Title: ROOT for Mainstreet Businesses Act
Policy area: Taxation

Summary:
Removing Onerous Obstacles in the Tax code for Mainstreet Businesses Act or the ROOT for Mainstreet Businesses Act
This bill amends the Internal Revenue Code to modify the tax treatment of personal holding companies.
The bill excludes from the definition of "personal holding company" a corporation with greater than 50% stock ownership held by nonresident alien individuals with no effectively connected income under tax provisions regarding expatriation to avoid tax or the taxation of nonresident alien individuals.
The bill also excludes from personal holding company income certain rents and royalties that are derived in the active conduct of a trade or business and are not received from a related person.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4045 Introduced in House (IH)]

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115th CONGRESS
  1st Session
                                H. R. 4045

 To amend the Internal Revenue Code of 1986 for shareholder ownership 
     and passive income rules of the personal holding company tax 
                              provisions.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 12, 2017

 Mr. Barr (for himself and Mr. Tiberi) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 for shareholder ownership 
     and passive income rules of the personal holding company tax 
                              provisions.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Removing Onerous Obstacles in the 
Tax code for Mainstreet Businesses Act'' or as the ``ROOT for 
Mainstreet Businesses Act''.

SEC. 2. ROYALTIES AND RENTS DERIVED IN THE ACTIVE CONDUCT OF A TRADE OR 
              BUSINESS.

    (a) Exception From Definition of Personal Holding Company.--
Paragraph (c) of section 542 of the Internal Revenue Code of 1986 is 
amended by striking ``and'' at the end of subparagraph (7), by striking 
the period at the end of subparagraph (8) and inserting ``; and'', and 
by adding at the end the following new paragraph:
            ``(9) a corporation with greater than 50 percent stock 
        ownership (as determined in section 542(a)) held by nonresident 
        alien individuals with no effectively connected income under 
        section 871 or 877.''.
    (b) Modifications Related to Definition of Personal Holding Company 
Income.--
            (1) Paragraph (1) of section 543(a) of the Code is amended 
        by striking ``and'' at the end of paragraph (D), by striking 
        the period at the end of paragraph (E) and inserting ``, and'', 
        and by adding at the end the following new subparagraph:
                    ``(F) Royalties and rents derived in the active 
                conduct of a trade or business and which are received 
                from a person other than a related person (within the 
                meaning of section 954(d)(3)).''.
            (2) Paragraph (4) of section 543(a) of such Code is amended 
        by inserting ``, which do not qualify for the active conduct of 
        a trade or business exception in subsection (a)(1)(F)'' after 
        ``Copyright royalties'' in the matter preceding subparagraph 
        (A).
            (3) Paragraph (A) of section 543(a)(5) of such Code is 
        amended by inserting ``, which do not qualify for the active 
        conduct of a trade or business exception in subsection 
        (a)(1)(F)'' after ``Produced film rent''.
            (4) Paragraph (3) of section 543(b) of such Code is amended 
        by inserting ``(but does not include rents derived from the 
        active conduct of a trade or business as provided in subsection 
        (a)(1)(F))'' after ``means the gross income from rents'' in the 
        matter preceding subparagraph (A).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending on or after the date of the enactment of 
this Act.
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