Page:United States Statutes at Large Volume 111 Part 1.djvu/1055

 PUBLIC LAW 105-34—AUG. 5, 1997 111 STAT. 1031 Secretary for the purposes of ascertaining the actual ownership of the outstanding shares, or certificates of beneficial interest, of such trust. " (2) FAILURE TO COMPLY.— "(A) IN GENERAL.— If a real estate investment trust fails to comply with the requirements of paragraph (1) for a taxable year, such trust shall pay (on notice and demand by the Secretary and in the same manner as tax) a penalty of $25,000. "(B) INTENTIONAL DISREGARD. — If any failure under paragraph (1) is due to intentional disregard of the requirement under paragraph (1), the penalty under subparagraph (A) shall be $50,000. " (C) FAILURE TO COMPLY AFTER NOTICE.— The Secretary may require a real estate investment trust to take such actions as the Secretary determines appropriate to ascertain actual ownership if the trust fails to meet the requirements of paragraph (1). If the trust fails to take such actions, the trust shall pay (on notice and demand by the Secretary and in the same manner as tax) an additional penalty equal to the penalty determined under subparagraph (A) or (B), whichever is applicable. "(D) REASONABLE CAUSE.— No penalty shall be imposed under this paragraph with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect.". (b) COMPLL^NCE WITH CLOSELY HELD PROHIBITION.— (1) IN GENERAL.— Section 856 (defining real estate investment trust) is amended by adding at the end the following new subsection: " (k) REQUIREMENT THAT ENTITY NOT BE CLOSELY HELD TREAT- ED AS MET IN CERTAIN CASES. —A corporation, trust, or association— "(1) which for a taxable year meets the requirements of section 857(f)(1), and "(2) which does not know, or exercising reasonable diligence would not have known, whether the entity failed to meet the requirement of subsection (a)(6), shall be treated as having met the requirement of subsection (a)(6) for the taxable year.". (2) CONFORMING AMENDMENT. —Paragraph (6) of section 856(a) is amended by inserting "subject to the provisions of subsection (k)," before "which is not". SEC. 1262. DE MINIMIS RULE FOR TENANT SERVICES INCOME. (a) IN GENERAL. —Paragraph (2) of section 856(d) (defining rents from real property) is amended by striking subparagraph (C) and the last sentence and inserting: "(C) any impermissible tenant service income (as defined in paragraph (7)).". (b) IMPERMISSIBLE TENANT SERVICE INCOME.—Section 856(d) is amended by adding at the end the following new paragraph: "(7) IMPERMISSIBLE TENANT SERVICE INCOME.—For purposes of paragraph (2)(C)— "(A) IN GENERAL.— The term 'impermissible tenant service income' means, with respect to any real or personal

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