,,ii ,calendar ,no4 #dh #aadth ,,congress #ast ,session ,s4 #iae ,report ,no4 #aad-be ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,april #ad1 #bjae,mr4 ,hatch1 from the ,committee on ,finance1 reported the following original bill2 which was read twice and placed on the calendar ,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 title2 etc 7a7 ,short title ,this ,act may be cited as the ,real ,estate ,investment and ,jobs ,act of #bjae4 7b7 ,amendment of #aihf ,code ,except as otherwise expressly provided1 whenever in this ,act an amendment or repeal is expressed in terms of an amendment to1 or repeal of1 a section or other provision1 the reference shall be considered to be made to a section or other provision of the ,internal ,revenue ,code of #aihf4 #b4 ,exception from ,,firpta for certain stock of real estate investment trusts 7a7 ,modifications of ownership rules 7#a7 ,in general ,section #hig is amended by adding at the end the following new subsection3 7k7 ,special rules relating to real estate investment trusts 7#a7 ,increase in percentage ownership for exceptions for persons holding publicly traded stock 7,a7 ,dispositions ,in the case of any disposition of stock in a real estate investment trust1 paragraphs 7#c7 and 7#f77;,c7 of subsection 7c7 shall each be applied by substituting more than #aj percent for more than #e percent4 7,b7 ,distributions ,in the case of any distribution from a real estate investment trust1 subsection 7h77#a7 shall be applied by substituting #aj percent for #e percent4 7#b7 ,stock held by qualified shareholders not treated as ,,usrpi 7,a7 ,in general ,except as provided in subparagraph 7,b7-- 7i7 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 interest1 and 7ii7 notwithstanding subsection 7h77#a71 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 7i74 7,b7 ,exception ,in the case of a qualified shareholder with #a or more applicable investors-- 7i7 subparagraph 7,a77i7 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 amount of the interests 7other than interests held solely as a creditor7 held by such applicable investors in the qualified shareholder bears to all such interests in the qualified shareholder1 and 7ii7 a percentage equal to the ratio determined under clause 7i7 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 interests4 7,c7 ,applicable investor ,for purposes of this paragraph-- 7i7 ,in general ,the term applicable investor means1 with respect to any qualified shareholder holding stock in a real estate investment trust1 a person 7other than a qualified shareholder7 which-- 7,i7 holds an interest 7other than an interest solely as a creditor7 in such qualified shareholder1 and 7,,ii7 holds more than #aj percent of the stock of such real estate investment trust 7whether or not by reason of the person's ownership interest in the qualified shareholder74 7ii7 ,constructive ownership rules ,for purposes of this subparagraph1 the constructive ownership rules under subsection 7c77#f77;,c7 shall apply4 7#c7 ,qualified shareholder ,for purposes of this subsection-- 7,a7 ,in general ,the term qualified shareholder means a foreign person-- 7i7 which is eligible for benefits of a comprehensive income tax treaty with the ,united ,states which includes an exchange of information program1 7ii7 which is a qualified collective investment vehicle1 7iii7 the principal class of interests of which is listed and regularly traded on #a or more recognized stock exchanges 7as defined in such comprehensive income tax treaty71 and 7iv7 which maintains records on the identity of each person who1 at any time during the foreign person's taxable year1 holds directly more than #aj percent of the class of interest described in clause 7iii74 7,b7 ,qualified collective investment vehicle ,for purposes of this subsection1 the term qualified collective investment vehicle means a foreign person-- 7i7 which1 under the comprehensive income tax treaty described in subparagraph 7,a77i71 is eligible for a reduced rate of withholding with respect to ordinary dividends paid by a real estate investment trust and continues to be so eligible even if such person holds more than #aj percent of the stock of such real estate investment trust1 7ii7 which1 if such person were a ,united ,states person1 would be classified as a ,united ,states real property holding corporation 7determined without regard to paragraph 7#b77 at any time during the #e-year period ending on the date of any disposition of1 or distribution with respect to1 the person's interests in a real estate investment trust1 or 7iii7 which is designated as a qualified collective investment vehicle by the ,secretary and is either-- 7,i7 fiscally transparent within the meaning of section #hid1 or 7,,ii7 required to include dividends in its gross income1 but entitled to a deduction for distributions to persons holding interests 7other than interests solely as a creditor7 in such foreign person4 4 7#b7 ,conforming amendments 7,a7 ,section #hig7;c77#a77;,a7 is amended by inserting or subsection 7k7 after subparagraph 7,b7 in the matter preceding clause 7i74 7,b7 ,section #heg7;b77#c77;,f7 is amended by inserting or section #hig7k77#b77;,a77ii7 after #hig7;h77#a74 7b7 ,determination of domestic control 7#a7 ,special ownership rules 7,a7 ,in general ,section #hig7;h77#d7 is amended by adding at the end the following new subparagraph3 7,e7 ,special ownership rules ,for purposes of determining the holder of stock under subparagraphs 7,b7 and 7,c7-- 7i7 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 ,states1 a person holding less than #e 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 person1 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 securities market1 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 person1 except that if such other qualified investment entity is domestically controlled 7determined after application of this subparagraph71 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 in proportion to the stock of such other qualified investment entity which is 7or is treated under clause 7ii7 or 7iii7 as7 held by a ,united ,states person4 4 7,b7 ,conforming amendment ,the heading for paragraph 7#d7 of section #hig7;h7 is amended by inserting and special rules after ,definitions4 7#b7 ,technical amendment ,clause 7ii7 of section #hig7;h77#d77;,a7 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 trust4 7c7 ,effective dates 7#a7 ,in general ,the amendments made by subsection 7a7 shall take effect on the date of enactment and shall apply to-- 7,a7 any disposition on and after the date of the enactment of this ,act1 and 7,b7 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#b7 ,determination of domestic control ,the amendments made by subsection 7b77#a7 shall take effect on the date of the enactment of this ,act4 7#c7 ,technical amendment ,the amendment made by subsection 7b77#b7 shall take effect on ,january #a1 #bjae4 #c4 ,increase in rate of withholding of tax on dispositions of ,united ,states real property interests 7a7 ,in general ,subsections 7a71 7e77#c71 7e77#d71 and 7e77#e7 of section #adde are each amended by striking #aj percent and inserting #ae percent4 7b7 ,exception for certain residences ,section #adde7;c7 is amended by adding at the end the following new paragraph3 7#d7 ,reduced rate of withholding for residence where amount realized does not exceed #a1jjj1jjj ,in the case of a disposition-- 7,a7 of property which is acquired by the transferee for use by the transferee as a residence1 7,b7 with respect to which the amount realized for such property does not exceed #a1jjj1jjj1 and 7,c7 to which subsection 7b77#e7 does not apply1 subsection 7a7 shall be applied by substituting #aj percent for #ae percent4 4 7c7 ,effective date ,the amendments made by this section shall apply to dispositions after the date which is #fj days after the date of the enactment of this ,act4 #d4 ,required notification of status as ,united ,states real property holding corporation 7a7 ,notification of status as ,united ,states real property holding corporation 7#a7 ,in general ,subpart ,a of part ,,iii of subchapter ,a of chapter #fa is amended by inserting before section #fjci;,c the following new section3 #fjci;,b4 ,notification of status as ,united ,states real property holding corporation 7a7 ,in general ,any corporation which is a ,united ,states real property holding corporation shall make the following notifications3 7#a7 ,disclosure to the ,secretary ,not later than the due date for its return of tax 7including extensions7 for the taxable year1 the corporation shall disclose the information described in subsection 7b7 to the ,secretary in such form and manner as the ,secretary may require4 7#b7 ,disclosure on payee statements ,the corporation shall include on any statement required to be made under section #fjdb7;c7 the information described in subsection 7b74 7#c7 ,disclosure to the public ,the corporation shall disclose to the public the information described in subsection 7b7-- 7,a7 in any annual report made by such corporation1 or 7,b7 in the case of a corporation which does not file an annual report for any year1 on its website or through such other media as determined appropriate by the ,secretary in the interests of tax administration4 7b7 ,information described ,the information described in this subsection is-- 7#a7 a statement that such corporation is a ,united ,states real property holding corporation1 and 7#b7 such other information as may be required by the ,secretary4 7c7 ,united ,states real property holding corporation 7#a7 ,in general ,for purposes of this section1 a corporation is a ,united ,states real property holding corporation if-- 7,a7 such corporation meets the requirements of section #hig7;c77#b7 at any time during the applicable period1 or 7,b7 any officer of such corporation has actual knowledge that such corporation meets such requirements at any time during the period beginning on the first day after the end of the applicable period and ending on the date the notification required under subsection 7a7 is made4 7#b7 ,applicable period ,for purposes of paragraph 7#a71 the applicable period is-- 7,a7 in the case of any notice required under subsection 7a77#a71 the #e-year period ending on the last day of the taxable year for which a disclosure was required to be made under such subsection1 7,b7 in the case of any notice required under subsection 7a77#b71 the #e-year period ending on the last day of the calendar year for which a disclosure was required to be made under such subsection1 and 7,c7 in the case of any notice required under subsection 7a77#c71 the #e-year period ending on the last day of the year for which a disclosure was required to be made under such subsection4 7d7 ,application to publicly traded partnerships ,under regulations prescribed by the ,secretary1 rules similar to the rules of subsection 7a7 shall apply to any publicly traded partnership 7as defined in section #ggjd7;b77 which-- 7#a7 is not treated as a corporation under section #ggjd7;a71 and 7#b7 would be a ,united ,states real property holding corporation if such publicly traded partnership were a corporation4 4 7#b7 ,clerical amendment ,the table of sections for subpart ,a of part ,,iii of subchapter ,a of chapter #fa is amended by inserting before the item relating to section #fjci;,c the following new item3 ,sec4 #fjci;,b4 ,notification of status as ,united ,states real property holding corporation4 4 7b7 ,notification of domestic control ,subparagraph 7,b7 of section #hig7;h77#d7 is amended by adding at the end the following new sentence3 ,notwithstanding the preceding sentence1 a qualified investment entity shall not be treated as a domestically controlled qualified investment entity for any period unless such entity makes a disclosure that such entity is domestically controlled on any annual report made by such entity on or after ,january #a1 #bjaf 7or1 in the case of an entity which does not file an annual report for the year1 on its website or through such other media as determined appropriate by the ,secretary in the interests of tax administration744 7c7 ,penalty for failure to make notification of status 7#a7 ,in general ,part ,i of subchapter ,b of chapter #fh is amended by adding at the end the following new section3 #fgbj;,d4 ,failure to make notification of status as ,united ,states real property holding company 7a7 ,in general ,any person required to make a notification under section #fjci;,b who-- 7#a7 fails to disclose to the ,secretary the information required under section #fjci;,b7a77#a7 for any taxable year1 7#b7 fails to substantially comply with the requirements of section #fjci;,b7a77#b7 for any calendar year1 or 7#c7 fails to make the disclosure required under section #fjci;,b7a77#c7 for any year1 shall pay a penalty with respect to each such failure in the amount determined under subsection 7b74 7b7 ,amount of penalty 7#a7 ,in general ,except as otherwise provided in this subsection1 the amount of the penalty under this subsection shall be #a1ejj1jjj4 7#b7 ,lower penalty for persons with gross receipts of not more than #e1jjj1jjj 7,a7 ,in general ,in the case of a person who meets the gross receipts test under subparagraph 7,b71 the amount of the penalty under this subsection shall be #ejj1jjj4 7,b7 ,gross receipts test 7i7 ,in general ,a person meets the gross receipts test of this subparagraph for any calendar year if the average annual gross receipts of such person for the most recent #e taxable years ending before such calendar year do not exceed #e1jjj1jjj4 7ii7 ,certain rules made applicable ,for purposes of clause 7i71 rules similar to the rules of paragraphs 7#b7 and 7#c7 of section #ddh7;c7 shall apply4 7#c7 ,higher penalty for persons with large ,united ,states real property interests 7,a7 ,in general ,in the case of a person described in subparagraph 7,c71 the amount of the penalty under this subsection shall be #e1jjj1jjj4 7,b7 ,intentional disregard ,if a failure is due to intentional disregard1 subparagraph 7,a7 shall be applied by substituting #aj1jjj1jjj for #e1jjj1jjj4 7,c7 ,person described 7i7 ,in general ,a person is described in this subparagraph if such person has ,united ,states real property interests 7as defined in section #hig7;c77 with a gross fair market value of #a1jjj1jjj1jjj or more at any time during the applicable period 7as defined in section #fjci;,b7b77#b774 7ii7 ,aggregation rules ,for purposes of this paragraph1 rules similar to the rules of paragraph 7#b7 of section #ddh7;c7 shall apply4 7c7 ,coordination with penalty for failure to file correct payee statements ,no penalty shall be imposed under section #fgbb with respect to any failure to comply with the requirements of section #fjci;,b7a77#b7 if a penalty is imposed under subsection 7a77#b7 with respect to such failure4 7d7 ,reasonable cause waiver ,no penalty shall be imposed under this section with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect4 7e7 ,inflation adjustment 7#a7 ,in general ,in the case of any failure relating to a notice required to be made in a calendar year beginning after #bjaf1 each of the dollar amounts under subsection 7b7 shall be increased by such dollar amount multiplied by the cost-of-living adjustment determined under section #a7;f77#c71 determined by substituting calendar year #bjae for calendar year #aiib in subparagraph 7,b7 thereof4 7#b7 ,rounding ,if any amount adjusted under paragraph 7#a7 is not a multiple of #aj1jjj1 such amount shall be rounded to the next lowest multiple of #aj1jjj4 4 7#b7 ,clerical amendment ,the table of sections for part ,i of subchapter ,b of chapter #fh is amended by adding at the end the following new item3 ,sec4 #fgbj;,d4 ,failure to make notification of status as ,united ,states real property holding company4 4 7d7 ,effective dates 7#a7 ,notification ,the amendments made by subsections 7a7 and 7b7 shall take effect on ,january #a1 #bjaf4 7#b7 ,penalties ,the amendments made by subsection 7c7 shall apply to notifications required to be made on or after ,january #a1 #bjaf4 #e4 ,required withholding by brokers on sales by shareholders owning a more than #e percent interest 7a7 ,in general ,section #adde7;e7 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 dispositions of certain interests in ,united ,states real property holding corporations and publicly traded partnerships 7,a7 ,in general ,in the case of any disposition of stock of a ,united ,states real property holding corporation by a foreign person in which the disposition is made through a broker 7as defined in section #fjde7;c771 such broker shall be required to deduct and withhold a tax equal to #ae percent of the amount realized on the disposition4 7,b7 ,exceptions 7i7 ,amounts withheld by transferee ,subparagraph 7,a7 shall not apply to any disposition if-- 7,i7 the transferee is required to deduct and withhold tax under subsection 7a71 and 7,,ii7 the transferee furnishes to the broker an affidavit1 under penalty of perjury1 that the transferee has deducted and withheld such tax4 7ii7 ,interests regularly traded on an established securities market ,subparagraph 7,a7 shall not apply to any disposition of any class of stock of a ,united ,states real property holding corporation which is regularly traded on an established securities market if the transferor1 immediately prior to the disposition1 holds #e percent 7#aj percent in the case of a real estate investment trust7 or less of such class of stock 7determined under the rules of section #hig7;c77#f77;,c774 7iii7 ,domestically controlled qualified investment entities and real estate investment trusts ,subparagraph 7,a7 shall not apply to dispositions of stock of-- 7,i7 any domestically controlled qualified investment entity 7as defined in section #hig7;h77#d771 or 7,,ii7 any real estate investment trust to the extent that such stock is not treated as a ,united ,states real property interest pursuant to section #hig7k77#b74 7iv7 ,interests in certain corporations ,subparagraph 7,a7 shall not apply to any disposition of stock in a ,united ,states real property holding corporation if such stock is not treated as a ,united ,states real property interest by reason of section #hig7;c77#a77;,b74 7v7 ,lack of broker knowledge 7,i7 ,in general ,subparagraph 7,a7 shall not apply if the broker had no knowledge1 and reasonably could not have been expected to have knowledge1 that the disposition was of stock in a ,united ,states real property holding corporation4 7,,ii7 ,special rule ,for purposes of subclause 7,i71 a broker may rely on public statements made by a public company1 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 7,c7 ,application to publicly traded partnerships ,under regulations prescribed by the ,secretary1 rules similar to the rules of subparagraphs 7,a7 and 7,b7 shall apply to the disposition through a broker of any interest in a publicly traded partnership 7as defined in section #ggjd7;b77 which-- 7i7 is not treated as a corporation under section #ggjd7;a71 and 7ii7 would be a ,united ,states real property holding corporation if such publicly traded partnership were a corporation4 7,d7 ,united ,states real property holding corporation ,for purposes of this paragraph1 the term ,united ,states real property holding corporation means any corporation which was a ,united ,states real property holding corporation 7as defined in section #hig7;c77#b77 at any time during the #e-year period ending on the date of the disposition referred to in subparagraph 7,a74 4 7b7 ,conforming amendment ,section #adde7;b77#f7 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 ,december #ca1 #bjae4 #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 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 trust at any time during the shorter of the periods described in subparagraph 7,a77ii74 4 7b7 ,effective date ,the amendment made by this section shall apply to dispositions on or 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 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 7c7 ,no inference ,nothing contained in this section or the amendments made by this section shall be construed to create any inference with respect to the proper treatment under section #bde of the ,internal ,revenue ,code of #aihf of dividends received from regulated investment companies or real estate investment trusts before the date of the enactment of this ,act4 #h4 ,increase in continuous levy 7a7 ,in general ,paragraph 7#c7 of section #fcca7;h7 of the ,internal ,revenue ,code of #aihf is amended by striking #cj percent and inserting #ce percent4 7b7 ,effective date ,the amendment made by this section shall apply to payments made after #ahj days after the date of the enactment of this ,act4 ,april #ad1 #bjae,read twice and placed on the calendar