Eric Kodesch was quoted in a Tax Notes article titled “FIRPTA and Feeder Funds in Opportunity Zones.” The article discusses the new Opportunity Zone regime and questions of how to deal with withholding on non-U.S. investors under the 1980 Foreign Investment in Real Property Tax Act (FIRPTA), as well as whether feed funds are acceptable investment vehicles.
The Opportunity Zone regime effectively repealed the FIRPTA tax for non-U.S. persons who invest capital gains that wouldn’t have been taxed by the United States to begin with, said Eric Kodesch of Lane Powell PC. If non-U.S. persons have capital gain from the sale of stock that the United States doesn’t tax, for example, and they invest that gain in a qualified opportunity fund, they aren’t subject to tax on the appreciation if they hold the QOF investment for 10 years, even if the sole asset of the QOF is U.S. real estate. That effectively repeals the FIRPTA tax.
However, Kodesch said FIRPTA withholding is more complicated than that. Assuming that the interest in the QOF is a U.S. real property interest (USRPI), when the non-U.S. persons sell their QOF interest after the 10-year period, they must either get a FIRPTA certificate from the IRS or allow the withholding and file for a refund, Kodesch said.
Marie Sapirie authored the article, and Tax Analysts, the original publisher, granted Lane Powell permission to share the full article on its website.