To amend the Internal Revenue Code of 1986 to restore the taxable REIT subsidiary asset test.
H.R. 2198 would amend the Internal Revenue Code to restore the taxable REIT subsidiary (TRS) asset test by increasing the allowable share of a REIT’s total assets that may be held in a TRS from 20 percent to 25 percent. This change applies to taxable years beginning after December 31, 2025. The TRS structure allows a REIT to own a subsidiary that is taxed as a corporation and can engage in activities not permissible for the REIT itself, providing greater flexibility in financing, management, and other non-real-estate operations. By raising the cap, REITs would be able to place a larger portion of their assets in TRS form, potentially expanding the range of permissible activities conducted through TRS. The bill was introduced in the House by Mr. Kelly of Pennsylvania with a group of cosponsors and referred to the Ways and Means Committee. It is currently in the introduction stage with no further action yet.
Key Points
- 1Restores the TRS asset test by increasing the cap from 20 percent to 25 percent of a REIT’s total assets.
- 2Applies to taxable years beginning after December 31, 2025 (i.e., starting in 2026).
- 3The change affects how much of a REIT’s assets can be held in a Taxable REIT Subsidiary, which is a subsidiary taxed as a corporation that can conduct activities not allowed for the REIT itself.
- 4Aims to provide REITs with greater flexibility to use TRS structures for certain non-REIT activities (e.g., management, financing, or other services) while maintaining REIT status.
- 5Status: Introduced in the House on March 18, 2025; referred to the Ways and Means Committee; co-sponsors listed in the bill header.