II
112th CONGRESS
1st Session
S. 1616
IN THE SENATE OF THE UNITED STATES
September 22, 2011
Mr. Menendez (for himself and Mr. Enzi) introduced the following bill; which was read twice and referred to the Committee on Finance
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 Investment and Jobs
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—
by striking all
that precedes If any class
and inserting the following:
Exceptions for certain stock
Exception for stock regularly traded on established securities markets
,
by inserting
before the period the following: . In the case of any class of stock of
a real estate investment trust, the preceding sentence shall be applied by
substituting
,
and10 percent
for 5 percent
by adding at the end the following new subparagraph:
Exception for 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 (other than an investor that is a 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 an entity—
that is eligible for benefits of a comprehensive income tax treaty with the United States which includes an exchange of information program,
that is a qualified collective investment vehicle,
whose principal class of interests is listed and regularly traded on one or more recognized stock exchanges (as defined in such comprehensive income tax treaty), and
that maintains records on the identity of each person who, at any time during the qualified shareholder’s taxable year, is the direct owner of more than 10 percent of the class of interest described in clause (III).
Qualified collective investment vehicle
For purposes of this subparagraph, the term qualified collective investment vehicle means an entity that—
would be eligible for a reduced rate of withholding under such comprehensive income tax treaty with respect to ordinary dividends paid by a real estate investment trust, even if such entity holds more than 10 percent of the stock of such real estate investment trust,
would be classified as a United States real property holding corporation (determined without regard to this paragraph) at any time during the 5-year period ending on the date of disposition of or distribution with respect to the entity’s interests in a real estate investment trust, or
is designated as such by the Secretary and is either—
fiscally transparent within the meaning of section 894, or
required to include dividends in its gross income, but is entitled to a deduction for distributions to its investors.
.
Distributions by real estate investment trusts
Paragraph (1) of section 897(h) of the Internal Revenue Code of 1986 is amended—
by striking
Any distribution
and inserting the following:
In general
Except as provided in subparagraph (B), any distribution
,
by inserting
(10 percent in the case of stock of a real estate investment
trust)
after 5 percent of such class of stock
,
by inserting
, 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)
before the period at the end of the second sentence,
and
by adding at the end the following new subparagraph:
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
Paragraph
(4) of section 897(h) of the Internal Revenue Code of 1986 is amended by adding
at the end of subparagraph (B) 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 other qualified investment
entity is domestically controlled. In making such a 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 regularly 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 the Internal Revenue Code of 1986 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 dates
In general
The amendments made by subsection (a) shall apply to dispositions on and after the date of the enactment of this Act.
Distributions
The amendments made by subsection (b) shall apply to any distribution by a real estate investment trust on or after the date of the enactment of this Act which is treated as a deduction for a taxable year of such trust ending after such date.
Definitions
The amendments made by subsections (c) and (d) shall take effect on the date of the enactment of this Act.
United States real property interest
United States real property interest
Subparagraph (B) of section 897(c)(1) of
the Internal Revenue Code of 1986 is amended by striking all that precedes
(i) as of the date of the disposition
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 this section shall take effect on the date of the enactment of this Act.