(WASHINGTON, D.C.) — In conjunction with a House Ways & Means Committee hearing today exploring long-term funding solutions for the Highway Trust Fund (HTF) — whose latest funding “patch” expires July 31 — The Real Estate Roundtable and a coalition of business and labor organizations urged reform of the Foreign Investment in Real Property Tax Act (FIRPTA) as a “simple, cost-effective” way to “galvanize billions in new private capital for investment in U.S. transportation and infrastructure.”
In a letter submitted for the hearing record, the coalition said the 1980 law “is a major hurdle for the foreign investor seeking to invest in US infrastructure projects.” It also characterized FIRPTA as a “punitive,” “anti-competitive” law that “subjects foreign investment in U.S. real estate or infrastructure to a much higher tax burden than applies to a foreign investor purchasing a U.S. stock or bond, or an investment in any other asset class.” In some cases, the FIRPTA tax burden is as high as 54.5 percent. [A similar letter is being submitted to Senate tax-writers in conjunction with their scheduled HTF hearing tomorrow.]
In the view of The Roundtable and its coalition partners, any long-term HTF funding bill should include FIRPTA reforms such as those in H.R. 2128 — legislation introduced by Ways and Means Committee members Kevin Brady (R-TX) and Joseph Crowley (D-NY). The “Real Estate Investment and Jobs Act of 2015” would increase (from 5 percent to 10 percent) the ownership stake that a foreign investor can have in a U.S. publicly traded REIT without triggering FIRPTA liability (extending this provision to certain collective investment vehicles); and exempt foreign tax-exempt pension funds from FIRPTA altogether.
“By providing relief from FIRPTA, the Brady-Crowley bill will spur domestic real estate investment, create jobs and help provide the capital we need to rebuild the nation’s crumbling infrastructure,” said Roundtable President and CEO Jeffrey D. DeBoer. Since the bill’s re-introduction in April, 31 (of 39) Ways & Means Committee members have signed on as co-sponsors.
Earlier this year, the Senate Finance Committee unanimously passed legislation (S. 915) that contains a significant part of what The Roundtable and its coalition partners are seeking, in terms of FIRPTA reform. Also illustrating the strong bipartisan support for FIRPTA reform, the full House cleared similar legislation in 2010 by a vote of 402-11.
Because of the close connection between FIRPTA and infrastructure investment, the Administration included a FIRPTA reform proposal in its 2013 Rebuild America infrastructure initiative, and in its last three budget submissions to Congress.