April 15, 2021

Foreign Pension Funds: Eyes on Proposed Tax Changes

The Biden Administration and Senate Democrats recently released more details on proposed tax law changes. Not surprisingly, they involve tax increases. Which raises the question: how might foreign pension funds investing in the U.S. be affected? It is too early to say for sure – but in some scenarios, the tax increase could be very material and warrant a re-thinking of investment structures.

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In recent years, foreign pension funds have been steadily increasing their investments in US alternative investment funds, such as private equity, real estate, and infrastructure funds. Many pension fund managers are surprised at the complexity of the US tax rules, and even more surprised at the difficulties associated with the preparation and filing of US income tax returns.
Since the enactment of the Protecting Americans from Tax Hikes Act (PATH) in December 2015, private Real Estate Investment Trusts (REITs) have become the vehicle of choice for many foreign pension funds investing in U.S. real estate.
Authors

Rebecca Lara

Director

Jonathan Afromsky

Director
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