Section 1 Short title
This Act may be cited as the “Removing Onerous Obstacles in the Tax code for Mainstreet Businesses Act” or as the “ROOT for Mainstreet Businesses Act”.
Removing Onerous Obstacles in the Tax code for Mainstreet Businesses Act
A BILL
To amend the Internal Revenue Code of 1986 for shareholder ownership and passive income rules of the personal holding company tax provisions.
Sec. 2 Royalties and rents derived in the active conduct of a trade or business
Exception from definition of personal holding company— Paragraph (c) of section 542 of the Internal Revenue Code of 1986 is amended by striking “and” at the end of subparagraph (7), by striking the period at the end of subparagraph (8) and inserting “; and”, and by adding at the end the following new paragraph:
“(9) a corporation with greater than 50 percent stock ownership (as determined in section 542(a)) held by nonresident alien individuals with no effectively connected income under section 871 or 877.”
Modifications related to definition of personal holding company income—
Paragraph (1) of section 543(a) of the Code is amended by striking “and” at the end of paragraph (D), by striking the period at the end of paragraph (E) and inserting “, and”, and by adding at the end the following new subparagraph:
“(F) Royalties and rents derived in the active conduct of a trade or business and which are received from a person other than a related person (within the meaning of section 954(d)(3)).”
Paragraph (4) of section 543(a) of such Code is amended by inserting “, which do not qualify for the active conduct of a trade or business exception in subsection (a)(1)(F)” after “Copyright royalties” in the matter preceding subparagraph (A).
Paragraph (A) of section 543(a)(5) of such Code is amended by inserting “, which do not qualify for the active conduct of a trade or business exception in subsection (a)(1)(F)” after “Produced film rent”.
Paragraph (3) of section 543(b) of such Code is amended by inserting “(but does not include rents derived from the active conduct of a trade or business as provided in subsection (a)(1)(F))” after “means the gross income from rents” in the matter preceding subparagraph (A).
Effective date— The amendments made by this section shall apply to taxable years ending on or after the date of the enactment of this Act.