NAR Backs Changes in Foreign Investment Taxation
May 16, 2014
Legislation to amend the Foreign Investment in Real Property Tax Act (FIRPTA), which was enacted in 1980 with the aim of establishing equity in the tax treatment of domestic and overseas buyers of U.S. property, is under discussion in the House and Senate. The proposed measures are backed by the National Association of REALTORS®, said Russell Riggs, senior regulatory representative for NAR, in a presentation to the association’s Global Business Alliances Committee Wednesday during the REALTOR® Party Convention and Trade Expo in Washington, D.C.
If passed, the legislation would allow foreign investors to own up to 10 percent of stock in a U.S. Real Estate Investment Trust (REIT) without being subject to FIRPTA tax obligations upon the sale of those securities, up from the current level of 5 percent.
Originally enacted to alleviate concerns about rising foreign purchases of U.S. farmland, FIRPTA attempts to level the playing field of taxation on domestic and foreign real estate investors by levying a 10 percent tax on the “amount realized” by the latter group if they sell a property for more than $300,000.
Historically, NAR has not taken any position on FIRPTA. But in light of recent discussions by policymakers and legislators to change or possibly repeal it, a work group composed of select members of the Federal Taxation, Commercial, and Global Business and Alliances Committees was formed last year to review the FIRPTA proposals. The conclusion reached by the workgroup, backed by NAR’s Government Affairs department, was that passage of the bills represent the best possible approach for REALTORS®.
“We don’t want to get rid of FIRPTA,” Riggs said. “We want to make it work better.”
—Brian Summerfield, REALTOR® Magazine
Updated: June 20, 2018