[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3749 Introduced in House (IH)]
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118th CONGRESS
1st Session
H. R. 3749
To amend the Internal Revenue Code of 1986 to modify the treatment of
certain rents received by real estate investment trusts from related
parties.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 30, 2023
Mr. LaHood (for himself and Mr. Schneider) 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 modify the treatment of
certain rents received by real estate investment trusts from related
parties.
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 ``Retail Revitalization Act of 2023''.
SEC. 2. MODIFICATION OF TREATMENT OF CERTAIN RENTS RECEIVED BY REAL
ESTATE INVESTMENT TRUST FROM RELATED PARTIES.
(a) Special Rule for Distressed Tenants.--
(1) In general.--Section 856(d) of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
paragraph:
``(10) Special rule for distressed tenants.--
``(A) In general.--Except as otherwise provided by
the Secretary, in the case of a real estate investment
trust which makes a qualified acquisition of a
qualified tenant during the 4-year period beginning on
the date of the enactment of this paragraph, paragraph
(2)(B) shall be applied with respect to such tenant by
substituting `50 percent' for `10 percent' each place
it appears therein.
``(B) Qualified acquisition.--For purposes of this
paragraph--
``(i) In general.--The term `qualified
acquisition' means the acquisition by a real
estate investment trust of stock, assets, or
net profits in connection with the bankruptcy,
insolvency (within the meaning of section
108(d)(3)), or cash flow insolvency of a
qualified tenant.
``(ii) Cash flow insolvency.--For purposes
of clause (i), a qualified tenant shall be
treated as having cash flow insolvency
following a reasonable determination by the
real estate investment trust, based upon an
examination of the facts and circumstances,
that such tenant's revenue is insufficient to
cover its debt service payments based on such
tenant's applicable financial statement (as
defined in section 451(b)(3)).
``(C) Qualified tenant.--For purposes of this
paragraph--
``(i) In general.--The term `qualified
tenant' means, with respect to any acquisition
referred to in subparagraph (B), any person
from which the real estate investment trust
received or accrued rents from real property
pursuant to a lease which was in effect on the
date of the enactment of this paragraph.
``(ii) Renewals, etc., of existing
leases.--For purposes of clause (i), a lease
shall be treated as in effect on the date of
the enactment of this paragraph if the
conditions of paragraph (9)(C) are satisfied.
``(iii) Successors.--The term `qualified
tenant' shall include a person if such person
is a successor to a qualified tenant within the
meaning of subsection (g) (without regard to
such person's status as a real estate
investment trust or any continuity of
shareholder interest requirement) or for
purposes of section 381.
``(D) Limitation on period for which treatment
applies.--With respect to any qualified acquisition,
subparagraph (A) shall apply only to amounts received
or accrued during the 7-taxable-year period beginning
with the taxable year which includes the date of such
acquisition.
``(E) Coordination with certain other provisions.--
For purposes of clauses (i) and (v) of paragraph
(8)(A), whether a person is described in paragraph
(2)(B) shall be determined after application of
subparagraph (A) of this paragraph.''.
(2) Conforming amendment.--Section 856(d)(2)(B) of such
Code is amended by striking ``paragraph (8)'' and inserting
``paragraphs (8) and (10)''.
(3) Effective date.--The amendments made by this subsection
shall apply to qualified acquisitions (as defined in section
856(d)(10)(B) of the Internal Revenue Code of 1986, as added by
this subsection) after the date of the enactment of this Act,
in taxable years ending after such date.
(b) Increase in Percentage of Ownership at Which Rents Are
Generally Disqualified.--
(1) In general.--Section 856(d)(2)(B) of such Code is
amended by striking ``10 percent'' each place it appears and
inserting ``30 percent''.
(2) Effective date.--The amendment made by this subsection
shall apply to taxable years ending after the date of the
enactment of this Act.
(c) Increase in Percentage of Ownership at Which Constructive
Ownership Rules Begin To Apply.--
(1) In general.--Section 856(d)(5) of such Code is
amended--
(A) by striking ``10 percent'' in subparagraph (A)
and inserting ``30 percent'', and
(B) by striking ``25 percent'' in subparagraph (B)
and inserting ``30 percent''.
(2) Effective date.--The amendments made by this subsection
shall apply to taxable years ending after the date of the
enactment of this Act.
(d) Limitation on Application of Constructive Ownership Rules.--
(1) In general.--Section 856(d)(5) of such Code is amended
by striking ``and'' at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting ``,
and'', and by adding at the end the following:
``(C) except as otherwise provided by the
Secretary, stock, assets, and net profits
constructively owned by a partnership, estate, trust,
or corporation by reason of the application of section
318(a)(3) (after application of subparagraphs (A) and
(B)) shall not be considered as owned by it for
purposes of again applying such section in order to
make another person the constructive owner of such
stock, assets, or net profits.
Subparagraph (C) shall not prevent any person from being the
constructive owner of stock, assets, or net profits of any
person as the result of any other application of section 318(a)
(as modified by this paragraph).''.
(2) No inference.--Nothing in the amendments made by
paragraph (1) shall be construed to create any inference with
respect to the proper application of section 318 of the
Internal Revenue Code of 1986 to cases other than cases to
which such amendments apply.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years ending after the date of the
enactment of this Act.
(e) Modification of Rental Exception for Taxable REIT
Subsidiaries.--
(1) In general.--Section 856(d)(8)(A)(i) of such Code is
amended to read as follows:
``(i) In general.--The requirements of this
subparagraph are met with respect to any
property if--
``(I) not more than 30 percent of
the leasable space of such property is
rented to taxable REIT subsidiaries and
other persons described in paragraph
(2)(B) (determined without regard to
paragraph (10)), and
``(II) not more than 50 percent of
the leasable space of such property is
rented to taxable REIT subsidiaries and
other persons described in paragraph
(2)(B) (determined after the
application of paragraph (10)).''.
(2) Effective date.--The amendment made by this subsection
shall apply to taxable years ending after the date of the
enactment of this Act.
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