Congress has approved the Protecting Americans From Tax Hikes (PATH) Act of 2015, which includes significant reforms to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).
Under the PATH Act, non-U.S. investors would be able to hold up to 10 percent of a publicly traded U.S. REIT’s stock without triggering FIRPTA upon sale of the stock or upon receiving proceeds from a REIT’s sale of assets. Current law requires that FIRPTA is triggered upon sale or a capital gain distribution if a foreign investor holds more than 5 percent of a U.S. REIT’s shares. Also, the act allows foreign pension and retirement fund investments in U.S. REITs and real estate to receive equivalent tax treatment under FIRPTA as U.S. pension funds.
Provisions in the PATH Act also provide REITs with more flexibility to manage their operations in an efficient and effective manner.
FIRPTA reform legislation in the House of Representatives was co-sponsored by Ways and Means Committee Chairman Kevin Brady (R-TX) and Ways and Means Committee member Joe Crowley (D-NY). In the Senate, reform was led by Senate Finance Committee members Mike Enzi (R-WY) and Bob Menendez (D-NJ).
UPDATE: President Obama signed the PATH Act into law on Dec. 18.