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The U.S. Treasury recently released proposed regulations> that would repeal the "domestic corporation look-through rule" and, instead, treat all domestic C corporations as domestic entities for purposes of determining whether a REIT is domestically controlled.
As a result, taxpayers will no longer need to look through a U.S. C corporation to determine whether its owners are domestic or foreign for purposes of determining whether a REIT that is owned in part by the C corporation is a domestically controlled REIT; instead, a domestic C corporation (e.g., an entity formed in the U.S. that is taxable as a corporation) will be treated as "domestic" for this purpose, regardless of how much of its shares are owned by foreign persons.
Taxpayers are permitted to rely on the proposed regulations and to apply them to any transaction occurring on or after April 25, 2024.
This is a welcome development with respect to foreign investment in U.S. REITs, particularly for investors who do not have access to Section 892 and are not QFPFs.
Footnote
1 Internal Revenue Service,REG-109742-25 - Domestically Controlled Qualified Investment Entities(October 20, 2025).
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