The second charge was a $1,229,000 reduction related to a Real Estate Investment Trust (REIT) consent dividend deduction available to California banks for the tax years 2001 and 2002.
The Company does not plan to record any benefits related to the REIT consent dividend going forward until the courts resolve this tax issue.
The second adjustment relates to the Bank REIT consent dividend
and the state of California Voluntary Compliance Initiative (VCI) program announced in early 2004.
shareholders agree to a consent dividend
election with respect to such earnings.
The IRS allowed a deemed consent dividend
at the end of the third year and thereby eliminated the corporation's AE&P.
The consent dividend
mechanism is a hypothetical distribution of a specified amount made by a corporation that has a reasonable basis to believe that it is subject to the AET.
The proposed regulations provide three ways to facilitate the distribution of E&P: (1) an AAA bypass election, (2) a PTI bypass election and (3) a deemed dividend election (25) This last election works like a consent dividend
Form 973 - Corporation Claim for Deduction for Consent Dividends
Chapter 6 of the book addresses basis issues, and covers deemed dividends, the new investment adjustment regime, excess loss accounts, and consent dividends
Form 973, Corporation Claim for Deduction for Consent Dividends
This seems a harsh and unfair result, because E&P is not frozen as to distributions, redemptions, consent dividends
SCRA Section 223 would statutorily allow consent dividends
, which are currently permitted only by Regs.