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Obama Proposes Foreign Pension Fund Investment Tax Change

by Mike Godfrey, Tax-News.com, Washington

03 April 2013


Within President Barack Obama's recently-announced plan to encourage additional investment in infrastructure and real estate in the United States, the Administration is proposing changes to the Foreign Investment in Real Property Tax Act (FIRPTA) of 1980 aimed at enhancing the attractiveness of such investment to a broader universe of private investors, such as foreign pension funds.

The President's new "Rebuild America Partnership" attempts to bring together an array of new and existing policies aimed at enhancing the role of private capital in US infrastructure investment, as an addition to the traditional roles of federal, state and local governments.

"Infrastructure assets can be attractive investments for long-term investors such as pension funds that value the long-term, predictable, and stable nature of the cash flows associated with infrastructure,"” the White House plan states.

However, "under current law," it adds, "gains of foreign investors from the disposition of US real property interests are generally subject to US tax under FIRPTA, and foreign investors, including large foreign pension funds, regularly cite FIRPTA as an impediment to their investment in US infrastructure and real estate assets."

"With US pension funds generally exempt from US tax upon the disposition of US real property investments," the Administration therefore "proposes to put foreign pension funds on an approximately equal footing, by exempting their gains from the disposition of US real property interests, including infrastructure and real estate assets, from US tax under FIRPTA."

It can be expected that more details on the tax exemption will be available when President Obama's full budgetary proposals are disclosed in the next few days.

TAGS: tax | investment | pensions | foreign direct investment (FDI) | law | budget | legislation | United States | tax breaks | construction

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