,i #aacth ,,congress #b;d ,session ,h4 ,r4 #edhg ,,in ,,the ,,house ,,of ,,representatives ,september #af1 #bjad ,mr4 ,brady of ,texas 7for himself and ,mr4 ,crowley7 introduced the following bill2 which was referred to the ,committee on ,ways and ,means ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to exempt certain stock of real estate investment trusts from the tax on foreign investments in ,united ,states real property interests1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,real ,estate ,investment and ,jobs ,act of #bjad4 #b4 ,exception from ,,firpta for certain stock of real estate investment trusts 7a7 ,in general ,paragraph 7#c7 of section #hig7;c7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking all that precedes ,if any class and inserting the following3 7#c7 ,exceptions for certain stock 7,a7 ,exception for stock regularly traded on established securities markets 1 7#b7 by inserting before the period the following3 4 ,in the case of any class of stock of a real estate investment trust1 the preceding sentence shall be applied by substituting #aj percent for #e percent1 and 7#c7 by adding at the end the following new subparagraph3 7,b7 ,exception for certain stock in real estate investment trusts 7i7 ,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 7other than an investor that is a qualified shareholder7 holds more than #aj percent of the stock of such real estate investment trust 7determined by applying the constructive ownership rules of section #hig7;c77#f77;,c774 7ii7 ,qualified shareholder ,for purposes of this subparagraph1 the term qualified shareholder means an entity-- 7,i7 that is eligible for benefits of a comprehensive income tax treaty with the ,united ,states which includes an exchange of information program1 7,,ii7 that is a qualified collective investment vehicle1 7,,iii7 whose principal class of interests is listed and regularly traded on one or more recognized stock exchanges 7as defined in such comprehensive income tax treaty71 and 7,,iv7 that maintains records on the identity of each person who1 at any time during the qualified shareholder's taxable year1 is the direct owner of #e percent or more of the class of interest described in clause 7,,iii74 7iii7 ,qualified collective investment vehicle ,for purposes of this subparagraph1 the term qualified collective investment vehicle means an entity that-- 7,i7 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 trust1 even if such entity holds more than #aj percent of the stock of such real estate investment trust1 or 7,,ii7 is designated as a qualified collective investment vehicle by the ,secretary and is either-- 7aa7 fiscally transparent within the meaning of section #hid1 or 7bb7 required to include dividends in its gross income1 but is entitled to a deduction for distributions to its investors4 4 7b7 ,distributions by real estate investment trusts ,paragraph 7#a7 of section #hig7;h7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by inserting 7#aj percent in the case of stock of a real estate investment trust7 after #e percent of such class of stock1 and 7#b7 by inserting 1 and any distribution to a qualified shareholder 7as defined in subsection 7c77#c77;,b77ii77 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 7c77#c77;,b7 before the period at the end of the second sentence4 7c7 ,definition ,subparagraph 7,b7 of section #hig7;h77#d7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following3 ,in determining whether a qualified investment entity is domestically controlled-- 7i7 a qualified investment entity shall be permitted to presume that stock held by a holder of less than #e 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 ownership1 7ii7 any stock in the qualified investment entity held by another qualified investment entity-- 7,i7 any class of stock of which is regularly traded on an established stock exchange1 or 7,,ii7 which is a regulated investment company which issues redeemable securities 7within the meaning of section #b of the ,investment ,company ,act of #aidj71 shall be treated as held by a foreign person unless such other qualified investment entity is domestically controlled 7as determined under this subparagraph7 in which case such stock shall be treated as held by a ,united ,states person1 and 7iii7 any stock in the qualified investment entity held by any other qualified investment entity not described in subclause 7,i7 or 7,,ii7 of clause 7ii7 shall only be treated as held by a ,united ,states person to the extent that the stock of such other qualified investment entity is 7or is treated under this subparagraph as7 held by a ,united ,states person4 4 7d7 ,conforming amendment ,subparagraph 7,c7 of section #hig7;c77#f7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking more than #e percent and inserting more than #e or #aj percent1 whichever is applicable11 and 7#b7 by striking substituting #e percent for #ej percent7 and inserting substituting #e percent or #aj percent1 whichever is applicable for #ej percent74 7e7 ,effective dates 7#a7 ,in general ,the amendments made by subsection 7a7 shall apply to dispositions on and after the date of the enactment of this ,act4 7#b7 ,distributions ,the amendments made by subsection 7b7 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 date4 7#c7 ,definitions ,the amendments made by subsections 7c7 and 7d7 shall take effect on the date of the enactment of this ,act4 #c4 ,united ,states real property interest 7a7 ,united ,states real property interest ,subparagraph 7,b7 of section #hig7;c77#a7 of the ,internal ,revenue ,code of #aihf is amended by striking all that precedes 7i7 as of the date of the disposition and inserting the following3 7,b7 ,exclusion for interest in certain corporations ,the term ,united ,states real property interest does not include any interest in a corporation 7other than a qualified investment entity 7as defined in subsection 7h77#d77;,a77i77 if-- 4 7b7 ,effective date ,the amendment made by this section shall take effect on the date of the enactment of this ,act4 #d4 ,required notification of ,,firpta status 7a7 ,in general ,section #fjci;,c of the ,internal ,revenue ,code of #aihf is amended by redesignating subsection 7d7 as subsection 7e7 and by inserting after subsection 7c7 the following new subsection3 7d7 ,required notification of status as ,united ,states real property holding corporation2 presumption of foreign control for qualified investment entities 7#a7 ,required notification of status as ,united ,states real property holding corporation ,any ,united ,states real property holding corporation 7as defined in section #hig7;c77#b77 is hereby required to make its status as a ,united ,states real property holding corporation readily accessible1 and in the case of a publicly traded corporation1 publicly available4 ,under regulations prescribed by the ,secretary1 such notifications may include disclosure of such status on ,form #ajiis sent to shareholders1 in annual reports1 on websites1 and1 in the case of privately held corporations1 on stock certificates4 7#b7 ,presumption of foreign control of qualified investment entities ,in the absence of disclosure to the contrary 7in such form and manner as the ,secretary may prescribe71 any qualified investment entity 7as defined in section #hig7;h77#d77;,a77 will be presumed for purposes of section #hig to be foreign controlled4 7#c7 ,penalty for failure to make notification of status ,the penalty provided under section #fgba shall apply to any failure to comply with the requirements of paragraph 7#a71 with the following modifications-- 7,a7 in the case of a corporation other than a corporation which meets the gross receipts test of section #fgba7;d77#b71 the minimum penalty imposed under such section shall be equal to the maximum penalty provided under section #fgba7;a77#a71 7,b7 in the case of a corporation which holds ,united ,states real estate with a gross fair market value of at least #a1jjj1jjj1jjj-- 7i7 the minimum penalty imposed under such section shall be equal to #e1jjj1jjj1 and 7ii7 in the case of an intentional failure1 the minimum penalty imposed under such section shall be the greater of the penalty provided under section #fgba7;e7 or #aj1jjj1jjj4 4 7b7 ,effective date ,the amendments made by this section shall take effect on the date of the enactment of this ,act4 #e4 ,require ,,firpta withholding by brokers on sales by shareholders owning a more than #e percent interest 7a7 ,in general ,section #adde7;e7 of the ,internal ,revenue ,code of #aihf is amended by redesignating paragraph 7#g7 as paragraph 7#h7 and by inserting after paragraph 7#f7 the following new paragraph3 7#g7 ,broker withholding obligation on certain dispositions of nondomestically controlled ,united ,states real property holding corporations 7,a7 ,in general ,in the case of any disposition of an interest in a ,united ,states real property holding corporation 7as defined in section #hig7;c77#b77 involving a broker 7as defined in section #fjde7;c771 such broker shall be required to deduct and withhold a tax equal to #aj percent of the amount realized on the disposition4 7,b7 ,exceptions 7i7 ,domestic qualified investment entities and real estate investment trusts ,subparagraph 7,a7 shall not apply to sales of stock of a domestically controlled qualified investment entity 7as defined in section #hig7;h77#d77 or stock of a real estate investment trust that is not treated as a ,united ,states real property interest pursuant to section #hig7;c77#c77;,b74 7ii7 ,greater than #e percent interest in ,united ,states real property holding corporation ,subparagraph 7,a7 shall not apply if the transferee held a greater than #e percent interest 7or in the case of the disposition of any class of stock of a real estate investment trust that is regularly traded on an established securities market1 a greater than #aj percent interest7 in the ,united ,states real property holding corporation4 ,in determining whether that threshold is met1 brokers are permitted to rely on public statements made by public companies1 including statements related to the status of the company as a ,united ,states real property holding corporation or as a domestically controlled qualified investment entity4 7iii7 ,lack of broker knowledge ,subparagraph 7,a7 shall apply only if the broker had actual knowledge 7or reasonably should have known7 of their withholding obligation4 4 7b7 ,conforming amendment ,section #adde7;b77#f7 of the ,internal ,revenue ,code of #aihf is amended by striking ,this paragraph and inserting ,except as provided in subsection 7e77#g71 this paragraph4 7c7 ,effective date ,the amendments made by this section shall apply to dispositions after the date of the enactment of this ,act4 #f4 ,interests in ,r,i,cs and ,r,e,i,ts not excluded from definition of ,united ,states real property interests 7a7 ,in general ,section #hig7;c77#a77;,b7 of the ,internal ,revenue ,code of #aihf is amended by striking and at the end of clause 7i71 by striking the period at the end of clause 7ii77,,ii7 and inserting 1 and1 and by adding at the end the following new clause3 7iii7 neither such corporation nor any predecessor of such corporation was a regulated investment company or a real estate investment company at any time during the period described in subparagraph 7,a77ii74 4 7b7 ,effective date ,the amendment made by this section shall apply to dispositions after the date of the enactment of this ,act4 #g4 ,dividends derived from ,r,i,cs and ,r,e,i,ts ineligible for deduction for ,united ,states source portion of dividends from certain foreign corporations 7a7 ,in general ,section #bde7;a7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#ab7 ,dividends derived from ,r,i,cs and ,r,e,i,ts ineligible for deduction ,regulated investment companies and real estate investment trusts shall not be treated as domestic corporations for purposes of paragraph 7#e77;,b74 4 7b7 ,effective date ,the amendment made by this section shall apply to dividends received from regulated investment companies and real estate investment trusts on or after the date of the enactment of this ,act4