Page:United States Statutes at Large Volume 113 Part 3.djvu/428

 113 STAT. 1946 PUBLIC LAW 106-170—DEC. 17, 1999 "(vi) EXCEPTION FOR CERTAIN SERVICES BASED ON SUBSIDIARY'S INCOME FROM THE SERVICES.—Clause (i) shall not apply to any service rendered by a taxable REIT subsidiary of a real estate investment trust to a tenant of such trust if the gross income of such subsidiary from such service is not less than 150 percent of such subsidiary's direct cost in furnishing or rendering the service. "(vii) EXCEPTIONS GRANTED BY SECRETARY.— The Secretary may waive the tax otherwise imposed by subparagraph (A) if the trust establishes to the satisfaction of the Secretary that rents charged to tenants were established on an arms' length basis even though a taxable REIT subsidiary of the trust provided services to such tenants. "(C) REDETERMINED DEDUCTIONS.—The term 'redetermined deductions' means deductions (other than redetermined rents) of a taxable REIT subsidiary of a real estate investment trust if the amount of such deductions would (but for subparagraph (E)) be decreased on distribution, apportionment, or allocation under section 482 to clearly reflect income as between such subsidiary and such trust. "(D) EXCESS INTEREST. —The term 'excess interest' means any deductions for interest payments by a taxable REIT subsidiary of a real estate investment trust to such trust to the extent that the interest payments are in excess of a rate that is commercially reasonable. "(E) COORDINATION WITH SECTION 482.— The imposition of tax under subparagraph (A) shall be in lieu of any distribution, apportionment, or allocation under section 482. "(F) REGULATORY AUTHORITY.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this paragraph. Until the Secretary prescribes such regulations, real estate investment trusts and their taxable REIT subsidiaries may base their allocations on any reasonable method.", (b) AMOUNT SUBJECT TO TAX NOT REQUIRED TO BE DISTRIB- UTED. — Subparagraph (E) of section 857(b)(2) of such Code (relating to real estate investment trust taxable income) is amended by striking "paragraph (5)" and inserting "paragraphs (5) and (7)". 26 USC 856 note. SEC. 546. EFFECTIVE DATE. (a) IN GENERAL. — The amendments made by this subpart shall apply to taxable years beginning after December 31, 2000. (b) TRANSITIONAL RULES RELATED TO SECTION 541.— (1) EXISTING ARRANGEMENTS.— (A) IN GENERAL.— Except as otherwise provided in this paragraph, the amendment made by section 541 shall not apply to a real estate investment trust with respect to— (i) securities of a corporation held directly or indirectly by such trust on July 12, 1999; (ii) securities of a corporation held by an entity on July 12, 1999, if such trust acquires control of such entity pursuant to a written binding contract in effect on such date and at all times thereafter before such acquisition;

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