QUALIFIED LESSEE CONSTRUCTION ALLOWANCES FOR SHORT-TERM LEASES.

SEC. 1213. QUALIFIED LESSEE CONSTRUCTION ALLOWANCES FOR SHORT-TERM LEASES. (a) In General.—Part III of subchapter B of chapter 1 is amended by inserting after section 109 the following new section: “SEC. 110. QUALIFIED LESSEE CONSTRUCTION ALLOWANCES FOR SHORT-TERM LEASES. “(a) In General.—Gross income of a lessee does not include any amount received in cash (or treated as a rent reduction) by a lessee from a lessor— “(1) under a short-term lease of retail space, and “(2) for the purpose of such lessee’s constructing or improving qualified long-term real property for use in such lessee’s trade or business at such retail space, but only to the extent that such amount does not exceed the amount expended by the lessee for such construction or improvement. “(b) Consistent Treatment by Lessor.—Qualified long-term real property constructed or improved in connection with any amount excluded from a lessee’s income by reason of subsection (a) shall be treated as nonresidential real property of the lessor (including for purposes of section 168(i)(8)(B)). “(c) Definitions.—For purposes of this section— “(1) Qualified long-term real property.—The term ‘qualified long-term real property’ means nonresidential real property which is part of, or otherwise present at, the retail space referred to in subsection (a) and which reverts to the lessor at the termination of the lease. “(2) Short-term lease.—The term ‘short-term lease’ means a lease (or other agreement for occupancy or use) of retail space for 15 years or less (as determined under the rules of section 168(i)(3)).111 STAT. 1001 “(3) Retail space.—The term ‘retail space’ means real property leased, occupied, or otherwise used by a lessee in its trade or business of selling tangible personal property or services to the general public. “(d) Information Required To Be Furnished to Secretary.—Under regulations, the lessee and lessor described in subsection (a) shall, at such times and in such manner as may be provided in such regulations, furnish to the Secretary— “(1) information concerning the amounts received (or treated as a rent reduction) and expended as described in subsection (a), and “(2) any other information which the Secretary deems necessary to carry out the provisions of this section.”. (b) Treatment as Information Return.—Subparagraph (A) of section 6724(d)(1)(A) is amended by striking “or” at the end of clause (vii), by adding “or” at the end of clause (viii), and by adding at the end the following new clause: “(ix) section 110(d) (relating to qualified lessee construction allowances for short-term leases),”. (c) Cross Reference.—Paragraph (8) of section 168(i) (relating to treatment of leasehold improvements) is amended by adding at the end the following new subparagraph: “(C) Cross reference.— “For treatment of qualified long-term real property constructed or improved in connection with cash or rent reduction from lessor to lessee, see section 110(b).”. (d) Clerical Amendment.—The table of sections for part III of subchapter B of chapter 1 is amended by inserting after the item relating to section 109 the following new item: “Sec. 110. Qualified lessee construction allowances for short-term leases ”. (e) Effective Date.—The amendments made by this section shall apply to leases entered into after the date of the enactment of this Act.