On March 29, the Obama Administration issued a press release
outlining its plan to encourage private investment in
infrastructure. As part of its 2014 Budget, foreign pension plans
would be exempted from U.S. tax on gain from the disposition of
U.S. real property interests, including both infrastructure and
other U.S. real estate assets. Some foreign pension plans,
including those organized in Canada, are formed by foreign
governments or serve mainly governmental employees. Under current
law, such governmental plans may qualify for exemption from U.S.
Federal income tax on gains from the disposition of non-controlling
interests in U.S. corporations that hold predominately U.S. real
estate assets, including certain infrastructure assets.
Practitioners had questioned whether this proposal would apply to
these governmental pension plans as well as private pension plans.
A government official recently clarified publicly that the
exemption would be intended to apply to all foreign pension plans,
both private and governmental, and that this point will be
clarified as the proposal moves forward. Also uncertain is whether
the proposal would expand the current governmental-plan exemption
to cover controlling interests in U.S. real estate holding
corporations. We expect the extent of the proposed exemption to be
clarified as well.
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