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Code · BILL · 113th Congress · H.R. 1 (Introduced in House) — To amend the Internal Revenue Code of 1986 to provide for comprehensive tax reform. · Sec. 3635

Sec. 3635. Limitation on fixed percentage rent and interest exceptions for REIT income tests

338 words·~2 min read·/bill/113/hr/1/ih/section-3635

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Section 856 is amended by adding at the end the following new subsection: If the fixed percentage rent and interest income received or accrued by a real estate investment trust from a single C corporation (other than a taxable REIT subsidiary of such real estate investment trust) for any taxable year exceeds either— 25 percent of the fixed percentage rent income received or accrued by such real estate investment trust for such taxable year, or 25 percent of the fixed percentage interest income received or accrued by such real estate investment trust for such taxable year, then, notwithstanding subsection (d)(2), none of the fixed percentage rent income received or accrued from such corporation which is attributable to leases entered into after December 31, 2014, shall be treated as rents from real property and, notwithstanding subsection (f), none of the fixed percentage interest income received or accrued from such corporation which is attributable to debt instruments acquired after December 31, 2014, shall be treated as interest.
For purposes of this subsection— The term fixed percentage rent and interest income means the sum of the fixed percentage rent income plus the fixed percentage interest income. The term fixed percentage rent income means amounts described in subsection (d)(2)(A) which are based on a fixed percentage or percentages of receipts or sales. The term fixed percentage interest income means amounts described in subsection (f)(1) which are based on a fixed percentage or percentages of receipts or sales.
Members of the same affiliated group (as defined in section 1504, applied by substituting 50 percent for 80 percent each place it appears therein) shall be treated as 1 corporation for purposes of paragraph (1). For purposes of paragraph (1), any material modification (including any extension of the term) of a lease or debt instrument shall be treated as a new lease or debt instrument, as the case may be, entered into on the date of such modification. . The amendment made by this section shall apply to taxable years ending after December 31, 2014.
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