UNITED STATES – The Association of Foreign Investors in Real Estate (AFIRE) has welcomed proposals to changes tax laws affecting foreign property investors.
The White House has proposed changes to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), as part of a broader infrastructure package unveiled by President Barack Obama. The proposals, known as the Rebuild America Partnership, are designed to spearhead significant new investment in US infrastructure.
According to the president, the changes are "aimed at enhancing the attractiveness of investment in US infrastructure and real estate to a broader universe of private investors."
FIRPTA has long been seen as an obstacle to foreign investment in US real estate. Under the legislation, foreign firms that dispose of US real property are obligated to pay US tax on any gains realised. This is not the case for other types of US investments.
As a White House proposal pointed out, "Foreign investors, including large foreign pension funds, regularly cite FIRPTA as an impediment to their investment in US infrastructure and real estate assets".
Organisations such as the Real Estate Roundtable and the Association of Foreign Investors in Real Estate (AFIRE) have long lobbied against FIRPTA and have greeted the news positively, albeit with caution.
"It is an important step that the awareness of FIRPTA has reached the White House level, but it still requires Congress to take action," Jim Fetgatter, chief executive of AFIRE, told IP Real Estate.
"We have been talking about slight changes to FIRPTA for three years, so I have to approach this news with a little caution."
The Obama proposal would level the playing field for foreign investors in real estate by exempting them from the FIRPTA taxation when they sell US infrastructure, property or real estate assets.
It is possible that it will be pushed through as an administrative action, not requiring implementation by Congress, although there is bipartisan support for FIRPTA reform.