Passed at the end of 2015 by the U.S. Congress, the Protecting Americans from Tax Hikes Act of 2015 (“Path Act”) contains several very significant changes to the taxation of certain non-U.S. investors with respect to gain on U.S. real estate and in many instances could have positive implications for these investors.
The PATH Act contains a number of important revisions to the FIRPTA rules under section 897 relating to non-U.S. taxpayers investing in U.S. real estate.
- For publicly-traded REITs, raise FIRPTA exemption from 5% shareholders to 10% shareholders
- Exemption from FIRPTA for qualified foreign pension plans
- Revisions to rules determining “domestically controlled REIT” status
- Narrowly targeted provision exempting qualified shareholders from FIRPTA
- “Cleansing” rule would not apply to REITs
- FIRPTA withholding increased from 10% to 15% of gross purchase price