I 

114TH CONGRESS 

1ST SESSION H. R. 2128 

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 

APRIL 30, 2015 

Mr. BRADY of Texas (for himself, Mr. CROWLEY, Mr. MCDERMOTT, Mr. 

REICHERT, Mr. MARCHANT, Mr. YOUNG of Indiana, Mr. ROSKAM, Mr. 

MEEHAN, Ms. LINDA T. SA ́NCHEZ of California, Mr. RENACCI, Mr. 

REED, Mr. TIBERI, Mr. BLUMENAUER, Mr. RANGEL, Mr. THOMPSON of 

California, Mr. LARSON of Connecticut, Mr. NEAL, Mr. KIND, Mr. KING

of New York, Mr. SESSIONS, Mr. SAM JOHNSON of Texas, Mr. DOLD, 

Mr. BUCHANAN, and Ms. JENKINS of Kansas) 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; ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Real Estate Investment and Jobs Act of 2015’’. 


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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment 

4 to, or repeal of, a section or other provision, the reference 

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986. 

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

8 REAL ESTATE INVESTMENT TRUSTS. 

9 (a) MODIFICATIONS OF OWNERSHIP RULES.— 

10 (1) IN GENERAL.—Section 897 is amended by 

11 adding at the end the following new subsection: 

12 ‘‘(k) SPECIAL RULES RELATING TO REAL ESTATE

13 INVESTMENT TRUSTS.— 

14 ‘‘(1) INCREASE IN PERCENTAGE OWNERSHIP

15 FOR EXCEPTIONS FOR PERSONS HOLDING PUBLICLY

16 TRADED STOCK.— 

17 ‘‘(A) DISPOSITIONS.—In the case of any 

18 disposition of stock in a real estate investment 

19 trust, paragraphs (3) and (6)(C) of subsection 

20 (c) shall each be applied by substituting ‘more 

21 than 10 percent’ for ‘more than 5 percent’. 

22 ‘‘(B) DISTRIBUTIONS.—In the case of any 

23 distribution from a real estate investment trust, 

24 subsection (h)(1) shall be applied by sub25 stituting ‘10 percent’ for ‘5 percent’. 


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1 ‘‘(2) STOCK HELD BY QUALIFIED SHARE2 HOLDERS NOT TREATED AS USRPI.— 

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

4 subparagraph (B)— 

5 ‘‘(i) stock of a real estate investment 

6 trust which is held directly by a qualified 

7 shareholder shall not be treated as a 

8 United States real property interest, and 

9 ‘‘(ii) notwithstanding subsection 

10 (h)(1), any distribution to a qualified 

11 shareholder shall not be treated as gain 

12 recognized from the sale or exchange of a 

13 United States real property interest to the 

14 extent the stock of the real estate invest15 ment trust held by such qualified share16 holder is not treated as a United States 

17 real property interest under clause (i). 

18 ‘‘(B) EXCEPTION.—In the case of a quali19 fied shareholder with 1 or more applicable in20 vestors— 

21 ‘‘(i) subparagraph (A)(i) shall not 

22 apply to so much of the stock of a real es23 tate investment trust held by a qualified 

24 shareholder as bears the same ratio to the 

25 value of the interests (other than interests 


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1 held solely as a creditor) held by such ap2 plicable investors in the qualified share3 holder bears to value of all interests (other 

4 than interests held solely as a creditor) in 

5 the qualified shareholder, and 

6 ‘‘(ii) a percentage equal to the ratio 

7 determined under clause (i) of the amounts 

8 realized by the qualified shareholder with 

9 respect to any disposition of stock in the 

10 real estate investment trust or with respect 

11 to any distribution from the real estate in12 vestment trust attributable to gain from 

13 sales or exchanges of a United States real 

14 property interest shall be treated as 

15 amounts realized from the disposition of 

16 United States real property interests. 

17 ‘‘(C) APPLICABLE INVESTOR.—For pur18 poses of this paragraph, the term ‘applicable in19 vestor’ means, with respect to any qualified 

20 shareholder holding stock in a real estate in21 vestment trust, a person (other than a qualified 

22 shareholder) which— 

23 ‘‘(i) holds an interest (other than an 

24 interest solely as a creditor) in such quali25 fied shareholder, and 


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1 ‘‘(ii) holds more than 10 percent of 

2 the stock of such real estate investment 

3 trust (whether or not by reason of the per4 son’s ownership interest in the qualified 

5 shareholder). 

6 ‘‘(D) CONSTRUCTIVE OWNERSHIP

7 RULES.—For purposes of subparagraphs (B)(i) 

8 and (C), the constructive ownership rules under 

9 subsection (c)(6)(C) shall apply. 

10 ‘‘(3) QUALIFIED SHAREHOLDER.—For purposes 

11 of this subsection— 

12 ‘‘(A) IN GENERAL.—The term ‘qualified 

13 shareholder’ means a foreign person— 

14 ‘‘(i) which is eligible for benefits of a 

15 comprehensive income tax treaty with the 

16 United States which includes an exchange 

17 of information program, 

18 ‘‘(ii) which is a qualified collective in19 vestment vehicle, 

20 ‘‘(iii) the principal class of interests of 

21 which is listed and regularly traded on 1 or 

22 more recognized stock exchanges (as de23 fined in such comprehensive income tax 

24 treaty), and 


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1 ‘‘(iv) which maintains records on the 

2 identity of each person who, at any time 

3 during the foreign person’s taxable year, 

4 holds directly 5 percent or more of the 

5 class of interest described in clause (iii). 

6 ‘‘(B) QUALIFIED COLLECTIVE INVEST7 MENT VEHICLE.—For purposes of this sub8 section, the term ‘qualified collective investment 

9 vehicle’ means a foreign person— 

10 ‘‘(i) which, under the comprehensive 

11 income tax treaty described in subpara12 graph (A)(i), is eligible for a reduced rate 

13 of withholding with respect to ordinary 

14 dividends paid by a real estate investment 

15 trust even if such person holds more than 

16 10 percent of the stock of such real estate 

17 investment trust, or 

18 ‘‘(ii) which is designated as a qualified 

19 collective investment vehicle by the Sec20 retary and is either— 

21 ‘‘(I) fiscally transparent within 

22 the meaning of section 894, or 

23 ‘‘(II) required to include divi24 dends in its gross income, but entitled 

25 to a deduction for distributions to perVerDate Sep 11 2014 02:14 May 09, 2015 Jkt 049200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2128.IH H2128

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1 sons holding interests (other than in2 terests solely as a creditor) in such 

3 foreign person.’’. 

4 (2) CONFORMING AMENDMENTS.— 

5 (A) Section 897(c)(1)(A) is amended by in6 serting ‘‘or subsection (k)’’ after ‘‘subparagraph 

7 (B)’’ in the matter preceding clause (i). 

8 (B) Section 857(b)(3)(F) is amended by 

9 inserting ‘‘or section 897(k)(2)(A)(ii)’’ after 

10 ‘‘897(h)(1)’’. 

11 (b) DETERMINATION OF DOMESTIC CONTROL.— 

12 (1) SPECIAL OWNERSHIP RULES.— 

13 (A) IN GENERAL.—Section 897(h)(4) is 

14 amended by adding at the end the following 

15 new subparagraph: 

16 ‘‘(E) SPECIAL OWNERSHIP RULES.—For 

17 purposes of determining the holder of stock 

18 under subparagraphs (B) and (C)— 

19 ‘‘(i) in the case of any class of stock 

20 of the qualified investment entity which is 

21 regularly traded on an established securi22 ties market in the United States, a person 

23 holding less than 5 percent of such class of 

24 stock at all times during the testing period 

25 shall be treated as a United States person 


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1 unless the qualified investment entity has 

2 actual knowledge that such person is not a 

3 United States person, 

4 ‘‘(ii) any stock in the qualified invest5 ment entity held by another qualified in6 vestment entity— 

7 ‘‘(I) any class of stock of which 

8 is regularly traded on an established 

9 securities market, or 

10 ‘‘(II) which is a regulated invest11 ment company which issues redeem12 able securities (within the meaning of 

13 section 2 of the Investment Company 

14 Act of 1940), 

15 shall be treated as held by a foreign per16 son, except that if such other qualified in17 vestment entity is domestically controlled 

18 (determined after application of this sub19 paragraph), such stock shall be treated as 

20 held by a United States person, and 

21 ‘‘(iii) any stock in the qualified invest22 ment entity held by any other qualified in23 vestment entity not described in subclause 

24 (I) or (II) of clause (ii) shall only be treat25 ed as held by a United States person in 


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1 proportion to the stock of such other quali2 fied investment entity which is (or is treat3 ed under clause (ii) or (iii) as) held by a 

4 United States person.’’. 

5 (B) CONFORMING AMENDMENT.—The 

6 heading for paragraph (4) of section 897(h) is 

7 amended by inserting ‘‘AND SPECIAL RULES’’ 

8 after ‘‘DEFINITIONS’’. 

9 (2) TECHNICAL AMENDMENT.—Clause (ii) of 

10 section 897(h)(4)(A) is amended by inserting ‘‘and 

11 for purposes of determining whether a real estate in12 vestment trust is a domestically controlled qualified 

13 investment entity under this subsection’’ after ‘‘real 

14 estate investment trust’’. 

15 (c) EFFECTIVE DATES.— 

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

17 subsection (a) shall take effect on the date of enact18 ment and shall apply to— 

19 (A) any disposition on and after the date 

20 of the enactment of this Act, and 

21 (B) any distribution by a real estate in22 vestment trust on or after the date of the en23 actment of this Act which is treated as a deduc24 tion for a taxable year of such trust ending 

25 after such date. 


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1 (2) DETERMINATION OF DOMESTIC CONTROL.— 

2 The amendments made by subsection (b)(1) shall 

3 take effect on the date of the enactment of this Act. 

4 (3) TECHNICAL AMENDMENT.—The amendment 

5 made by subsection (b)(2) shall take effect on Janu6 ary 1, 2015. 

7 SEC. 3. EXCEPTION FOR INTERESTS HELD BY FOREIGN RE8 TIREMENT OR PENSION FUNDS. 

9 (a) IN GENERAL.—Section 897, as amended by sec10 tion 2, is amended by adding at the end the following new 

11 subsection: 

12 ‘‘(l) EXCEPTION FOR INTERESTS HELD BY FOREIGN

13 PENSION FUNDS.— 

14 ‘‘(1) IN GENERAL.—This section shall not apply 

15 to any United States real property interest held 

16 by— 

17 ‘‘(A) a qualified foreign pension fund, or 

18 ‘‘(B) any entity all of the interests of 

19 which are held by a qualified foreign pension 

20 fund. 

21 ‘‘(2) QUALIFIED FOREIGN PENSION FUND.— 

22 For purposes of this subsection, the term ‘qualified 

23 foreign pension fund’ means any trust, corporation, 

24 or other organization or arrangement— 


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1 ‘‘(A) which is created or organized under 

2 the law of a country other than the United 

3 States, 

4 ‘‘(B) which is established to provide retire5 ment or pension benefits to participants or 

6 beneficiaries that are current or former employ7 ees (or persons designated by such employees) 

8 of one or more employers in consideration for 

9 services rendered, 

10 ‘‘(C) which does not have a single partici11 pant or beneficiary with a right to more than 

12 five percent of its assets or income, 

13 ‘‘(D) which is subject to government regu14 lation and provides annual information report15 ing about its beneficiaries to the relevant tax 

16 authorities in the country in which it is estab17 lished or operates, and 

18 ‘‘(E) with respect to which, under the laws 

19 of the country in which it is established or oper20 ates— 

21 ‘‘(i) contributions to such trust, cor22 poration, organization, or arrangement 

23 which would otherwise be subject to tax 

24 under such laws are deductible or excluded 


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1 from the gross income of such entity or 

2 taxed at a reduced rate, or 

3 ‘‘(ii) taxation of any investment in4 come of such trust, corporation, organiza5 tion or arrangement is deferred or such in6 come is taxed at a reduced rate. 

7 ‘‘(3) REGULATIONS.—The Secretary shall pre8 scribe such regulations as may be necessary or ap9 propriate to carry out the purposes of this sub10 section.’’. 

11 (b) EXEMPTION FROM WITHHOLDING.—Section 

12 1445(f)(3) is amended by striking ‘‘any person’’ and all 

13 that follows and inserting the following: ‘‘any person other 

14 than— 

15 ‘‘(A) a United States person, and 

16 ‘‘(B) except as otherwise provided by the 

17 Secretary, an entity with respect to which sec18 tion 897 does not apply by reason of subsection 

19 (l) thereof.’’. 

20 (c) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to dispositions and distributions 

22 after the date of the enactment of this Act. 

Æ 


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