FIRPTA Revisions Free Foreign Capital to Invest REITs, Tax Lawyer Says

Prentiss Feagles, a partner at Hogan Lovells LLP, joined REIT.com for a video interview at REITWise 2016: NAREIT’s Law, Accounting and Finance Conference at the Marriott Marquis in Washington, D.C.

Feagles commented on reforms to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) that were included in the Protecting Americans From Tax Hikes (PATH) Act of 2015 and their impact on REITs.

He noted that foreign investors in real estate “have always had a problem in the United States. FIRPTA reform has freed them up to invest like other large institutional investors in REITs.” Qualified foreign pension firms can also invest in REITs without being subject to FIRPTA, he noted.

“My sense is that (the) Treasury (Department) is reasonably receptive to this change and will work with the industry to answer the myriad of questions that are now coming out,” Feagles said.

Meanwhile, Feagles observed that one of the most complex tax issues he deals with concerns REITs that operate with an UPREIT structure and have limited partners with deferred tax liabilities. The interests of the limited partners may diverge from those of the public shareholders, Feagles said: “Those deals are always the hardest to do because of the competing interests.”