White House Proposes to Exempt Foreign Pension Funds From FIRPTA

The White House on March 29, 2013 announced a new proposal that would exempt foreign pension funds from having to pay U.S. taxes on gains from investments in U.S. infrastructure and real estate under the 1980 Foreign Investment in Real Property Tax Act (FIRPTA). FIRPTA added section 897 to the code, under which the gain or loss of a nonresident alien individual or foreign corporation on the disposition of a U.S. real property interest is treated as effectively connected with a U.S. trade or business, whether or not the individual or corporation would otherwise be considered to have a trade or business in the United States.

Taxation Partner Mark Stone said the economy has changed since the enactment of FIRPTA and that he sees the administration's proposal as a good first step in eliminating or limiting the law. "Given the need for funding, foreign or otherwise, in an economic real estate downturn, it makes sense to open up U.S. real estate markets to foreign pension funding," he said.