113 STAT. 1944
PUBLIC LAW 106-170—DEC. 17, 1999
Such an election, once made, shall be irrevocable unless both
such trust and corporation consent to its revocation. Such election, and any revocation thereof, may be made without the
consent of the Secretary.
"(2) THIRTY-FIVE PERCENT OWNERSHIP IN ANOTHER TAXABLE
REIT SUBSIDIARY. — The term 'taxable REIT subsidiary' includes,
with respect to any real estate investment trust, any corporation (other than a real estate investment trust) with respect
to which a taxable REIT subsidiary of such trust owns directly
or indirectly—
"(A) securities possessing more than 35 percent of the
total voting power of the outstanding securities of such
corporation, or
"(B) securities having a value of more than 35 percent
of the total value of the outstanding securities of such
corporation.
The preceding sentence shall not apply to a qualified REIT
subsidiary (as defined in subsection (i)(2)). The rule of section
856(c)(7) shall apply for purposes of subparagraph (B).
"(3) EXCEPTIONS.— The term 'taxable REIT subsidiary' shall
not include—
"(A) any corporation which directly or indirectly operates or manages a lodging facility or a health care facility,
and
"(B) any corporation which directly or indirectly provides to any other person (under a franchise, license, or
otherwise) rights to suiy brand name under which any
lodging facility or health care facility is operated.
Subparagraph (B) shall not apply to rights provided to an
eligible independent contractor to operate or manage a lodging
facility if such rights are held by such corporation as a
franchisee, licensee, or in a similar capacity and such lodging
facility is either owned by such corporation or is leased to
such corporation from the real estate investment trust.
" (4) DEFINITIONS.— For purposes of paragraph (3)—
"(A) LODGING FACILITY. —The term 'lodging facility' has
the meaning given to such term by paragraph (9)(D)(ii).
"(B) HEALTH CARE FACILITY. —The term 'health care
facility' has the meaning given to such term by subsection
(e)(6)(D)(ii).".
(b) CONFORMING AMENDMENT.— Paragraph (2) of section 856(i)
of such Code is amended by adding at the end the following new
sentence: "Such term shall not include a taxable REIT subsidiary.".
SEC. 544. LIMITATION ON EARNINGS STRIPPING.
Paragraph (3) of section 163(j) of the Internal Revenue Code
26 USC 163.
of 1986 (relating to limitation on deduction for interest on certain
indebtedness) 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
new subparagraph:
"(C) any interest paid or accrued (directly or indirectly)
by a taxable REIT subsidiary (as defined in section 856(1))
of a real estate investment trust to such trust.".
SEC. 545. 100 PERCENT TAX ON IMPROPERLY ALLOCATED AMOUNTS.
(a) IN GENERAL.—Subsection (b) of section 857 of the Internal
26 USC 857.
Revenue Code of 1986 (relating to method of taxation of real estate
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