‘‘(ii) TAX
COMPUTED.—The amount 
of the tax imposed by clause (i) shall be 
the greater of—
‘‘(I) $50,000, or 
‘‘(II) the amount determined 
(pursuant to regulations promulgated 
by the Secretary) by multiplying the 
net income generated by the assets 
described in the schedule specified in 
subparagraph (B)(ii) for the period 
specified in clause (iii) by the highest 
rate of tax specified in section 11. 
‘‘(iii) 
PERIOD.—For 
purposes 
of 
clause (ii)(II), the period described in this 
clause is the period beginning on the first 
date that the failure to satisfy the require-
ments of such paragraph (4) occurs as a 
result of the ownership of such assets and 
ending on the earlier of the date on which 
the trust disposes of such assets or the end 
of the first quarter when there is no longer 
a failure to satisfy such paragraph (4). 
‘‘(iv) ADMINISTRATIVE PROVISIONS.—
For purposes of subtitle F, the taxes im-
posed by this subparagraph shall be treat-
ed as excise taxes with respect to which the 
deficiency procedures of such subtitle 
apply.’’. 
(b) MODIFICATION OF RULES OF APPLICATION FOR 
FAILURE
TO
SATISFY
SECTIONS
856(c)(2) 
OR 
856(c)(3).—Paragraph (6) of section 856(c) (relating to 
definition of real estate investment trust) is amended by 
striking subparagraphs (A) and (B), by redesignating sub-
paragraph (C) as subparagraph (B), and by inserting be-
fore subparagraph (B) (as so redesignated) the following 
new subparagraph: 
‘‘(A) following the corporation, trust, or 
association’s identification of the failure to meet 
the requirements of paragraph (2) or (3), or of 
both such paragraphs, for any taxable year, a 
description of each item of its gross income de-
scribed in such paragraphs is set forth in a 
schedule for such taxable year filed in accord-
ance with regulations prescribed by the Sec-
retary, and’’. 
(c) REASONABLE CAUSE EXCEPTION TO LOSS OF 
REIT STATUS
IF
FAILURE
TO
SATISFY
REQUIRE-
MENTS.—Subsection (g) of section 856 (relating to termi-
nation of election) is amended—
(1) in paragraph (1) by inserting before the pe-
riod at the end of the first sentence the following: 
‘‘unless paragraph (5) applies’’, and 
(2) by adding at the end the following new 
paragraph: 
‘‘(5) ENTITIES
TO
WHICH
PARAGRAPH
AP-
PLIES.—This paragraph applies to a corporation, 
trust, or association—
‘‘(A) which is not a real estate investment 
trust to which the provisions of this part apply 
for the taxable year due to one or more failures 
to comply with one or more of the provisions of 
this part (other than subsection (c)(6) or (c)(7) 
of section 856), 
‘‘(B) such failures are due to reasonable 
cause and not due to willful neglect, and 
‘‘(C) if such corporation, trust, or associa-
tion pays (as prescribed by the Secretary in 
regulations and in the same manner as tax) a 
penalty of $50,000 for each failure to satisfy a 
provision of this part due to reasonable cause 
and not willful neglect.’’. 
(d) DEDUCTION OF TAX PAID FROM AMOUNT RE-
QUIRED TO BE DISTRIBUTED.—Subparagraph (E) of sec-
tion 857(b)(2) is amended by striking ‘‘(7)’’ and inserting
‘‘(7) of this subsection, section 856(c)(7)(B)(iii), and sec-
tion 856(g)(1).’’. 
(e) EXPANSION OF DEFICIENCY DIVIDEND PROCE-
DURE.—Subsection (e) of section 860 is amended by strik-
ing ‘‘or’’ at the end of paragraph (2), by striking the pe-
riod at the end of paragraph (3) and inserting ‘‘; or’’, and 
by adding at the end the following new paragraph: 
‘‘(4) a statement by the taxpayer attached to its 
amendment or supplement to a return of tax for the 
relevant tax year.’’. 
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
date of enactment.
Æ