Section 1 Short title
This Act may be cited as the “Real Estate Reciprocity Act”.
Real Estate Reciprocity Act
A BILL
To amend the Internal Revenue Code of 1986 to require all real estate purchases by non-citizens to be reported to the Internal Revenue Service, to impose a tax on the purchase of real estate purchases by certain non-citizens, and for other purposes.
Sec. 2 Returns with respect to foreign persons holding direct investments in United States real property interests
Required return— Section 6039C(a) of the Internal Revenue Code of 1986 is amended by striking “To the extent provided in regulations, any” and inserting “Any”.
Dollar threshold removed— Section 6039C(b) of such Code is amended by striking “during any calendar year if—” and all that follows through the period and inserting “during any calendar year if such person did not engage in a trade or business in the United States at any time during such calendar year”.
Effective date— The amendments made by this section shall apply to returns filed with respect to taxable years beginning after the date of the enactment of this Act.
Sec. 3 Report on foreign prohibition of United States ownership of real property interests
Not later than 60 days after the date of the enactment of this Act, and annually thereafter, the Secretary of State shall provide to the Secretary of the Treasury a report describing all foreign countries that prohibit the purchase or ownership of real estate by citizens of the United States.
Sec. 4 Imposition of tax on the acquisition of United States real property by disqualified persons
In general— Subtitle D is amended by inserting after chapter 50A the following new chapter:
“50B Acquisition of United States real property by disqualified persons
“5000E. Imposition of tax on acquisition of United States real property by disqualified persons
“(a) In general—In the case of any acquisition of any United States real property by any disqualified person, there is hereby imposed on such person a tax equal to 50 percent of the amount paid for such interest.
“(b) Disqualified person—For purposes of this section—
“(1) In general—The term “disqualified person” means—
“(A) any citizen of a disqualified country (other than a citizen, or lawful permanent resident, of the United States),
“(B) any entity domiciled in a disqualified country,
“(C) any disqualified country and any political subdivision, agency, or instrumentality thereof, and
“(D) except as provided in paragraph (3), any entity if persons described in subparagraph (A), (B), or (C) (in the aggregate) 10-percent control such entity.
“(2) Disqualified country—The term “disqualified country” means any country identified in the report described in section 3 of the Real Estate Reciprocity Act.
“(3) Exception for certain non-citizens—An individual shall not be treated as described in paragraph (1)(A) if such individual resides in the United States during the taxable year due to—
“(A) diplomatic obligations, or
“(B) a grant of asylum by the United States.
“(4) Exception for certain publicly traded corporations
“(A) In general—An entity shall not be treated as described in paragraph (1)(D) if—
“(i) such entity is a specified publicly traded corporation, or
“(ii) specified publicly traded corporations (in the aggregate) control such entity.
“(B) Specified publicly traded corporation
“(i) In general—The term “specified publicly traded corporation” means any corporation if—
“(I) the stock of such corporation is regularly traded on an established securities market located in the United States, and
“(II) specified disqualified persons do not (in the aggregate) control such corporation.
“(ii) Specified disqualified persons—The term “specified disqualified persons” means, with respect to any corporation referred to in clause (i), any person which—
“(I) is described in subparagraph (A), (B), or (C) of paragraph (1), and
“(II) 10-percent controls such corporation.
“(c) Prorated tax on acquisitions by entities not more than 50 percent controlled by disqualified persons
“(1) In general—In the case of any disqualified person described in subsection (b)(1)(D) with respect to which persons described in subparagraphs (A), (B), or (C) of subsection (b)(1) do not (in the aggregate) control such disqualified person, subsection (a) shall be applied by substituting “the applicable percentage of the amount” for “the amount”.
“(2) Applicable percentage—For purposes of this section, the term “applicable percentage” means, with respect to any disqualified person to which paragraph (1) applies, the highest percentage which could be substituted for “50 percent” both places it appears in section 954(d)(3) without causing persons described in subparagraph (A), (B), or (C) of subsection (b)(1) (in the aggregate) to control (determined by taking into account such substitution) such disqualified person.
“(d) Control—For purposes of this section—
“(1) In general—The term “control” has the meaning given such term under section 954(d)(3), determined by treating the rules of section 958(a)(2) as applying to both foreign and domestic corporations, partnerships, trusts, and estates.
“(2) 10-percent control—The term “10-percent control” means control (as defined in paragraph (1)), determined by substituting “10 percent” for “50 percent” both places it appears in section 954(d)(3).
“(e) United States real property—The term “United States real property” has the meaning which would be given the term “United States real property interest” by section 897(c) if—
“(1) paragraph (1)(A)(ii) were applied by substituting “such corporation was not a United States real property holding corporation at the time of acquisition” for “such corporation” and all that follows,
“(2) paragraph (1)(B) did not apply, and
“(3) paragraph (3) were applied by substituting “at the time of acquisition” for “at some time during the shorter of the periods described in paragraph (1)(A)(ii)”.”
Reporting requirements—
In general— Subpart B of part III of subchapter A of chapter 61 is amended by adding at the end the following new section:
“6050AA. Returns relating to acquisition of United States real property by disqualified persons
“(a) In general—The required reporting person, with respect to any acquisition of any United States real property by a presumptively disqualified person to which section 5000E(a) applies, shall make a return at such time as the Secretary may provide setting forth—
“(1) the name, address, and TIN of such presumptively disqualified person,
“(2) a description of such United States real property (including the street address, if applicable), and
“(3) the amount paid for such United States real property.
“(b) Statement To be furnished to presumptively disqualified person—Every person required to make a return under subsection (a) shall furnish, at such time as the Secretary may provide, to each presumptively disqualified person whose name is required to be set forth in such return a written statement showing—
“(1) the name and address of the information contact of the required reporting person, and
“(2) the information described in paragraphs (1), (2), and (3) of subsection (a) which relates to such disqualified person.
“(c) Required reporting person—For purposes of this section, the term “required reporting person” means, with respect to any acquisition of any United States real property—
“(1) the person (including any attorney or title company) responsible for closing the transaction in which such United States real property is acquired, or
“(2) if no one is responsible for closing such transaction (or in such other cases as the Secretary may provide), the transferor of such United States real property.
“(d) Presumptively disqualified person—For purposes of this section, the term “presumptively disqualified person” means any person unless such person furnishes to the required reporting person an affidavit by the such person stating, under penalty of perjury, that such person is not a disqualified person (as defined in section 5000E(b)).
“(e) Requirement To request affidavit—If the required reporting person, with respect to any acquisition of any United States real property, has not, as of the time of such acquisition, been furnished the affidavit described in subsection (d) by the acquirer of such interest, such required reporting person shall furnish to such acquirer, at such time, a written statement informing such acquirer of the required reporting person’s obligation to make the return described in subsection (a) with respect to such acquisition and including such other information as the Secretary may require.
“(f) United States real property—For purposes of this section, the term “United States real property” has the meaning given such term in section 5000E.”
Penalties— Section 6724(d) is amended—
in paragraph (1)(B), by striking “or” at the end of clause (xxvii), by striking “and” at the end of clause (xxviii) and inserting “or”, and by adding at the end the following new clause:
“(xxix) section 6050AA(a) (relating to returns relating to acquisition of United States real property by disqualified persons), and”
in paragraph (2), by striking “or” at the end of subparagraph (KK), by striking the period at the end of subparagraph (LL) and inserting “, or”, and by inserting after subparagraph (LL) the following new subparagraph:
“(MM) subsection (b) or (e) of section 6055AA (relating to statements relating to acquisition of United States real property by disqualified persons).”
Clerical amendments—
The table of chapters for subtitle D is amended by inserting after the item relating to chapter 50A the following new item:
The table of sections for subpart B of part III of subchapter A of chapter 61 is amended by adding at the end the following new item:
Effective date— The amendments made by this section shall apply to acquisitions in taxable years beginning after the date of the enactment of this Act.