RESTRICTION ON TAX-FREE SPINOFFS INVOLVING REITS.

SEC. 311. RESTRICTION ON TAX-FREE SPINOFFS INVOLVING REITS. (a) [26 U.S.C. 355] In General.—Section 355 is amended by adding at the end the following new subsection: “(h) Restriction on Distributions Involving Real Estate Investment Trusts.— “(1) In general.—This section (and so much of section 356 as relates to this section) shall not apply to any distribution if either the distributing corporation or controlled corporation is a real estate investment trust. “(2) Exceptions for certain spinoffs.— “(A) Spinoffs of a real estate investment trust by another real estate investment trust.—Paragraph (1) shall not apply to any distribution if, immediately after the distribution, the distributing corporation and the controlled corporation are both real estate investment trusts. “(B) Spinoffs of certain taxable reit subsidiaries.—Paragraph (1) shall not apply to any distribution if— “(i) the distributing corporation has been a real estate investment trust at all times during the 3-year period ending on the date of such distribution, “(ii) the controlled corporation has been a taxable REIT subsidiary (as defined in section 856(l)) of the distributing corporation at all times during such period, and “(iii) the distributing corporation had control (as defined in section 368(c) applied by taking into account stock owned directly or indirectly, including through one or more corporations or partnerships, by the distributing corporation) of the controlled corporation at all times during such period. A controlled corporation will be treated as meeting the requirements of clauses (ii) and (iii) if the stock of such corporation was distributed by a taxable REIT subsidiary in a transaction to which this section (or so much of section 356 as relates to this section) applies and the assets of such corporation consist solely of the stock or assets of assets held by one or more taxable REIT subsidiaries of the distributing corporation meeting the requirements of clauses (ii) and (iii). For purposes of clause (iii), control of a partnership means ownership of 80 percent of the profits interest and 80 percent of the capital interests.” . (b) [26 U.S.C. 856] Prevention of REIT Election Following Tax-free Spin Off.—Section 856(c) is amended by redesignating paragraph (8) as paragraph (9) and by inserting after paragraph (7) the following new paragraph: “(8) Election after tax-free reorganization.—If a corporation was a distributing corporation or a controlled corporation (other than a controlled corporation with respect to a distribution described in section 355(h)(2)(A)) with respect to any distribution to which section 355 (or so much of section 356 as relates to section 355) applied, such corporation (and any successor corporation) shall not be eligible to make any election under paragraph (1) for any taxable year beginning before the end of the 10-year period beginning on the date of such distribution.” . (c) [26 U.S.C. 355 note] Effective Date.—The amendments made by this section shall apply to distributions on or after December 7, 2015, but shall not apply to any distribution pursuant to a transaction described in a ruling request initially submitted to the Internal Revenue Service on or before such date, which request has not been withdrawn and with respect to which a ruling has not been issued or denied in its entirety as of such date.