On December 18, 2015, the U.S. Congress passed and President Obama signed into law major reforms to the Foreign Investment in Real Property Tax Act contained in the Protecting Americans from Tax Hikes Act of 2015. As we previously noted, amendments were proposed to the 35-year old law pertaining to the U.S. taxation of foreign investment in U.S. real property.
The amendments would essentially treat certain qualified foreign pension funds in the same manner as U.S. pension funds with respect to investments in U.S. real estate by waiving an additional tax imposed on foreign investors under FIRPTA. The amendments would also allow foreign investors to purchase as much as ten percent of a U.S. publicly traded real estate investment trust (a REIT, which would be a U.S. Real Property Holding Corporation under FIRPTA) without FIRPTA taxation. The previous threshold was five percent.