Significant Changes to the REITs and FIRPTA Rules in 2016 and Beyond
In December 2015, President Obama signed into law the Protecting Americans from Tax Hikes (PATH) Act of 2015 that contains significant changes relevant to the rules governing real estate investment trusts (REITs) and the Foreign Investment in Real Property Tax Act (FIRPTA). The modifications, including the new FIRPTA exemption for qualified foreign pension funds, are highly significant to certain classes of non-U.S. investors.
Other key changes include, among other modifications, an enhanced FIRPTA exemption for holders of small interests in publicly traded REITs; a new exception for certain qualified foreign shareholders of REITs; elimination of the FIRPTA "cleansing rule” for REITs; and an increase in the rate of withholding now required under FIRPTA.
In a two-hour LIVE Webcast, a panel of thought leaders and practitioners assembled by The Knowledge Group will provide an in-depth discussion of tax rules governing investments in U.S. real estate, including FIRPTA and REITs. They will also discuss significant issues and provide the latest insights relevant to the reforms made to REITs and to the FIRPTA rules by the new PATH Act as they relate to foreign investors in U.S. real estate. The speakers will offer their expert thoughts and opinions on how best to take advantage of these changes.
Some of the major topics that will be covered in this course are:
- Overview of U.S. tax rules applicable to foreign investors
- Specific tax rules for real estate, including FIRPTA and use of REITs
- FIRPTA exceptions
- Comparison of structural alternatives
- Recent reforms affecting REITs and FIRPTA
- New rules applicable to “Qualified Foreign Pension Plans”
- Other available FIRPTA exemptions
- The “cleansing rule”
- Impacts on and advantages to investments in U.S. real estate
- Current legislative and other developments
Carl J. Riley, Shareholder
Greenberg Traurig, LLP
John P. Napoli, Partner
Seyfarth Shaw LLP
U.S. Source Income
- Foreign Investors
- Investment (“FDAP”) Income
- Business Income
- FDAP or ECI?
- Comparison of Income Categories
- Tax Treaties
- Taxation of Gains
Foreign Investments in U.S. Real Estate
- Gains from USRPIs
- What is a USRPI?
- What is a REIT?
- REIT Requirements
- Taxation of REIT Distributions
- FIRPTA Tax Triggers
- FIRPTA Exceptions
- Notice 2007-55
- Dividends for 10% or Less Exception
- Section 892 – Foreign Governments Exception
- Requirements of Section 892
- Investment Vehicle Comparison
Commonly Used Structures
- Base Case Real Estate Fund Structure
- Base Case REIT Structure
- Mini REIT Strategy
- Leveraged Blocker Structure
- Portfolio Interest Summary
Recent Legislative Reforms in the PATH Act
- The PATH Act at a Glance
- Qualified Foreign Pension Fund FIRPTA Exception
- Increase in Ownership Limit for Publicly-Traded REITs
- Qualified Shareholders FIRPTA Exemption
- Determining Domestically Controlled REIT Status
- Increase to FIRPTA Withholding Rate
- Limitation to the “Cleansing Rule”
- Sample of Other REIT Provisions in the PATH Act
Who Should Attend:
- Real Estate and Tax Attorneys
- Managers and Sponsors of REITs and Real Estate Funds
- Foreign Investors
- CPAs and other Tax Advisors and Preparers
- Public and Private Companies
- Other Related / Interested Professionals
Carl J. Riley is a Shareholder in Greenberg Traurig’s New York Office. Carl focuses his practice on complex tax matters, specializing in real estate-related matters, including initial public offerings, formations and other securities issuances, with particular emphasis on transactions involving REITs. He is experienced with tax rulings and treaties, administrative practice before taxing authorities, and the Foreign Investment in Real Property Tax Act (FIRPTA). In addition, Carl advises clients regarding mergers and acquisitions, securities offerings, and transactions involving regulated investment companies (RICs), partnerships, pension funds and other tax exempt entities, and sovereign wealth funds. He is also experienced in the formation, diligencing, structuring and implementation of various investments and acquisitions involving private equity funds. He received his J.D. and LL.M. from the New York University School of Law.
Carl J. Riley is a Shareholder in Greenberg Traurig’s New York Office. Carl focuses his practice on complex tax matters, …
Mr. Napoli is co-managing partner of the firm’s New York office. He practices in the areas of federal, state and local taxation and co-chairs the firm’s national Tax practice group. He represents both public and private clients and regularly advises clients on tax issues relating to corporate mergers and acquisitions, international transactions, restructurings, consolidations, financing, real estate (including REITs), tax free like kind 1031 exchanges, subchapter S corporations, partnerships, joint ventures, and limited liability companies. Mr. Napoli has been instrumental in structuring numerous tax-efficient real estate transactions, including the formation, operation and liquidation of REITs and UPREITs. Mr. Napoli also represents clients before the Internal Revenue Service, United States Tax Court, and various state and local authorities on a variety of controversy matters.
Mr. Napoli is co-managing partner of the firm’s New York office. He practices in the areas of federal, state and …
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About Greenberg Traurig, LLP
Greenberg Traurig, LLP is an international, multi-practice law firm with approximately 1900 attorneys serving clients from 38 offices in the United States, Latin America, Europe, Asia, and the Middle East. The firm is among the 2015 BTI Brand Elite and among the most “Tech Savvy.” It was on the 2013-2015 BTI Client Service 30 listings of firms “most recognized by clients for providing excellent client service,” and one of the 2014 BTI Client Relationship Scorecard “Power Elite,” based on the nature and strength of its client relationships.
At GT, we understand our clients’ businesses and offer them a highly entrepreneurial approach to legal counsel. Our multidisciplinary team includes senior lawyers who have served as chief legal officers at major multinational companies and have spent years solving real-world problems in the business, political and legal environments of major commercial centers. We also recognize that clients expect and are entitled to high quality legal work and, equally important, superior client service. Accordingly, we strive to provide our clients with the highest quality legal work and service at a reasonable cost.
About Seyfarth Shaw LLP
Seyfarth Shaw LLP provides thoughtful, strategic, practical legal counsel to client companies and legal teams of all sizes. With more than 850 attorneys in the U.S., London, Shanghai, Melbourne and Sydney, they offer a national platform and an international gateway to serve your changing business and legal needs in litigation, employment, corporate, real estate and employee benefits.
The firm have gained acclaim for their innovative SeyfarthLean client service model, which incorporates the core principles of Lean Six Sigma to the delivery of legal services, and continue to develop new reporting and project management tools for greater transparency and collaboration with their clients.
The firm’s efforts have contributed to their recognition by in-house counsel as ‘Best of the Best’ for client service within the 2015 BTI Consulting Group's Client Service A-Team and being named by the Financial Times U.S. Innovative Lawyers Report among the most innovative law firms.