The Foreign Investment in Real Property Tax Act (FIRPTA) was enacted by Congress in 1980 as a means to tax the gains on non-US citizens’ income from the sale of US real property. FIRPTA acts as a significant impediment to foreign investment in US infrastructure and real estate at a time when the country’s infrastructure needs are greater than ever.
As a practical matter, FIRPTA limits the amount that foreign investors are willing and able to invest in US REITs. Shareholders of a listed real estate company are not subject to FIRPTA if they own less than 5 percent of the company during the five years before they sell their stock, but above that threshold, foreign investors face an unnecessary tax liability. FIRPTA also does not apply when a foreign investor sells domestically controlled REIT shares, so long as the majority of the shares are owned by US taxpayers.
A bipartisan group in Congress has attempted to reform FIRPTA in the past. In the 113th Congress, Sens. Robert Menendez (D-N.J) and Michael Enzi (R-Wyo.) introduced the “Real Estate Investment and Jobs Act;” in the House, Reps. Kevin Brady (R-Texas) and Joseph Crowley (D-N.Y.) offered similar legislation. NAREIT has strongly supported both the House and Senate bills. Last year, Senators Menendez and Enzi filed a modified version of their bill as an amendment to the highway bill. The Menendez/Enzi proposal includes two critical provisions: first, it would increase the ownership stake that a foreign investor can take in a publicly-traded company whose assets consist largely of US real property without triggering FIRPTA liability and extend the provision to certain collective investment vehicles; second:, it would remove the tax penalty that FIRPTA imposes on foreign pension funds that invest in US real estate and infrastructure. In November, NAREIT and the other large commercial real estate trade associations sent a letter to then-Senate Majority Leader Harry Reid and then-Senate Minority Leader Mitch McConnell asking for passage of the Menendez-Enzi proposal.
It is widely expected that the 114th Congress will again attempt to reform FIRPTA. President Obama, in his FY2016 budget, recommended to exempt foreign pension funds from the FIRPTA, as had his previous two budgets.
STATUS: On Feb. 11, 2015, the Senate Finance Committee unanimously approved doubling the ownership level mentioned above from 5 percent to 10 percent for listed REITs.
- NAREIT FirstBrief: FIRPTA Reform REIT Proposal Adopted by Senate Finance Committee - 2/11/15
- Joint Trade Association Letter in Support of FIRPTA Reform Bill Before the Senate Finance Committee - 2/10/15
- NAREIT Supports FIRPTA Reform Bill Marked-Up by the Senate Finance Committee - 2/10/15
- Joint Committee on Taxation Description of the FIPTA Reform Bill Passed by the Senate Finance Committee - 2/9/15
- Industry Associations Ask the Senate Leadership to Pass FIRPTA Reform - 11/5/14
- Coalition Letter to Chairman Camp regarding FIRPTA - 9/12/14
- Senator Menendez’s Dialogue with Treasury Secretary Lew regarding FIRPTA Reform - 3/5/14
- NAREIT FirstBrief on FIRPTA Reform Proposal Re-Introduced in the House of Representatives - 8/1/13
- NAREIT FirstBrief on the FIRPTA Reform Bill Re-introduced in the Senate - 6/19/13
- Statutory Language of S.1181, The Real Estate Investment and Jobs Act of 2013 - 6/18/2013
- Co-sponsors of S. 1181, The Real Estate Investment and Jobs Act of 2013 - 6/18/13
- NAREIT FirstBrief on Provisions in the Obama Administration's FY 2014 Budget -4/12/13
- Senator Menendez (D-NJ) and Treasury Secretary Jacob Lew Discuss Potential FIRPTA reform - 4/12/13
- The White House Proposes a Legislative Change to Allow Non-U.S. Pension Plans to Invest Without Incurring FIRPTA -3/29/13
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NAREIT FirstBrief - FIRPTA Reform Proposal Introduced in the Senate - 9/23/11
- Statutory Language of S. 1616, the Real Estate Investment and Jobs Act of 2011 - 9/22/11
- Sen. Robert Menendez (D-NJ) Introduces the Real Estate Investment and Jobs Act of 2011 in the Senate - 9/22/11
- Co-Sponsors of S. 1616, the Real Estate Investment and Jobs Act of 2011 - 9/22/11
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NAREIT FirstBrief - FIRPTA Reform Proposal Introduced in the House - 9/22/11
- Statutory Language of H.R. 2989, the Real Estate Jobs and Investment Act of 2011 - 9/21/11
- Co-Sponsors of H.R. 2989, the Real Estate Jobs and Investment Act of 2011 - 9/21/11
- Lawmakers Call on the Treasury Department and the IRS to Reverse IRS Notice 2007-55 - 6/24/11
- U.S. Senate Letter to the Senate Finance Committee in Support of FIRPTA Reform - 12/1/10
- Association of Foreign Investors in Real Estate (AFIRE) Letter to Senator Menendez in Support of Legislation to Modify or Repeal FIRPTA - 9/27/10
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NAREIT FirstBrief - House Passes FIRPTA Reform Proposal for REITs Today - 7/30/10
- Statutory Language of H.R. 5901, the Real Estate Jobs and Investment Act of 2010 - 7/30/10
- Final Vote Results for House Consideration of H.R. 5901, the Real Estate Jobs and Investment Act - 7/30/10
- Technical Explanation of the Revenue Provisions of H.R. 5901, the Real Estate Jobs and Investment Act of 2010, Prepared by the Joint Committee on Taxation - 7/29/10
- House Consideration of H.R. 5901, the Real Estate Jobs and Investment Act (C-SPAN Video Coverage) - 7/29/10
- House Consideration of H.R. 5901, the Real Estate Jobs and Investment Act (Congressional Record) - 7/29/10
- NAREIT Letter to Rep. Joseph Crowley (D-NY) in Support of H.R. 5901, the Real Estate Jobs and Investment Act of 2010 - 7/29/10
- National Association of Real Estate Investment Managers (NAREIM) Letter to Representative Crowley in Support of H.R. 5901, the Real Estate Jobs and Investment Act - 7/29/10
- Building Owners and Managers Association (BOMA) Letter to Rep. Joseph Crowley (D-NY) in Support of H.R. 5901, the Real Estate Jobs and Investment Act of 2010 - 7/29/10
- International Council of Shopping Centers (ICSC) Letter to Rep. Joseph Crowley (D-NY) in Support of H.R. 5901, the Real Estate Jobs and Investment Act of 2010 - 7/29/10
- National Multi Housing Council (NMHC) and National Apartment Association (NAA) Letter to Rep. Joseph Crowley (D-NY) in Support of H.R. 5901, the Real Estate Jobs and Investment Act of 2010 - 7/29/10
- Real Estate Roundtable Letter to Rep. Joseph Crowley (D-NY) in Support of H.R. 5901, the Real Estate Jobs and Investment Act of 2010 - 7/29/10
- Analysis of H.R. 4539, the Real Estate Revitalization Act of 2010 (RERA) - 2/12/10
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NAREIT FirstBrief - Rep. Crowley Introduces Bill to Reduce Barriers to Foreign Investment in U.S. Real Estate - 1/28/10
- Statutory Language of H.R. 4539, the Real Estate Revitalization Act of 2010 (RERA) - 1/27/10
- U.S. Chamber of Congress Letter Regarding the Credit Crisis - 1/6/09
- FIRPTA Changes Needed to Address the Financial Crisis - 12/11/08
- PIAC Comments Regarding Withholding Tax on Capital Gain Dividends and Liquidating Distributions (Internal Revenue Service Notice 2007-55) - 11/14/08
- ABA Comments on REIT Liquidating Dividends and FIRPTA - 6/10/08
- IRS Advice Memorandum (AM2008-003) on Liquidating REIT Distributions - 2/15/08
- Internal Revenue Service Notice 2007-55: Guidance to Clarify the Treatment of Certain Distributions Under Internal Revenue Code Section 897(h)(1) - 7/2/07
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