S.Amdt. 2865

1. Inserts new text wherever appropriate

   Inserts

   Inserted: SEC. . REVISIONS TO REIT PROVISIONS.

   Inserted: (a) Rules of Application for Failure To Satisfy Section 856(c)(4).--Section 856(c) (relating to definition of real estate investment trust), as amended by section 101, is amended by inserting after paragraph (6) the following new paragraph:

   Inserted: "(7) Rules of application for failure to satisfy paragraph (4)--

   Inserted: "(A) De minimus failure.--A corporation, trust, or association that fails to meet the requirements of paragraph (4)(B)(iii) for a particular quarter shall nevertheless be considered to have satisfied the requirements of such paragraph for such quarter if--

   Inserted: "(i) such failure is due to the ownership of assets the total value of which does not exceed the lesser of--

   Inserted: "(I) 1 percent of the total value of the trust's assets at the end of the quarter for which such measurement is done, and

   Inserted: "(II) $10,000,000, and

   Inserted: "(ii)(I) the corporation, trust, or association, following the identification of such failure, disposes of assets in order to meet the requirements of such paragraph within 6 months after the last day of the quarter in which the corporation, trust or association's identification of the failure to satisfy the requirements of such paragraph occurred or such other time period prescribed by the Secretary and in the manner prescribed by the Secretary, or

   Inserted: "(II) the requirements of such paragraph are otherwise met within the time period specified in subclause (I).

   Inserted: "(B) Failures exceeding de minimis amount.--A corporation, trust, or association that fails to meet the requirements of paragraph (4) for a particular quarter shall nevertheless be considered to have satisfied the requirements of such paragraph for such quarter if--

   Inserted: "(i) such failure involves the ownership of assets the total value of which exceeds the de minimis standard described in subparagraph (A)(i) at the end of the quarter for which such measurement is done,

   Inserted: "(ii) following the corporation, trust, or association's identification of the failure to satisfy the requirements of such paragraph for a particular quarter, a description of each asset that causes the corporation, trust, or association to fail to satisfy the requirements of such paragraph at the close of such quarter of any taxable year is set forth in a schedule for such quarter filed in accordance with regulations prescribed by the Secretary,

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   Inserted: "(iii) the failure to meet the requirements of such paragraph for a particular quarter is due to reasonable cause and not due to willful neglect,

   Inserted: "(iv) the corporation, trust, or association pays a tax computed under subparagraph (C), and

   Inserted: "(v)(I) the corporation, trust, or association disposes of the assets set forth on the schedule specified in clause (ii) within 6 months after the last day of the quarter in which the corporation, trust or association's identification of the failure to satisfy the requirements of such paragraph occurred or such other time period prescribed by the Secretary and in the manner prescribed by the Secretary, or

   Inserted: "(II) the requirements of such paragraph are otherwise met within the time period specified in subclause (I).

   Inserted: "(C) Tax.--For purposes of subparagraph (B)(iv)--

   Inserted: "(i) Tax imposed.--If a corporation, trust, or association elects the application of this subparagraph, there is hereby imposed a tax on the failure described in subparagraph (B) of such corporation, trust, or association. Such tax shall be paid by the corporation, trust, or association.

   Inserted: "(ii) Tax computed.--The amount of the tax imposed by clause (i) shall be the greater of--

   Inserted: "(I) $50,000, or

   Inserted: "(II) the amount determined (pursuant to regulations promulgated by the Secretary) by multiplying the net income generated by the assets described in the schedule specified in subparagraph (B)(ii) for the period specified in clause (iii) by the highest rate of tax specified in section 11.

   Inserted: "(iii) Period.--For purposes of clause (ii)(II), the period described in this clause is the period beginning on the first date that the failure to satisfy the requirements of such paragraph (4) occurs as a result of the ownership of such assets and ending on the earlier of the date on which the trust disposes of such assets or the end of the first quarter when there is no longer a failure to satisfy such paragraph (4).

   Inserted: "(iv) Administrative provisions.--For purposes of subtitle F, the taxes imposed by this subparagraph shall be treated as excise taxes with respect to which the deficiency procedures of such subtitle apply.".

   Inserted: "(b) Modification of Rules of Application for Failure To Satisfy Sections 856(c)(2) or 856(c)(3).--Paragraph (6) of section 856(c) (relating to definition of real estate investment trust) is amended by striking subparagraphs (A) and (B), by redesignating subparagraph (C) as subparagraph (B), and by inserting before subparagraph (B) (as so redesignated) the following new subparagraph:

   Inserted: "(A) following the corporation, trust, or association's identification of the failure to meet the requirements of paragraph (2) or (3), or of both such paragraphs, for any taxable year, a description of each item of its gross income described in such paragraphs is set forth in a schedule for such taxable year filed in accordance with regulations prescribed by the Secretary, and".

   Inserted: (c) Reasonable Cause Exception to Loss of Reit Status if Failure To Satisfy Requirements.--Subsection (g) of section 856 (relating to termination of election) is amended--

   Inserted: (1) in paragraph (1) by inserting before the period at the end of the first sentence the following: "unless paragraph (5) applies", and

   Inserted: (2) by adding at the end the following new paragraph:

   Inserted: "(5) Entities to which paragraph applies.--This paragraph applies to a corporation, trust, or association--

   Inserted: "(A) which is not a real estate investment trust to which the provisions of this part apply for the taxable year due to one or more failures to comply with one or more of the provisions of this part (other than subsection (c)(6) or (c)(7) of section 856),

   Inserted: "(B) such failures are due to reasonable cause and not due to willful neglect, and

   Inserted: "(C) if such corporation, trust, or association pays (as prescribed by the Secretary in regulations and in the same manner as tax) a penalty of $50,000 for each failure to satisfy a provision of this part due to reasonable cause and not willful neglect.".

   Inserted: (d) Deduction of Tax Paid From Amount Required To Be Distributed.--Subparagraph (E) of section 857(b)(2) is amended by striking "(7)" and inserting "(7) of this subsection, section 856(c)(7)(B)(iii), and section 856(g)(1).".

   Inserted: (e) Expansion of Deficiency Dividend Procedure.--Subsection (e) of section 860 is amended by striking "or" at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting "; or," and by adding at the end the following new paragraph:

   Inserted: "(4) a statement by the taxpayer attached to its amendment or supplement to a return of tax for the relevant tax year.".

   Inserted: (f) Effective Date.--The amendments made by this section shall apply to taxable years beginning after date of the enactment of this Act.

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   Original wording

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As printed