securities market located in the Unites States shall not 
be treated as gain recognized from the sale or exchange 
of a United States real property interest if the shareholder 
did not own more than 5 percent of such class of stock 
during the taxable year.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
TITLE III—REIT SAVINGS 
PROVISIONS 
SEC. 301. REVISIONS TO REIT PROVISIONS. 
(a) RULES OF APPLICATION FOR FAILURE TO SAT-
ISFY SECTION 856(c)(4).—Section 856(c) (relating to def-
inition of real estate investment trust), as amended by sec-
tion 101, is amended by inserting after paragraph (6) the 
following new paragraph: 
‘‘(7) RULES OF APPLICATION FOR FAILURE TO 
SATISFY PARAGRAPH (4).—
‘‘(A) DE
MINIMIS
FAILURE.—A corpora-
tion, trust, or association that fails to meet the 
requirements of paragraph (4)(B)(iii) for a par-
ticular quarter shall nevertheless be considered 
to have satisfied the requirements of such para-
graph for such quarter if—
‘‘(i) such failure is due to the owner-
ship of assets the total value of which does 
not exceed the lesser of—
‘‘(I) 1 percent of the total value 
of the trust’s assets at the end of the 
quarter for which such measurement 
is done, and 
‘‘(II) $10,000,000, and 
‘‘(ii)(I) the corporation, trust, or asso-
ciation, following the identification of such 
failure, disposes of assets in order to meet 
the requirements of such paragraph within 
6 months after the last day of the quarter 
in which the corporation, trust or associa-
tion’s identification of the failure to satisfy 
the requirements of such paragraph oc-
curred or such other time period prescribed 
by the Secretary and in the manner pre-
scribed by the Secretary, or 
‘‘(II) the requirements of such para-
graph are otherwise met within the time 
period specified in subclause (I). 
‘‘(B) FAILURES
EXCEEDING
DE
MINIMIS 
AMOUNT.—A corporation, trust, or association 
that fails to meet the requirements of para-
graph (4) for a particular quarter shall never-
theless be considered to have satisfied the re-
quirements of such paragraph for such quarter 
if—
‘‘(i) such failure involves the owner-
ship of assets the total value of which ex-
ceeds the de minimis standard described in 
subparagraph (A)(i) at the end of the 
quarter for which such measurement is 
done, 
‘‘(ii) following the corporation, trust, 
or association’s identification of the failure 
to satisfy the requirements of such para-
graph for a particular quarter, a descrip-
tion of each asset that causes the corpora-
tion, trust, or association to fail to satisfy 
the requirements of such paragraph at the 
close of such quarter of any taxable year is 
set forth in a schedule for such quarter 
filed in accordance with regulations pre-
scribed by the Secretary, 
‘‘(iii) the failure to meet the require-
ments of such paragraph for a particular 
quarter is due to reasonable cause and not 
due to willful neglect,
‘‘(iv) the corporation, trust, or asso-
ciation pays a tax computed under sub-
paragraph (C), and 
‘‘(v)(I) the corporation, trust, or asso-
ciation disposes of the assets set forth on 
the schedule specified in clause (ii) within 
6 months after the last day of the quarter 
in which the corporation, trust or associa-
tion’s identification of the failure to satisfy 
the requirements of such paragraph oc-
curred or such other time period prescribed 
by the Secretary and in the manner pre-
scribed by the Secretary, or 
‘‘(II) the requirements of such para-
graph are otherwise met within the time 
period specified in subclause (I). 
‘‘(C) TAX.—For purposes of subparagraph 
(B)(iv)—
‘‘(i) TAX IMPOSED.—If a corporation, 
trust, or association elects the application 
of this subparagraph, there is hereby im-
posed a tax on the failure described in sub-
paragraph (B) of such corporation, trust, 
or association. Such tax shall be paid by 
the corporation, trust, or association.