Calls for eliminating FIRPTA occur amid a backdrop of what McNearney calls a “lower for longer” theme characterizing the current economic recovery, the fourth longest since the end of the Second World War. “While the economy has failed to generate the trajectory achieved in other recoveries, there appears to be far less risk of overheating and a prognosis for continued steady growth,” he says, adding that aggregate GDP growth remains “well below the historical average of 3.22%.”

HOUSTON—It's time to do away with the Foreign Investment in Real Property Tax Act of 1980, says Transwestern's Tom McNearney. Doing so would unlock billions of dollars for potential investment in US real estate, the Transwestern CIO argues in the latest edition of the firm's BRIEFING report.

“In a year when tax reform is on the menu, lawmakers should consider repealing FIRPTA,” McNearney says. “This antiquated double standard is a disincentive to invest that unfairly burdens the property sector,” by singling out foreign investors' real estate dispositions for taxation. “Repealing FIRPTA would add tremendous liquidity that could offset slowing institutional allocations to real estate.”

McNearney notes that the Real Estate Roundtable has been educating lawmakers on the need to rescind FIRPTA, “building bipartisan support over several years.” Two years ago, President Barack Obama signed the Protecting Americans From Tax Hikes Act, which included provisions exempting certain foreign investors from FIRPTA.

“Even the minor FIRPTA reforms in 2015 generated tens of billions of dollars of new investment in the US, including in secondary markets,” Peter Lowy, CEO of Westfield Corp., wrote in a commentary appearing in The Hill this past May. However, Lowy noted, foreign investors are still reluctant to invest in US infrastructure “because assets like toll bridges, transmission towers, tunnels, and roadbeds are subject to FIRPTA taxation. Large investors in infrastructure have stated that US infrastructure projects would attract much more foreign capital if FIRPTA were repealed.”

Calls for eliminating FIRPTA occur amid a backdrop of what McNearney calls a “lower for longer” theme characterizing the current economic recovery, the fourth longest since the end of the Second World War. “While the economy has failed to generate the trajectory achieved in other recoveries, there appears to be far less risk of overheating and a prognosis for continued steady growth,” he says, adding that aggregate GDP growth remains “well below the historical average of 3.22%.”