[Congressional Record Volume 157, Number 142 (Thursday, September 22, 2011)]
[Senate]
[Page S5910]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MENENDEZ (for himself and Mr. Enzi):
  S. 1616. A bill to amend the Internal Revenue Code of 1986 to exempt 
certain stock of real estate investment trusts from the tax on foreign 
investments in United States real property interests, and for other 
purposes; to the Committee on Finance.
  Mr. MENENDEZ. Mr. President, I rise to introduce a critical bill for 
our economic recovery. As communities across the country continue to 
recover from the economic downturn and devastating falling property 
values, commercial real estate properties throughout the nation are 
confronting a severe equity crisis. Just as the crash in the 
residential real estate market triggered the most severe economic 
recession in generations, the looming crisis in the commercial real 
estate market, if left unchecked, could prove to be devastating for our 
fragile economic recovery.
  Studies have shown that more than $1 trillion of commercial real 
estate loans will be maturing in just the next few years. In fact, by 
2018 more than $2.4 trillion dollars of loans held by insurance 
companies, thrifts, banks, and in commercial mortgage-backed securities 
will mature. Just as we saw with home mortgages, if these borrowers 
can't secure other funding options when these payments come due, 
commercial properties across the country will go into foreclosure, 
leaving communities with even more vacant storefronts, less jobs, lower 
tax revenues, and a deeper economic hole to dig themselves out of.
  Simply put, the commercial real estate industry has an equity problem 
too large for domestic investment alone to solve.
  Unfortunately, certain tax rules--most of which were drafted 30 years 
ago, before the current crisis could be foreseen--impose significant 
penalties on foreign investments in domestic real estate that do not 
exist on other types of U.S. investments such as corporate stocks and 
bonds. As a result, overseas investors are discouraged from investing 
in U.S. real estate at a time when their capital is sorely needed.
  These rules, created by the Foreign Investment in Real Property Tax 
Act, or FIRPTA as it is come to be known, freeze out foreign investment 
in our real estate markets by imposing an arbitrary withholding tax on 
the gains realized by overseas capital invested in domestic properties.
  Not only is this different treatment questionable as a policy, it is 
damaging to the economy. At no point have these rules been more 
damaging to the economy than today. They continue to keep capital out 
of the U.S. at a time when commercial real estate in all of our 
communities desperately needs the equity investment.
  If these rules are not reformed, it is a real possibility that 
hundreds of billions of dollars in debt would go into default, 
triggering massive foreclosures, significant decreases in property 
values and a severe constriction of capital available for U.S. 
consumers and businesses--absolutely the last thing this economy needs 
right now.
  That is why today, Senator Enzi and I are introducing bipartisan, 
bicameral legislation that would implement efficient and meaningful 
reform of these tax rules to encourage more equity investment in U.S. 
real estate.
  These reforms would help save communities all across America from the 
drag of a wave of commercial real estate foreclosures, help to restart 
the credit markets, and free up capital to create jobs and economic 
opportunities for families in every region of the country.
  These provisions are modest but effective.
  We are not tackling the bigger question of whether or not the 
existing FIRPTA rules are effective in a 21st century economy. This 
legislation simply creates targeted opportunities for investment in 
American real estate while preserving the underlying foreign ownership 
limits imposed by these tax rules.
  We may not agree on a whole lot these days, but today we offer a 
bipartisan, bicameral solution to help the U.S. economy. I hope all of 
my colleagues can take the time to look at this bill, understand the 
positive effects it will have for every State, and we can get this done 
for the American people.
                                 ______