(3) CONSTRUCTION.—No provision of this Act, 
including paragraph (1) or (2), may be construed or 
applied in a manner that impairs or limits any other 
exemption that is available under applicable securi-
ties laws. 
(b) EXEMPTIONS FOR ESTATES.—Any estate that is or 
may be created under section 4(b)(1) or 4(c)(2) shall be ex-
empt from all securities laws but— 
(1) shall be subject to the reporting requirements 
established by the applicable covered bond regulator 
under section 4(d)(1)(E)(iii); and 
(2) shall succeed to any requirement of the issuer 
to file such periodic information, documents, and re-
ports in respect of the covered bonds as specified in 
section 13(a) of the Securities and Exchange Act of 
1934 (15 U.S.C. 78m(a)) or rules established by an 
appropriate Federal banking agency. 
(c) EXEMPTIONS FOR RESIDUAL INTERESTS.—Any re-
sidual interest in an estate that is or may be created under 
section 4(b)(1) or 4(c)(2) shall be exempt from all securities 
laws. 
SEC. 6. MISCELLANEOUS PROVISIONS. 
(a) DOMESTIC SECURITIES.—Section 106(a)(1) of the 
Secondary Mortgage Market Enhancement Act of 1984 (15 
U.S.C. 77r–1(a)(1)) is amended— 
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(1) in subparagraph (C), by striking ‘‘or’’ at the 
end; 
(2) in subparagraph (D), by adding ‘‘or’’ at the 
end; and 
(3) by inserting after subparagraph (D) the fol-
lowing: 
‘‘(E) covered bonds (as defined in section 2 of the 
United States Covered Bond Act of 2011),’’. 
(b) NO TAX IMPLICATIONS.—Any estate created under 
section 4(b)(1) or 4(c)(2) shall not be treated as an entity 
subject to taxation separate from the owner of the residual 
interest for purposes of the Internal Revenue Code of 1986 
(26 U.S.C. 1 et seq.), including by reason of the taxable 
mortgage pool provisions of section 7701(i) of the Internal 
Revenue Code of 1986 (26 U.S.C. 7701(i)), but instead shall 
be treated as a disregarded entity that is owned by the 
owner of the residual interest for such purposes as described 
in applicable regulations of the Secretary, as in effect on 
the date of the enactment of this Act. No transfer or assump-
tion of any asset or liability to or by an estate or an eligible 
issuer under section 4(b) or 4(c) shall cause or constitute 
an event in which gain or loss shall be recognized under 
section 1001 of the Internal Revenue Code of 1986 (26 
U.S.C. 1001). 
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(c) REAL ESTATE MORTGAGE INVESTMENT CON-
DUITS.—Section 860G(a)(3) of the Internal Revenue Code 
of 1986 (26 U.S.C. 860G(a)(3)) is amended— 
(1) in subparagraph (B), by striking ‘‘and’’ at 
the end; 
(2) in subparagraph (C), by striking the period 
and inserting ‘‘, and’’; and 
(3) by inserting after subparagraph (C) the fol-
lowing: 
‘‘(D) covered bonds that are secured by eli-
gible assets from the residential mortgage asset 
class or the commercial mortgage asset class, as 
such terms are defined in section 2 of the United 
States Covered Bond Act of 2011.’’. 
(d) REAL ESTATE INVESTMENT TRUSTS.—To the ex-
tent provided by regulations that may be promulgated by 
the Secretary, a covered bond described in section 
860G(a)(3)(D) of the Internal Revenue Code of 1986 shall 
be treated as a real estate asset in the same manner as a 
regular interest in a REMIC for purposes of section 
856(c)(5)(E) of such Code. 
(e) INVESTMENT TREATMENT FOR TAX PURPOSES.— 
The acquisition of any covered bond shall be treated as an 
acquisition of an investment security, and not as an acqui-
sition of an interest in a loan or otherwise as a lending 
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transaction, for purposes of determining the character of 
any related trade or business activity of the acquirer or any 
asset held by the acquirer under the Internal Revenue Code 
of 1986 (26 U.S.C. 1 et seq.). 
(f) STATE AND LOCAL TAXES.—The Secretary may 
promulgate regulations under this Act that are similar to 
the provisions of section 346 of title 11, United States Code, 
including regulations to provide that— 
(1) if an estate created under section 4(b)(1) or 
4(c)(2) is not treated as an entity subject to taxation 
separate from the owner of the residual interest for 
purposes of the Internal Revenue Code of 1986 (26 
U.S.C. 1 et seq.), no separate taxable entity shall be 
created with respect to the estate for purposes of any 
State or local law imposing a tax on or measured by 
income; and 
(2) if a transfer or assumption of an asset or li-
ability to or by an estate or an eligible issuer under 
section 4(b) or 4(c) does not cause or constitute an 
event in which gain or loss is recognized under sec-
tion 1001 of the Internal Revenue Code of 1986 (26 
U.S.C. 1001), the transfer or assumption shall not 
cause or constitute a disposition for purposes of any 
provision assigning tax consequences to a disposition 
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in connection with any State or local law imposing 
a tax on or measured by income. 
(g) NO CONFLICT.—The provisions of this Act shall 
apply, notwithstanding any provision of the Federal De-
posit Insurance Act (12 U.S.C. 1811 et seq.), title 11, 
United States Code, title II of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (12 U.S.C. 5381 et 
seq.), or any other provision of Federal law with respect 
to conservatorship, receivership, liquidation, or bankruptcy. 
No provision of the Federal Deposit Insurance Act (12 
U.S.C. 1811 et seq.), title 11, United States Code, title II 
of the Dodd-Frank Wall Street Reform and Consumer Pro-
tection Act (12 U.S.C. 5381 et seq.), or any other provision 
of Federal law with respect to conservatorship, receivership, 
liquidation, or bankruptcy may be construed or applied in 
a manner that defeats or interferes with the purpose or op-
eration of this Act. 
(h) ANNUAL REPORT
TO CONGRESS.—The covered 
bond regulators shall, annually— 
(1) submit a joint report to the Congress describ-
ing the current state of the covered bond market in the 
United States; and 
(2) testify on the current state of the covered 
bond market in the United States before the Com-
mittee on Financial Services of the House of Rep-
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resentatives and the Committee on Banking, Housing, 
and Urban Affairs of the Senate. 
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Union Calendar No. 542 
112TH CONGRESS 
2ND SESSION H. R. 940 
[Report No. 112–407, Part I] 
A BILL 
To establish standards for covered bond programs 
and a covered bond regulatory oversight pro-
gram, and for other purposes. 
DECEMBER 31, 2012 
The Committee on Ways and Means discharged; com-
mitted to the Committee of the Whole House on the 
State of the Union and ordered to be printed 
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