WASHINGTON, DC-As head of AFIRE (the Association of Foreign Investors in Real Estate), Jim Fetgatter hears complaints about the Foreign Investment in Real Property Tax Act All. The. Time. “It is definitely a major impediment to investment,” he tells GlobeSt.com. Little wonder Fetgatter is lauding the latest effort to reform the act, referred to as FIRPTA in real estate circles. “It is long in coming. The original law was written for a different era. Now it is like driving a Model-T in an era of driverless cars.”
On Wednesday Rep. Kevin Brady (R-TX) and Rep. Joseph Crowley (D-NY) introduced The Real Estate Investment and Jobs Act of 2013. The bill has wide support from the industry; the press conferencing announcing its debut was attended by Jeff DeBoer, president and CEO of The Real Estate Roundtable and John Zuccotti, co-chairman of Brookfield Properties Corp, among others.
The act, a companion to the Senate bill S. 1181, which was introduced by US Senators Robert Menendez (D-NJ) and Mike Enzi (R-WY) in June, would alter the original legislation which requires foreign investors to pay taxes on the profits they earn when selling US properties or US real estate securities. The act doesn’t do away with the tax but does loosen several features of the act that foreign investors particularly dislike, such as increasing the current “portfolio investor” exception for sales of stock and capital gains dividends of listed REITs from 5 percent to 10 percent, and reversing an Internal Revenue Service ruling requiring foreign investors to pay taxes on small private REIT transactions.
Whether the act will make it into law, of course, is an open question. Complicating matters is the push for comprehensive tax reform on the Hill, which, if it continues to make traction, will touch on most aspects of the tax code including FIRPTA. Fetgatter thinks that despite its uphill climb, the act has a good chance of becoming law – or at least better than in years’ past. “There is more talk and determination behind it,” he says.