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H.R. 2128 (114th): Real Estate Investment and Jobs Act of 2015

The text of the bill below is as of Apr 30, 2015 (Introduced).

Source: GPO

I

114th CONGRESS

1st Session

H. R. 2128

IN THE HOUSE OF REPRESENTATIVES

April 30, 2015

(for himself, Mr. Crowley, Mr. McDermott, Mr. Reichert, Mr. Marchant, Mr. Young of Indiana, Mr. Roskam, Mr. Meehan, Ms. Linda T. Sánchez of California, Mr. Renacci, Mr. Reed, Mr. Tiberi, Mr. Blumenauer, Mr. Rangel, Mr. Thompson of California, Mr. Larson of Connecticut, Mr. Neal, Mr. Kind, Mr. King of New York, Mr. Sessions, Mr. Sam Johnson of Texas, Mr. Dold, Mr. Buchanan, and Ms. Jenkins of Kansas) 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.

1.

Short title; etc

(a)

Short title

This Act may be cited as the Real Estate Investment and Jobs Act of 2015.

(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.

2.

Exception from FIRPTA for certain stock of real estate investment trusts

(a)

Modifications of ownership rules

(1)

In general

Section 897 is amended by adding at the end the following new subsection:

(k)

Special rules relating to real estate investment trusts

(1)

Increase in percentage ownership for exceptions for persons holding publicly traded stock

(A)

Dispositions

In the case of any disposition of stock in a real estate investment trust, paragraphs (3) and (6)(C) of subsection (c) shall each be applied by substituting more than 10 percent for more than 5 percent.

(B)

Distributions

In the case of any distribution from a real estate investment trust, subsection (h)(1) shall be applied by substituting 10 percent for 5 percent.

(2)

Stock held by qualified shareholders not treated as USRPI

(A)

In general

Except as provided in subparagraph (B)—

(i)

stock of a real estate investment trust which is held directly by a qualified shareholder shall not be treated as a United States real property interest, and

(ii)

notwithstanding subsection (h)(1), any distribution to a qualified shareholder shall not be treated as gain recognized from the sale or exchange of a United States real property interest to the extent the stock of the real estate investment trust held by such qualified shareholder is not treated as a United States real property interest under clause (i).

(B)

Exception

In the case of a qualified shareholder with 1 or more applicable investors—

(i)

subparagraph (A)(i) shall not apply to so much of the stock of a real estate investment trust held by a qualified shareholder as bears the same ratio to the value of the interests (other than interests held solely as a creditor) held by such applicable investors in the qualified shareholder bears to value of all interests (other than interests held solely as a creditor) in the qualified shareholder, and

(ii)

a percentage equal to the ratio determined under clause (i) of the amounts realized by the qualified shareholder with respect to any disposition of stock in the real estate investment trust or with respect to any distribution from the real estate investment trust attributable to gain from sales or exchanges of a United States real property interest shall be treated as amounts realized from the disposition of United States real property interests.

(C)

Applicable investor

For purposes of this paragraph, the term applicable investor means, with respect to any qualified shareholder holding stock in a real estate investment trust, a person (other than a qualified shareholder) which—

(i)

holds an interest (other than an interest solely as a creditor) in such qualified shareholder, and

(ii)

holds more than 10 percent of the stock of such real estate investment trust (whether or not by reason of the person's ownership interest in the qualified shareholder).

(D)

Constructive ownership rules

For purposes of subparagraphs (B)(i) and (C), the constructive ownership rules under subsection (c)(6)(C) shall apply.

(3)

Qualified shareholder

For purposes of this subsection—

(A)

In general

The term qualified shareholder means a foreign person—

(i)

which is eligible for benefits of a comprehensive income tax treaty with the United States which includes an exchange of information program,

(ii)

which is a qualified collective investment vehicle,

(iii)

the principal class of interests of which is listed and regularly traded on 1 or more recognized stock exchanges (as defined in such comprehensive income tax treaty), and

(iv)

which maintains records on the identity of each person who, at any time during the foreign person’s taxable year, holds directly 5 percent or more of the class of interest described in clause (iii).

(B)

Qualified collective investment vehicle

For purposes of this subsection, the term qualified collective investment vehicle means a foreign person—

(i)

which, under the comprehensive income tax treaty described in subparagraph (A)(i), is eligible for a reduced rate of withholding with respect to ordinary dividends paid by a real estate investment trust even if such person holds more than 10 percent of the stock of such real estate investment trust, or

(ii)

which is designated as a qualified collective investment vehicle by the Secretary and is either—

(I)

fiscally transparent within the meaning of section 894, or

(II)

required to include dividends in its gross income, but entitled to a deduction for distributions to persons holding interests (other than interests solely as a creditor) in such foreign person.

.

(2)

Conforming amendments

(A)

Section 897(c)(1)(A) is amended by inserting or subsection (k) after subparagraph (B) in the matter preceding clause (i).

(B)

Section 857(b)(3)(F) is amended by inserting or section 897(k)(2)(A)(ii) after 897(h)(1).

(b)

Determination of domestic control

(1)

Special ownership rules

(A)

In general

Section 897(h)(4) is amended by adding at the end the following new subparagraph:

(E)

Special ownership rules

For purposes of determining the holder of stock under subparagraphs (B) and (C)—

(i)

in the case of any class of stock of the qualified investment entity which is regularly traded on an established securities market in the United States, a person holding less than 5 percent of such class of stock at all times during the testing period shall be treated as a United States person unless the qualified investment entity has actual knowledge that such person is not a United States person,

(ii)

any stock in the qualified investment entity held by another qualified investment entity—

(I)

any class of stock of which is regularly traded on an established securities market, or

(II)

which is a regulated investment company which issues redeemable securities (within the meaning of section 2 of the Investment Company Act of 1940),

shall be treated as held by a foreign person, except that if such other qualified investment entity is domestically controlled (determined after application of this subparagraph), such stock shall be treated as held by a United States person, and
(iii)

any stock in the qualified investment entity held by any other qualified investment entity not described in subclause (I) or (II) of clause (ii) shall only be treated as held by a United States person in proportion to the stock of such other qualified investment entity which is (or is treated under clause (ii) or (iii) as) held by a United States person.

.

(B)

Conforming amendment

The heading for paragraph (4) of section 897(h) is amended by inserting and special rules after Definitions.

(2)

Technical amendment

Clause (ii) of section 897(h)(4)(A) is amended by inserting and for purposes of determining whether a real estate investment trust is a domestically controlled qualified investment entity under this subsection after real estate investment trust.

(c)

Effective dates

(1)

In general

The amendments made by subsection (a) shall take effect on the date of enactment and shall apply to—

(A)

any disposition on and after the date of the enactment of this Act, and

(B)

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.

(2)

Determination of domestic control

The amendments made by subsection (b)(1) shall take effect on the date of the enactment of this Act.

(3)

Technical amendment

The amendment made by subsection (b)(2) shall take effect on January 1, 2015.

3.

Exception for interests held by foreign retirement or pension funds

(a)

In general

Section 897, as amended by section 2, is amended by adding at the end the following new subsection:

(l)

Exception for interests held by foreign pension funds

(1)

In general

This section shall not apply to any United States real property interest held by—

(A)

a qualified foreign pension fund, or

(B)

any entity all of the interests of which are held by a qualified foreign pension fund.

(2)

Qualified foreign pension fund

For purposes of this subsection, the term qualified foreign pension fund means any trust, corporation, or other organization or arrangement—

(A)

which is created or organized under the law of a country other than the United States,

(B)

which is established to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (or persons designated by such employees) of one or more employers in consideration for services rendered,

(C)

which does not have a single participant or beneficiary with a right to more than five percent of its assets or income,

(D)

which is subject to government regulation and provides annual information reporting about its beneficiaries to the relevant tax authorities in the country in which it is established or operates, and

(E)

with respect to which, under the laws of the country in which it is established or operates—

(i)

contributions to such trust, corporation, organization, or arrangement which would otherwise be subject to tax under such laws are deductible or excluded from the gross income of such entity or taxed at a reduced rate, or

(ii)

taxation of any investment income of such trust, corporation, organization or arrangement is deferred or such income is taxed at a reduced rate.

(3)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.

.

(b)

Exemption from withholding

Section 1445(f)(3) is amended by striking any person and all that follows and inserting the following:

any person other than—

(A)

a United States person, and

(B)

except as otherwise provided by the Secretary, an entity with respect to which section 897 does not apply by reason of subsection (l) thereof.

.

(c)

Effective date

The amendments made by this section shall apply to dispositions and distributions after the date of the enactment of this Act.