S 1334119th CongressIn Committee

A bill to amend the Internal Revenue Code of 1986 to increase the percentage limitation on assets of real estate investment trusts which may be held in taxable REIT subsidiaries.

Introduced: Apr 8, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

This bill would change the Internal Revenue Code to give real estate investment trusts (REITs) greater flexibility in how they structure their holdings. Specifically, it increases the limit on the percentage of a REIT’s assets that can be held in taxable REIT subsidiaries (TRSs) from 20 percent to 25 percent. TRSs are separate, taxable subsidiaries that REITs use to own assets or engage in activities that may not be suitable for the REIT itself under the REIT rules. The change would apply to taxable years beginning after December 31, 2025. In short, the bill makes it a bit easier for REITs to use TRSs to house non-REIT assets or operations, while preserving the overall framework of the REIT tax regime.

Key Points

1Increases TRS asset limit: The statutory cap on assets a REIT may place in a TRS rises from 20% to 25%.
2Effective date: The change applies to taxable years beginning after December 31, 2025, not retroactively.
3Rationale (implied): The policy aim is to give REITs more flexibility to structure non-REIT activities or assets inside TRSs, potentially simplifying capital deployment and operations without undermining the REIT framework.
4TRS concept remains intact: A TRS is a separately taxed subsidiary of a REIT used to hold assets or conduct activities that might not qualify as REIT income or assets directly owned by the REIT.
5No other changes: The bill focuses solely on increasing the TRS asset limit; it does not alter other REIT or TRS rules.

Impact Areas

Primary group/area affected: Real estate investment trusts (REITs) and their management/ownership structures, including sponsors and parent entities that use TRSs.Secondary group/area affected: Investors and financial professionals who work with REITs, as the change may influence REIT capital structures and potential risk/return profiles.Additional impacts: Tax considerations for TRSs (which remain taxed as corporations) and potential effects on capital allocation, service/management arrangements, and the way non-REIT income is generated within REIT structures. The rule change could influence compliance and planning for REITs seeking to optimize asset composition within the 25% TRS limit.

Generated by gpt-5-nano on Nov 18, 2025