Two members of the US House of Representatives are adding their voices to those of the American Seniors Housing Association and 14 other real estate-related groups calling for the withdrawal of a retroactive IRS proposal that would impose capital gains taxes on US real estate investment trusts if they exceed a 25% threshold of foreign ownership.
The 15 groups back in March told members of Congress that the proposal, which would change the decades-old Foreign Investment in Real Property Tax Act, or FIRPTA, “would rewrite decades of existing tax law, overrule and supersede Congressional intent, and potentially stifle real estate’s access to foreign capital.”
In the current economic climate, foreign capital is “a critical source of equity financing for affordable housing” and other development, ASHA and the other groups told leaders of the Senate Finance Committee and the House Ways and Means Committee.
“When Congress enacted FIRPTA in 1980, it exempted sales of domestically controlled real estate investment trust (DC REIT) stock when less than half of its stock (by value) is owned by foreign persons,” their letter stated. “The DC REIT rules have allowed many US real estate businesses to flourish by continuing to attract foreign investment for projects that boost job growth, increase affordable housing, and improve communities.”
Reps. Darin LaHood (R-IL) and Carol Miller (R-WV) added their voices to the opposition about a little more than a week ago. In a July 28 letter to Treasury Secretary Janet Yellen, the representatives called on the Treasury and the IRS to withdraw the proposed regulation.
“Miller and LaHood argued that retroactively changing an established rule on domestic REITs would go against 43 years of precedent and undo rules that have been in place for 14 years for domestic C corporations — where owners or shareholders are taxed separately from the investment entity, like REITs — possibly impacting commercial real investment across the board,” the Commercial Observer reported.
