US House Aims For Foreign Real Estate Investment Boost
Bipartisan legislation has been introduced into the House of Representatives to amend the Foreign Investment in Real Property Tax Act (FIRPTA) of 1980 that requires foreign investors to pay taxes on capital gains when selling commercial properties or real estate securities in the United States.
To encourage foreign investment in US real estate, Kevin Brady (R – Texas) and Joe Crowley (D – New York), both senior members of the House Ways and Means Committee, have re-introduced the Real Estate Investment and Jobs Act of 2015, which would increase the FIRPTA ownership stake exemption for foreign shareholders in a publicly traded US real estate investment trust from 5 percent to 10 percent. It also exempts foreign pension funds from the FIRPTA tax entirely.
Brady stated: “In a world of fluid global capital, the tax code shouldn’t discourage foreign capital from investing in US commercial real estate, nor discriminate against it with higher taxes than other US investments. Modernizing FIRPTA and encouraging foreign investment will boost job growth and expand our local economies.”
“Foreign investments in commercial real estate are sorely behind other industries because of uneven tax treatment,” Crowley added. “What’s clear is that the law that is on the books does more harm than good, and something must be done.”
In a recent survey of Association of Foreign Investors in Real Estate members, 76 percent of respondents said that FIRPTA tax relief would spur their investment in US real estate.
The Invest in America Coalition, an alliance of business groups, unions, and allied trades, has also supported FIRPTA reforms. “The FIRPTA regime is a global outlier that reduces inbound investment and hurts American competitiveness,” Jeffrey DeBoer, President and CEO of the Real Estate Roundtable, commented. “The legislation will spur domestic real estate investment, create jobs, and help provide the capital we need to rebuild the nation’s crumbling infrastructure.”
In February this year, the US Senate Finance Committee unanimously passed a version of the proposed bill.