Current through Register 1531, September 27, 2024
(1)
General.
(a)
Purpose of
Regulation. 830 CMR 63.38B.1 sets forth the rules for the
Massachusetts tax treatment of security corporations under M.G.L. c. 63, §
38B.
(b)
Organization. 830 CMR 63.38B.1 is organized as
follows:
1. General.
2. Definitions.
3. Qualification for Security Corporation
Classification.
4. Definition of
Securities.
5. Requirement that
Securities be Held Exclusively for Investment Purposes.
6. Procedure for Security Corporation
Classification.
7. Continuing
Status of Application and Classification; Change in Activities.
8. Election for Voluntary
Withdrawal.
9.
Revocation.
10. Submissions to the
Security Corporations Unit.
11.
Effective Date.
(2)
Definitions.
Affiliate, for purposes of 830 CMR
63.38B.1, means a member of an affiliated group as defined under section 1504
of the Code.
Arm's Length Secondary Market, a venue
for purchasing previously issued and outstanding securities that is not related
to the seller, the purchaser, or the issuer of the securities being acquired.
An arm's length secondary market may include a private investment firm that
makes a market in securities or that otherwise brokers or acts as an
intermediary in facilitating a purchase and sale of securities.
Bank Holding Company, a bank holding
company as defined under the Code in effect for the tax year.
Code, the federal Internal Revenue
Code in effect for the tax year.
Commissioner, the Commissioner of
Revenue or the Commissioner's representative authorized to perform the duties
of the Commissioner.
Debt Instruments, shall be deemed to
include, without limitation, in addition to corporate bonds, debt obligations
of the United States, its agencies or instrumentalities and of any state or
political subdivision thereof, their agencies or instrumentalities.
Financial Institution, a financial
institution as defined in M.G.L. c. 63, § 1.
Open Tax Year, any tax year for which
additional assessments may be made by the Commissioner under the applicable
statute of limitations.
REIT, a real estate investment trust
as defined in the Code.
Related Member, as defined in M.G.L.
c. 63, § 31I.
Regulated Investment Company, or
RIC, an entity that is treated as a regulated
investment company for the tax year under the Code.
Real Estate Mortgage Investment
Conduit, or REMIC, an entity that is
treated as a real estate mortgage investment conduit for the tax year under the
Code.
Securities, securities as defined at
830 CMR 63.38B.1(4).
Security Corporation, every financial
institution or business corporation that is engaged exclusively in buying,
selling, dealing in, or holding securities on its own behalf and not as a
broker, and either applies to the Commissioner to be classified as a security
corporation before the end of the tax year and is so classified, or has been so
classified by the Commissioner and that classification has not been revoked. A
security corporation is subject to tax under the provisions of M.G.L. c. 63,
§ 38B, and is not subject to an excise imposed by M.G.L. c. 63,
§§ 2, 32, 32D, or 39.
(3)
Qualification for Security
Corporation Classification.
(a)
In General. In order to qualify for security
corporation classification, the entity must satisfy a two-pronged test:
1. the instruments held by the entity must be
securities; and
2. the securities
must be acquired and held for investment purposes.
(b) Requirement that a security corporation
be engaged exclusively in securities investment activities, namely buying,
selling, dealing in, or holding securities on their own behalf and not as a
broker. A corporation that is engaged in any business activity other than
securities investment activity during any portion of its tax year is not
entitled to classification as a security corporation.
Example (3)(b). ManufacturingCo is a
corporation engaged in manufacturing with a tax year end of June
30th. On June 15, 2007 ManufacturingCo enters into a
purchase and sale agreement to transfer its manufacturing assets on July 7,
2007. From July 1 through July 7, 2007, the first seven days of its tax year,
ManufacturingCo derives income from the last of its manufacturing activities.
On July 7, 2007 ManufacturingCo sells all if its manufacturing assets,
investing the proceeds in various securities. From July 7, 2007 through June
30, 2008 ManufacturingCo engages exclusively in the buying, selling, holding
and dealing in securities. ManufacturingCo is not entitled to classification as
a security corporation for its tax year ending June 30, 2008, because it has
engaged in a business other than a securities business for a portion of that
tax year.
(c) A security
corporation may engage in ancillary activity that is necessary or typical in
the context of its securities investment business. Examples of this type of
ancillary activity include: owning office furniture or supplies used in
operating its business; engaging a payroll services company for payment of its
staff; sponsoring employee benefits programs on behalf of its staff. Ancillary
activities may include activities that are necessary to protect a corporation's
assets from liabilities, or to meet obligations that may arise from a prior,
discontinued business.
Example (3)(c). SecurityCo currently
invests only in securities, but prior to 2002 it sold parts for heavy
construction equipment. SecurityCo continues to maintain products liability
insurance for potential liabilities arising from the continuing existence of
the equipment. Generally, a security corporation does not purchase products
liability insurance, but in this case, because the corporation maintains the
insurance to insulate its assets from liabilities that could arise from its
prior, discontinued business activities, the ownership of the insurance will
not of itself preclude SecurityCo from obtaining security corporation
classification.
(4)
Definition of
Securities.
(a) The definition of
securities that applies to bank holding companies. As applied to bank holding
companies, the term security means a security that is recognized as such under
the general rules of Massachusetts case and statutory law. The scope of
qualifying securities for these purposes will generally encompass any
instrument qualifying as a security under the rules found at M.G.L. c. 63
§ 38B(b1/2), and more fully explained in 830 CMR
63.38B.1(4)(b).
(b) The definition
of securities that applies to entities that are not bank holding companies. As
applied to entities that are not bank holding companies, for tax years that end
on or after October 1, 2004, securities are defined under M.G.L. c. 63, §
38B(b1/2) to include:
1. Equity or debt
instruments and options, futures and other derivatives, that are traded on and
were acquired through a public exchange or another arm's length secondary
market. These options, futures, and other derivatives may have as their
underlying property either tangible goods, such as petroleum, grain, or
livestock, or intangible items, such as securities.
Example (4)(b)(1.1). SubsidiaryCo is
an investment subsidiary of ParentCo, a real estate developer. OtherCo is an
unrelated company. SubsidiaryCo lends money to OtherCo and takes back a
promissory note. Even though this security may in some circumstances be
saleable on a secondary market, it does not qualify as a security in this case
because it was not in fact purchased on an arm's length secondary market.
SubsidiaryCo will not qualify as a security corporation.
Example (4)(b)(1.2). InvestCo invests
in and holds securities. It approaches EquityCo, a major investment firm that
pairs interested investors with sellers of suitable privately-held business
interests to encourage private investment. EquityCo recommends that InvestCo
purchase ten percent of the stock of CloseCo from a third party, which holds
previously issued and outstanding stock of CloseCo. Neither EquityCo nor
InvestCo are affiliates of CloseCo. Provided it meets all other requirements of
this regulation, InvestCo's investment in CloseCo stock is an investment in a
security acquired on an arm's length secondary market.
2. Bonds as defined in and issued pursuant to
M.G.L. c. 23G, which includes bonds issued by the Massachusetts Development
Finance Agency.
3. Cash and cash
equivalents, including savings and checking accounts and certificates of
deposit, and foreign currencies.
4.
Interests in a REIT under section 856 of the Code or a RIC under section 851 of
the Code, or a real estate mortgage investment conduit under section 860D of
the Code, so long as none of the mortgages owned by the conduit were originated
by the holder of the instrument or by an affiliate of the holder.
5. Mortgage-backed securities that are
guaranteed by the Federal National Mortgage Association, the Government
National Mortgage Association, the Federal Home Loan Bank or the Federal Home
Loan Mortgage Corporation.
6.
Collateralized mortgage obligations, so long as none of the mortgages that
underlie the obligation were originated by the holder or by an affiliate of the
holder.
7. Any other passive
investment vehicles that, in the judgment of the Commissioner, should be
considered to constitute "securities." Taxpayers may request guidance on
specific questions about what qualifies as a security under this paragraph, by
seeking a letter ruling under
830 CMR 62C.3.2.
a. Further explanation of the term "other
passive investment vehicles." The Department will not treat a corporation as
failing to qualify for classification as a security corporation solely because
it holds on or after October 1, 2004 an equity interest in a business organized
as a corporation that it purchased at arm's length but which is otherwise not
described in section 38B(b 1/2)(1), for example, stock purchased from the
original issuer. In order to meet this requirement, the taxpayer must be able
to demonstrate to the satisfaction of the Commissioner, based on all the facts
and circumstances, that the instrument was purchased and is held for passive
investment purposes only; and neither the taxpayer nor any of its shareholders,
officers, directors, or related members:
i.
has either legal or effective control, directly or indirectly, of the business
(whether through stock ownership, board representation, contract, or
otherwise), either with respect to operations or with respect to any
fundamental business matters, such as corporate governance, dividend policy,
mergers and acquisitions, and financings, etc.;
ii. participates actively in management of
the business, whether or not serving in a formal capacity such as an
officer;
iii. is a related member
of the business;
iv. holds a debt
security, not otherwise named in 830 CMR 63.38B.1(4)(b), in the business, or is
otherwise a creditor of the business.
Any decision on qualification as a security pursuant to 830 CMR
63.38B.1(4)(b)7. shall be in the Commissioner's discretion, and the taxpayer
shall have the burden of satisfying the Commissioner with respect to both the
applicable facts and circumstances and the application of the standards set out
above. The Department in the future may issue further guidance to change,
refine, or add to the requirements for qualification under section 38B(b
1/2)(7), and it is possible that such guidance will, on a prospective
basis, further restrict or eliminate the potential for qualification.
(c)
Transition Rule. A corporation shall not lose its
status as a security corporation for a tax year that begins before October 1,
2004 if:
1. the instruments that it holds for
the portion of the tax year ending on September 30, 2004 qualify as securities
under M.G.L. c. 63, § 38B as it read prior to the effective date of the
definition of "securities" set forth in M.G.L. c. 63, § 38B(b1/2) and
830 CMR 63.38B.1(4)(b), namely October 1, 2004; and
2. the instruments that it holds for the
portion of the tax year beginning on October 1, 2004 qualify as securities as
defined in 830 CMR 63.38B.1(4)(b).
(d) The new definition of "securities" will
not be construed to preclude a security corporation from acquiring certain
qualifying securities from an affiliate. The Department will not treat a
corporation that owns securities that otherwise meet the definition set forth
in 830 CMR 63.38B.1(4)(b)1. as failing to qualify as a security corporation
solely because it acquires securities from an affiliate, provided the
securities were initially acquired by the affiliate through a public exchange
or other arm's length secondary market as part of the affiliate's securities
investment activities.
(e)
Ownership of REITs by Security Corporations. A
security corporation may own an interest in a REIT. However, an ownership
interest in a REIT that is a related member shall not be considered a
qualifying security. This rule applies to bank holding companies and non-bank
holding companies.
(f)
Limitation on Scope of the Definition of Securities in 830 CMR
63.38B.1(4)(b). The definition of "securities" in 830 CMR
63.38B.1(4)(b) shall not be construed to limit the instruments that may be held
by an investment partnership for purposes of the safe harbor set forth in
M.G.L. c. 62, § 17(b).
(5)
The Securities must be
Acquired and Held Exclusively for Investment Purposes.
(a)
1.
Analysis of Investment Intent. To qualify for security
corporation classification, the corporation must engage in its activities for
an investment purpose. This purpose includes the intent to conserve and augment
capital and to provide income through judicious acquisition and retention of
securities. Holding an instrument, even one that in another context may qualify
as a security, for any purpose other than investment will disqualify an entity
from security corporation classification. A corporation that holds securities,
such as cash equivalent instruments, in circumstances where the funds invested
in an instrument are used directly or by an affiliate for operational purposes,
or are used as part of a cash management system, does not qualify as a security
corporation.
2.
Special
Rule for Security Corporation Subsidiaries of Financial
Institutions. Security corporations that are subsidiaries of
financial institutions are permitted to deposit cash in an account of a related
financial institution (the "related financial account") under certain
conditions, notwithstanding the provisions in 830 CMR 63.38B.1(5)(a)1. This
permission is limited to a security corporation that has generated cash from
interest, dividends, or other qualifying income earned from its investments, or
from the sale, redemption, or maturity of a security, and that deposits the
cash in the related financial account solely on a temporary, short-term basis
pending reinvestment of the cash by the security corporation in qualifying
securities issued by unrelated issuers. To be eligible for this exception, the
following additional conditions must be met:
a. The related financial account must be
established, and deposits made therein, on terms and conditions generally
available to similarly-situated customers.
b. The security corporation must regularly
(e.g. quarterly) declare and pay dividends or otherwise make
distributions of all amounts of cash or other property on hand, except to the
extent that such cash or other property is either held in cash or invested in
qualifying securities issued by unrelated issuers or is deposited in the
related financial account on terms meeting the standards set out in 830 CMR
63.38B.1.
c. Deposits by the
security corporation in the related financial account must be limited in amount
and time on deposit so as to reasonably reflect, and be commensurate with, a
demonstrated need for holding cash in an interest-bearing account on a
short-term, temporary basis pending reinvestment in qualifying securities
issued by unrelated issuers (taking into account the availability to the
security corporation of any other cash or property for purposes of investing in
qualifying securities, including cash or other property contributed by its
parent or other shareholders). Any amounts so deposited that are not promptly
reinvested in such qualifying securities must be dividended or otherwise
distributed by the security corporation to its parent or other
shareholders.
d. In computing its
net income, the related financial institution paying interest on the related
financial account in which the security corporation is permitted to make
temporary, short-term deposits of cash pursuant to 830 CMR 63.38B.1(5)(a)2.
must add back otherwise deductible interest paid, accrued, or incurred to the
security corporation, subject to the exceptional cases where such deductions
are allowable, according to the provisions of M.G.L. c. 63, § 31J. The
Department will closely examine requests for such add back exceptions, and the
taxpayer must establish to the Department's satisfaction the reasonableness of
the security corporation deposits in light of the standards set out in 830 CMR
63.38B.1.
e. The security
corporation must maintain books and records establishing that it has met the
standards set out in 830 CMR 63.38B.1, and be prepared to demonstrate to the
satisfaction of the Department that it has met such standards.
Example (5)(a.1). LendCo is in the
business of lending money for business and personal reasons, which it secures
through promissory notes. The business of lending money is not the acquisition
of securities for an investment purpose; thus LendCo is ineligible for security
corporation classification.
Example (5)(a.2). InvestCo owns a
variety of securities, including stock of BigCo that it purchased through a
secondary market. InvestCo has negotiated loans with BigCo and has taken back
promissory notes as a means of financing BigCo's operations. InvestCo is
ineligible for security corporation classification, for two reasons: Because
InvestCo is negotiating loans with BigCo, it is engaged in activities with
respect to its holdings that go beyond an investment related purpose; and the
notes themselves are not securities within the meaning of 830 CMR
63.38B.1(3)(b)1., because the notes were not acquired through a public exchange
or other arm's length secondary market.
Example (5)(a.3). CloseCo is a closely
held corporation. CloseCo holds, in addition to various securities, promissory
notes received from its president and a principal stockholder of CloseCo as
security for loans made for the accommodation of CloseCo's principals. The
notes are unsecured and provide for a favorable rate of interest. CloseCo may
not be classified as a security corporation for two reasons. First, the notes
were not taken for investment purposes, but as security for loans made for the
accommodation of CloseCo's principals. Second, the notes were not purchased on
an arm's length secondary market.
Example (5)(a.4). ManufacturingCo is a
corporation engaged in manufacturing. In 2007, ManufacturingCo sells its plant,
equipment and other assets and ceases its manufacturing business, taking back
from Buyer a promissory note that Buyer will repay over a fifteen-year period.
After 2008, ManufacturingCo continues to hold the note, and engages in
investing in a variety of securities. ManufacturingCo may not be classified as
a security corporation for any year during which it holds the original note,
because the note was not acquired for investment purposes.
(b)
1. In order to qualify as a security
corporation, the taxpayer generally must exercise no management or control over
the issuer of the instrument. The taxpayer can have no more than the ordinary
rights typically possessed by a corporate shareholder, which include:
a. the right to elect directors;
b. the right to vote on the amendment of a
corporate charter;
c. the right to
agree to dissolution of the corporation; and
d. the right to agree to the sale of
substantially all of the corporation's assets.
Example (5)(b)(1.1). ConsultCo owns a
variety of securities. Recently, ConsultCo acquired an 8% limited partnership
interest in a limited partnership (LP) that it purchased through a secondary
market. The limited partnership is not in the business of dealing in
securities. There are ten other limited partners invested in LP, each of which
holds an 8% interest. ConsultCo's interest in LP gives it a variety of powers.
ConsultCo has the right to vote on amendments to the underlying partnership
agreement. It also has rights that exceed those granted to all limited partners
under M.G.L. c. 109, which governs limited partnerships. For example, ConsultCo
has the right to veto decisions concerning the business activities of the
limited partnership; and it has the right to veto borrowing and investment
activities of the limited partnership. While an interest in a limited
partnership may be a security provided it meets all the requirements of 830 CMR
63.38B.1(4)(a), in this case the rights granted the limited partner exceed
those allowed under 830 CMR 63.38B.1. The right to vote on amendments to the
underlying partnership agreement is similar to rights given an ordinary
corporate shareholder, and does not disqualify the corporation from security
corporation classification. The right to veto business or investment decisions
of the partnership, however, is not a right held by an ordinary investor, and
will prevent the corporation from having security corporation
classification.
Example (5)(b)(1.2). VentureCo
generates capital through equity investments in high-risk ventures, such as in
early-stage development companies. VentureCo introduces other investors to
potential investments in companies in which Venture Co invests; VentureCo both
extends lines of credit to the developing companies and arranges the extension
of credit from lenders to them. It also advises management of the emerging
businesses on best practices and strategies. Because VentureCo's activities
include both investment activities and non-qualifying business activities, it
does not qualify for security corporation classification.
Example (5)(b)(1.3). Parent
Corporation owns several subsidiaries, including ManageCo, which contracts to
manage publicly traded mutual funds, and InvestCo, which purchased shares in
several funds managed by ManageCo through an arm's length secondary market.
Provided InvestCo engages in no other disqualifying activity, it is eligible to
be classified as a security corporation, notwithstanding ManageCo's contractual
relationship with the purchased funds to provide management services.
Example (5)(b)(1.4). InvestCo
purchases investments through stock exchanges and arm's length secondary
markets. It purchases a 40% interest in NewCo, which gives it the right to vote
to hire and fire managers. InvestCo has rights that exceed those ordinarily
held by a corporate shareholder, and is ineligible for security corporation
classification.
2.
In order to qualify as a security corporation, a non-bank holding company must
not own a controlling interest in a business entity. In addition to satisfying
other requirements for qualification as a security corporation, a non-bank
holding company security corporation's investment (whether direct or indirect)
in the equity of a business entity (or options or interests exercisable or
convertible into equity) must in any event not exceed 50% of the outstanding
equity interests in that entity (determined as if options and instruments
exercisable or convertible into equity are in fact exercised or converted),
whether measured by vote or value. For example, a corporation will not be
eligible for security corporation classification if it owns more than 50% of
the stock of a subsidiary, or is a related member of the subsidiary.
Example (5)(b)(2). ParentCo owns 51%
of HoldingCo, a holding company that it purchased through an arm's length
secondary market. HoldingCo owns the stock of two corporations that perform
business functions. ParentCo has no explicit rights to manage or control the
business of HoldingCo. Because its interest in HoldingCo exceeds 50% of
HoldingCo's outstanding equity interests, ParentCo is ineligible for security
corporation classification.
(6)
Procedure for Security
Corporation Classification.
(a)
Timing of the Application. A corporation seeking to be
classified as a security corporation must submit an application to the
Commissioner prior to the end of the tax year for which classification is
sought.
(b)
Information
Required in the Application. A corporation that seeks security
corporation classification must include in its application the following
information:
1. the name, address, and federal
identification number of the corporation;
2. the tax year for which classification is
sought;
3. a balance sheet as of
the first day of the tax year;
4. a
balance sheet as of the date of the application ( or as near as is reasonably
possible);
5. an income statement
for the period from the first day of the tax year to the date of the
application;
6. a statement that
the corporation will be in compliance with M.G.L. c. 63, § 38B for the
remaining portion of the tax year, and specifically that the corporation will
be engaged exclusively in buying, selling, dealing in and holding securities on
its own behalf and not as a broker, and engage in its activities exclusively
for investment purposes;
7. a
statement that the corporation is or is not a regulated investment company or a
bank holding company; and
8. the
name and telephone number of the officer or representative who is to be
contacted in case additional information is needed. If a representative, the
application must include a duly executed power of attorney authorizing the
Commissioner to discuss the application with that representative.
(c)
Requirements for
Statements Accompanying the Application. Any general balance sheet
entries, such as "Investments," "Accounts Receivable," or "Marketable
Securities" must be accompanied by a detailed schedule listing the applicable
assets.
(d)
Additional
Information. In addition to the application described in
830
CMR 63.38B.1(6), the
Commissioner may require a corporation seeking security corporation
classification to submit additional information supporting its
application.
(e)
Application Submission Instructions. Applications for
security corporation classification should be submitted to the Security
Corporations Unit, as set forth in
830
CMR 63.38B.1(10).
(7)
Continuing Status
of Application; Change in Activities.
(a)
Classification in Successive
Years. Once a corporation has been classified as a security
corporation, it may continue to file as a security corporation for successive
years unless it is notified by the Commissioner that its classification has
been revoked, provided that the corporation must in good faith believe that it
continues to qualify as a security corporation.
(b)
Required Notification to
Commissioner of a Change in Corporate Activities or Other Facts that Might
Affect Security Corporation Status. A corporation that has been
classified as a security corporation must notify the Commissioner of any change
in its activities or other facts that might impact its classification. Such
notice should be submitted to the Security Corporations Unit, as set forth in
830
CMR 63.38B.1(10) before the
end of the tax year in which such change occurs.
(8)
Election for Voluntary
Withdrawal.
(a)
General. A corporation that has been classified as a
security corporation may elect to withdraw from the classification.
(b)
Time for
Election. To be effective for a given tax year, a corporation's
election to withdraw as a security corporation must be submitted to the
Commissioner by the end of the tax year.
(c)
Information
Required. A notice to withdraw as a security corporation must
include the corporation's federal identification number and a brief statement
of the reason for the request.
(d)
Effect of Election. A notice to withdraw as a security
corporation is effective for the tax year during which the security corporation
submits the notice and for all succeeding tax years of the
corporation.
(e)
Notice
Submission Instructions. A notice to withdraw from security
corporation classification should be submitted to the Security Corporations
Unit, as set forth in
830
CMR 63.38B.1(10).
(f)
Retroactive Voluntary
Withdrawal Not Allowed. After the end of a tax year, a security
corporation may not seek to withdraw as a security corporation for a prior tax
year.
Example (8)(f). SecurityCo elects to
be classified as a security corporation and duly files its returns for tax
years 2004 - 2007 as a security corporation. After filing, SecurityCo reviews
its 2005 return and realizes that if it had been a business corporation it
would have been entitled to a dividends received deduction for some of its
income, which would have yielded a more favorable tax result. SecurityCo seeks
to file an amended return as a business corporation for the year in question.
SecurityCo is not permitted to change its status as a security corporation
because the tax year is concluded.
(9)
Revocation of Security
Corporation Classification.
(a)
Assessment. A corporation that has been classified as
a security corporation is entitled to taxation under M.G.L. c. 63, § 38B
for a given tax year only if it meets the requirements of that section for that
year. Accordingly, if during any tax year a corporation that is classified
under M.G.L. c. 63, § 38B fails to meet this section's requirements, the
Commissioner may revoke the corporation's classification and assess the
corporation for any amounts due under the corporate excise.
(b)
Retroactive
Revocation. Where the Commissioner finds that a corporation
classified under M.G.L. c. 63, § 38B has failed to meet the requirements
of that section for a prior tax year, the Commissioner may retroactively revoke
the security corporation classification for that year and all subsequent years
that the corporation failed to meet the classification requirements under
M.G.L. c. 63, § 38B. Where the Commissioner has retroactively revoked a
corporation's security corporation classification for a prior tax year, the
Commissioner may assess that corporation under the applicable statute for all
open tax years. The Commissioner has the discretion to treat a corporation that
met the requirements of M.G.L. c. 63, § 38B in other open tax years as a
security corporation for any such year.
(10)
Submissions to the Security
Corporations Unit.
(a) Taxpayers
shall submit all required written applications and notices to the Security
Corporations Unit at the following address:
Massachusetts Department of Revenue
Attn: Security Corporations Unit
200 Arlington Street, Room 4300
Chelsea, MA 02150
(b)
Electronic
Filing. Security corporations are subject to the general rules for
electronic filing that apply to other corporations. Taxpayers are advised to
review current electronic filing requirements on the Department of Revenue Web
site,
www.dor.state.ma.us.
(11)
Effective
Date.
830
CMR 63.38B.1 shall take effect for tax years
beginning on or after January 1, 2006.
