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April 9, 2008, 12:00 am ET - Amendment SA 4390 proposed by Senator Dodd for Senator Hatch to Amendment SA 4387.
April 9, 2008, 12:00 am ET - Amendment SA 4390 as modified agreed to in Senate by Unanimous Consent.

Full Text of this Amendment

SA 4390. Mr. HATCH (for himself, Mr. Salazar, and Mr. Kerry) submitted an amendment intended to be proposed by him to the bill H.R. 3221, moving the United States toward greater energy independence and security, developing innovative new technologies, reducing carbon emissions, creating green jobs, protecting consumers, increasing clean renewable energy production, and modernizing our energy infrastructure, and to amend the Internal Revenue Code of 1986 to provide tax incentives
for the production of renewable energy and energy conservation; which was ordered to lie on the table; as follows:

At the end add the following:
TITLE VIII--REIT INVESTMENT DIVERSIFICATION AND EMPOWERMENT


SEC. 800. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) Short Title.--This title may be cited as the ``REIT Investment Diversification and Empowerment Act of 2008''.
(b) Amendment of 1986 Code.--Except as otherwise expressly provided, whenever in this title 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.
Subtitle A--Foreign Currency and Other Qualified Activities


SEC. 801. REVISIONS TO REIT INCOME TESTS.
(a) Addition of Permissible Income Categories.--Section 856(c) (relating to limitations) is amended--
(1) by striking ``and'' at the end of paragraph (2)(G) and by inserting after paragraph (2)(H) the following new subparagraphs:
``(I) passive foreign exchange gains; and
``(J) any other item of income or gain as determined by the Secretary;'', and
(2) by striking ``and'' at the end of paragraphs (3)(H) and (3)(I) and by inserting after paragraph (3)(I) the following new subparagraphs:
``(J) real estate foreign exchange gains; and
``(K) any other item of income or gain as determined by the Secretary; and''.
(b) Rules Regarding Foreign Currency Transactions.--Section 856 (defining real estate investment trust) is amended by adding at the end the following new subsection:
``(n) Rules Regarding Foreign Currency Transactions.--With respect to any taxable year--
``(1) REAL ESTATE FOREIGN EXCHANGE GAINS.--For purposes of subsection (c)(3)(J), the term `real estate foreign exchange gains' means--
``(A) foreign currency gains (as defined in section 988(b)(1)) which are attributable to--
``(i) any item described in subsection (c)(3) (other than in subparagraph (J) thereof),
``(ii) the acquisition or ownership of obligations secured by mortgages on real property or on interests in real property (other than foreign currency gains attributable to any item described in clause (i)), or
``(iii) becoming or being the obligor under obligations secured by mortgages on real property or on interests in real property (other than foreign currency gains attributable to any item described in clause (i)),
``(B) 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--
``(i) subsection (c)(3) (without regard to subparagraph (J) thereof) for the taxable year, and
``(ii) 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
``(C) any other foreign currency gains as determined by the Secretary.
``(2) PASSIVE FOREIGN EXCHANGE GAINS.--For purposes of subsection (c)(2)(I), the term `passive foreign exchange gains' means--
``(A) real estate foreign exchange gains,
``(B) foreign currency gains (as defined in section 988(b)(1)) which are not described in subparagraph (A) and which are attributable to any item described in subsection (c)(2) (other than in subparagraph (I) thereof), and
``(C) any other foreign currency gains as determined by the Secretary.''.
(c) Addition to REIT Hedging Rule.--Subparagraph (G) of section 856(c)(5) is amended to read as follows:
``(G) TREATMENT OF CERTAIN HEDGING INSTRUMENTS.--Except to the extent as determined by the Secretary--
``(i) 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
``(ii) 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 paragraph (2) or (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).''.
(d) Authority to Exclude Items of Income From REIT Income Tests.--Section 856(c)(5) is amended by adding at the end the following new subparagraph:
``(H) SECRETARIAL AUTHORITY TO EXCLUDE OTHER ITEMS OF INCOME.--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.''.
SEC. 802. REVISIONS TO REIT ASSET TESTS.
(a) Clarification of Valuation Test.--The first sentence in the matter following section 856(c)(4)(B)(iii)(III) is amended by inserting ``(including a discrepancy caused solely by the change in the foreign currency exchange rate used to value a foreign asset)'' after ``such requirements''.
(b) Clarification of Permissible Asset Category.--Section 856(c)(5), as amended by this Act, is amended by adding at the end the following new subparagraph:
``(I) CASH.--The term `cash' 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)).''.
SEC. 803. CONFORMING FOREIGN CURRENCY REVISIONS.
(a) Net Income From Foreclosure Property.--Clause (i) of section 857(b)(4)(B) is amended to read as follows:
``(i) 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''.
(b) Net Income From Prohibited Transactions.--Clause (i) of section 857(b)(6)(B) is amended to read as follows:
``(i) the term `net income derived from prohibited transactions' 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;''.
Subtitle B--Taxable Reit Subsidiaries


SEC. 811. CONFORMING TAXABLE REIT SUBSIDIARY ASSET TEST.
Section 856(c)(4)(B)(ii) is amended by striking ``20 percent'' and inserting ``25 percent''.
Subtitle C--Dealer Sales


SEC. 821. HOLDING PERIOD UNDER SAFE HARBOR.
Section 857(b)(6) (relating to income from prohibited transactions) is amended--
(1) by striking ``4 years'' in subparagraphs (C)(i), (C)(iv), and (D)(i) and inserting ``2 years'',
(2) by striking ``4-year period'' in subparagraphs (C)(ii), (D)(ii), and (D)(iii) and inserting ``2-year period'', and
(3) by striking ``real estate asset''and all that follows through ``if'' in the matter preceding clause (i) of subparagraphs (C) and (D), respectively, and inserting ``real estate asset (as defined in section 856(c)(5)(B)) and which is described in section 1221(a)(1) if''.
SEC. 822. DETERMINING VALUE OF SALES UNDER SAFE HARBOR.
Section 857(b)(6) is amended--
(1) by striking the semicolon at the end of subparagraph (C)(iii) and inserting ``, or (III) 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;'', and
(2) by adding ``or'' at the end of subclause (II) of subparagraph (D)(iv) and by adding at the end of such subparagraph the following new subclause:
``(III) 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,''.
Subtitle D--Health Care Reits


SEC. 831. CONFORMITY FOR HEALTH CARE FACILITIES.
(a) Related Party Rentals.--Subparagraph (B) of section 856(d)(8) (relating to special rule for taxable REIT subsidiaries) is amended to read as follows:
``(B) EXCEPTION FOR CERTAIN LODGING FACILITIES AND HEALTH CARE PROPERTY.--The requirements of this subparagraph are met with respect to an interest in real property which is a qualified lodging facility (as defined in paragraph (9)(D)) 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. For
purposes of this section, a taxable REIT subsidiary is not considered to be operating or managing a qualified health care property or qualified lodging facility solely because it--
``(i) directly or indirectly possesses a license, permit, or similar instrument enabling it to do so, or
``(ii) employs individuals working at such property or facility located outside the United States, but only if an eligible independent contractor is responsible for the daily supervision and direction of such individuals on behalf of the taxable REIT subsidiary pursuant to a management agreement or similar service contract.''.
(b) Eligible Independent Contractor.--Subparagraphs (A) and (B) of section 856(d)(9) (relating to eligible independent contractor) are amended to read as follows:
``(A) IN GENERAL.--The term `eligible independent contractor' 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.
``(B) SPECIAL RULES.--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:
``(i) 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.
``(ii) 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.
``(iii) 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--
``(I) January 1, 1999, or
``(II) 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.''.
(c) Taxable Reit Subsidiaries.--The last sentence of section 856(l)(3) is amended--
(1) by inserting ``or a health care facility'' after ``a lodging facility'', and
(2) by inserting ``or health care facility'' after ``such lodging facility''.
Subtitle E--Effective Dates and Sunset


SEC. 841 EFFECTIVE DATES AND SUNSET.
(a) In General.--Except as otherwise provided in this section, the amendments made by this title shall apply to taxable years beginning after the date of the enactment of this Act.
(b) REIT Income Tests.--
(1) The amendment made by section 801(a) and (b) shall apply to gains and items of income recognized after the date of the enactment of this Act.
(2) The amendment made by section 801(c) shall apply to transactions entered into after the date of the enactment of this Act.
(3) The amendment made by section 801(d) shall apply after the date of the enactment of this Act.
(c) Conforming Foreign Currency Revisions.--
(1) The amendment made by section 803(a) shall apply to gains recognized after the date of the enactment of this Act.
(2) The amendment made by section 803(b) shall apply to gains and deductions recognized after the date of the enactment of this Act.
(d) Dealer Sales.--The amendments made by subtitle C shall apply to sales made after the date of the enactment of this Act.
(e) Sunset.--All amendments made by this title shall not apply to taxable years beginning after the date which is 5 years after the date of the enactment of this Act. The Internal Revenue Code of 1986 shall be applied and administered to taxable years described in the preceding sentence as if the amendments so described had never been enacted.


(As printed in the Congressional Record for the Senate on Apr 3, 2008.)