Update and Streamline REIT Act: Would Simplify and Modernize Rules to Help Investors
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The U.S. Chamber has long supported Congressional simplification and modernization of tax rules in order to improve efficiency and help businesses create jobs. Consider the rules governing real estate investment trusts (REITs). Congress created real estate investment trusts (REITs) over 50 years ago to allow investors to enjoy the benefits of investing in real estate by owning shares of companies that own, operate, or finance income-producing real estate. REITs afford investors a highly liquid way to invest in real estate.
Today, REITs play a vital role in generating capital for many sectors of the economy such as apartments, offices, warehouses shopping centers, hotels, healthcare facilities, data centers and timberlands. As of May 2012, publicly traded REITs owned over 30,000 commercial real estate properties worth approximately $850 billion (comprising about 20% of total institutional commercial real estate in the U.S.) and have provided over $300 billion to finance both commercial and residential properties.
To maintain status as a REIT, the code requires that REITs comply with a series of requirements that ensure their business is focused on the long-term ownership or financing of income-producing real estate. Additionally, REITs are required to distribute nearly all of their taxable income to shareholders as dividends every year. If REITs meet these requirements, the code allows REITs to deduct the dividends they pay to their shareholders.
While, over the years, Congress has enacted a number of incremental changes to the REIT rules to permit the industry to keep pace with changing market conditions, to build thriving communities, and to continue enabling all Americans to create wealth, our code once again needs to be update to reflect today’s current business environment.
Recognizing the need for modernization, Representatives Pat Tiberi (R-OH) and Richard Neal (D-MA), recently introduced H.R. 5746, the “Update and Streamline REIT Act (U.S. REIT Act)”, a bill that is now cosponsored by over two-thirds of the members of the House Ways and Means Committee on both sides of the aisle. The U.S. Chamber supports the U.S. REIT Act, and applauds Representatives Tiberi and Neal for their recognition that Congress’ periodic review, and simplifying and modernizing of, the tax code helps REITs to manage their portfolios more effectively, raise capital more efficiently, continue to positively affect the commercial real estate market, and to invest in local communities, create jobs, and meaningfully contribute to economic recovery.
For more information about the U.S. REIT Act, click here.