Representatives Joseph Crowley (D-NY) and Eric Cantor (R-VA) introduced the REIT Investment Diversification and Empowerment Act (RIDEA) in the House of Representatives on Feb. 16. This bill is similar to RIDEA legislation introduced in the last Congress by Senator Orrin Hatch (R-UT).

The bill's provisions would provide REITs with more flexibility to investing in global markets and to manage their U.S. portfolios. Michael Schindler, vice president of tax strategy and planning with Kimco Realty Corporation (NYSE: KIM), says the provisions are critical to the REIT industry's continued growth and development. "As REITs expand globally, guidance is needed to clarify the rules in connection with foreign investments."

Rep. Eric Cantor (R-VA) at NAREIT's Washington Leadership Forum.

According to RIDEA's provisions, foreign exchange gains generated by REITs operating outside the United States would generally qualify under both REIT gross income tests. Additionally, U.S. REITs to own foreign REIT stock under the same rules applying to the ownership of U.S. REITs, as long as the foreign REIT is organized in a country with similar REIT tests to those of the United States.

In the U.S., the REIT ownership limit on taxable REIT subsidiaries (TRS) would increase from 20 percent to 25 percent of a REIT's gross assets. RIDEA also would provide a new safe harbor test for dealer sales that would reduce the holding period requirement from four years to two years. It would measure the 10 percent sales test by fair market value instead of on a tax basis. Finally, healthcare facilities could be leased by a TRS under the same rules applying to lodging facilities.