I
112th CONGRESS
1st Session
H. R. 2989
IN THE HOUSE OF REPRESENTATIVES
September 21, 2011
Mr. Brady of Texas (for himself, Mr. Crowley, Mr. Tiberi, and Ms. Berkley) introduced the following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to exempt certain stock of real estate investment trusts from the tax on foreign investments in United States real property interests, and for other purposes.
Short title
This Act may be cited as the
Real Estate Jobs and Investment Act of
2011
.
Exception from FIRPTA for certain stock of real estate investment trusts
In general
Paragraph (3) of section 897(c) of the Internal Revenue Code of 1986 is amended to read as follows:
Exceptions for certain stock dispositions
Stock regularly traded on established securities markets
If any class of stock of
a corporation is regularly traded on an established securities market, stock of
such class shall be treated as a United States real property interest only in
the case of a person who, at some time during the shorter of the periods
described in paragraph (1)(A)(ii), held more than 5 percent of such class of
stock. In the case of any class of stock of a real estate investment trust, the
preceding sentence shall be applied by substituting 10 percent
for 5 percent
.
Certain stock in real estate investment trusts
In general
Stock of a real estate investment trust held by a qualified shareholder shall not be treated as a United States real property interest except to the extent that an investor in the qualified shareholder holds (directly or indirectly through the qualified shareholder) more than 10 percent of the stock of such real estate investment trust.
Qualified shareholder
For purposes of this subparagraph, the term qualified shareholder means a shareholder—
which would be eligible for a reduced rate of withholding under any income tax treaty of the United States with respect to ordinary dividends paid by a real estate investment trust even if such shareholder holds more than 10 percent of the stock of such real estate investment trust, and
whose principal class of interests is listed and regularly traded on one or more recognized stock exchanges (as defined in the relevant income tax treaty referred to in subclause (I)).
.
Distributions of real estate investment trusts
Paragraph (1) of section 897(h) of such Code is amended to read as follows:
Look-through of distributions
In general
Except as provided in subparagraph (B), any distribution by a qualified investment entity to a nonresident alien individual, a foreign corporation, or other qualified investment entity shall, to the extent attributable to gain from sales or exchanges by the qualified investment entity of United States real property interests, be treated as gain recognized by such nonresident alien individual, foreign corporation, or other qualified investment entity from the sale or exchange of a United States real property interest. Notwithstanding the preceding sentence—
any distribution by a qualified investment entity to a nonresident alien individual or a foreign corporation with respect to any class of stock which is regularly traded on an established securities market located in the United States shall not be treated as gain recognized from the sale or exchange of a United States real property interest if such individual or corporation did not own more than 5 percent of such class of stock (10 percent in the case of stock of a real estate investment trust) at any time during the 1-year period ending on the date of such distribution, and
any distribution to a qualified shareholder (as defined in subsection (c)(3)(B)(ii)) shall not be treated as gain recognized from the sale or exchange of a United States real property interest to the extent that the stock of the real estate investment trust held by such qualified shareholder is not treated as a United States real property interest under subsection (c)(3)(B).
Special rule
Subparagraph (A) shall not apply to distributions which are treated as a sale or exchange of stock or property pursuant to section 301(c)(3), 302, or 331.
.
Definition of domestically controlled
Subparagraph (B) of section 897(h)(4) of
such Code is amended by adding at the end the following: In determining
whether a qualified investment entity is domestically controlled, any stock in
the qualified investment entity held by another qualified investment entity
shall be treated as held by a foreign person unless such qualified investment
entity is domestically controlled. In making such determination a qualified
investment entity shall be permitted to presume that stock held by a holder of
less than 5 percent of a class of stock traded on an established securities
market in the United States is held by United States persons throughout the
testing period except to the extent that the qualified investment entity has
actual knowledge regarding stock ownership.
.
Conforming amendment
Subparagraph (C) of section 897(c)(6) of such Code is amended—
by striking more than 5
percent
and inserting more than 5 or 10 percent, whichever is
applicable,
, and
by striking
substituting
and inserting 5 percent
for 50
percent
substituting
.5 percent or
10 percent, whichever is applicable
for 50
percent
Effective date
The amendments made by this section shall apply to dispositions and distributions made after the date of the enactment of this Act.
United States real property interest
In general
Subparagraph (B) of section 897(c)(1) of the Internal Revenue Code of 1986 is amended by striking all that precedes clause (i) and inserting the following:
Exclusion for interest in certain corporations
The term United States real property interest does not include any interest in a corporation (other than a qualified investment entity (as defined in subsection (h)(4)(A)(i)) if—
.
Effective date
The amendment made by subsection (a) shall apply to dispositions made after the date of the enactment of this Act.