I 

112TH CONGRESS 

1ST SESSION H. R. 2989 

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 

SEPTEMBER 21, 2011 

Mr. BRADY of Texas (for himself, Mr. CROWLEY, Mr. TIBERI, and Ms. BERKLEY) 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 Jobs and 

5 Investment Act of 2011’’. 


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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 to read 

5 as follows: 

6 ‘‘(3) EXCEPTIONS FOR CERTAIN STOCK DIS7 POSITIONS.— 

8 ‘‘(A) STOCK REGULARLY TRADED ON ES9 TABLISHED SECURITIES MARKETS.—If any 

10 class of stock of a corporation is regularly trad11 ed on an established securities market, stock of 

12 such class shall be treated as a United States 

13 real property interest only in the case of a per14 son who, at some time during the shorter of the 

15 periods described in paragraph (1)(A)(ii), held 

16 more than 5 percent of such class of stock. In 

17 the case of any class of stock of a real estate 

18 investment trust, the preceding sentence shall 

19 be applied by substituting ‘10 percent’ for ‘5 

20 percent’. 

21 ‘‘(B) CERTAIN STOCK IN REAL ESTATE IN22 VESTMENT TRUSTS.— 

23 ‘‘(i) IN GENERAL.—Stock of a real es24 tate investment trust held by a qualified 

25 shareholder shall not be treated as a 

26 United States real property interest except 


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1 to the extent that an investor in the quali2 fied shareholder holds (directly or indi3 rectly through the qualified shareholder) 

4 more than 10 percent of the stock of such 

5 real estate investment trust. 

6 ‘‘(ii) QUALIFIED SHAREHOLDER.— 

7 For purposes of this subparagraph, the 

8 term ‘qualified shareholder’ means a share9 holder— 

10 ‘‘(I) which would be eligible for a 

11 reduced rate of withholding under any 

12 income tax treaty of the United States 

13 with respect to ordinary dividends 

14 paid by a real estate investment trust 

15 even if such shareholder holds more 

16 than 10 percent of the stock of such 

17 real estate investment trust, and 

18 ‘‘(II) whose principal class of in19 terests is listed and regularly traded 

20 on one or more recognized stock ex21 changes (as defined in the relevant in22 come tax treaty referred to in sub23 clause (I)).’’. 


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1 (b) DISTRIBUTIONS OF REAL ESTATE INVESTMENT

2 TRUSTS.—Paragraph (1) of section 897(h) of such Code 

3 is amended to read as follows: 

4 ‘‘(1) LOOK-THROUGH OF DISTRIBUTIONS.— 

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

6 subparagraph (B), any distribution by a quali7 fied investment entity to a nonresident alien in8 dividual, a foreign corporation, or other quali9 fied investment entity shall, to the extent attrib10 utable to gain from sales or exchanges by the 

11 qualified investment entity of United States real 

12 property interests, be treated as gain recognized 

13 by such nonresident alien individual, foreign 

14 corporation, or other qualified investment entity 

15 from the sale or exchange of a United States 

16 real property interest. Notwithstanding the pre17 ceding sentence— 

18 ‘‘(i) any distribution by a qualified in19 vestment entity to a nonresident alien indi20 vidual or a foreign corporation with respect 

21 to any class of stock which is regularly 

22 traded on an established securities market 

23 located in the United States shall not be 

24 treated as gain recognized from the sale or 

25 exchange of a United States real property 


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1 interest if such individual or corporation 

2 did not own more than 5 percent of such 

3 class of stock (10 percent in the case of 

4 stock of a real estate investment trust) at 

5 any time during the 1-year period ending 

6 on the date of such distribution, and 

7 ‘‘(ii) any distribution to a qualified 

8 shareholder (as defined in subsection 

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

10 recognized from the sale or exchange of a 

11 United States real property interest to the 

12 extent that the stock of the real estate in13 vestment trust held by such qualified 

14 shareholder is not treated as a United 

15 States real property interest under sub16 section (c)(3)(B). 

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

18 shall not apply to distributions which are treat19 ed as a sale or exchange of stock or property 

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

21 (c) DEFINITION OF DOMESTICALLY CONTROLLED.— 

22 Subparagraph (B) of section 897(h)(4) of such Code is 

23 amended by adding at the end the following: ‘‘In deter24 mining whether a qualified investment entity is domesti25 cally controlled, any stock in the qualified investment entiVerDate Mar 15 2010 04:30 Sep 22, 2011 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2989.IH H2989

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1 ty held by another qualified investment entity shall be 

2 treated as held by a foreign person unless such qualified 

3 investment entity is domestically controlled. In making 

4 such determination a qualified investment entity shall be 

5 permitted to presume that stock held by a holder of less 

6 than 5 percent of a class of stock traded on an established 

7 securities market in the United States is held by United 

8 States persons throughout the testing period except to the 

9 extent that the qualified investment entity has actual 

10 knowledge regarding stock ownership.’’. 

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

12 of section 897(c)(6) of such Code is amended— 

13 (1) by striking ‘‘more than 5 percent’’ and in14 serting ‘‘more than 5 or 10 percent, whichever is ap15 plicable,’’, and 

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

17 percent’ ’’ and inserting ‘‘substituting ‘5 percent or 

18 10 percent, whichever is applicable’ for ‘50 per19 cent’ ’’. 

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

21 this section shall apply to dispositions and distributions 

22 made after the date of the enactment of this Act. 

23 SEC. 3. UNITED STATES REAL PROPERTY INTEREST. 

24 (a) IN GENERAL.—Subparagraph (B) of section 

25 897(c)(1) of the Internal Revenue Code of 1986 is amendVerDate Mar 15 2010 04:30 Sep 22, 2011 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2989.IH H2989

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1 ed by striking all that precedes clause (i) and inserting 

2 the following: 

3 ‘‘(B) EXCLUSION FOR INTEREST IN CER4 TAIN CORPORATIONS.—The term ‘United States 

5 real property interest’ does not include any in6 terest in a corporation (other than a qualified 

7 investment entity (as defined in subsection 

8 (h)(4)(A)(i)) if—’’. 

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

10 subsection (a) shall apply to dispositions made after the 

11 date of the enactment of this Act. 

Æ 


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