FIRPTA Reform Clears House

The United States House of Representatatives has voted by a landslide to pass legislation modifying and updating the Foreign Investment in Real Property Tax of 1980. The bill cleared the House by a vote of 402 to 11.

August 2, 2010
By Allison Landa, News Editor

The United States House of Representatatives has voted by a landslide to pass legislation modifying and updating the Foreign Investment in Real Property Tax of 1980. The bill cleared the House by a vote of 402 to 11.

Authored by Rep. Joseph Crowley (D-NY), the bill would increase from 5 to 10 percent the amount of ownership that a foreign investor can have in a public REIT without being subject to certain reporting and administrative requirements.

“Modernizing FIRPTA to reduce the tax barrier to foreign investment in U.S. real estate is much needed,” Washington, DC-based Real Estate Roundtable president and CEO Jeffrey DeBoer wrote in a letter of support to Crowley. “It would facilitate greater equity investment in U.S. real estate, which is needed to fully restart the lending marketplace. It would help stabilize bank risk exposure. And it would be in the best interest of the overall economy.”

The Roundtable includes FIRPTA reform among its key objectives in its policy agenda.

According to a report issued earlier this year by Real Capital Analytics, such policy circles are lending more support to potential foreign investors in U.S. commercial real estate given the troubled state of the domestic credit markets. That report, “The Case for FIRPTA Reform: Will Investment Grow if This Protectionist Tax is Relaxed?”, states that foreign investors are finding value in the U.S. market in spite of FIRPTA.

“Where they have failed to bring more dollars into the U.S. over the last year, foreign investors are more likely to cite an absence of investment opportunities than the tax code,” RCA asserted. “But there is ample room for growth in foreign capital inflows; fewer than 10 percent of U.S. properties are purchased by non-North American entities.”