PATH Act Creates New FIRPTA Withholding Tax Rate and Exemption for Foreign Pension Funds

March 01, 2016

The Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”), signed into law on December 18, 2015, has resulted in a number of changes to the taxation of investments in U.S. real property by foreign investors. Among the most significant of such changes, the PATH Act increased the U.S. federal withholding tax rate on dispositions of U.S. real property interests, introduced a new exemption for foreign pension funds, expanded the publicly-traded exemption for public Real Estate Investment Trusts ("REITs") and created a favorable presumption rule for determining the domestically-controlled status of public REITs. The PATH Act also effectively put an end to tax-free REIT spinoffs, which had become a popular transaction for public companies with significant real estate assets.

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