On April 10, 2019, Reps. John B. Larson (D-CT) and Kenny Marchant (R-TX) introduced the Invest in America Act (H.R. 2210), which would repeal section 897, added by the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”), and the corresponding Chapter 3 withholding provision under section 1445.

Section 897 imposes taxes on gain realized by a foreign individual or corporation from dispositions of a U.S. real property interest (“USRPI”), which includes interests in real property located in the United States and stock of a domestic U.S. real property holding company. Section 897 is currently enforced by section 1445 and accompanying regulations, which impose an obligation on the transferee to withhold 15 percent of the amount realized by any person on the disposition of a USPRI, unless the transferee obtains a certificate of non-foreign status or a statement that the transferred interest is not U.S. real property holding company interest, or if certain other exceptions apply.  The amount required to be withheld under section 1445 may be reduced or eliminated if the transferor or transferee applies and obtains a withholding certification from the IRS.  A transferee who fails to withhold the required amount is liable for the tax due and could be subject to applicable penalties and interest.

The new bill, if passed, would repeal both section 897, the cumbersome withholding obligations under section 1445, and the accompanying regulations.  The bill is sponsored by a bipartisan group of lawmakers in the House and has gained support from industry groups.  Companion legislation has not been introduced in the Senate at this time.

Photo of Michael M. Lloyd Michael M. Lloyd

Michael Lloyd practices in the areas of tax and employee benefits with a focus on information reporting and withholding on cross-border payments (e.g., Forms 1042 and 1042-S) and Foreign Account Tax Compliance Act (FATCA), backup withholding, employment taxation, the treatment of fringe benefits…

Michael Lloyd practices in the areas of tax and employee benefits with a focus on information reporting and withholding on cross-border payments (e.g., Forms 1042 and 1042-S) and Foreign Account Tax Compliance Act (FATCA), backup withholding, employment taxation, the treatment of fringe benefits, cross-border compensation, domestic information reporting (e.g., Forms W-2, 1099, 1095 series returns), penalty abatement, and general tax planning and controversy matters. Mr. Lloyd advises large U.S. and foreign multinationals regarding compliance with information reporting and withholding issues, as well as a range of other federal and state tax issues.