US REITs for Foreign Investment: Understanding Advantages under FIRPTA Proposed Reforms
Overview:Real estate investment trusts (REITs) have long been considered to be tax-efficient vehicles for foreign investments in U.S. real estate. Recently, the Obama administration and members of Congress have issued various legislative proposals that encourage private infrastructure investment. These proposals are intended to attract foreign capital to the U.S. real estate market by reducing existing tax barriers to investment, primarily under the Foreign Investment in Real Property Tax Act of 1980 (commonly known as FIRPTA).
Many (but not all) of these reforms could enhance the value of REITs as vehicles for foreign investment in the United States. However, since REITs are subject to complex rules related to income, assets, share ownership, and distribution of income, they can represent challenges to adopters and investors.
In this 2-hour live webcast, our panel of key thought leaders and practitioners will offer insight with respect to the latest and significant issues surrounding foreign investment in U.S. real estate through REITs.
Carl J. Riley
Greenberg Traurig, LLP
Robert J. Le Duc
DLA Piper LLP
Partner, Co-Chair, National REIT Tax Practice
John P. Napoli
Seyfarth Shaw LLP
US REITs FOR FOREIGN INVESTORS – UNDERSTANDING ADVANTAGES; PROPOSED FIRPTA REFORMS
- Brief overview of US tax treatment of foreign investors
- Foreign investors generally
- Taxation of interest, dividends, etc.
- Capital gains
- Business income – income effectively connected with the conduct of a US trade or business
- Rental real estate
- Rental income
- Brief overview of REITs
- Why attractive vehicle for non-US investors?
- Blocker that (generally) prevents recognition of effectively connected income
- Unlike other blocker entities, REITs are generally not subject to entity level tax
- What is a REIT?
- Specific FIRPTA rules and application to REITs
- Sale of stock of United States Real Property Holding Corporation (“USRPHC”)
- What is a USRPHC?
- Exception for sale of stock of publicly traded corporation where seller owns less than 5%
- Exception for sale of stock of domestically-controlled qualified investment entity
- Capital gain dividends (e.g., where REIT sells US real property at a gain and distributes the proceeds)
- Special rule where publicly traded and non-US shareholder owns less than 5% of the stock
- Liquidating distributions
- Use of single-property mini-REITs (or baby REITs)
- IRS Notice 2007-55
- Foreign sovereigns and Section 892
- Common investment structures
- Legislative reform proposals
- Identify proposals
- Obama administration
- House of Representatives
- Substance of proposals
- Repeal/override Notice 2007-55
- Increase maximum permitted ownership for favorable treatment from 5% to 10%
- Provide exemption for foreign tax exempts
- Clarify attribution rules for determining whether domestically-controlled>
- Likelihood of enactment?
Who Should Attend:
- REITS & Fund Managers
- Real Estate & Tax Attorneys
- Public Companies
- Private Companies
- And Other Interested/Related 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, …
Robert J. Le Duc concentrates his practice in federal and international income taxation. Mr. Le Duc also has extensive experience in the real estate and mortgage-related areas, including representation of real estate funds, debt funds, and publicly traded and privately owned equity and mortgage real estate investment trusts (REITs). He has structured dozens of debt and equity offerings, REIT mergers and acquisitions, formations of private REITs, partnership roll-ups and various mortgage REIT transactions. In addition, Mr. Le Duc has provided tax advice regarding numerous cross border real estate investments and cross border financing transactions, with particular focus on advising non-US governmental investors.
Legal 500 names Mr. Le Duc for his REIT practice, calling him "extremely responsive."
Robert J. Le Duc concentrates his practice in federal and international income taxation. Mr. Le Duc also has extensive experience …
John Napoli is co-managing partner of Seyfarth Shaw’s New York office, where he practices in the areas of federal, state and local taxation and chairs the firm’s national Tax practice group. Mr. Napoli advises public and private clients on tax issues relating to corporate mergers and acquisitions, 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. He 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 has an AV rating in Martindale Hubbell, has been selected for inclusion in Super Lawyers–NY Metro every year since 2006, and in 2011, was named to the NACD Directorship’s “Directorship 100” list of “people to watch” in corporate America.
John Napoli is co-managing partner of Seyfarth Shaw’s New York office, where he practices in the areas of federal, state …
Print and review course materials
Method of Presentation:
On-demand Webcast (CLE)
NASBA Field of Study:
Specialized Knowledge and Applications - 2.00 credit hours
NY Category of CLE credit:
2.0 CPE (Not eligible for QAS (On-demand) CPE credits)
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About Greenberg Traurig, LLP
Greenberg Traurig, LLP (GT) is an international, multi-practice law firm with approximately 1750 attorneys serving clients from 36 offices in the United States, Latin America, Europe, the Middle East and Asia. GT is among the Top 10 law firms on The National Law Journal's 2013 NLJ 350, an annual ranking of the largest firms in the U.S.
GT provides integrated legal services for clients worldwide. It offers a multidisciplinary team, including senior lawyers who have been the 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. GT’s experience in more than 100 practice areas and network of contacts throughout the world position the firm to help clients achieve their objectives both domestically and in the global marketplace.
About DLA Piper LLP
DLA Piper is a global law firm, with approximately 4,200 lawyers located in more than 30 countries throughout the Americas, Asia Pacific, Europe and the Middle East.
About Seyfarth Shaw LLP
Seyfarth Shaw LLP has more than 800 attorneys in the U.S., London, Shanghai, Melbourne and Sydney, and provides a broad range of legal services in the areas of corporate, real estate, labor and employment, employee benefits, and litigation. The firm is a recognized leader in delivering value and innovation for legal services, and its acclaimed SeyfarthLean client service model has earned numerous accolades from a variety of highly respected third parties, including industry associations, consulting firms and media.
Seyfarth Shaw’s REIT practice is interdisciplinary, comprised of attorneys with corporate, securities, real estate and tax law expertise who represent public and private REITs as outside general counsel and in speciﬁc ﬁnance, development, acquisition and disposition transaction, as well as advising on reporting obligations under Sarbanes-Oxley and SEC filings. Attorneys in the practice have comprehensive experience in all stages of REIT operations, and represent every type of REIT including equity, mortgage, hybrid, special purpose REITs, public and private REITs, and funds that invest in REITs.