Just a few days after Bill Mack mentioned talks of reforming FIRPTA laws in the US to make more favorable tax implications for foreign investors, I hear in Globe St. about new pending legislation that will do just that.
FIRPTA, which imposes an up to 55% levy on any capital gains realized from the sale of US commercial property, shares in REITs, and real estate operating companies, would be reformed thanks to NY Rep. Joseph Crowley who introduced the Real Estate Revitalization Act of 2010 (RERA).
RERA is meant to encourage foreign investors at a time when we want as much foreign capital to come into the country as possible. RERA would eliminate certain taxes that are part of FIRPTA. Even without the assistance of RERA foreign investors are eying US commercial property as they think values have bottomed and due to the relative weakness of the dollar against foreign currencies.
This change is necessary.
Here is an example from CNN: “If a British citizen buys stock in IBM and sells stock in IBM – that person is not subject to tax in the U.S. and only pays UK-levied taxes. But if he buys and sells shares in a REIT (Real Estate Investment Trust) shares, he will pay an additional tax on the sale of those shares. Foreign investors also don’t pay added taxes when they make real estate investments in other foreign markets.”
“London doesn’t have this FIRPTA layer of tax, so comparing a London building to a [Washington] DC building — it makes the London building more attractive, and that is enough to tilt buy pills online with no prescription the needle.”
Status of the Bill: Introduced January 27, 2010; Referred to House ways and Means Subcommittee
Do you think this will have a considerable impact?
*Update – I didn’t see this article until after I published the post, but Sam Chandan of Real Capital Analytics and Wharton professor wrote about RERA. Check out his write-up as it’s better than anything I could have put together.
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