I 
110TH CONGRESS 
1ST SESSION H. R. 1147 
To amend the Internal Revenue Code of 1986 to simplify certain provisions 
applicable to real estate investment trusts, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 16, 2007 
Mr. CROWLEY (for himself, Mr. CANTOR, Mr. POMEROY, and Mr. REYNOLDS) 
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 simplify 
certain provisions applicable to real estate investment 
trusts, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘REIT Investment Di-
versification and Empowerment Act of 2007’’. 
SEC. 2. AMENDMENT OF 1986 CODE. 
Except as otherwise expressly provided, whenever in 
the Act an amendment or repeal is expressed in terms of 
an amendment to, or repeal of, a section or other provi-
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sion, the reference shall be considered to be made to a 
section or other provision of the Internal Revenue Code 
of 1986. 
TITLE 
I—FOREIGN 
CURRENCY 
AND OTHER QUALIFIED AC-
TIVITIES 
SEC. 101. REVISIONS TO REIT INCOME TESTS. 
(a) ADDITION
OF
PERMISSIBLE
INCOME
CAT-
EGORIES.—Section 856(c) (relating to limitations) is 
amended— 
(1) by striking ‘‘and’’ at the end of paragraph 
(2)(G) and by inserting after paragraph (2)(H) the 
following new subparagraphs: 
‘‘(I) passive foreign exchange gains; and 
‘‘(J) any other item of income or gain as 
determined by the Secretary;’’, and 
(2) by striking ‘‘and’’ at the end of paragraphs 
(3)(H) and (3)(I) and by inserting after paragraph 
(3)(I) the following new subparagraphs: 
‘‘(J) real estate foreign exchange gains; 
and 
‘‘(K) any other item of income or gain as 
determined by the Secretary; and’’. 
(b) RULES REGARDING FOREIGN CURRENCY TRANS-
ACTIONS.—Section 856 (defining real estate investment 
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trust) is amended by adding at the end the following new 
subsection: 
‘‘(n) RULES
REGARDING
FOREIGN
CURRENCY 
TRANSACTIONS.—With respect to any taxable year— 
‘‘(1) 
REAL
ESTATE
FOREIGN
EXCHANGE 
GAINS.—For purposes of subsection (c)(3)(J), the 
term ‘real estate foreign exchange gains’ means— 
‘‘(A) foreign currency gains (as defined in 
section 988(b)(1)) which are attributable to— 
‘‘(i) any item described in subsection 
(c)(3) (other than in subparagraph (J) 
thereof), 
‘‘(ii) the acquisition or ownership of 
obligations secured by mortgages on real 
property or on interests in real property 
(other than foreign currency gains attrib-
utable to any item described in clause (i)), 
or 
‘‘(iii) becoming or being the obligor 
under obligations secured by mortgages on 
real property or on interests in real prop-
erty (other than foreign currency gains at-
tributable to any item described in clause 
(i)), 
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‘‘(B) gains described in section 987 attrib-
utable to a qualified business unit (as defined 
by section 989) of the real estate investment 
trust, but only if such qualified business unit 
meets the requirements under— 
‘‘(i) subsection (c)(3) (without regard 
to subparagraph (J) thereof) for the tax-
able year, and 
‘‘(ii) subsection (c)(4)(A) at the close 
of each quarter that the real estate invest-
ment trust has directly or indirectly held 
the qualified business unit, and 
‘‘(C) any other foreign currency gains as 
determined by the Secretary. 
‘‘(2) PASSIVE FOREIGN EXCHANGE GAINS.—For 
purposes of subsection (c)(2)(I), the term ‘passive 
foreign exchange gains’ means— 
‘‘(A) real estate foreign exchange gains, 
‘‘(B) foreign currency gains (as defined in 
section 988(b)(1)) which are not described in 
subparagraph (A) and which are attributable to 
any item described in subsection (c)(2) (other 
than in subparagraph (I) thereof), and 
‘‘(C) any other foreign currency gains as 
determined by the Secretary.’’. 
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(c) ADDITION TO REIT HEDGING RULE.—Subpara-
graph (G) of section 856(c)(5) is amended to read as fol-
lows: 
‘‘(G) TREATMENT OF CERTAIN HEDGING 
INSTRUMENTS.—Except to the extent as deter-
mined by the Secretary— 
‘‘(i) any income of a real estate in-
vestment trust from a hedging transaction 
(as defined in clause (ii) or (iii) of section 
1221(b)(2)(A)) which is clearly identified 
pursuant to section 1221(a)(7), including 
gain from the sale or disposition of such a 
transaction, shall not constitute gross in-
come under paragraphs (2) and (3) to the 
extent that the transaction hedges any in-
debtedness incurred or to be incurred by 
the trust to acquire or carry real estate as-
sets, and 
‘‘(ii) any income of a real estate in-
vestment trust from a transaction entered 
into by the trust primarily to manage risk 
of currency fluctuations with respect to 
any item described in paragraph (2) or (3), 
including gain from the termination of 
such a transaction, shall not constitute 
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gross income under paragraphs (2) and 
(3), but only if such transaction is clearly 
identified as such before the close of the 
day on which it was acquired, originated, 
or entered into (or such other time as the 
Secretary may prescribe).’’. 
(d) AUTHORITY
TO EXCLUDE ITEMS
OF INCOME 
FROM
REIT INCOME
TESTS.—Section 856(c)(5) is 
amended by adding at the end the following new subpara-
graph: 
‘‘(H) SECRETARIAL
AUTHORITY
TO
EX-
CLUDE OTHER ITEMS OF INCOME.—The Sec-
retary is authorized to determine whether any 
item of income or gain which does not otherwise 
qualify under paragraph (2) or (3) may be con-
sidered as not constituting gross income solely 
for purposes of this part.’’. 
SEC. 102. REVISIONS TO REIT ASSET TESTS. 
(a) CLARIFICATION OF VALUATION TEST.—The first 
sentence 
in 
the 
matter 
following 
section 
856(c)(4)(B)(iii)(III) is amended by inserting ‘‘(including 
a discrepancy caused solely by the change in the foreign 
currency exchange rate used to value a foreign asset)’’ 
after ‘‘such requirements’’. 
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(b) CLARIFICATION OF PERMISSIBLE ASSET CAT-
EGORY.—Section 856(c)(5), as amended by section 
101(d), is amended by adding at the end the following new 
subparagraph: 
‘‘(I) CASH.—The term ‘cash’ includes for-
eign currency if the real estate investment trust 
or its qualified business unit (as defined in sec-
tion 989) uses such foreign currency as its 
functional currency (as defined in section 
985(b)).’’. 
SEC. 103. CONFORMING FOREIGN CURRENCY REVISIONS. 
(a) NET INCOME FROM FORECLOSURE PROPERTY.— 
Clause (i) of section 857(b)(4)(B) is amended to read as 
follows: 
‘‘(i) gain (including any foreign cur-
rency gain, as defined in section 988(b)(1)) 
from the sale or other disposition of fore-
closure 
property 
described 
in 
section 
1221(a)(1) and the gross income for the 
taxable year derived from foreclosure prop-
erty (as defined in section 856(e)), but 
only to the extent such gross income is not 
described in (or, in the case of foreign cur-
rency gain, not attributable to gross in-
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