U.S. House Ways and Means Committee members Reps. Kevin Brady (R-TX) and Joseph Crowley (D-NY) introduced legislation April 30 intended to provide relief from the Foreign Investment in Real Property Tax Act (FIRPTA).
The measure, H.R. 2128, was co-sponsored by 14 Republican and eight Democratic House members.
Sponsors of the new legislation, the Real Estate Investment and Jobs Act of 2015, say it will allow billions of dollars in new, long-term capital to flow into the U.S. commercial real estate market. The new investment would jumpstart credit markets, fund infrastructure projects, and create jobs and economic opportunities, according to its proponents.
The Senate Finance Committee unanimously approved similar legislation in February.
In a conference call, Crowley said the current FIRPTA legislation has hindered not only the commercial real estate sector, but the economy as a whole. “The law does more harm than good,” he said.
FIRPTA was enacted in 1980 to discourage cross-border equity investment in U.S. real estate by taxing non-U.S. investors’ gains on the sale of real property, including real estate and infrastructure assets. In some cases, it can create a tax burden as high as 54.5 percent.
Brady added that by removing the tax penalty that FIRPTA imposes on foreign pension funds that invest in U.S. real estate, the new bill would attract a significant amount of capital into the country. That would mean a broadening of investment beyond traditional gateway cities, he said.
NAREIT, one of several organizations that supported the bill, applauded its introduction.
NAREIT President and CEO Steven A. Wechsler noted that provisions of the bill “will help level the playing field in the global competition for capital, enabling the U.S. to attract more cross-border investment that will create jobs in the real estate and construction industries, upgrade U.S. commercial real estate and infrastructure, and expand state and local tax bases through increased economic activity.”
Jeff DeBoer, president and CEO of The Real Estate Roundtable, said that as a result of FIRPTA, the U.S. has lost a significant amount of capital investment to other foreign markets. “We are losing the global competition for capital,” he observed.