WASHINGTON, DC—The Senate Finance Committee will be discussing two bills of interest to the commercial real estate industry on Wednesday, both of which appear likely to pass. The first is a reform measure for the Foreign Investment in Real Property Tax Act. The second bill is an investment tax credit for "waste heat-to-power" systems, or combined heat and power systems, to defray the cost of these systems.

Industry advocates are feeling confident that the measures will pass the committee, although as last year's surprise move by the Senate to kill TRIA showed, one can never safely assume anything is a done deal in Congress until a law is signed.

It has been a long, hard slog to push FIRPTA changes through Congress. Reform of the law has been on the industry's wish list for years; it is often cited as a barrier to foreign investment in US real estate.

"The United States is among the world's favorite places to invest," Real Estate Roundtable CEO Jeff DeBoer wrote in a letter urging the measure's passage. "Yet today's outdated tax laws actively discourage investment from overseas in places where it could have a tremendous economic impact – notably infrastructure and the commercial real estate industry, which alone represents 13 percent of US GDP by revenue and generates or supports over 9 million American jobs."

The bill considered before the committee would double the allowable amount that a foreign investor could invest in a publicly-traded REIT to 10% from 5% without facing the FIRPTA tax.

As it currently stands, FIRPTA collects little in the way of actual revenue, DeBoer said. The revenue effects of the legislation would be largely offset by a number of noncontroversial provisions aimed at improving FIRPTA and REIT tax compliance and enforcement, "such as measures requiring corporations to notify shareholders that they are subject to FIRPTA and increasing the withholding rate on FIRPTA transactions."

The second bill to be considered is an investment tax credit for up to 10% of a combined heat and power system's cost. These CHP systems are used to capture heat that would otherwise be wasted and use it to power a building's electrical systems. They are akin a building having its own "mini-power plant", the Real Estate Roundtable said. It noted that when Superstorm Sandy hit New York City, some of the first buildings that were back up and running were those with CHP systems in place.

Instant Insights /

Senate Finance Committee to Consider FIRPTA, Tax Credit

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