With the tie-breaking vote cast by Vice President Vance on July 1, 2025, the Senate approved an amended version of H.R. 1, originally titled the “One Big Beautiful Bill Act,” which was previously approved by the House of Representatives on May 22, 2025 (the House of Representatives’ version, the “House Bill,” and the Senate’s version, the “Amended O3BA”).[1] On July 3, 2025, the House of Representatives approved the Amended O3BA by a four-vote margin. President Trump signed the Amended O3BA into law on July 4, 2025.
The provisions of the Amended O3BA, as compared to the House Bill and to prior law, generally are good news for real estate investment trusts (“REITs”) and their shareholders.[2] Most notably, the Amended O3BA eliminates so‑called “section 899” (Enforcement of Remedies Against Unfair Foreign Taxes), which was proposed in the House Bill. The elimination of section 899 is particularly good news for REITs and their shareholders as section 899, if enacted, would have had a significant negative impact on foreign investment in U.S. real estate. In addition, the Amended O3BA retains the increase in the taxable REIT subsidiary (“TRS”) asset test from 20% to 25%, as compared to prior law. Finally, with respect to the clean energy investment credit under Section 48E[3] (the “Energy ITC”), the Amended O3BA accelerates the termination of the Energy ITC with respect to wind and solar electricity generation facilities (but generally retains transferability of available Energy ITCs), as compared to prior law.
The Amended O3BA’s most significant changes to prior law are briefly summarized below.
Section 199A Deduction[4]
The Amended O3BA preserves the eligibility of REIT ordinary dividends for the qualified business income deduction in Section 199A, and makes that deduction permanent.
TRS Asset Test[5]
Effective for taxable years beginning after December 31, 2025, the Amended O3BA increases the quarterly asset test limit on securities of TRSs from 20% to 25%.
Limitation on Business Interest Deduction[6]
The limitation on business interest deductions in Section 163(j) was more favorable to taxpayers for the period through December 31, 2021 than it was immediately prior to enactment of Amended O3BA. Through December 31, 2021, the Section 163(j) limitation generally was calculated as the product of 30% multiplied by an adjusted taxable income amount which was roughly equivalent to earnings before interest, taxes, depreciation and amortization (“EBITDA”). For periods beginning after December 31, 2021, Section 163(j) calculated the 30% limitation based on an amount which was roughly equivalent to earnings before interest and taxes (or “EBIT,” i.e., an amount after depreciation and amortization). When the Section 163(j) limitation starts to pinch, most REITs make the irrevocable election for “electing real property trades or businesses” to avoid the Section 163(j) limitation altogether.
The Amended O3BA applies the more favorable EBITDA calculation for taxable years starting on or after January 1, 2025, and makes the more favorable EBITDA calculation permanent.[7] However, for taxable years beginning after December 31, 2025, the Amended O3BA generally calculates the Section 163(j) limitation prior to the application of any interest capitalization provisions.[8] As before, the exception for “electing real property trades or businesses” remains available to REITs.
Energy ITCs and Transferability[9]
The Amended O3BA terminates the availability of the Energy ITC with respect to wind and solar electricity generation facilities (but not for energy storage technology at such wind and solar generation facilities) the construction of which begins after July 4, 2026 and which is placed in service after December 31, 2027. The Amended O3BA also restricts access to the credit for certain prohibited foreign entities (“PFEs”) by (i) disallowing any credit for a facility that commences construction after December 31, 2025 that includes any material assistance from a PFE and (ii) disallowing any credit for a PFE for taxable years beginning after enactment. However, the Amended O3BA retains transferability of available Energy ITCs (other than transfers to certain PFEs).
