January 20, 2016
It happened without much fanfare as Congress passed the omnibus spending bill in mid-December. Although no changes were made to the EB-5 investment visa program, Congress did include reforms to the Foreign Investment in Real Property Tax Act of 1980.
The act, known as FIRPTA, was passed to make foreign investment in U.S. real estate less attractive by taxing foreign investors when they sell property at a higher rate than U.S. investors. That inequity has now been eliminated.
Jeffery DeBoer, president and CEO of Real Estate Roundtable, told Bloomberg Business that, “By breaking down outdated tax barriers to inbound investment, the FIRPTA relief will help mobilize private capital for real estate and infrastructure projects.”
Although foreign investment in U.S. real estate has burgeoned from $4.7 billion in 2009 to $78.4 billion this past year, it still accounts for only 16% of all real estate investments. With commercial real estate values at record highs, the waiving of the tax should encourage even more foreign investment, particularly by private and public pension funds.
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