or grossincome received from the lessee.  The absence of the certificate in itselfshall give rise to the presumption that the lessee is not allowed the deductionunder this section.

(c)  If various real property or space leasedto the lessee have different rental values, then the total monetary grossproceeds or gross income paid to a lessor for all real property or space shallfirst be allocated to the fair rental value for each real property or space. If the lessee leases less than one hundred per cent of real property or spacethat was leased from the lessor to a sublessee, then the total monetary grossproceeds or gross income paid by the lessee for that real property or space toits lessor shall be allocated.  The percentage of real property or spacesubleased shall be multiplied by the monetary gross proceeds or gross incomepaid for the real property or space by the lessee to its lessor.  The productof the preceding multiplication shall be deducted from the monetary grossproceeds or gross income received for real property or space by the lessee.

Once the allocations are made, the appropriatededuction under subsection (g) shall be made.

(d)  The lessor shall make allocations underthis section at the time the sublease is entered into and the allocations shallnot be changed during the term of the sublease.  There shall be a reasonablebasis for the allocations, taking into consideration the size, quality, andlocation of the real property or space subleased.  In no event shall the totalamount allocated to all subleases exceed the total monetary gross proceeds paidby the lessee to its lessor.  The director may redetermine the amount of thededuction under this section if the director finds that the basis forallocation is not reasonable or that redetermination is necessary to preventthe avoidance of taxes.

(e)  As used in this section:

"Lease" means the rental of realproperty under an instrument in writing by which one conveys real property fora specified term and for a specified consideration, and includes the writtenextension or renegotiation of a lease, and any holdover tenancy.

"Lessee" means one who holds realproperty under lease, and includes a sublessee.

"Lessor" means one who conveys realproperty by lease, and includes a sublessor.

"Real property or space" means thearea actually rented and used by the lessee, and includes common elements asdefined in section 514A-3 or 514B-3.

"Sublease" includes the rental ofreal property which is held under a lease and is made in a written document bywhich one conveys real property for a specified term and for a specifiedconsideration.  A sublease includes the written extension or renegotiation of asublease and any holdover tenancy under the written sublease.

"Sublessee" means one who holds realproperty under a sublease.

"Sublessor" means one who conveysreal property by sublease.

(f)  This section shall not cause the tax upona lessor, with respect to any item of the lessor's gross proceeds or grossincome, to exceed four per cent.

(g)  After allocation under subsection (c), ifnecessary, the deduction under this section shall be allowed from the grossproceeds or gross income of the lessee received from its sublease in an amountcalculated by multiplying the gross proceeds or gross income paid by the lesseeto its lessor for the lease of the real property by the following amount:

(1)  In calendar year 1998, .125;

(2)  In calendar year 1999, .25;

(3)  In calendar year 2000, .375;

(4)  In calendar year 2001, .50;

(5)  In calendar year 2002, .625;

(6)  In calendar year 2003, .75; and

(7)  In calendar year 2004, and thereafter, .875.

The amount calculated under paragraphs (1) to(7) shall be deducted by the lessee from the lessee's total reported grossproceeds or gross income.  The deduction allowed by this subsection may betaken by the fiscal and calendar year lessees. [L 1997, c 353, §2; am L 2004, c164, §§6, 35(5); am L 2005, c 93, §7; am L 2008, c 28, §4]

 

Note

 

  The 2008 amendment is retroactive to July 1, 2006.  L 2008, c28, §43.