04/30/2015 | by
Nareit Staff

New FIRPTA Reform Bill Introduced in the U.S. House of Representatives

April 30, 2015

New FIRPTA Reform Bill Introduced in the U.S. House of Representatives

Earlier today, Representatives Kevin Brady (R-TX) and Joe Crowley (D-NY), introduced H.R. 2128, the "Real Estate Investment and Jobs Act of 2015.” The measure, backed by twenty-two bipartisan members of the U.S. House of Representatives, would make two significant changes to the Foreign Investment in Real Property Tax Act (FIRPTA). The bill is similar to legislation Representatives Brady and Crowley introduced in the last session of Congress, along with a companion version in the U.S. Senate co-authored by Senators Mike Enzi (R-WY) and Bob Menendez (D-NJ). Enactment of the two significant provisions in H.R. 2128 would be an important step toward achieving the reforms to FIRPTA that NAREIT, The Real Estate Roundtable and a number of other real estate organizations have been advocating for several years. Upon introduction of the House bill, NAREIT issued a press release and signed a coalition letter to House members in support of the proposal.

Like the prior versions of this legislation, H.R. 2128 includes a proposal that 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 certain non-U.S. collective investment entities investing in U.S. real estate. This provision, which passed the House by a vote of 402-11 as a stand-alone bill in 2010, would conform the definition of "portfolio investor" for FIRPTA purposes to that used in U.S. tax treaties and which is applicable to foreign investment in U.S. debt securities. As noted here, REIT dividends paid to non-U.S. portfolio investors would remain subject to U.S. withholding (but not FIRPTA) tax.

Second, H.R. 2128 would exempt investments from foreign pension funds from FIRPTA altogether, attracting the investment potential from a large and growing source of foreign capital into the U.S. commercial real estate space. This part of the bill is based on a proposal that has been included in the last two fiscal year budget proposals put forward by the Obama Administration.

NAREIT again expresses its appreciation to Representatives Brady and Crowley, both members of the House Ways and Means Committee, for their continued efforts to achieve important modifications to FIRPTA at a time when the U.S. real estate sector could greatly benefit from additional foreign equity investment. In addition, NAREIT commends the twenty-two Representatives, including twenty who serve on Ways and Means, who have added their names as original co-sponsors to H.R. 2128: Representatives Earl Blumenauer (D-OR), Vern Buchanan (R-FL), Robert Dold (R-IL), Lynn Jenkins (R-KS), Sam Johnson (R-TX), Ron Kind (D-WI), Peter King (R-NY), John Larson (D-CT), Kenny Marchant (R-TX), Jim McDermott (D-WA), Patrick Meehan (R-PA), Richard Neal (D-MA), Charles Rangel (D-NY), Tom Reed (R-NY), Dave Reichert (R-WA), Jim Renacci (R-OH), Peter Roskam (R-IL), Linda Sanchez (D-CA), Pete Sessions (R-TX), Mike Thompson (D-CA), Pat Tiberi (R-OH), and Todd Young (R-IN).

On a related note, as NAREIT reported, on February 11, the Senate Finance Committee unanimously adopted S. 915, also entitled the “Real Estate Investment and Jobs Act of 2015” and introduced by Chairman Orrin Hatch (R-UT), during the Committee’s first mark-up session of the year. This measure only included the 5 to 10 percent increase provision. In addition, the legislation included non-controversial language related to general tax compliance and enforcement to “pay-for” the overall cost of the bill. A report issued by the Finance Committee explains the details of S. 915 in greater depth. Sens. Enzi, Menendez and other senators supporting FIRPTA reform intend to pursue the inclusion of the foreign pension piece once the full Senate considers the bill later this year.

The introduction of the "Real Estate Investment and Jobs Act of 2015" in the House, combined with the Senate Finance Committee’s action earlier this year and the Obama Administration's Fiscal Year 2016 budget proposal to treat foreign pension plans the same as U.S. pension plans for purposes of FIRPTA, are positive steps that will hopefully result in the achievement of FIRPTA reform during the 114th Congress.

NAREIT will continue to work with its coalition partners to achieve this desired reform to boost job growth in the U.S., promote inbound investment into U.S. commercial real estate, and improve the nation’s infrastructure.


For further information, please contact NAREIT's SVP of Government Relations, Robert Dibblee, at rdibblee@nareit.com, or VP of Government Affairs Kirk Freeman at kfreeman@nareit.com.

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