President Obama on Dec. 18 signed the Protecting Americans From Tax Hikes (PATH) Act of 2015 into law, enacting major reforms to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).
Under the changes, non-U.S. investors can now 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. Previously, FIRPTA was triggered upon sale or a capital gain distribution if a foreign investor held more than 5 percent of a U.S. REIT’s shares. Also, the new law 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).