In addition, President Obama actively supports FIRPTA reform. His last two budgets have included a FIRPTA proposal to tax foreign pension plans the same way we tax domestic pension plans on their real estate and infrastructure investments as part of his plan to “Rebuild American Partnership.” According to the White House, “foreign investors including large foreign pension funds regularly cite FIRPTA as an impediment to their investment in U.S. infrastructure and real estate assets.”
Foreign institutional investors will inevitably play a major role in the future of infrastructure financing. Our nation needs policies to help in the best way possible.
Global institutional investors manage well over $65 trillion in assets, including $17 trillion in private pension plans alone. Transportation and infrastructure investments offer stable and predictable income streams, act as a hedge against inflation, and allow investors to diversify their holdings. In the case of pension funds, the long time horizon of an infrastructure project can match the long duration of pension liabilities. The Organisation for Economic Co-operation and Development estimates that private, cross-border investment in infrastructure will increase in the years ahead.
Innovative financing proposals, such as reform of the Foreign Investment in Real Property Tax Act , would unlock billions of private capital for investment in U.S. infrastructure projects. At the same time, FIRPTA reform would help build the bipartisan political goodwill needed to advance a major highway bill. Free-market conservatives and pro-labor progressives agree on the need to reform the punitive and antiquated FIRPTA law and agree that our nation’s infrastructure needs rebuilding.
Let’s do both and reform FIRPTA quickly as a way to finance the rebuilding of America.
Jeffrey D. DeBoer is President and CEO The Real Estate Roundtable.