US Federal House Bill HB2198

US Federal 2025-2026 Regular Session

• Introduced: 3/18/25
• Refer: 3/18/25

Caption

To amend the Internal Revenue Code of 1986 to restore the taxable REIT subsidiary asset test.

Summary

HB2198 would amend the Internal Revenue Code to restore the asset test for taxable REIT subsidiaries by increasing the allowable value of such subsidiaries from 20 percent to 25 percent of a real estate investment trust’s assets. In practical terms, the bill gives REITs more flexibility to hold and operate taxable REIT subsidiaries without violating federal tax qualification rules. The change would apply to taxable years beginning after December 31, 2025. The bill is narrowly focused on a technical tax provision affecting REITs and their subsidiary structures. It does not create a new tax credit or deduction, but instead adjusts an existing threshold in the REIT qualification rules under section 856 of the Internal Revenue Code. Because the measure is prospective, it would affect future tax years rather than retroactively changing prior filings or liabilities.

Impact

HB2198 would amend section 856(c)(4)(B)(ii) of the Internal Revenue Code of 1986, replacing the current 20 percent cap with a 25 percent cap for taxable REIT subsidiary assets. This would expand the amount of assets a REIT can allocate to taxable subsidiaries while still maintaining REIT tax status, potentially affecting REIT structuring, compliance, and investment strategies. The bill would apply beginning in tax years after December 31, 2025, so its legal effect would be forward-looking and limited to taxpayers organized as REITs and their subsidiaries.

Sentiment

Available information suggests generally favorable or at least noncontroversial treatment of the bill. The measure was introduced with bipartisan and cross-party cosponsorship from a sizable group of House members, indicating support for the technical tax adjustment. There are no recorded committee transcripts or votes in the provided material, so there is no evidence of formal opposition or debate in the available record.

Contention

No specific contention is documented in the provided materials. Because the bill is a targeted tax-technical change, any disagreement would likely center on whether increasing the taxable REIT subsidiary asset threshold from 20 percent to 25 percent is an appropriate expansion of REIT flexibility or whether it could weaken the policy boundaries of REIT taxation. However, no named opponents, amendments, or committee objections are included in the record provided.