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There’s a new bill introduced in Congress: H.R. 3829.
Among other things, it contains a provision that proposes to create a new breed of animal exempt from FIRPTA. It’s a domestically controlled investment partnership.
If foreign partners hold less than 50 percent of the capital or profits interests, AND no one has more than 10 percent of the partnership, AND the partnership has less than 10 percent of its assets in U.S. real estate, then FIRPTA doesn’t apply.
Let’s be a bit more accurate. If you are a non-U.S. investor and you own a partnership interest that qualifies as a “domestically controlled investment partnership,” you can sell your interest in the partnership without triggering FIRPTA gain recognition.
The plan seems to cover U.S. investments where real estate is an incidental part of the total investment. You buy into a deal that owns a manufacturing company. There are some factories involved, but your main investment is not to buy the factories. You’re buying into a company that manufactures stuff. If you later sell your investment in this company, you don’t want to be tripped up by an incidental FIRPTA gain.
This proposal sits in the Ways & Means Committee, where it will marinate for a while. Rep. Eric Cantor, R-Va, is the bill’s author. He sits on the Ways & Means Committee. I’m not making any suggestions about the likelihood of passage.
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