Foreign Investment in Real Property Act (FIRPTA) (CRS Report for Congress)
| Release Date |
Sept. 18, 2023 |
| Report Number |
IF12498 |
| Report Type |
In Focus |
| Authors |
Jane G. Gravelle |
| Source Agency |
Congressional Research Service |
Summary:
In general, a foreign person or corporation is not taxed on
U.S.-source capital gains income unless it is associated with
operating a trade or business. However, under the Foreign
Investment in Real Property Tax Act (FIRPTA), gain on the
sale of U.S. real property is taxed at the same rates that
apply to U.S. sellers. To ensure collection of this tax, the
buyer is required to withhold part of the purchase price and
submit a payment to the Internal Revenue Service, unless
the sale falls under one of several exceptions. The foreign
investor then files a U.S. tax return which can be used to
refund part of the withholding tax if it exceeds the tax on
the gain.
The FIRPTA rules were adopted in 1980, as part of the
Omnibus Reconciliation Act of 1980 (P.L. 96-499). The
general rationale was to equalize the tax treatment of
foreign and domestic investors, although it was also partly
in response to concerns about purchases of U.S. farm land
by foreign investors.
