Update and Streamline REIT Act of 2012 or US REIT Act of 2012 - Amends the Internal Revenue Code, with respect to the tax treatment of real estate investment trusts (REITs), to: (1) modify safe harbor rules for avoiding penalties for prohibited sales of rental and timber properties by REITs by allowing three-year averaging of sales proceeds for such properties, (2) repeal the preferential dividend rule for dividend payments to shareholders of publicly-offered REITs, (3) revise REIT income and assets tests to allow treatment of publicly-offered REIT debt instruments and personal property leased or mortgaged in connection with REIT real property as real estate assets, (4) make permanent the treatment of gain from sales of timber property and mineral royalties as qualifying REIT income, and (5) revise the calculation of REIT earnings and profits to avoid duplicate taxation of REIT shareholders.
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5746 Introduced in House (IH)]
112th CONGRESS
2d Session
H. R. 5746
To amend the Internal Revenue Code of 1986 to modify certain rules
applicable to real estate investment trusts, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 15, 2012
Mr. Tiberi (for himself, Mr. Neal, Mr. Sam Johnson of Texas, Mr.
Rangel, Mr. Nunes, Mr. Stark, Mr. Reichert, Mr. Lewis of Georgia, Mr.
Roskam, Mr. Blumenauer, Mr. Gerlach, Mr. Kind, Mr. Schock, Mr. Crowley,
Ms. Jenkins, and Mr. Paulsen) 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 modify certain rules
applicable to real estate investment trusts, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; ETC.
(a) Short Title.--This Act may be cited as the ``Update and
Streamline REIT Act of 2012'' or the ``US REIT Act of 2012''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; etc.
TITLE I--UPDATE OF PROHIBITED TRANSACTION AND RELATED PROVISIONS
Sec. 101. Prohibited transaction safe harbors.
Sec. 102. Treatment of taxable REIT subsidiaries.
TITLE II--PREFERENTIAL AND DESIGNATED DIVIDENDS
Sec. 201. Repeal of preferential dividend rule for publicly offered
REITs.
Sec. 202. Authority for alternative remedies to address certain
failures.
Sec. 203. Treatment of interest-related dividends of specified REITs.
Sec. 204. Limitations on designation of dividends.
TITLE III--UPDATE AND MODIFICATION OF REIT INCOME AND ASSET TESTS
Sec. 301. Debt instruments of publicly offered REITs and mortgages
treated as real estate assets.
Sec. 302. Asset and income test clarification regarding ancillary
personal property.
Sec. 303. Special rules for treatment of timber gains made permanent.
Sec. 304. Treatment of mineral royalty income as qualifying income.
Sec. 305. Hedging provisions.
TITLE IV--EARNINGS AND PROFITS OF REAL ESTATE INVESTMENT TRUSTS
Sec. 401. Modification of real estate investment trust earnings and
profits calculation to avoid duplicate
taxation.
TITLE I--UPDATE OF PROHIBITED TRANSACTION AND RELATED PROVISIONS
SEC. 101. PROHIBITED TRANSACTION SAFE HARBORS.
(a) Alternative 3-Year Averaging Test for Percentage of Assets That
Can Be Sold Annually.--
(1) In general.--Clause (iii) of section 857(b)(6)C) is
amended by inserting before the semicolon at the end the
following: ``, or (IV) the trust satisfies the requirements of
subclause (II) applied by substituting `20 percent' for `10
percent' and the 3-year average adjusted bases percentage for
the taxable year (as defined in subparagraph (G)) does not
exceed 10 percent, or (V) the trust satisfies the requirements
of subclause (III) applied by substituting `20 percent' for `10
percent' and the 3-year average fair market value percentage
for the taxable year (as defined in subparagraph (H)) does not
exceed 10 percent''.
(2) 3-year average adjusted bases and fair market value
percentages.--Paragraph (6) of section 857(b) is amended by
redesignating subparagraphs (G) and (H) as subparagraphs (I)
and (J), respectively, and by inserting after subparagraph (F)
the following new subparagraphs:
``(G) 3-year average adjusted bases percentage.--
The term `3-year average adjusted bases percentage'
means, with respect to any taxable year, the ratio
(expressed as a percentage) of--
``(i) the aggregate adjusted bases (as
determined for purposes of computing earnings
and profits) of property (other than sales of
foreclosure property or sales to which section
1033 applies) sold during the 3 taxable year
period ending with such taxable year, divided
by
``(ii) the sum of the aggregate adjusted
bases (as so determined) of all of the assets
of the trust as of the beginning of each of the
3 taxable years which are part of the period
referred to in clause (i).
``(H) 3-year average fair market value
percentage.--The term `3-year average fair market value
percentage' means, with respect to any taxable year,
the ratio (expressed as a percentage) of--
``(i) the fair market value of property
(other than sales of foreclosure property or
sales to which section 1033 applies) sold
during the 3 taxable year period ending with
such taxable year, divided by
``(ii) the sum of the fair market value of
all of the assets of the trust as of the
beginning of each of the 3 taxable years which
are part of the period referred to in clause
(i).''.
(3) Conforming amendments.--Clause (iv) of section
857(b)(6)(D) is amended by adding ``or'' at the end of
subclause (III) and by adding at the end the following new
subclauses:
``(IV) the trust satisfies the
requirements of subclause (II) applied
by substituting `20 percent' for `10
percent' and the 3-year average
adjusted bases percentage for the
taxable year (as defined in
subparagraph (G)) does not exceed 10
percent, or
``(V) the trust satisfies the
requirements of subclause (III) applied
by substituting `20 percent' for `10
percent' and the 3-year average fair
market value percentage for the taxable
year (as defined in subparagraph (H))
does not exceed 10 percent,''.
(b) Application of Safe Harbors Independent of Determination
Whether Real Estate Asset Is Inventory Property.--
(1) In general.--Subparagraphs (C) and (D) of section
857(b)(6) are each amended by striking ``and which is described
in section 1221(a)(1)'' in the matter preceding clause (i).
(2) No inference from safe harbors.--Subparagraph (F) of
section 857(b)(6) is amended to read as follows:
``(F) No inference with respect to treatment as
inventory property.--The determination of whether
property is described in section 1221(a)(1) shall be
made without regard to this paragraph.''.
(c) Effective Dates.--
(1) In general.--The amendments made by subsection (a)
shall apply to taxable years beginning after the date of the
enactment of this Act.
(2) Application of safe harbors.--
(A) In general.--Except as provided in subparagraph
(B), the amendments made by subsection (b) shall take
effect as if included in section 3051 of the Housing
Assistance Tax Act of 2008.
(B) Retroactive application of no inference not
applicable to certain timber property previously
treated as not inventory property.--The amendment made
by subsection (b)(2) shall not apply to any sale of
property to which section 857(b)(6)(G) of the Internal
Revenue Code of 1986 (as in effect on the day before
the date of the enactment of this Act) applies.
SEC. 102. TREATMENT OF TAXABLE REIT SUBSIDIARIES.
(a) Taxable REIT Subsidiaries Treated in Same Manner as Independent
Contractors for Certain Purposes.--
(1) Marketing and development expenses under rental
property safe harbor.--Clause (v) of section 857(b)(6)(C) is
amended by inserting ``or by a taxable REIT subsidiary'' before
the period at the end.
(2) Rule for marketing expenses under timber property safe
harbor reinstated and made permanent.--Clause (v) of section
857(b)(6)(D) is amended by striking ``, or, in the case of a
sale on or before the termination date,'' and inserting ``or
by''.
(3) Foreclosure property grace period.--Subparagraph (C) of
section 856(e)(4) is amended by inserting ``or through a
taxable REIT subsidiary'' after ``receive any income''.
(b) Tax on Redetermined TRS Service Income.--
(1) In general.--Subparagraph (A) of section 857(b)(7) is
amended by striking ``and excess interest'' and inserting
``excess interest, and redetermined TRS service income''.
(2) Redetermined trs service income.--Paragraph (7) of
section 857(b) is amended by redesignating subparagraphs (E)
and (F) as subparagraphs (F) and (G), respectively, and
inserting after subparagraph (D) the following new
subparagraph:
``(E) Redetermined trs service income.--
``(i) In general.--The term `redetermined
TRS service income' means gross income of a
taxable REIT subsidiary of a real estate
investment trust attributable to services
provided to, or on behalf of, such trust (less
deductions properly allocable thereto) to the
extent the amount of such income (less such
deductions) would (but for subparagraph (F)) be
increased on distribution, apportionment, or
allocation under section 482.
``(ii) Coordination with redetermined
rents.--Clause (i) shall not apply with respect
to gross income attributable to services
furnished or rendered to a tenant of the real
estate investment trust (or to deductions
properly allocable thereto).''.
(3) Conforming amendments.--Subparagraphs (B)(i) and (C) of
section 857(b)(7) are each amended by striking ``subparagraph
(E)'' and inserting ``subparagraph (F)''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
TITLE II--PREFERENTIAL AND DESIGNATED DIVIDENDS
SEC. 201. REPEAL OF PREFERENTIAL DIVIDEND RULE FOR PUBLICLY OFFERED
REITS.
(a) In General.--Subsection (c) of section 562 is amended by
inserting ``or a publicly offered REIT (as defined in section
856(c)(5)(K))'' after ``a publicly offered regulated investment company
(as defined in section 67(c)(2)(B))''.
(b) Effective Date.--The amendment made by this section shall apply
to distributions in taxable years beginning after the date of the
enactment of this Act.
SEC. 202. AUTHORITY FOR ALTERNATIVE REMEDIES TO ADDRESS CERTAIN
FAILURES.
(a) In General.--Subsection (e) of section 562 is amended--
(1) by striking ``In the case of a real estate investment
trust'' and inserting the following:
``(1) Determination of earnings and profits for purposes of
dividends paid deduction.--In the case of a real estate
investment trust'', and
(2) by adding at the end the following new paragraph:
``(2) Authority to provide alternative remedies for certain
failures.--In the case of a failure of a distribution by a real
estate investment trust to comply with the requirements of
subsection (c), the Secretary may provide an appropriate remedy
to cure such failure in lieu of not considering the
distribution to be a dividend for purposes of computing the
dividends paid deduction if--
``(A) the Secretary determines that such failure is
inadvertent or is due to reasonable cause and not due
to willful neglect, or
``(B) such failure is of a type of failure which
the Secretary has identified for purposes of this
paragraph as being described in subparagraph (A).''.
(b) Effective Date.--The amendments made by this section shall
apply to distributions in taxable years beginning after the date of the
enactment of this Act.
SEC. 203. TREATMENT OF INTEREST-RELATED DIVIDENDS OF SPECIFIED REITS.
(a) Nonresident Alien Individuals.--
(1) In general.--Section 871 is amended by redesignating
subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:
``(n) Interest-Related Dividends of Specified REITs.--
``(1) In general.--Except as provided in paragraph (2), no
tax shall be imposed under paragraph (1)(A) of subsection (a)
on any interest-related dividend received from a specified
REIT.
``(2) Exceptions.--Paragraph (1) shall not apply to any
dividend described in subsection (k)(1)(B) (determined by
treating the specified REIT as a regulated investment company).
``(3) Interest-related dividend.--For purposes of this
subsection--
``(A) In general.--The term `interest-related
dividend' means any dividend (or part thereof) which is
designated by the specified REIT as an interest-related
dividend in a written notice mailed to its shareholders
or holders of beneficial interests before the
expiration of 60 days after the close of its taxable
year.
``(B) Excess reported amount.--If the aggregate
amount so designated with respect to a taxable year of
the trust (including amounts so designated with respect
to dividends paid after the close of the taxable year
described in section 858) is greater than the qualified
net interest income of the trust for such taxable year,
the portion of each distribution which shall be an
interest-related dividend shall be only that portion of
the amounts so designated which such qualified net
interest income bears to the aggregate amount so
designated.
``(C) Qualified net interest income.--The term
`qualified net interest income' has the meaning given
such term by subsection (k)(1)(D) (determined by
treating the specified REIT as a regulated investment
company).
``(D) Termination.--The term `interest-related
dividend' shall not include any dividend with respect
to any taxable year of the trust beginning after the
date set forth in clause (v) of subsection (k)(1)(C).
``(4) Specified reit.--For purposes of this subsection, the
term `specified REIT' means any publicly offered REIT (as
defined in section 856(c)(5)(K)) other than any real estate
investment trust with respect to which any foreign person owns
(within the meaning of section 856(d)(5)) 50 percent or more
(determined by vote or value) of the shares, or certificates of
beneficial interest, in such trust.''.
(2) Conforming amendment.--Clause (iv) of section
871(k)(1)(E) is amended by striking ``another regulated
investment company'' and inserting ``a regulated investment
company or a specified REIT (as defined in subsection
(n)(4))''.
(b) Foreign Corporations.--Section 881 is amended by redesignating
subsection (f) as subsection (g) and by inserting after subsection (e)
the following new subsection:
``(f) Tax Not To Apply to Interest-Related Dividends of Specified
REITs.--
``(1) In general.--Except as provided in paragraph (2), no
tax shall be imposed under paragraph (1) of subsection (a) on
any interest-related dividend (as defined in section 871(n)(3))
received from a specified REIT (as defined in section
871(n)(4)).
``(2) Exceptions and special rules.--Rules similar to the
rules of subparagraphs (B) and (C) of subsection (e)(1) shall
apply for purposes of this subsection (determined by treating
the specified REIT as a regulated investment company).''.
(c) Withholding.--
(1) Nonresident aliens.--Paragraph (12) of section 1441(c)
is amended--
(A) by striking ``section 871(k)'' in subparagraph
(A) and inserting ``subsection (k) or (n) of section
871'',
(B) by inserting ``or real estate investment trust
(as the case may be)'' after ``regulated investment
company'' in subparagraph (B), and
(C) by striking ``regulated investment companies''
in the heading thereof and inserting ``regulated
investment companies and real estate investment
trusts''.
(2) Foreign corporations.--Subsection (a) of section 1442
is amended--
(A) by striking ``sections 871(a) and 871(k)'' and
inserting ``subsections (a), (k), and (n) of section
871'',
(B) by striking ``sections 881(a) and 881(e)'' and
inserting ``subsections (a), (e), and (f) of section
881'', and
(C) by inserting ``or real estate investment trust
(as the case may be)'' after ``regulated investment
company''.
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to distributions made after the date of the enactment of
this Act.
(2) Transition rule.--In the case of a taxable year which
includes the date of the enactment of this Act, qualified net
interest income (as defined in section 871(n)(3)(C) of the
Internal Revenue Code of 1986, as added by this section) shall
be determined by taking into account only items properly
includible in gross income for the portion of such taxable year
after such date (and deductions properly allocable to such
income).
SEC. 204. LIMITATIONS ON DESIGNATION OF DIVIDENDS.
(a) In General.--Section 857 is amended by redesignating subsection
(g) as subsection (h) and by inserting after subsection (f) the
following new subsection:
``(g) Limitations on Designation of Dividends.--
``(1) Overall limitation.--The aggregate amount of
dividends designated by a real estate investment trust under
section 857(b)(3)(C), section 857(c)(2)(A), and section
871(n)(3) with respect to any taxable year may not exceed the
dividends paid by such trust with respect to such year. For
purposes of the preceding sentence, dividends paid after the
close of the taxable year described in section 858 shall be
treated as paid with respect to such year.
``(2) Proportionality.--The Secretary may prescribe
regulations or other guidance requiring the proportionality of
the designation of particular types of dividends among shares
or beneficial interests of a real estate investment trust.''.
(b) Effective Date.--The amendments made by this section shall
apply to distributions in taxable years beginning after the date of the
enactment of this Act.
TITLE III--UPDATE AND MODIFICATION OF REIT INCOME AND ASSET TESTS
SEC. 301. DEBT INSTRUMENTS OF PUBLICLY OFFERED REITS AND MORTGAGES
TREATED AS REAL ESTATE ASSETS.
(a) Debt Instruments of Publicly Offered REITs Treated as Real
Estate Assets.--
(1) In general.--Subparagraph (B) of section 856(c)(5) is
amended--
(A) by striking ``and shares'' and inserting ``,
shares'', and
(B) by inserting ``, and debt instruments issued by
publicly offered REITs'' before the period at the end
of the first sentence.
(2) Income from nonqualified debt instruments of publicly
offered reits not qualified for purposes of satisfying the 75
percent gross income test.--Subparagraph (H) of section
856(c)(3) is amended by inserting ``(other than a nonqualified
publicly offered REIT debt instrument)'' after ``real estate
asset''.
(3) 25 percent asset limitation on holding of nonqualified
debt instruments of publicly offered reits.--Subparagraph (B)
of section 856(c)(4) is amended by redesignating clause (iii)
as clause (iv) and by inserting after clause (ii) the following
new clause:
``(iii) not more than 25 percent of the
value of its total assets is represented by
nonqualified publicly offered REIT debt
instruments, and''.
(4) Definitions related to debt instruments of publicly
offered reits.--Paragraph (5) of section 856(c) is amended by
adding at the end the following new subparagraph:
``(L) Definitions related to debt instruments of
publicly offered reits.--
``(i) Publicly offered reit.--The term
`publicly offered REIT' means any real estate
investment trust which meets the requirements
of this part and which is required to file
annual and periodic reports with the Securities
and Exchange Commission under the Securities
Exchange Act of 1934.
``(ii) Nonqualified publicly offered reit
debt instrument.--The term `nonqualified
publicly offered REIT debt instrument' means
any real estate asset which would cease to be a
real estate asset if subparagraph (B) were
applied without regard to the reference to
`debt instruments issued by publicly offered
REITs'.''.
(b) Interests in Mortgages on Interests in Real Property Treated as
Real Estate Assets.--Subparagraph (B) of section 856(c)(5) is amended
by inserting ``or on interests in real property'' after ``interests in
mortgages on real property''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 302. ASSET AND INCOME TEST CLARIFICATION REGARDING ANCILLARY
PERSONAL PROPERTY.
(a) In General.--Subsection (c) of section 856 is amended by adding
at the end the following new paragraph:
``(9) Special rules for certain personal property which is
ancillary to real property.--
``(A) Certain personal property leased in
connection with real property.--Personal property shall
be treated as a real estate asset for purposes of
paragraph (4)(A) to the extent that rents attributable
to such personal property are treated as rents from
real property under subsection (d)(1)(C).
``(B) Certain personal property mortgaged in
connection with real property.--In the case of an
obligation secured by a mortgage on both real property
and personal property, if the fair market value of such
personal property does not exceed 15 percent of the
total fair market value of all such property, such
personal property shall be treated as real property for
purposes of applying paragraphs (3)(B) and (4)(A). For
purposes of the preceding sentence, the fair market
value of all such property shall be determined in the
same manner as the fair market value of real property
is determined for purposes of apportioning interest
income between real property and personal property
under paragraph (3)(B).''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 303. SPECIAL RULES FOR TREATMENT OF TIMBER GAINS MADE PERMANENT.
(a) In General.--Subparagraph (H) of section 856(c)(5) is amended
by striking clause (iii).
(b) Clarification of Exemption From Prohibited Transaction Rules.--
Subclause (II) of section 856(c)(5)(H)(ii) is amended to read as
follows:
``(II) Exemption from prohibited
transaction rules.--For purposes of
this part, income described in this
subparagraph shall not be treated as
gain from a prohibited transaction.''.
(c) Conforming Amendments.--
(1) Subclause (I) of section 856(c)(5)(H)(ii) is amended by
inserting ``Deemed sale of cut timber.--'' before ``For
purposes of''.
(2) Subsection (c) of section 856, as amended by section
302, is amended by striking paragraph (8) and redesignating
paragraph (9) as paragraph (8).
(3) Paragraph (6) of section 857(b), as amended by section
101(a), is amended by striking subparagraphs (I) and (J).
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 304. TREATMENT OF MINERAL ROYALTY INCOME AS QUALIFYING INCOME.
(a) In General.--Subparagraph (I) of section 856(c)(2) is amended
to read as follows:
``(I) mineral royalty income (including oil and gas
royalties) from real property owned by a real estate
investment trust and held, or once held, in connection
with the trust's trade or business of generating rents
from real property or producing timber;''.
(b) Conforming Amendment.--Paragraph (5) of section 856(c), as
amended by section 301, is amended by striking subparagraph (I) and by
redesignating subparagraphs (J), (K), and (L) as subparagraphs (I),
(J), and (K), respectively.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 305. HEDGING PROVISIONS.
(a) Modification To Permit the Termination of a Hedging Transaction
Using an Additional Hedging Instrument.--Subparagraph (G) of section
856(c)(5) is amended by striking ``and'' at the end of clause (i), by
striking the period at the end of clause (ii) and inserting ``, and'',
and by adding at the end the following new clause:
``(iii) if--
``(I) a real estate investment
trust enters into one or more positions
described in clause (i) with respect to
indebtedness described in clause (i) or
one or more positions described in
clause (ii) with respect to property
which generates income or gain
described in paragraph (2) or (3),
``(II) any portion of such
indebtedness is extinguished or any
portion of such property is disposed
of, and
``(III) in connection with such
extinguishment or disposition, such
trust enters into one or more hedging
transactions (as defined in clause (ii)
or (iii) of section 1221(b)(2)(A)) with
respect to any position referred to in
subclause (I),
any income of such trust from any position
referred to in subclause (I) and from any
transaction referred to in subclause (III)
(including gain from the termination of any
such position or transaction) shall not
constitute gross income under paragraphs (2)
and (3) to the extent that such transaction
hedges such position.''.
(b) Identification Requirements.--
(1) In general.--Subparagraph (G) of section 856(c)(5), as
amended by subsection (a), is amended by striking ``and'' at
the end of clause (ii), by striking the period at the end of
clause (iii) and inserting ``, and'', and by adding at the end
the following new clause:
``(iv) clauses (i), (ii), and (iii) shall
not apply with respect to any transaction
unless such transaction satisfies the
identification requirement described in section
1221(a)(7) (determined after taking into
account any curative provisions provided under
the regulations referred to therein).''.
(2) Conforming amendments.--Subparagraph (G) of section
856(c)(5) is amended--
(A) by striking ``which is clearly identified
pursuant to section 1221(a)(7)'' in clause (i), and
(B) by striking ``, but only if such transaction is
clearly identified as such before the close of the day
on which it was acquired, originated, or entered into
(or such other time as the Secretary may prescribe)''
in clause (ii).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
TITLE IV--EARNINGS AND PROFITS OF REAL ESTATE INVESTMENT TRUSTS
SEC. 401. MODIFICATION OF REAL ESTATE INVESTMENT TRUST EARNINGS AND
PROFITS CALCULATION TO AVOID DUPLICATE TAXATION.
(a) Earnings and Profits Not Increased by Amounts Allowed in
Computing Taxable Income in Prior Years.--
(1) In general.--Paragraph (1) of section 857(d) is amended
to read as follows:
``(1) In general.--The earnings and profits of a real
estate investment trust for any taxable year (but not its
accumulated earnings) shall not be reduced by any amount
which--
``(A) is not allowable in computing its taxable
income for such taxable year, and
``(B) was not allowable in computing its taxable
income for any prior taxable year.''.
(2) Exception for purposes of determining dividends paid
deduction.--Paragraph (1) of section 562(e), as amended by
section 302, is amended--
(A) by striking ``deduction, the earnings'' and
inserting the following: ``deduction--
``(A) the earnings'',
(B) by striking the period at the end and inserting
``, and'', and
(C) by adding at the end the following new
subparagraph:
``(B) section 857(d)(1) shall be applied without
regard to subparagraph (B) thereof.''.
(3) Conforming amendments.--Subsection (d) of section 857
is amended by adding at the end the following new paragraphs:
``(4) Real estate investment trust.--For purposes of this
subsection, the term `real estate investment trust' includes a
domestic corporation, trust, or association which is a real
estate investment trust determined without regard to the
requirements of subsection (a).
``(5) Special rules for determining earnings and profits
for purposes of the deduction for dividends paid.--For special
rules for determining the earnings and profits of a real estate
investment trust for purposes of the deduction for dividends
paid, see section 562(e)(1).''.
(b) Treatment of Gain on Sales of Real Property.--Subparagraph (A)
of section 562(e)(1), as amended by section 202 and subsection (a), is
amended to read as follows:
``(A) the earnings and profits of such trust for
any taxable year (but not its accumulated earnings)
shall be increased by the amount of gain (if any) on
the sale or exchange of real property which is taken
into account in determining the taxable income of such
trust for such taxable year (and not otherwise taken
into account in determining such earnings and profits),
and''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
Sponsor introductory remarks on measure. (CR E820)
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