Summary of HR 2198: Amendment to the Internal Revenue Code

Bill Number: HR 2198

Title: To amend the Internal Revenue Code of 1986 to restore the taxable REIT subsidiary asset test

Status: Introduced in House

Introduced On: March 18, 2025

Classification: Bill

Purpose and Intent

The primary purpose of HR 2198 is to amend the Internal Revenue Code of 1986 by modifying the asset test for taxable Real Estate Investment Trusts (REITs). This bill aims to restore a previous threshold that governs the ownership of assets by taxable REIT subsidiaries, which can impact their tax obligations and operational flexibility.

Key Provisions

• Amendment to Asset Test:

  • The bill proposes to amend Section 856(c)(4)(B)(ii) of the Internal Revenue Code by increasing the allowable percentage of assets that a taxable REIT subsidiary can hold from 20 percent to 25 percent.

• Effective Date:

  • The changes stipulated in this bill will apply to taxable years beginning after December 31, 2025.

Impact

• Affected Entities:

  • This legislation primarily affects taxable REITs and their subsidiaries, which are companies that own and manage real estate properties and are subject to specific tax regulations under the Internal Revenue Code.

• Operational Flexibility:

  • By increasing the asset threshold, taxable REIT subsidiaries may have greater flexibility in managing their assets and investments, potentially allowing for more strategic growth and diversification.

Legislative Actions

• March 18, 2025:
  • The bill was introduced in the House and subsequently referred to the House Committee on Ways and Means for further consideration.

Sponsors

HR 2198 has garnered support from a diverse group of sponsors, including:

• Primary Sponsor: Mike Kelly
• Cosponsors:
  • Gwen Moore
  • Ron Estes
  • Nathaniel Moran
  • Kevin Hern
  • Vern Buchanan
  • Claudia Tenney
  • Randy Feenstra
  • Blake D. Moore
  • Adrian Smith
  • Thomas R. Suozzi
  • David Kustoff
  • Suzan K. DelBene
  • Jimmy Panetta
  • Bradley Scott Schneider
  • Danny K. Davis
  • Brian K. Fitzpatrick
  • Darin LaHood
  • Gregory F. Murphy
  • Mike Carey

Conclusion

HR 2198 seeks to amend the Internal Revenue Code to enhance the operational capabilities of taxable REIT subsidiaries by adjusting the asset test threshold. If enacted, this bill could provide significant benefits to the real estate investment sector, promoting growth and investment opportunities while ensuring compliance with tax regulations.