July 30, 2010
HOUSE PASSES FIRPTA REFORM PROPOSAL FOR REITS TODAY
The House of Representatives considered and passed H.R. 5901, the Real Estate Jobs and Investment Act, introduced by Rep. Joe Crowley (D-NY), today by a vote of 402-11. This proposal would make a significant change to the Foreign Investment in Real Property Tax Act (FIRPTA) in order to provide the same U.S. tax treatment for foreign equity investments in listed U.S. REITs that currently exists for foreign equity investments in other publicly-traded U.S. businesses.
The passage of H.R. 5901 by the House represents an important step in the enactment of necessary reforms to FIRPTA that NAREIT and a number of other real estate organizations have been advocating.
Specifically, H.R. 5901 would increase the current "portfolio investor" exception for sales of stock and capital gains dividends of listed REITs from 5 percent to 10 percent, including for investors of 10 percent or less in listed foreign entities entitled to pass-through treatment under applicable U.S. tax treaties. This change would be consistent with the definition of portfolio investor for FIRPTA purposes to that used in tax treaties and that which is applicable to foreign investment in U.S. debt securities. REIT dividends paid to non-U.S. investors would remain subject to U.S. withholding (but not FIRPTA) tax.
The Real Estate Jobs and Investment Act was passed in the House under suspension, a procedure that requires a two-thirds vote for passage and is reserved for non-controversial measures. A proposal contained in the Administration's budget fully paid for the cost of the bill.
NAREIT especially appreciates the leadership of Rep. Crowley and House Ways and Means Committee Chairman Sander Levin (D-MI), as well as Ranking House Ways and Means Committee Republican Member Dave Camp (R-MI) and Rep. Pat Tiberi (R-OH) for their efforts in addressing much-needed FIRPTA reform. NAREIT is hopeful that comparable legislation will be introduced and considered in the Senate soon.