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.

Summary: Real Estate Investment and Jobs Act of 2011 - Amends the Internal Revenue Code to increase from 5% to 10% the allowable ownership interest in real estate investment trust (REIT) stock for purposes of tax exemptions allowed by the Foreign Investment in Real Property Tax Act relating to foreign investment in United States real property interests.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Real Estate Investment and Jobs Act 
of 2011''.

SEC. 2. EXCEPTION FROM FIRPTA FOR CERTAIN STOCK OF REAL ESTATE 
              INVESTMENT TRUSTS.

    (a) In General.--Paragraph (3) of section 897(c) of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking all that precedes ``If any class'' and 
        inserting the following:
            ``(3) Exceptions for certain stock.--
                    ``(A) Exception for stock regularly traded on 
                established securities markets.--'',
            (2) by inserting before the period the following: ``. In 
        the case of any class of stock of a real estate investment 
        trust, the preceding sentence shall be applied by substituting 
        `10 percent' for `5 percent''', and
            (3) by adding at the end the following new subparagraph:
                    ``(B) Exception for certain stock in real estate 
                investment trusts.--
                            ``(i) 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 (other than an investor that is a 
                        qualified shareholder) holds (directly or 
                        indirectly through the qualified shareholder) 
                        more than 10 percent of the stock of such real 
                        estate investment trust.
                            ``(ii) Qualified shareholder.--For purposes 
                        of this subparagraph, the term `qualified 
                        shareholder' means an entity--
                                    ``(I) that is eligible for benefits 
                                of a comprehensive income tax treaty 
                                with the United States which includes 
                                an exchange of information program,
                                    ``(II) that is a qualified 
                                collective investment vehicle,
                                    ``(III) whose principal class of 
                                interests is listed and regularly 
                                traded on one or more recognized stock 
                                exchanges (as defined in such 
                                comprehensive income tax treaty), and
                                    ``(IV) that maintains records on 
                                the identity of each person who, at any 
                                time during the qualified shareholder's 
                                taxable year, is the direct owner of 
                                more than 10 percent of the class of 
                                interest described in clause (III).
                            ``(iii) Qualified collective investment 
                        vehicle.--For purposes of this subparagraph, 
                        the term `qualified collective investment 
                        vehicle' means an entity that--
                                    ``(I) 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 trust, even if 
                                such entity holds more than 10 percent 
                                of the stock of such real estate 
                                investment trust,
                                    ``(II) would be classified as a 
                                United States real property holding 
                                corporation (determined without regard 
                                to this paragraph) at any time during 
                                the 5-year period ending on the date of 
                                disposition of or distribution with 
                                respect to the entity's interests in a 
                                real estate investment trust, or
                                    ``(III) is designated as such by 
                                the Secretary and is either--
                                            ``(aa) fiscally transparent 
                                        within the meaning of section 
                                        894, or
                                            ``(bb) required to include 
                                        dividends in its gross income, 
                                        but is entitled to a deduction 
                                        for distributions to its 
                                        investors.''.
    (b) Distributions by Real Estate Investment Trusts.--Paragraph (1) 
of section 897(h) of the Internal Revenue Code of 1986 is amended--
            (1) by striking ``Any distribution'' and inserting the 
        following:
                    ``(A) In general.--Except as provided in 
                subparagraph (B), any distribution'',
            (2) by inserting ``(10 percent in the case of stock of a 
        real estate investment trust)'' after ``5 percent of such class 
        of stock'',
            (3) by inserting ``, and any distribution to a qualified 
        shareholder (as defined in subsection (c)(3)(B)(ii)) 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 (c)(3)(B)'' before the 
        period at the end of the second sentence, and
            (4) by adding at the end the following new subparagraph:
                    ``(B) Special rule.--Subparagraph (A) shall not 
                apply to distributions which are treated as a sale or 
                exchange of stock or property pursuant to section 
                301(c)(3), 302, or 331.''.
    (c) Definition.--Paragraph (4) of section 897(h) of the Internal 
Revenue Code of 1986 is amended by adding at the end of subparagraph 
(B) the following: ``In determining whether a qualified investment 
entity is domestically controlled, any stock in the qualified 
investment entity held by another qualified investment entity shall be 
treated as held by a foreign person unless such other qualified 
investment entity is domestically controlled. In making such a 
determination, a qualified investment entity shall be permitted to 
presume that stock held by a holder of less than 5 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 ownership.''.
    (d) Conforming Amendment.--Subparagraph (C) of section 897(c)(6) of 
the Internal Revenue Code of 1986 is amended--
            (1) by striking ``more than 5 percent'' and inserting 
        ``more than 5 or 10 percent, whichever is applicable,'', and
            (2) by striking ``substituting `5 percent' for `50 
        percent')'' and inserting ``substituting `5 percent or 10 
        percent, whichever is applicable' for `50 percent')''.
    (e) Effective Dates.--
            (1) In general.--The amendments made by subsection (a) 
        shall apply to dispositions on and after the date of the 
        enactment of this Act.
            (2) Distributions.--The amendments made by subsection (b) 
        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 date.
            (3) Definitions.--The amendments made by subsections (c) 
        and (d) shall take effect on the date of the enactment of this 
        Act.

SEC. 3. UNITED STATES REAL PROPERTY INTEREST.

    (a) United States Real Property Interest.--Subparagraph (B) of 
section 897(c)(1) of the Internal Revenue Code of 1986 is amended by 
striking all that precedes ``(i) as of the date of the disposition'' 
and inserting the following:
                    ``(B) Exclusion for interest in certain 
                corporations.--The term `United States real property 
                interest' does not include any interest in a 
                corporation (other than a qualified investment entity 
                (as defined in subsection (h)(4)(A)(i)) if--''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.