<enum>I</enum><header>Foreign currency and other qualified activities</header> <section id="idBB45EA089C644C83870FE42C6BBA52BA"><enum>101.</enum><header>Revisions to REIT income tests</header> <subsection id="ID64ec01c2e9d1446fbcb9d43499dbe042"><enum>(a)</enum><header>Addition of permissible income categories</header><text>Section 856(c) (relating to limitations) is amended—</text> <paragraph id="ID29a377d690844fc89b5a9a28670495b6"><enum>(1)</enum><text>by striking <quote>and</quote> at the end of paragraph (2)(G) and by inserting after paragraph (2)(H) the following new subparagraphs:</text> <quoted-block display-inline="no-display-inline" id="idCA1EDB85B01144268CE00DA7DB1A3304" style="OLC"> <subparagraph id="ID0d5b4c0c4c034c8e9c20e1fee8cb2e69"><enum>(I)</enum><text>passive foreign exchange gains; and</text> </subparagraph><subparagraph id="ID8ef94365d0f043d4a8ba3ca5a5586a02"><enum>(J)</enum><text>any other item of income or gain as determined by the Secretary;</text> </subparagraph><after-quoted-block>, and</after-quoted-block></quoted-block> </paragraph><paragraph id="ID487f95b8993e4b5ab791262de2e0f19d"><enum>(2)</enum><text>by striking <quote>and</quote> at the end of paragraphs (3)(H) and (3)(I) and by inserting after paragraph (3)(I) the following new subparagraphs:</text> <quoted-block display-inline="no-display-inline" id="idA35DEE9245C54CD7A5F9DB4029D3F3E8" style="OLC"> <subparagraph id="ID6d587f89e9694a83a936f50988133b90"><enum>(J)</enum><text>real estate foreign exchange gains; and</text> </subparagraph><subparagraph id="ID98524a0d0d144825aee1658810ebb578"><enum>(K)</enum><text>any other item of income or gain as determined by the Secretary; and</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="IDabdd476a9bfa42aa9d78038fede6ccfc"><enum>(b)</enum><header>Rules regarding foreign currency transactions</header><text>Section 856 (defining real estate investment trust) is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="id0A841DA6653040AEAABAB628C82B966A" style="OLC"> <subsection id="ID90b6d5536c4741d1b1150e9955da3400"><enum>(n)</enum><header>Rules regarding foreign currency transactions</header><text>With respect to any taxable year—</text> <paragraph id="ID14a1bcf453db4daabffb9cb4b5a1e1dd"><enum>(1)</enum><header>Real estate foreign exchange gains</header><text>For purposes of subsection (c)(3)(J), the term <term>real estate foreign exchange gains</term> means—</text> <subparagraph id="ID3657a329ba8944b399862b342205bbb7"><enum>(A)</enum><text>foreign currency gains (as defined in section 988(b)(1)) which are attributable to—</text> <clause id="IDcb0e41723cb047b782de4b2c225b2bcd"><enum>(i)</enum><text>any item described in subsection (c)(3),</text> </clause><clause id="ID1f4b4ac533cc4a17881b14ccb72f7f46"><enum>(ii)</enum><text>the acquisition or ownership of obligations secured by mortgages on real property or on interests in real property (other than foreign currency gains described in clause (i)), or</text> </clause><clause id="ID0ecb6b2fbe7c4b9f8fe365265b7eb2ff"><enum>(iii)</enum><text>becoming or being the obligor under obligations secured by mortgages on real property or on interests in real property (other than foreign currency gains described in clause (i)),</text> </clause></subparagraph><subparagraph id="IDa00238496fe94eca908473426b420718"><enum>(B)</enum><text>gains described in section 987 attributable 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—</text> <clause id="ID5c2dca979f034a3387d56a163199074c"><enum>(i)</enum><text>subsection (c)(3) for the taxable year; and</text> </clause><clause id="IDd0a6fee47f924c1c8c1ecff5acaefbfe"><enum>(ii)</enum><text>subsection (c)(4)(A) at the close of each quarter that the real estate investment trust has directly or indirectly held the qualified business unit, and</text> </clause></subparagraph><subparagraph id="ID1cc68e8aa0b94f0a9f86adb9bca09ed0"><enum>(C)</enum><text>any other foreign currency gains as determined by the Secretary.</text> </subparagraph></paragraph><paragraph id="ID5d6155178fdd4e2c87a9d853226e4c78"><enum>(2)</enum><header>Passive foreign exchange gains</header><text>For purposes of subsection (c)(2)(I), the term <term>passive foreign exchange gains</term> means—</text> <subparagraph id="ID52b8a14fda4e4f8384ad3b0d5c2ff774"><enum>(A)</enum><text>gains described under paragraph (1),</text> </subparagraph><subparagraph id="ID209e0db33bdd47e799d8174a078e7f2e"><enum>(B)</enum><text>foreign currency gains (as defined in section 988(b)(1)) which are attributable to any item described in subsection (c)(2) (other than those items includible under subparagraph (A)), and</text> </subparagraph><subparagraph id="IDad8a3159a2e447ac9dbd485f5444cda5"><enum>(C)</enum><text>any other foreign currency gains as determined by the Secretary.</text> </subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="IDb89f7e1af5664c86972cab9ab1e9f832"><enum>(c)</enum><header>Addition to REIT hedging rule</header><text>Subparagraph (G) of section 856(c)(5) is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="idAB5F4265CAD14FFDB5C74EE39524B0A2" style="OLC"> <subparagraph id="IDf019714a5cf145e8a8ac24078cfd8857"><enum>(G)</enum><header>Treatment of certain hedging instruments</header><text>Except to the extent as determined by the Secretary—</text> <clause id="ID894fe7a6c3464c7f83f409aac16f4d28"><enum>(i)</enum><text>any income of a real estate investment 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 income under paragraphs (2) and (3) to the extent that the transaction hedges any indebtedness incurred or to be incurred by the trust to acquire or carry real estate assets, and</text> </clause><clause id="IDc524040a6e2949479c41599e2a3abca7"><enum>(ii)</enum><text>any income of a real estate investment trust from a transaction entered into by the trust primarily to manage risk of currency fluctuations with respect to any item described in paragraphs (2) and (3), including gain from the termination of such a transaction, shall not constitute 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).</text> </clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="ID22bb6a6b633844829153dae7f5de7625"><enum>(d)</enum><header>Authority to exclude items of income from REIT income tests</header><text>Section 856(c)(5) is amended by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="id1CAE6644F4E34830B29C116FC0975950" style="OLC"> <subparagraph id="IDe6418e7e17ac4a58b026d8a5f206170c"><enum>(H)</enum><header>Secretarial authority to exclude other items of income</header><text>The Secretary is authorized to determine whether any item of income or gain which does not otherwise qualify under paragraph (2) or (3) may be considered as not constituting gross income solely for purposes of this part.</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection></section><section id="id3965D9BB5DC7428F9C54DCE59FFF7C2F"><enum>102.</enum><header>Revisions to REIT asset tests</header> <subsection id="ID56e8d066dd644a2d9c5c3d2191461148"><enum>(a)</enum><header>Clarification of valuation test</header><text>The first sentence in the matter following section 856(c)(4)(B)(iii)(III) is amended by inserting <quote>(including a discrepancy caused solely by the change in the foreign currency exchange rate used to value a foreign asset)</quote> after <quote>such requirements</quote>.</text> </subsection><subsection id="ID4e3fd246799b42ff9cd4ce6e1380e9cb"><enum>(b)</enum><header>Clarification of permissible asset category</header><text>Section 856(c)(5), as amended by section 101(d), is amended by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="id9A58447440F04C53AD717367820CD01A" style="OLC"> <subparagraph id="ID43f8431028c34888884d51cb3e36b97e"><enum>(I)</enum><header>Cash</header><text>For purposes of this part, the term <term>cash</term> includes foreign currency if the real estate investment trust or its qualified business unit (as defined in section 989) uses such foreign currency as its functional currency (as defined in section 985(b)).</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection></section><section id="id70C8DBA4F406477D93ED7256E6802B9E"><enum>103.</enum><header>Conforming foreign currency revisions</header> <subsection id="ID90f00ddfef5b401eaec4431433bb0f16"><enum>(a)</enum><header>Net income from foreclosure property</header><text>Clause (i) of section 857(b)(4)(B) is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="id49925562130E422EB3AE51FC237561CA" style="OLC"> <clause id="IDa1674124750f4835af3c2628c5785acf"><enum>(i)</enum><text>gain (including any foreign currency gain, as defined in section 988(b)(1)) from the sale or other disposition of foreclosure property described in section 1221(a)(1) and the gross income for the taxable year derived from foreclosure property (as defined in section 856(e)), but only to the extent such gross income is not described in (or, in the case of foreign currency gain, not attributable to gross income described in) section 856(c)(3) other than subparagraph (F) thereof, over</text> </clause><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="IDb78342999eb544fa8d603d228f6c38b0"><enum>(b)</enum><header>Net income from prohibited transactions</header><text>Clause (i) of section 857(b)(6)(B) is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="id54A026F7F36544ED9CEAF5DAA600FCE7" style="OLC"> <clause id="IDa32e93f333394cf6a98d2be258d8ae5a"><enum>(i)</enum><text>the term <term>net income derived from prohibited transactions</term> means the excess of the gain (including any foreign currency gain, as defined in section 988(b)(1)) from prohibited transactions over the deductions (including any foreign currency loss, as defined in section 988(b)(2)) allowed by this chapter which are directly connected with prohibited transactions;</text> </clause><after-quoted-block>.</after-quoted-block></quoted-block> </subsection></section>

Short title

This Act may be cited as the

REIT Investment Diversification and Empowerment Act of 2006

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 provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

<enum>I</enum><header>Foreign currency and other qualified activities</header> <section id="idBB45EA089C644C83870FE42C6BBA52BA"><enum>101.</enum><header>Revisions to REIT income tests</header> <subsection id="ID64ec01c2e9d1446fbcb9d43499dbe042"><enum>(a)</enum><header>Addition of permissible income categories</header><text>Section 856(c) (relating to limitations) is amended—</text> <paragraph id="ID29a377d690844fc89b5a9a28670495b6"><enum>(1)</enum><text>by striking <quote>and</quote> at the end of paragraph (2)(G) and by inserting after paragraph (2)(H) the following new subparagraphs:</text> <quoted-block display-inline="no-display-inline" id="idCA1EDB85B01144268CE00DA7DB1A3304" style="OLC"> <subparagraph id="ID0d5b4c0c4c034c8e9c20e1fee8cb2e69"><enum>(I)</enum><text>passive foreign exchange gains; and</text> </subparagraph><subparagraph id="ID8ef94365d0f043d4a8ba3ca5a5586a02"><enum>(J)</enum><text>any other item of income or gain as determined by the Secretary;</text> </subparagraph><after-quoted-block>, and</after-quoted-block></quoted-block> </paragraph><paragraph id="ID487f95b8993e4b5ab791262de2e0f19d"><enum>(2)</enum><text>by striking <quote>and</quote> at the end of paragraphs (3)(H) and (3)(I) and by inserting after paragraph (3)(I) the following new subparagraphs:</text> <quoted-block display-inline="no-display-inline" id="idA35DEE9245C54CD7A5F9DB4029D3F3E8" style="OLC"> <subparagraph id="ID6d587f89e9694a83a936f50988133b90"><enum>(J)</enum><text>real estate foreign exchange gains; and</text> </subparagraph><subparagraph id="ID98524a0d0d144825aee1658810ebb578"><enum>(K)</enum><text>any other item of income or gain as determined by the Secretary; and</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </paragraph></subsection><subsection id="IDabdd476a9bfa42aa9d78038fede6ccfc"><enum>(b)</enum><header>Rules regarding foreign currency transactions</header><text>Section 856 (defining real estate investment trust) is amended by adding at the end the following new subsection:</text> <quoted-block display-inline="no-display-inline" id="id0A841DA6653040AEAABAB628C82B966A" style="OLC"> <subsection id="ID90b6d5536c4741d1b1150e9955da3400"><enum>(n)</enum><header>Rules regarding foreign currency transactions</header><text>With respect to any taxable year—</text> <paragraph id="ID14a1bcf453db4daabffb9cb4b5a1e1dd"><enum>(1)</enum><header>Real estate foreign exchange gains</header><text>For purposes of subsection (c)(3)(J), the term <term>real estate foreign exchange gains</term> means—</text> <subparagraph id="ID3657a329ba8944b399862b342205bbb7"><enum>(A)</enum><text>foreign currency gains (as defined in section 988(b)(1)) which are attributable to—</text> <clause id="IDcb0e41723cb047b782de4b2c225b2bcd"><enum>(i)</enum><text>any item described in subsection (c)(3),</text> </clause><clause id="ID1f4b4ac533cc4a17881b14ccb72f7f46"><enum>(ii)</enum><text>the acquisition or ownership of obligations secured by mortgages on real property or on interests in real property (other than foreign currency gains described in clause (i)), or</text> </clause><clause id="ID0ecb6b2fbe7c4b9f8fe365265b7eb2ff"><enum>(iii)</enum><text>becoming or being the obligor under obligations secured by mortgages on real property or on interests in real property (other than foreign currency gains described in clause (i)),</text> </clause></subparagraph><subparagraph id="IDa00238496fe94eca908473426b420718"><enum>(B)</enum><text>gains described in section 987 attributable 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—</text> <clause id="ID5c2dca979f034a3387d56a163199074c"><enum>(i)</enum><text>subsection (c)(3) for the taxable year; and</text> </clause><clause id="IDd0a6fee47f924c1c8c1ecff5acaefbfe"><enum>(ii)</enum><text>subsection (c)(4)(A) at the close of each quarter that the real estate investment trust has directly or indirectly held the qualified business unit, and</text> </clause></subparagraph><subparagraph id="ID1cc68e8aa0b94f0a9f86adb9bca09ed0"><enum>(C)</enum><text>any other foreign currency gains as determined by the Secretary.</text> </subparagraph></paragraph><paragraph id="ID5d6155178fdd4e2c87a9d853226e4c78"><enum>(2)</enum><header>Passive foreign exchange gains</header><text>For purposes of subsection (c)(2)(I), the term <term>passive foreign exchange gains</term> means—</text> <subparagraph id="ID52b8a14fda4e4f8384ad3b0d5c2ff774"><enum>(A)</enum><text>gains described under paragraph (1),</text> </subparagraph><subparagraph id="ID209e0db33bdd47e799d8174a078e7f2e"><enum>(B)</enum><text>foreign currency gains (as defined in section 988(b)(1)) which are attributable to any item described in subsection (c)(2) (other than those items includible under subparagraph (A)), and</text> </subparagraph><subparagraph id="IDad8a3159a2e447ac9dbd485f5444cda5"><enum>(C)</enum><text>any other foreign currency gains as determined by the Secretary.</text> </subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="IDb89f7e1af5664c86972cab9ab1e9f832"><enum>(c)</enum><header>Addition to REIT hedging rule</header><text>Subparagraph (G) of section 856(c)(5) is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="idAB5F4265CAD14FFDB5C74EE39524B0A2" style="OLC"> <subparagraph id="IDf019714a5cf145e8a8ac24078cfd8857"><enum>(G)</enum><header>Treatment of certain hedging instruments</header><text>Except to the extent as determined by the Secretary—</text> <clause id="ID894fe7a6c3464c7f83f409aac16f4d28"><enum>(i)</enum><text>any income of a real estate investment 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 income under paragraphs (2) and (3) to the extent that the transaction hedges any indebtedness incurred or to be incurred by the trust to acquire or carry real estate assets, and</text> </clause><clause id="IDc524040a6e2949479c41599e2a3abca7"><enum>(ii)</enum><text>any income of a real estate investment trust from a transaction entered into by the trust primarily to manage risk of currency fluctuations with respect to any item described in paragraphs (2) and (3), including gain from the termination of such a transaction, shall not constitute 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).</text> </clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="ID22bb6a6b633844829153dae7f5de7625"><enum>(d)</enum><header>Authority to exclude items of income from REIT income tests</header><text>Section 856(c)(5) is amended by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="id1CAE6644F4E34830B29C116FC0975950" style="OLC"> <subparagraph id="IDe6418e7e17ac4a58b026d8a5f206170c"><enum>(H)</enum><header>Secretarial authority to exclude other items of income</header><text>The Secretary is authorized to determine whether any item of income or gain which does not otherwise qualify under paragraph (2) or (3) may be considered as not constituting gross income solely for purposes of this part.</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection></section><section id="id3965D9BB5DC7428F9C54DCE59FFF7C2F"><enum>102.</enum><header>Revisions to REIT asset tests</header> <subsection id="ID56e8d066dd644a2d9c5c3d2191461148"><enum>(a)</enum><header>Clarification of valuation test</header><text>The first sentence in the matter following section 856(c)(4)(B)(iii)(III) is amended by inserting <quote>(including a discrepancy caused solely by the change in the foreign currency exchange rate used to value a foreign asset)</quote> after <quote>such requirements</quote>.</text> </subsection><subsection id="ID4e3fd246799b42ff9cd4ce6e1380e9cb"><enum>(b)</enum><header>Clarification of permissible asset category</header><text>Section 856(c)(5), as amended by section 101(d), is amended by adding at the end the following new subparagraph:</text> <quoted-block display-inline="no-display-inline" id="id9A58447440F04C53AD717367820CD01A" style="OLC"> <subparagraph id="ID43f8431028c34888884d51cb3e36b97e"><enum>(I)</enum><header>Cash</header><text>For purposes of this part, the term <term>cash</term> includes foreign currency if the real estate investment trust or its qualified business unit (as defined in section 989) uses such foreign currency as its functional currency (as defined in section 985(b)).</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection></section><section id="id70C8DBA4F406477D93ED7256E6802B9E"><enum>103.</enum><header>Conforming foreign currency revisions</header> <subsection id="ID90f00ddfef5b401eaec4431433bb0f16"><enum>(a)</enum><header>Net income from foreclosure property</header><text>Clause (i) of section 857(b)(4)(B) is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="id49925562130E422EB3AE51FC237561CA" style="OLC"> <clause id="IDa1674124750f4835af3c2628c5785acf"><enum>(i)</enum><text>gain (including any foreign currency gain, as defined in section 988(b)(1)) from the sale or other disposition of foreclosure property described in section 1221(a)(1) and the gross income for the taxable year derived from foreclosure property (as defined in section 856(e)), but only to the extent such gross income is not described in (or, in the case of foreign currency gain, not attributable to gross income described in) section 856(c)(3) other than subparagraph (F) thereof, over</text> </clause><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="IDb78342999eb544fa8d603d228f6c38b0"><enum>(b)</enum><header>Net income from prohibited transactions</header><text>Clause (i) of section 857(b)(6)(B) is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="id54A026F7F36544ED9CEAF5DAA600FCE7" style="OLC"> <clause id="IDa32e93f333394cf6a98d2be258d8ae5a"><enum>(i)</enum><text>the term <term>net income derived from prohibited transactions</term> means the excess of the gain (including any foreign currency gain, as defined in section 988(b)(1)) from prohibited transactions over the deductions (including any foreign currency loss, as defined in section 988(b)(2)) allowed by this chapter which are directly connected with prohibited transactions;</text> </clause><after-quoted-block>.</after-quoted-block></quoted-block> </subsection></section><enum>II</enum><header>Taxable REIT subsidiaries</header> <section id="id2CECC6EB8E904811A86CFC633E96F73D"><enum>201.</enum><header>Conforming taxable REIT subsidiary asset test</header><text display-inline="no-display-inline">Section 856(c)(4)(B)(ii) is amended by striking <quote>20 percent</quote> and inserting <quote>25 percent</quote>.</text> </section><enum>III</enum><header>Dealer sales</header> <section id="idCD06C1CFA5534896879B8E7C52AA1096"><enum>301.</enum><header>Holding period under safe harbor</header><text display-inline="no-display-inline">Section 857(b)(6) (relating to income from prohibited transactions) is amended—</text> <paragraph id="ID88ec0b8213684c8b89543920bb190e7e"><enum>(1)</enum><text>by striking <quote>4 years</quote> in subparagraphs (C)(i), (C)(iv), and (D)(i) and inserting <quote>2 years</quote>,</text> </paragraph><paragraph id="IDf3359bd90e824b8cad835c6a63755a17"><enum>(2)</enum><text>by striking <quote>4-year period</quote> in subparagraphs (C)(ii), (D)(ii), and (D)(iii) and inserting <quote>2-year period</quote>, and</text> </paragraph><paragraph id="idC0D04B07E9794987B9931ED62AE7F827"><enum>(3)</enum><text>by striking <quote>real estate asset</quote> and all that follows through <quote>if</quote> in the matter preceding clause (i) of subparagraphs (C) and (D) and inserting <quote>real estate asset (as defined in section 856(c)(5)(B) otherwise described in section 1221(a)(1) if</quote>.</text> </paragraph></section><section id="idE7A6269819BC41DFA5274269EC760E9B"><enum>302.</enum><header>Determining value of sales under safe harbor</header><text display-inline="no-display-inline">Subparagraphs (C)(iii)(II) and (D)(iv)(II) of section 857(b)(6) are each amended by striking <quote>the aggregate adjusted bases</quote> and all that follows through <quote>the beginning of the taxable year</quote> and inserting <quote>the fair market value of property (other than sales of foreclosure property or sales to which section 1033 applies) sold during the taxable year does not exceed 10 percent of the fair market value of all of the assets of the trust as of the beginning of the taxable year</quote>.</text> </section><enum>IV</enum><header>Health care REITs</header> <section id="id7E06E842E3E24408B378B90BC8915C8B"><enum>401.</enum><header>Conformity for health care facilities</header> <subsection id="ID8f12dfb632a4483a87cca42b8db76920"><enum>(a)</enum><header>Related party rentals</header><text>Subparagraph (B) of section 856(d)(8) (relating to special rule for taxable REIT subsidiaries) is amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="id9A78679639C94A52A2DF89102C2A8A60" style="OLC"> <subparagraph id="IDe1c6b0b5e00b4a5f90458c8d3b85581e"><enum>(B)</enum><header>Exception for certain lodging facilities and health care property</header><text>The requirements of this subparagraph are met with respect to an interest in real property which is a qualified lodging facility or a qualified health care property (as defined in subsection (e)(6)(D)(i)) leased by the trust to a taxable REIT subsidiary of the trust if the property is operated on behalf of such subsidiary by a person who is an eligible independent contractor.</text> </subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection><subsection id="IDf5d1538bfd2242cd84cdb8a414b3afc5"><enum>(b)</enum><header>Eligible independent contractor</header><text>Subparagraphs (A) and (B) of section 856(d)(9) (relating to eligible independent contractor) are amended to read as follows:</text> <quoted-block display-inline="no-display-inline" id="id5042EA3DECFC4399B230FDB6E1F7C90E" style="OLC"> <subparagraph id="IDaf54ec5aefe348fb81220011e368a6fb"><enum>(A)</enum><header>In general</header><text>The term <term>eligible independent contractor</term> means, with respect to any qualified lodging facility or qualified health care property (as defined in subsection (e)(6)(D)(i)), any independent contractor if, at the time such contractor enters into a management agreement or other similar service contract with the taxable REIT subsidiary to operate such qualified lodging facility or qualified health care property, such contractor (or any related person) is actively engaged in the trade or business of operating qualified lodging facilities or qualified health care properties, respectively, for any person who is not a related person with respect to the real estate investment trust or the taxable REIT subsidiary.</text> </subparagraph><subparagraph id="IDad0cee49c48e4aaf8750708aabc55534"><enum>(B)</enum><header>Special rules</header><text>Solely for purposes of this paragraph and paragraph (8)(B), a person shall not fail to be treated as an independent contractor with respect to any qualified lodging facility or qualified health care property (as so defined) by reason of the following:</text> <clause id="ID2a2459a2a3344001b62af6e5bdd5cb35"><enum>(i)</enum><text>The taxable REIT subsidiary bears the expenses for the operation of such qualified lodging facility or qualified health care property pursuant to the management agreement or other similar service contract.</text> </clause><clause id="ID7e710bd9e79b45bb9a5fb3704fdbc324"><enum>(ii)</enum><text>The taxable REIT subsidiary receives the revenues from the operation of such qualified lodging facility or qualified health care property, net of expenses for such operation and fees payable to the operator pursuant to such agreement or contract.</text> </clause><clause id="ID87ed77160e6448d9846cea1d15739a2c"><enum>(iii)</enum><text>The real estate investment trust receives income from such person with respect to another property that is attributable to a lease of such other property to such person that was in effect as of the later of —</text> <subclause id="ID00938f02e2a7419389de857a9cf1634c"><enum>(I)</enum><text>January 1, 1999, or</text> </subclause><subclause id="ID0d09c90910d7479ba42a4c2b1e3a025b"><enum>(II)</enum><text>the earliest date that any taxable REIT subsidiary of such trust entered into a management agreement or other similar service contract with such person with respect to such qualified lodging facility or qualified health care property.</text> </subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection></section><enum>V</enum><header>Foreign REITs</header> <section id="idE81DEB8E587C45DB8BC1B584EA2159B7"><enum>501.</enum><header>Stock of foreign REITs as real estate assets</header> <subsection id="id4D04152F3E8747F0B3F76048F5B5C560"><enum>(a)</enum><header>In general</header><text>The first sentence in section 856(c)(5)(B) is amended by inserting <quote>or in a qualified foreign REIT</quote> after <quote>this part</quote>.</text> </subsection><subsection id="id7F0BC35C6D2A4A928C6B05BA27CC2B9B"><enum>(b)</enum><header>Qualified foreign REIT</header><text>Section 856(c) is amended by adding at the end the following new paragraph:</text> <quoted-block display-inline="no-display-inline" id="id36283D4926694F96AD29ABB5475CA7E2" style="OLC"> <paragraph id="idA2FBB77DEC664CCF910AD31D3D19737D"><enum>(8)</enum><header>Qualified foreign reit</header><text>For purposes of this subsection, the term <term>qualified foreign REIT</term> means a corporation, trust, or association—</text> <subparagraph id="id46B01398C6164EE6925B8732C8591DAE"><enum>(A)</enum><text>treated as a corporation under section 7701(a)(3),</text> </subparagraph><subparagraph id="id68DB3FCC60AC4A3587C8B2F92BBBE79D"><enum>(B)</enum><text>the shares or certificates of beneficial interests of which are regularly traded on an established securities market, and</text> </subparagraph><subparagraph id="idE6C606DA743049A38287DD61C0FDE456"><enum>(C)</enum><text>which is organized in a country under rules that the Secretary determines meet the following criteria:</text> <clause id="ID8a2bd53ca48c4fbc9ff7529da3a89d26"><enum>(i)</enum><text>At least 75 percent of the entity’s assets must qualify as real estate assets (determined without regard to shares or transferable certificates of beneficial interest in such entity), as determined at the close of the entity’s prior taxable year.</text> </clause><clause id="IDa267d0cc3bf3425a87fd608ca51cc63b"><enum>(ii)</enum><text>The entity either receives a dividends paid deduction comparable to section 561 or is exempt from corporate level tax.</text> </clause><clause id="IDbc6230333f954061bc71ef4c1c423cb0"><enum>(iii)</enum><text>The entity is required to distribute at least 85 percent of its annual taxable income (as computed in the jurisdiction in which it is organized) to the holders of its shares or certificates of beneficial interest on an annual basis.</text> </clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block> </subsection></section><section id="id94AF4EC914F74B6CAFAC0119B843C61E"><enum>502.</enum><header>Dividends from foreign REITs</header><text display-inline="no-display-inline">Section 856(c)(3)(D) is amended by inserting “and in qualified foreign REITs” after <quote>this part</quote>.</text> </section><enum>VI</enum><header>Effective dates</header> <section id="id40BAFB522E38408CAF3EB2CFD5793731"><enum>601.</enum><header>Effective dates</header> <subsection id="IDc059996a506b459894aa96501b1fc4d5"><enum>(a)</enum><header>In general</header><text>Except as otherwise provided in this section, the amendments made by this Act shall apply to taxable years beginning after the date of the enactment of this Act.</text> </subsection><subsection id="IDb708ba0c75bb438584b1189e95375d61"><enum>(b)</enum><header>REIT hedging rules</header><text>The amendment made by section 101(c) shall apply to transactions entered into after the date of the enactment of this Act.</text> </subsection></section>