Ch. 557                                    2004 LAWS OF MARYLAND

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, 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 ANOTHER STATE OR
POSSESSION OF THE UNITED STATES, OR IN A FOREIGN NATION THAT HAS ENTERED
INTO A COMPREHENSIVE TAX TREATY WITH THE UNITED STATES GOVERNMENT;

2. A MEASURE OF THE TAX IMPOSED BY THIS STATE AND
OTHER STATES OR POSSESSIONS OF THE UNITED STATES OR FOREIGN NATIONS, BY
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

3. THE EFFECTIVE RATE OF TAX PAID BY THE RELATED
MEMBER TO THIS STATE AND OTHER STATES OR POSSESSIONS OF THE UNITED
STATES OR FOREIGN NATIONS IN THE AGGREGATE ON THE AMOUNTS RECEIVED BY
THE RELATED MEMBER FROM THE CORPORATION IS EQUAL TO OR GREATER THAN

4% OR

3. THE EFFECTIVE RATE OF TAX IMPOSED IN THE
AGGREGATE ON THE AMOUNTS RECEIVED BY THE RELATED MEMBER FROM THE

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