To amend the Internal Revenue Code of 1986 to provide that interests in certain domestically controlled investment partnerships are not treated as United States real property interests.

Amends the Internal Revenue Code to provide that an interest in or owned by an investment partnership shall not be treated as a U.S. real property interest (and thus be subject to a higher rate of taxation upon the sale of such interest) if, during a specified testing period: (1) less than 50 percent in value of the capital or profits interests in such partnership is held directly or indirectly by foreign persons; (2) no single foreign person owns directly or indirectly more than ten percent of the capital or profits of such partnership; and (3) the adjusted basis of the partnership's U.S. real property interests does not exceed ten percent of the adjusted basis of its assets. Exempts dispositions of such interests of such partnerships from tax withholding requirements.

[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3829 Introduced in House (IH)]






108th CONGRESS
  2d Session
                                H. R. 3829

To amend the Internal Revenue Code of 1986 to provide that interests in 
certain domestically controlled investment partnerships are not treated 
               as United States real property interests.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 25, 2004

  Mr. Cantor 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 provide that interests in 
certain domestically controlled investment partnerships are not treated 
               as United States real property interests.

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

SECTION 1. CERTAIN DOMESTICALLY CONTROLLED INVESTMENT PARTNERSHIP 
              INTERESTS NOT TREATED AS UNITED STATES REAL PROPERTY 
              INTERESTS.

    (a) In General.--Paragraph (1) of section 897(c) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                    ``(C) Exclusion of domestically controlled 
                investment partnerships.--
                            ``(i) In general.--The term `United States 
                        real property interest' does not include any 
                        interest in or owned by an investment 
                        partnership (as defined by section 
                        731(c)(3)(C)(i)) if at all times during the 
                        testing period--
                                    ``(I) less than 50 percent in value 
                                of the capital or profits interests in 
                                such partnership is held directly or 
                                indirectly by foreign persons,
                                    ``(II) no single foreign person 
                                owns directly or indirectly more than 
                                10 percent of the capital or profits 
                                interests in such partnership, and
                                    ``(III) the adjusted basis of its 
                                United States real property interests 
                                does not exceed 10 percent of the 
                                adjusted basis of its assets.
                            ``(ii) Special rule for pension trusts.--In 
                        determining the ownership of the capital or 
                        profits in a partnership, any interest held by 
                        a pension trust shall be treated as held 
                        directly by its beneficiaries in proportion to 
                        their actuarial interests in such trust and 
                        shall not be treated as held by such trust.
                            ``(iii) Testing period.--For purposes of 
                        this subparagraph, the term `testing period' 
                        means the shorter of--
                                    ``(I) the 5-year period ending on 
                                the date of the disposition or of the 
                                distribution, as the case by be, or
                                    ``(II) the period during which the 
                                partnership was in existence.
                        For purposes of clause (i)(III), except as 
                        provided in regulations, the testing period 
                        shall not commence until the date which is 36 
                        months after the partnership came into 
                        existence.''.
    (b) Withholding Tax.--Section 1445(b) of such Code is amended--
            (1) in paragraph (1), by striking ``or (6)'' and inserting 
        ``(6), or (8)'', and
            (2) by adding at the end the following new paragraph:
            ``(8) Domestically controlled investment partnerships.--
        This paragraph applies if the disposition is of an interest in 
        or owned by a domestically controlled investment partnership 
        that is not a United States real property interest by reason of 
        section 897(c)(1)(C).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to dispositions on or after the date of the enactment of this 
Act.
                                 <all>