On June 12, ASHA joined with our real estate partner organizations in a letter to Senate Finance Committee members expressing our concerns relative to the significant impact retaliatory taxes will have on real estate investment and the cost of capital.

Specifically, the coalition requested the Senate revise Section 899, ENFORCEMENT OF REMEDIES AGAINST UNFAIR FOREIGN TAXES of the House passed Budget Reconciliation bill to exempt non-controlling investments in U.S. real estate, regardless of whether those investments are made through equity or debt. We also seek relief for existing transactions and investment that were made and negotiated on well settled current tax rules and treaties.

This provision is designed to retaliate against foreign taxes that discriminate against American businesses. The purpose is to put pressure on foreign governments to reform their unfair practices. However, in doing so, it imposes taxes on inbound investment, creating negative and unintended consequences for the nation’s housing supply, including seniors housing. The higher tax rates triggered by Section 899 would apply broadly to foreign investment in U.S. real estate. The rates would apply to interest income (foreign lenders to U.S. real estate) and dividend income (foreign equity investors in U.S. REITs), as well as direct investments in U.S. real estate. In many cases, Section 899 would result in higher capital gains taxes as well.

If enacted, Section 899 would have a chilling effect on real estate investment and would also impose and new tax burden on U.S. real estate owners and create an unfair retroactive application to current investments.

Click here for the coalition letter.