I 
113TH CONGRESS 
2D SESSION 
H. R. 5487 
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 16, 2014 
Mr. BRADY of Texas (for himself and Mr. CROWLEY) 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. 
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 ‘‘Real Estate Invest-
ment and Jobs Act of 2014’’. 
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SEC. 2. EXCEPTION FROM FIRPTA FOR CERTAIN STOCK OF 
REAL ESTATE INVESTMENT TRUSTS. 
(a) IN GENERAL.—Paragraph (3) of section 897(c) 
of the Internal Revenue Code of 1986 is amended— 
(1) by striking all that precedes ‘‘If any class’’ 
and inserting the following: 
‘‘(3) EXCEPTIONS FOR CERTAIN STOCK.— 
‘‘(A) EXCEPTION FOR STOCK REGULARLY 
TRADED
ON
ESTABLISHED
SECURITIES
MAR-
KETS.—’’, 
(2) by inserting before the period the following: 
‘‘. In the case of any class of stock of a real estate 
investment trust, the preceding sentence shall be ap-
plied by substituting ‘10 percent’ for ‘5 percent’ ’’, 
and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(B) EXCEPTION FOR CERTAIN STOCK IN 
REAL ESTATE INVESTMENT TRUSTS.— 
‘‘(i) IN GENERAL.—Stock of a real es-
tate investment trust held by a qualified 
shareholder shall not be treated as a 
United States real property interest except 
to the extent that an investor in the quali-
fied shareholder (other than an investor 
that is a qualified shareholder) holds more 
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than 10 percent of the stock of such real 
estate investment trust (determined by ap-
plying the constructive ownership rules of 
section 897(c)(6)(C)). 
‘‘(ii) 
QUALIFIED
SHAREHOLDER.— 
For purposes of this subparagraph, the 
term ‘qualified shareholder’ means an enti-
ty— 
‘‘(I) that is eligible for benefits of 
a comprehensive income tax treaty 
with the United States which includes 
an exchange of information program, 
‘‘(II) that is a qualified collective 
investment vehicle, 
‘‘(III) whose principal class of in-
terests is listed and regularly traded 
on one or more recognized stock ex-
changes (as defined in such com-
prehensive income tax treaty), and 
‘‘(IV) that maintains records on 
the identity of each person who, at 
any time during the qualified share-
holder’s taxable year, is the direct 
owner of 5 percent or more of the 
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class of interest described in clause 
(III). 
‘‘(iii) QUALIFIED
COLLECTIVE
IN-
VESTMENT
VEHICLE.—For purposes of 
this subparagraph, the term ‘qualified col-
lective investment vehicle’ means an entity 
that— 
‘‘(I) would be eligible for a re-
duced rate of withholding under such 
comprehensive income tax treaty with 
respect to ordinary dividends paid by 
a real estate investment trust, even if 
such entity holds more than 10 per-
cent of the stock of such real estate 
investment trust, or 
‘‘(II) is designated as a qualified 
collective investment vehicle by the 
Secretary and is either— 
‘‘(aa) 
fiscally 
transparent 
within the meaning of section 
894, or 
‘‘(bb) required to include 
dividends in its gross income, but 
is entitled to a deduction for dis-
tributions to its investors.’’. 
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(b) DISTRIBUTIONS BY REAL ESTATE INVESTMENT 
TRUSTS.—Paragraph (1) of section 897(h) of the Internal 
Revenue Code of 1986 is amended— 
(1) by inserting ‘‘(10 percent in the case of 
stock of a real estate investment trust)’’ after ‘‘5 
percent of such class of stock’’, and 
(2) by inserting ‘‘, and any distribution to a 
qualified shareholder (as defined in subsection 
(c)(3)(B)(ii)) shall not be treated as gain recognized 
from the sale or exchange of a United States real 
property interest to the extent that the stock of the 
real estate investment trust held by such qualified 
shareholder is not treated as a United States real 
property interest under subsection (c)(3)(B)’’ before 
the period at the end of the second sentence. 
(c) DEFINITION.—Subparagraph (B) of section 
897(h)(4) of the Internal Revenue Code of 1986 is amend-
ed by adding at the end the following: ‘‘In determining 
whether a qualified investment entity is domestically con-
trolled— 
‘‘(i) a qualified investment entity shall 
be permitted to presume that stock held by 
a holder of less than 5 percent of a class 
of stock regularly traded on an established 
securities market in the United States is 
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held by United States persons throughout 
the testing period except to the extent that 
the qualified investment entity has actual 
knowledge regarding stock ownership, 
‘‘(ii) any stock in the qualified invest-
ment entity held by another qualified in-
vestment entity— 
‘‘(I) any class of stock of which 
is regularly traded on an established 
stock exchange, or 
‘‘(II) which is a regulated invest-
ment company which issues redeem-
able securities (within the meaning of 
section 2 of the Investment Company 
Act of 1940), 
shall be treated as held by a foreign person 
unless such other qualified investment enti-
ty is domestically controlled (as determined 
under this subparagraph) in which case 
such stock shall be treated as held by a 
United States person, and 
‘‘(iii) any stock in the qualified invest-
ment entity held by any other qualified in-
vestment entity not described in subclause 
(I) or (II) of clause (ii) shall only be treat-
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ed as held by a United States person to 
the extent that the stock of such other 
qualified investment entity is (or is treated 
under this subparagraph as) held by a 
United States person.’’. 
(d) CONFORMING AMENDMENT.—Subparagraph (C) 
of section 897(c)(6) of the Internal Revenue Code of 1986 
is amended— 
(1) by striking ‘‘more than 5 percent’’ and in-
serting ‘‘more than 5 or 10 percent, whichever is ap-
plicable,’’, and 
(2) by striking ‘‘substituting ‘5 percent’ for ‘50 
percent’)’’ and inserting ‘‘substituting ‘5 percent or 
10 percent, whichever is applicable’ for ‘50 per-
cent’)’’. 
(e) EFFECTIVE DATES.— 
(1) IN GENERAL.—The amendments made by 
subsection (a) shall apply to dispositions on and 
after the date of the enactment of this Act. 
(2) DISTRIBUTIONS.—The amendments made 
by subsection (b) shall apply to any distribution by 
a real estate investment trust on or after the date 
of the enactment of this Act which is treated as a 
deduction for a taxable year of such trust ending 
after such date. 
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(3) DEFINITIONS.—The amendments made by 
subsections (c) and (d) shall take effect on the date 
of the enactment of this Act. 
SEC. 3. UNITED STATES REAL PROPERTY INTEREST. 
(a) UNITED STATES REAL PROPERTY INTEREST.— 
Subparagraph (B) of section 897(c)(1) of the Internal 
Revenue Code of 1986 is amended by striking all that pre-
cedes ‘‘(i) as of the date of the disposition’’ and inserting 
the following: 
‘‘(B) EXCLUSION FOR INTEREST IN CER-
TAIN CORPORATIONS.—The term ‘United States 
real property interest’ does not include any in-
terest in a corporation (other than a qualified 
investment entity (as defined in subsection 
(h)(4)(A)(i)) if—’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 4. REQUIRED NOTIFICATION OF FIRPTA STATUS. 
(a) IN GENERAL.—Section 6039C of the Internal 
Revenue Code of 1986 is amended by redesignating sub-
section (d) as subsection (e) and by inserting after sub-
section (c) the following new subsection: 
‘‘(d) REQUIRED
NOTIFICATION
OF
STATUS
AS 
UNITED STATES REAL PROPERTY HOLDING CORPORA-
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TION; PRESUMPTION OF FOREIGN CONTROL FOR QUALI-
FIED INVESTMENT ENTITIES.— 
‘‘(1) REQUIRED NOTIFICATION OF STATUS AS 
UNITED
STATES
REAL
PROPERTY
HOLDING
COR-
PORATION.—Any United States real property hold-
ing corporation (as defined in section 897(c)(2)) is 
hereby required to make its status as a United 
States real property holding corporation readily ac-
cessible, and in the case of a publicly traded cor-
poration, publicly available. Under regulations pre-
scribed by the Secretary, such notifications may in-
clude disclosure of such status on Form 1099s sent 
to shareholders, in annual reports, on websites, and, 
in the case of privately held corporations, on stock 
certificates. 
‘‘(2) PRESUMPTION OF FOREIGN CONTROL OF 
QUALIFIED INVESTMENT ENTITIES.—In the absence 
of disclosure to the contrary (in such form and man-
ner as the Secretary may prescribe), any qualified 
investment 
entity 
(as 
defined 
in 
section 
897(h)(4)(A)) will be presumed for purposes of sec-
tion 897 to be foreign controlled. 
‘‘(3) PENALTY FOR FAILURE TO MAKE NOTIFI-
CATION OF STATUS.—The penalty provided under 
section 6721 shall apply to any failure to comply 
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with the requirements of paragraph (1), with the fol-
lowing modifications— 
‘‘(A) in the case of a corporation other 
than a corporation which meets the gross re-
ceipts test of section 6721(d)(2), the minimum 
penalty imposed under such section shall be 
equal to the maximum penalty provided under 
section 6721(a)(1), 
‘‘(B) in the case of a corporation which 
holds United States real estate with a gross fair 
market value of at least $1,000,000,000— 
‘‘(i) the minimum penalty imposed 
under such section shall be equal to 
$5,000,000, and 
‘‘(ii) in the case of an intentional fail-
ure, the minimum penalty imposed under 
such section shall be the greater of the 
penalty provided under section 6721(e) or 
$10,000,000.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
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SEC. 5. REQUIRE FIRPTA WITHHOLDING BY BROKERS ON 
SALES BY SHAREHOLDERS OWNING A MORE 
THAN 5 PERCENT INTEREST. 
(a) IN GENERAL.—Section 1445(e) of the Internal 
Revenue Code of 1986 is amended by redesignating para-
graph (7) as paragraph (8) and by inserting after para-
graph (6) the following new paragraph: 
‘‘(7) BROKER
WITHHOLDING
OBLIGATION
ON 
CERTAIN DISPOSITIONS OF NONDOMESTICALLY CON-
TROLLED UNITED STATES REAL PROPERTY HOLDING 
CORPORATIONS.— 
‘‘(A) IN GENERAL.—In the case of any dis-
position of an interest in a United States real 
property holding corporation (as defined in sec-
tion 897(c)(2)) involving a broker (as defined in 
section 6045(c)), such broker shall be required 
to deduct and withhold a tax equal to 10 per-
cent of the amount realized on the disposition. 
‘‘(B) EXCEPTIONS.— 
‘‘(i) DOMESTIC
QUALIFIED
INVEST-
MENT
ENTITIES
AND
REAL
ESTATE
IN-
VESTMENT
TRUSTS.—Subparagraph (A) 
shall not apply to sales of stock of a do-
mestically controlled qualified investment 
entity (as defined in section 897(h)(4)) or 
stock of a real estate investment trust that 
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is not treated as a United States real prop-
erty 
interest 
pursuant 
to 
section 
897(c)(3)(B). 
‘‘(ii) GREATER THAN 5 PERCENT IN-
TEREST IN UNITED STATES REAL PROP-
ERTY
HOLDING
CORPORATION.—Subpara-
graph (A) shall not apply if the transferee 
held a greater than 5 percent interest (or 
in the case of the disposition of any class 
of stock of a real estate investment trust 
that is regularly traded on an established 
securities market, a greater than 10 per-
cent interest) in the United States real 
property holding corporation. In deter-
mining whether that threshold is met, bro-
kers are permitted to rely on public state-
ments made by public companies, including 
statements related to the status of the 
company as a United States real property 
holding corporation or as a domestically 
controlled qualified investment entity. 
‘‘(iii) LACK
OF
BROKER
KNOWL-
EDGE.—Subparagraph (A) shall apply only 
if the broker had actual knowledge (or rea-
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sonably should have known) of their with-
holding obligation.’’. 
(b) CONFORMING AMENDMENT.—Section 1445(b)(6) 
of the Internal Revenue Code of 1986 is amended by strik-
ing ‘‘This paragraph’’ and inserting ‘‘Except as provided 
in subsection (e)(7), this paragraph’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to dispositions after the date of 
the enactment of this Act. 
SEC. 6. INTERESTS IN RICS AND REITS NOT EXCLUDED 
FROM DEFINITION OF UNITED STATES REAL 
PROPERTY INTERESTS. 
(a) IN GENERAL.—Section 897(c)(1)(B) of the Inter-
nal Revenue Code of 1986 is amended by striking ‘‘and’’ 
at the end of clause (i), by striking the period at the end 
of clause (ii)(II) and inserting ‘‘, and’’, and by adding at 
the end the following new clause: 
‘‘(iii) neither such corporation nor any 
predecessor of such corporation was a reg-
ulated investment company or a real estate 
investment company at any time during 
the period described in subparagraph 
(A)(ii).’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to dispositions after the date of 
the enactment of this Act. 
SEC. 7. DIVIDENDS DERIVED FROM RICS AND REITS INELI-
GIBLE FOR DEDUCTION FOR UNITED STATES 
SOURCE PORTION OF DIVIDENDS FROM CER-
TAIN FOREIGN CORPORATIONS. 
(a) IN GENERAL.—Section 245(a) of the Internal 
Revenue Code of 1986 is amended by adding at the end 
the following new paragraph: 
‘‘(12) DIVIDENDS
DERIVED
FROM
RICS
AND 
REITS INELIGIBLE FOR DEDUCTION.—Regulated in-
vestment companies and real estate investment 
trusts shall not be treated as domestic corporations 
for purposes of paragraph (5)(B).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to dividends received from regu-
lated investment companies and real estate investment 
trusts on or after the date of the enactment of this Act. 
Æ 
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