I 

113TH CONGRESS 

1ST SESSION H. R. 2870 

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. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 31, 2013 

Mr. BRADY of Texas (for himself, Mr. CROWLEY, Ms. JENKINS, Mr. BLUMENAUER, Mr. RANGEL, Mr. ROSKAM, Mr. PASCRELL, Mr. VAN HOLLEN, Mr. SAM JOHNSON of Texas, Mr. LARSON of Connecticut, Mr. SESSIONS, Mr. GERLACH, Mr. KIND, and Mr. KING of New York) introduced 

the following bill; which was referred to the Committee on Ways and 

Means 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Real Estate Invest5 ment and Jobs Act of 2013’’. 


smartinez on DSK6TPTVN1PROD with BILLS
2 

•HR 2870 IH

1 SEC. 2. EXCEPTION FROM FIRPTA FOR CERTAIN STOCK OF 

2 REAL ESTATE INVESTMENT TRUSTS. 

3 (a) IN GENERAL.—Paragraph (3) of section 897(c) 

4 of the Internal Revenue Code of 1986 is amended— 

5 (1) by striking all that precedes ‘‘If any class’’ 

6 and inserting the following: 

7 ‘‘(3) EXCEPTIONS FOR CERTAIN STOCK.— 

8 ‘‘(A) EXCEPTION FOR STOCK REGULARLY

9 TRADED ON ESTABLISHED SECURITIES MAR10 KETS.—’’, 

11 (2) by inserting before the period the following: 

12 ‘‘. In the case of any class of stock of a real estate 

13 investment trust, the preceding sentence shall be ap14 plied by substituting ‘10 percent’ for ‘5 percent’ ’’, 

15 and 

16 (3) by adding at the end the following new sub17 paragraph: 

18 ‘‘(B) EXCEPTION FOR CERTAIN STOCK IN

19 REAL ESTATE INVESTMENT TRUSTS.— 

20 ‘‘(i) IN GENERAL.—Stock of a real es21 tate investment trust held by a qualified 

22 shareholder shall not be treated as a 

23 United States real property interest except 

24 to the extent that an investor in the quali25 fied shareholder (other than an investor 

26 that is a qualified shareholder) holds (diVerDate Mar 15 2010 00:02 Aug 02, 2013 Jkt 029200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2870.IH H2870

smartinez on DSK6TPTVN1PROD with BILLS
3 

•HR 2870 IH

1 rectly or indirectly through the qualified 

2 shareholder) more than 10 percent of the 

3 stock of such real estate investment trust. 

4 ‘‘(ii) QUALIFIED SHAREHOLDER.— 

5 For purposes of this subparagraph, the 

6 term ‘qualified shareholder’ means an enti7 ty— 

8 ‘‘(I) that is eligible for benefits of 

9 a comprehensive income tax treaty 

10 with the United States which includes 

11 an exchange of information program, 

12 ‘‘(II) that is a qualified collective 

13 investment vehicle, 

14 ‘‘(III) whose principal class of in15 terests is listed and regularly traded 

16 on one or more recognized stock ex17 changes (as defined in such com18 prehensive income tax treaty), and 

19 ‘‘(IV) that maintains records on 

20 the identity of each person who, at 

21 any time during the qualified share22 holder’s taxable year, is the direct 

23 owner of more than 10 percent of the 

24 class of interest described in clause 

25 (III). 


smartinez on DSK6TPTVN1PROD with BILLS
4 

•HR 2870 IH

1 ‘‘(iii) QUALIFIED COLLECTIVE IN2 VESTMENT VEHICLE.—For purposes of 

3 this subparagraph, the term ‘qualified col4 lective investment vehicle’ means an entity 

5 that— 

6 ‘‘(I) would be eligible for a re7 duced rate of withholding under such 

8 comprehensive income tax treaty with 

9 respect to ordinary dividends paid by 

10 a real estate investment trust, even if 

11 such entity holds more than 10 per12 cent of the stock of such real estate 

13 investment trust, 

14 ‘‘(II) is a corporation (other than 

15 a corporation that is entitled to a de16 duction or exclusion for dividends paid 

17 to its shareholders or subject to a re18 quirement to distribute any portion of 

19 its taxable income annually) engaged 

20 primarily in the trade or business of 

21 operating or managing real estate en22 tities or assets either directly or 

23 through entities under common con24 trol (within the meaning of sub25 sections (a) and (b) of section 52), or 


smartinez on DSK6TPTVN1PROD with BILLS
5 

•HR 2870 IH

1 ‘‘(III) is designated as a qualified 

2 collective investment vehicle by the 

3 Secretary and is either— 

4 ‘‘(aa) fiscally transparent 

5 within the meaning of section 

6 894, or 

7 ‘‘(bb) required to include 

8 dividends in its gross income, but 

9 is entitled to a deduction for dis10 tributions to its investors.’’. 

11 (b) DISTRIBUTIONS BY REAL ESTATE INVESTMENT

12 TRUSTS.—Paragraph (1) of section 897(h) of the Internal 

13 Revenue Code of 1986 is amended— 

14 (1) by striking ‘‘Any distribution’’ and inserting 

15 the following: 

16 ‘‘(A) IN GENERAL.—Except as provided in 

17 subparagraph (B), any distribution’’, 

18 (2) by inserting ‘‘(10 percent in the case of 

19 stock of a real estate investment trust)’’ after ‘‘5 

20 percent of such class of stock’’, 

21 (3) by inserting ‘‘, and any distribution to a 

22 qualified shareholder (as defined in subsection 

23 (c)(3)(B)(ii)) shall not be treated as gain recognized 

24 from the sale or exchange of a United States real 

25 property interest to the extent that the stock of the 


smartinez on DSK6TPTVN1PROD with BILLS
6 

•HR 2870 IH

1 real estate investment trust held by such qualified 

2 shareholder is not treated as a United States real 

3 property interest under subsection (c)(3)(B)’’ before 

4 the period at the end of the second sentence, and 

5 (4) by adding at the end the following new sub6 paragraph: 

7 ‘‘(B) SPECIAL RULE.—Subparagraph (A) 

8 shall not apply to distributions which are treat9 ed as a sale or exchange of stock or property 

10 pursuant to section 301(c)(3), 302, or 331.’’. 

11 (c) DEFINITION.—Paragraph (4) of section 897(h) of 

12 the Internal Revenue Code of 1986 is amended by adding 

13 at the end of subparagraph (B) the following: ‘‘In deter14 mining whether a qualified investment entity is domesti15 cally controlled, any stock in the qualified investment enti16 ty held by another qualified investment entity shall be 

17 treated as held by a foreign person unless such other 

18 qualified investment entity is domestically controlled. In 

19 making such a determination, a qualified investment enti20 ty shall be permitted to presume that stock held by a hold21 er of less than 5 percent of a class of stock regularly trad22 ed on an established securities market in the United 

23 States is held by United States persons throughout the 

24 testing period except to the extent that the qualified inVerDate Mar 15 2010 00:02 Aug 02, 2013 Jkt 029200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2870.IH H2870

smartinez on DSK6TPTVN1PROD with BILLS
7 

•HR 2870 IH

1 vestment entity has actual knowledge regarding stock 

2 ownership.’’. 

3 (d) CONFORMING AMENDMENT.—Subparagraph (C) 

4 of section 897(c)(6) of the Internal Revenue Code of 1986 

5 is amended— 

6 (1) by striking ‘‘more than 5 percent’’ and in7 serting ‘‘more than 5 or 10 percent, whichever is ap8 plicable,’’, and 

9 (2) by striking ‘‘substituting ‘5 percent’ for ‘50 

10 percent’)’’ and inserting ‘‘substituting ‘5 percent or 

11 10 percent, whichever is applicable’ for ‘50 per12 cent’)’’. 

13 (e) EFFECTIVE DATES.— 

14 (1) IN GENERAL.—The amendments made by 

15 subsection (a) shall apply to dispositions on and 

16 after the date of the enactment of this Act. 

17 (2) DISTRIBUTIONS.—The amendments made 

18 by subsection (b) shall apply to any distribution by 

19 a real estate investment trust on or after the date 

20 of the enactment of this Act which is treated as a 

21 deduction for a taxable year of such trust ending 

22 after such date. 

23 (3) DEFINITIONS.—The amendments made by 

24 subsections (c) and (d) shall take effect on the date 

25 of the enactment of this Act. 


smartinez on DSK6TPTVN1PROD with BILLS
8 

•HR 2870 IH

1 SEC. 3. UNITED STATES REAL PROPERTY INTEREST. 

2 (a) UNITED STATES REAL PROPERTY INTEREST.— 

3 Subparagraph (B) of section 897(c)(1) of the Internal 

4 Revenue Code of 1986 is amended by striking all that pre5 cedes ‘‘(i) as of the date of the disposition’’ and inserting 

6 the following: 

7 ‘‘(B) EXCLUSION FOR INTEREST IN CER8 TAIN CORPORATIONS.—The term ‘United States 

9 real property interest’ does not include any in10 terest in a corporation (other than a qualified 

11 investment entity (as defined in subsection 

12 (h)(4)(A)(i)) if—’’. 

13 (b) EFFECTIVE DATE.—The amendment made by 

14 this section shall take effect on the date of the enactment 

15 of this Act. 

Æ 


smartinez on DSK6TPTVN1PROD with BILLS