REIT Modernization Act of 1999

Remarks on S. 1057 by Senator Daniel Patrick Moynihan

Congressional Record
HON. DANIEL PATRICK MOYNIHAN in the Senate
FRIDAY, MAY 14, 1999

Mr. MOYNIHAN. Mr. President: I commend the efforts of my respected colleagues from Florida, Senator Mack and Senator Graham, as they work to modernize the tax rules that apply to Real Estate Investment Trusts (REITs). I have worked with the REIT industry over the years and have seen it grow to be a major contributor to the strength of the real estate sector in New York and nationally.

Congress first authorized REITs in 1960 so that investors of modest means could invest in income producing real estate assets. During the last four decades, REITs have provided not only real estate ownership opportunities for individual investors, but also an important source of capital for real estate investment.

As tax policy makers we have the responsibility to make sure that tax laws governing REITs are updated to reflect the realities of a dynamic market and to maintain a proper competitive balance between real estate owned through the REIT structure and through more traditional corporate and partnership structures. But because REITs are pass-through entities, we also have a responsibility to ensure that they are not used as vehicles for sheltering corporate taxes in a manner inconsistent with Congressional intent. In fact, twice in the last Congress the Finance Committee crafted legislation, later signed into law, to stop inappropriate use of the REIT structure in the case of so-called `stapled entities' and liquidating subsidiaries.

The Administration has included a proposal in its FY 2000 budget that would, among other things, allow REITs to own a taxable REIT subsidiary. The legislation introduced by Senators Mack and Graham builds on the Administration proposal, and would expand the permissible business activities of REITs.  

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