ROBERT L. EHRLICH, JR., Governor

Ch. 556

(III) A PERSON TO OR FROM WHOM THERE IS ATTRIBUTION OF
STOCK OWNERSHIP IN ACCORDANCE WITH § 1563(E) OF THE INTERNAL REVENUE
CODE.

(B) (1) EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION, IN ADDITION
TO THE MODIFICATIONS UNDER §§ 10-305 AND 10-306 OF THIS SUBTITLE, THE
AMOUNTS UNDER PARAGRAPH (2) OF THIS SUBSECTION ARE ADDED TO THE
FEDERAL TAXABLE INCOME OF A CORPORATION TO DETERMINE MARYLAND
MODIFIED INCOME.

(2) THE ADDITION UNDER THIS SUBSECTION INCLUDES ANY
OTHERWISE DEDUCTIBLE INTEREST EXPENSE OR INTANGIBLE EXPENSE IF THE
INTEREST EXPENSE OR INTANGIBLE EXPENSE IS DIRECTLY OR INDIRECTLY PAID,
ACCRUED, OR INCURRED TO, OR IN CONNECTION DIRECTLY OR INDIRECTLY WITH
ONE OR MORE DIRECT OR INDIRECT TRANSACTIONS WITH, ONE OR MORE RELATED
MEMBERS.

. (C) THE ADDITION REQUIRED UNDER SUBSECTION (B) OF THIS SECTION DOES
NOT APPLY TO ANY PORTION OF THE INTEREST EXPENSE OR INTANGIBLE EXPENSE
TO THE EXTENT THAT THE CORPORATION ESTABLISHES BY CLEAR AND CONVINCING
EVIDENCE, AS DETERMINED BY THE COMPTROLLER, THAT:

(1)     THE TRANSACTION GIVING RISE TO THE PAYMENT OF THE INTEREST
EXPENSE OR INTANGIBLE EXPENSE BETWEEN THE CORPORATION AND THE
RELATED MEMBER DID NOT HAVE AS A PRINCIPAL PURPOSE THE AVOIDANCE OF
ANY PORTION OF THE TAX DUE UNDER THIS TITLE;

(2)      THE INTEREST EXPENSE OR INTANGIBLE EXPENSE WAS PAID
PURSUANT TO ARM'S-LENGTH CONTRACTS AT AN ARM'S-LENGTH RATE OF INTEREST
OR PRICE; AND

(3)      (I) DURING THE SAME TAXABLE YEAR, THE RELATED MEMBER
DIRECTLY OR INDIRECTLY PAID, ACCRUED, OR INCURRED THE INTEREST EXPENSE
OR INTANGIBLE EXPENSE TO A PERSON WHO IS NOT A RELATED MEMBER, THE
INTEREST EXPENSE OR INTANGIBLE EXPENSE;

(II) 1. THE RELATED MEMBER WAS SUBJECT TO A TAX
MEASURED BY ITS NET INCOME OR RECEIPTS IN THIS STATE AND OTHER STATES OR
POSSESSIONS OF THE UNITED STATES OR FOREIGN NATIONS, IN OR ANOTHER STATE
OR POSSESSION OF THE UNITED STATES, OR IN A FOREIGN NATION THAT HAS
ENTERED INTO A COMPREHENSIVE TAX TREATY WITH THE UNITED STAGES
GOVERNMENT;

2. A MEASURE OF THE TAX IMPOSED BY THIS STATE AND
OTHER STATES OR POSSESSIONS OF THE UNITED STATES OR FOREIGN NATIONS, BY
OR ANOTHER STATE OR POSSESSION OF THE UNITED STATES, OR BY A FOREIGN
NATION THAT HAS ENTERED INTO A COMPREHENSIVE TAX TREATY WITH THE
UNITED STATES GOVERNMENT INCLUDED THE INTEREST EXPENSE OR INTANGIBLE
EXPENSE RECEIVED BY THE RELATED MEMBER FROM THE CORPORATION; AND

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