HOUSE OVERSIGHT 026830 212.573.8412 [email protected] Alex Gelinas Partner 212.573.8159 [email protected] Please feel free to discuss any aspect of this Alert with your regular Sadis & Goldberg contact or with any of the partners whose names and contact information can be found at the end of the Alert. On December 18, 2015, President Obama signed into law a bill that significantly reforms the provisions of the Internal Revenue Code that were originally added 35 years ago by the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). The Protecting Americans from Tax Hikes Act of 2015 (the "PATH Act") also includes extensions of a number of tax relief provisions that expired at the end of 2015. The PATH Act makes foreign capital investment in U.S. real estate, energy and infrastructure assets more attractive by expanding certain exemptions from FIRPTA and clarifying the application of certain FIRPTA provisions to REITs and their shareholders. I. FOREIGN PENSION FUNDS EXEMPTED FROM FIRPTA TAXATION One of the most significant provisions of the PATH Act is the addition of a complete exemption from FIRPTA for "qualified foreign pension funds" and "entities" wholly owned by such funds, effective on the date of enactment. A foreign pension fund is "qualified" if it is subject to government regulation and certain reporting requirements in its home jurisdiction, is established to provide retirement or pension benefits to participants or beneficiaries that are current or former employees, has no greater than 5 percent beneficiaries, and enjoys tax benefits on either contributions or investment income in its home jurisdiction. The new exemption applies to direct investments and investments made through partnerships (including private equity funds). The PATH Act provides for certain details to be addressed by Treasury Regulations. It appears that the "entities" eligible for the FIRPTA exemption could include a U.S. or foreign "blocke