Foreign Investment in U.S. Real Estate After Tax Reform: Planning and Compliance Issues

TCJA Changes to Blocker Corps, REITS, BEAT, FIRPTA Withholding

Recording of a 110-minute CPE webinar with Q&A


Conducted on Tuesday, October 23, 2018

Recorded event now available

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Program Materials

This webinar will provide tax advisers with a practical guide to the opportunities and challenges for foreign investors in U.S. real estate in the wake of the passage of the 2017 tax reform law. The panel will discuss the impact of the tax reform law on entity selection, FIRPTA withholding requirements, and blocker corporations, and outline new IRS reporting obligations and other planning and compliance changes.

Description

The U.S. tax rules governing investment in U.S. real estate by foreign nationals are complex, and the new tax law made significant changes for foreign investors. Tax professionals advising foreign investors must comprehend U.S. tax requirements for reporting and withholding. Counsel must be conversant with existing tax law as well as the new rules impacting foreign investment.

Foreign individuals and corporations will continue to face tax liability and withholding requirements under the existing FIRPTA rules on their dispositions of U.S. real property interests. While the tax reform law did not materially change the FIRPTA structure, the Act lowered the FIRPTA withholding rate on capital gain dividends and liquidating distributions paid by REITs to align with the reduced top corporate tax rate of 21% provided in the new law.

This rate reduction will influence the choice of investment vehicle, as will new carried interest rules, new NOL limitations, limitations on interest expense, and depreciation changes in the tax reform law. Also, foreign investors holding shares in a blocker corporation to hold U.S. real property will likely be subject to Base Erosion Tax (BEAT) on interest payments made or accrued by the blocker corporation to its related foreign party lender. Tax advisers must grasp the impact of tax reform on foreign investment in U.S. real property to avoid unanticipated U.S. tax liability.

Listen as our panel of experienced tax professionals discusses the impact of the new tax law on foreign investors buying, holding and disposing of U.S. real estate.

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Outline

  1. Overview of tax rules that apply to foreign investors in U.S. real estate
    1. Income
    2. FIRPTA and withholding requirements
    3. Estate and gift tax
    4. Income tax residency and estate/gift tax residency
    5. Treaty application
  2. Typical structure of blocker corporation for foreign persons or corporations to hold U.S. real property assets
  3. Changes in TCJA tax reform that will specifically impact income from owning or disposing of U.S. real property
    1. Corporate rate reduction and FIRPTA withholding rates
    2. Treatment of REITs
    3. Base Erosion and Anti-Abuse Tax (BEAT)
    4. Depreciation changes
    5. New NOL carryforward rules
  4. Planning opportunities through entity selection or change

Benefits

The panel will review these and other key issues:

  • Tax implications of purchasing U.S. real estate individually or through a U.S. LLC vs. a foreign corporation, a U.S. corporation, or a trust
  • Tax reporting obligations for non-U.S. owners of U.S. real estate
  • How the BEAT may impact blocker corporations
  • How tax reform changes may provide opportunities for restructuring foreign investments in real property
  • Special FIRPTA rules that apply to REITs

Faculty

Hassan, Cecilia
Cecilia (Ceci) Hassan

Partner
Baker & McKenzie

Ms. Hassan is a member of the firm's Tax Practice Group, and Global Wealth Management sub-practice group. Her...  |  Read More

Lehman, Richard
Richard S. Lehman

Atty
United States Taxation and Immigration Law

Mr. Lehman's tax law practice focuses on an array of commercial transactions involving an international and...  |  Read More

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