Deloitte Principal Offers Primer on PATH Act Changes

Mark Van Deusen, principal at Deloitte LLP, joined REIT.com for a video interview at REITWise 2017: NAREIT’s Law, Accounting & Finance Conference in La Quinta, California.

Van Deusen commented on tax changes resulting from the Protecting Americans From Tax Hikes (PATH) Act of 2015, which includes reforms to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).

According to Van Deusen, the preferential dividend rule was “one of the best things” to come out of the PATH act.  The rule denies the dividends paid deduction to publicly traded REITs if their dividends are preferential, or all shareholders are not treated the same

“That’s an easy rule to articulate. It’s a hard rule to comply with in the real world,” Van Deusen observed.

Van Deusen also discussed the impact of the PATH Act on REIT spinoffs. He described the impact for C-corps that spin off REITs in a tax-deferred transaction as “huge.”

Meanwhile, Van Deusen added that the FIRPTA changes “may end up being the most important changes in the PATH Act.”

Under the PATH Act, non-U.S. investors are able to hold up to 10 percent of a publicly traded U.S. REIT’s stock without triggering the FIRPTA tax upon sale of the stock or upon receiving proceeds from a REIT’s sale of assets.