The commercial real estate market needs money. We need investment dollars to pour into the market. Should we encourage foreign investment? Do we really care where the cash comes from? As Jerry McGuire's client said, "Show me the money"! FIRPTA creates a speed bump for foreign capital. It may be time for a change.The Foreign Investment in Real Property Tax Act (FIRPTA) is a statute that requires that a seller, who is a foreign person, permit a withholding of a part of the selling price (generally 10%) against the United States gains taxes that the foreign person will owe on capital gains earned on the sale of real property.A foreign person, for federal income tax purposes, is generally any person who is not either a resident alien or a United States citizen. If an owner of real property is an entity formed outside of the United States, it is also deemed a "foreign person" under the IRS code.The FIRPTA law creates a tremendous disincentive for foreign entities to invest in domestic real estate. This primary obstacle facing non US investors who invest in US real property - the FIRPTA - should be repealed. The law has profound implications for non US investors in US real estate. FIRPTA's discriminatory application (aimed solely at real estate) coupled with onerous reporting requirements impedes foreign investment in US real property, which in turn, has negative effects on the vitality of the US economy.FIRPTA was enacted in 1980. A senator from Michigan was concerned about farm land and wanted to protect "the American heartland" from foreign interests. The world has changed, but FIRPTA has not. Many of the rules that were written in the 1980s look outdated and unsuited to modern investment practices because they were written with a particular paradigm in mind, that being a single foreign investor or a small group of foreign investor acquiring US real property.Today, investments in US real property are being made in many different forms. They include REITs owned in part by foreign persons, private equity partnerships, and collective investment funds organized outside the US, making ultimate ownership difficult to determine. The United States generally has no jurisdiction to tax foreign persons on capital gains that are sourced within the US, unless those gains are "effectively connected with a US trade or business". The US taxation of international investors is governed by either the Internal Revenue Code or income tax treaties that the US has signed with other nations.Non US investors in US real property are subject to fundamentally different US federal income tax rules than those that apply to their investments in US corporations or other capital assets. Most notably, a foreign person's gains attributable to the disposition of capital assets other than US real property interests are not subject to US tax. FIRPTA discriminates against the asset class of real property.Credit availability in our market today is scarce creating a greater need for equity. Foreign investors and entities are a tremendous potential source of this greatly needed equity. Unfortunately, many foreign sources of equity investment have expressed little desire to make investments in US real estate when future gains will be taxed at marginal rates ranging from 35 to 50 percent, according to The Real Estate Roundtable. These sources of potential investment are looking for positions as lenders with contingent interest debt instruments to minimize their incidence of taxation in the United States. Property owners are reluctant to offer senior positions in the capital stack that could effectively diminish future upside in their investments.The US tax system should not be a barrier in the competition for institutional investment in real estate. As emerging economies grow, destinations for international institutional capital will grow and the US has to be competitive in this global market.The US real estate market has benefitted immensely from having an open ecomony that allows for the free flow of capital and goods with foreign trade partners. The continuation of policies such as FIRPTA will have negative effects on both real estate markets and the US economy. Foreign investors should be allowed to invest in US real property without any more disclosure other than that required of a US investor. Similarly, tax law affecting foreign investment in US real property should not be any more burdensome to foreign investors in the US than those that apply to US investors.Our market needs capital and if the foreign market wants to provide that capital, we should encourage that investment.