NMHC/NAA joined an industry coalition to back the Update and Streamline REIT Act (H.R. 5746), which would liberalize certain rules attributable to real estate investment trusts (REITs), including multifamily REITs, and enable them to operate more efficiently. Introduced by House Ways and Means Committee members Pat Tiberi (R-OH) and Richard Neal (D-MA), key provisions in the measure would:

• Improve REITs’ ability to sell more of their assets in a given year and, thereby, allow them to invest more effectively or diversify their holdings. Under current rules, a REIT may sell up to 10 percent of its property each year, or 30 percent over a three-year period, without triggering a 100 percent excise tax on so-called dealer sales. The proposed legislation would permit a REIT to elect to sell a maximum of 20 percent of its property in a single year, provided that its total sales over a three-year period averaged no more than 10 percent of its properties.

• Repeal a rule that could disqualify a REIT from REIT status if it inadvertently pays dividends in a way that mistakenly favors one shareholder class over another. Such preferential dividends, sometimes called “foot faults,” can currently jeopardize a REIT’s status.

• Adjust the income and assets tests that REITs must meet to treat personal property leased with real property (e.g., kitchen appliances in an apartment) as a real estate asset, if the personal property’s value does not exceed 15 percent of the total value of leased property. The proposal would make it easier for multifamily REITs to comply with the rules governing the share of real estate income and assets that they must maintain to qualify for REIT status.

The bill has significant support, as it is expected to generate minimal cost and could be attached to broader tax legislation later this year. Moreover, the bill has broad, bipartisan support among Ways and Means Committee members, which could aid its prospects.

In addition, to Reps. Tiberi and Neal, the legislation is cosponsored by Reps. Blumenauer (D-OR), Crowley (D-NY), Gerlach (R-PA), Jenkins (R-KS), Johnson (R-TX), Kind (R-WI),  Lewis (D-GA), McDermott (D-WA), Nunes (R-CA), Paulsen (R-MN), Rangel (D-NY), Reichert (R-WA), Roskam (R-IL), Schock (R-IL), and Stark (D-CA).

To read the letter, please go to http://www.nmhc.org/goto/60833.