March 6, 2023
NMHC Pushes Back on Proposed FIRPTA Rule
Following the December 2022 release of the proposed Foreign Investment in Real Property Tax Act (FIRPTA) rule (detailed below), NMHC and NAA sent a letter to IRS opposing the rule and also joined a coalition of real estate partners in calling on Congress to urge the Treasury Department and IRS to withdraw said proposal.
What This Means: Given the rule’s potential impact on the industry, it was imperative NMHC weigh in with Congress to request they convey the following concerns to the Treasury Secretary and IRS Commissioner:
- It could disrupt real estate’s access to capital at a time of rising rates and economic vulnerability—putting property values, jobs, and communities at risk.
- The proposal exceeds Treasury’s authority and circumvents the legislative process by overriding decades of well-settled, existing law and contradicting clear statements of congressional intent.
- By applying retroactively—and in certain ways, applying before it is even finalized—the rule is grossly unfair to current real estate investors who played by the rules and sends a damaging message to potential future investors that U.S tax law is neither stable nor predictable.
Why This Matters: If finalized, the rule could disrupt real estate’s access to capital, particularly during a period rising interest rates. Additionally, because the proposed rule would be retroactively applied, it would impose FIRPTA tax on prior investments upon sale.
What’s Next: In addition to asking lawmakers to weigh in with Treasury and the IRS, NMHC and NAA plan to provide comments to Treasury as part of the rulemaking process.