Sec. 322. EXCEPTION FROM FIRPTA FOR CERTAIN STOCK OF REITS
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## SEC. 322 EXCEPTION FROM FIRPTA FOR CERTAIN STOCK OF REITS ###
(a)Modifications of Ownership Rules ####
(1)In general **[**[26 U.S.C. 897](/us/usc/t26/s897)**]** 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 (or indirectly through 1 or more partnerships) 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) Special rule for certain distributions treated as sale or exchange > > If a distribution by a real estate investment trust is treated as a sale or exchange of stock under section 301(c)(3), 302, or 331 with respect to a qualified shareholder— > > > ###### “(i) > > in the case of an applicable investor, subparagraph
(B)shall apply with respect to such distribution, and > > > ###### “(ii) > > in the case of any other person, such distribution shall be treated under section 857(b)(3)(F) as a dividend from a real estate investment trust notwithstanding any other provision of this title. > > > ##### “(D) 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). > > > ##### “(E) Constructive ownership rules > > For purposes of subparagraphs (B)(i) and
(C)and paragraph (4), 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 which— > > > ###### “(i) > > > ######
(I)> > is eligible for benefits of a comprehensive income tax treaty with the United States which includes an exchange of information program and 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), or > > > ###### “(II) > > is a foreign partnership that is created or organized under foreign law as a limited partnership in a jurisdiction that has an agreement for the exchange of information with respect to taxes with the United States and has a class of limited partnership units which is regularly traded on the New York Stock Exchange or Nasdaq Stock Market and such class of limited partnership units value is greater than 50 percent of the value of all the partnership units, > > > ###### “(ii) > > is a qualified collective investment vehicle, and > > > ###### “(iii) > > 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 subclause
(I)or
(II)of clause (i), as the case may be. > > > ##### “(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, > > > ###### “(ii) > > which— > > > ###### “(I) > > is a publicly traded partnership (as defined in section 7704(b)) to which subsection
(a)of section 7704 does not apply, > > > ###### “(II) > > is a withholding foreign partnership for purposes of chapters 3, 4, and 61, > > > ###### “(III) > > if such foreign partnership were a United States corporation, would be a United States real property holding corporation (determined without regard to paragraph (1)) at any time during the 5-year period ending on the date of disposition of, or distribution with respect to, such partnership’s interests in a real estate investment trust, or > > > ###### “(iii) > > 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. > > > #### “(4) Partnership allocations > > > ##### “(A) In general > > For the purposes of this subsection, in the case of an applicable investor who is a nonresident alien individual or a foreign corporation and is a partner in a partnership that is a qualified shareholder, if such partner’s proportionate share of USRPI gain for the taxable year exceeds such partner’s distributive share of USRPI gain for the taxable year, then > > > ###### “(i) > > such partner’s distributive share of the amount of gain taken into account under subsection (a)(1) by the partner for the taxable year (determined without regard to this paragraph) shall be increased by the amount of such excess, and > > > ###### “(ii) > > such partner’s distributive share of items of income or gain for the taxable year that are not treated as gain taken into account under subsection (a)(1) (determined without regard to this paragraph) shall be decreased (but not below zero) by the amount of such excess. > > > ##### “(B) USRPI gain > > For the purposes of this paragraph, the term ‘USRPI gain’ means the excess (if any) of— > > > ###### “(i) > > the sum of— > > > ###### “(I) > > any gain recognized from the disposition of a United States real property interest, and > > > ###### “(II) > > any distribution by a real estate investment trust that is treated as gain recognized from the sale or exchange of a United States real property interest, over > > > ###### “(ii) > > any loss recognized from the disposition of a United States real property interest. > > > ##### “(C) Proportionate share of usrpi gain > > For purposes of this paragraph, an applicable investor’s proportionate share of USRPI gain shall be determined on the basis of such investor’s share of partnership items of income or gain (excluding gain allocated under section 704(c)), whichever results in the largest proportionate share. If the investor’s share of partnership items of income or gain (excluding gain allocated under section 704(c)) may vary during the period such investor is a partner in the partnership, such share shall be the highest share such investor may receive.” > . ####
(2)Conforming amendments #####
(A)**[**[26 U.S.C. 897](/us/usc/t26/s897)**]** Section 897(c)(1)(A) is amended by inserting “or subsection (k)” after “subparagraph (B)” in the matter preceding clause (i). #####
(B)**[**[26 U.S.C. 857](/us/usc/t26/s857)**]** Section 857(b)(3)(F) is amended by inserting “or subparagraph (A)(ii) or
(C)of section 897(k)(2)” 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”. **[**Paragraph
(2)of subsection
(b)was repealed by section 101(p)(6) of division U of Public Law 115–141.**]** ###
(c)Effective Dates ####
(1)In general **[**[26 U.S.C. 857 note](/us/usc/t26/s857)**]** 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 **[**[26 U.S.C. 897 note](/us/usc/t26/s897)**]** The amendments made by subsection (b)(1) shall apply with respect to testing periods (as defined in section 897(h)(4)(D) of the Internal Revenue Code of 1986) ending on or after the date of the enactment of this Act.
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Sec. 322
EXCEPTION FROM FIRPTA FOR CERTAIN STOCK OF REITS
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