Author(s): Richard K. "Dick" Clark
Published: 09/22/2009
A buyer contacts you to find property. Everything is going great until the buyer informs you that he is not a U.S. citizen and he wants to know if his foreign company can qualify for incentives in Colorado. What do you do? You can attend the Legal Panel at the Colorado Association of REALTORS® State Convention on Tuesday, October 20, at the Broadmoor Hotel in Colorado Springs and obtain detailed information on how to proceed.
FIRPTA Withholding Rules
A foreign person including a foreign entity may purchase real estate in the U.S. and even rent it. Relevant issues include choice of an entity to own the property and tax issues, especially under the Foreign Investment in Real Property Tax Act ("FIRPTA"). FIRPTA subjects the foreign person to a U.S. tax upon disposition of the real property. Thus, the buyer of foreign-owned real estate is obligated to withhold a tax and pay it to the IRS, which can be 10% of the amount realized by the seller on the transfer or a higher percentage of any gain recognized by a corporation or partnership.
During the Legal Panel, Jim Walker, Chair of the Tax Group at Rothgerber Johnson & Lyons LLP, will address a variety of tax and legal issues relevant to international real estate transactions, including who is domestic, who is foreign, FIRPTA details, and the import of tax treaties such as those with Mexico, Japan and the United Kingdom.
Colorado Investment Incentive Programs
The Colorado Office of Economic Development and International Trade ("OEDIT") provides financing tools including debt and equity financing, cash incentives, grants, and tax credits to support economic development activities that improve and support employment opportunities in Colorado. At the Legal Panel, Pam Reichert, Director of International Trade for OEDIT, will lead a discussion of these programs, including:
- Job Growth Incentive Tax Credit Your buyer's company may be eligible for a tax credit of up to 50% of its annual FICA taxes paid on new employees assuming the business meets certain requirements under the Economic Development Commission's Job Growth Incentive Tax Credit program.
- Job Creation Performance Incentive Fund Your buyer might qualify for a performance based incentive payment if his business creates new full-time jobs paying above-average wages.
- Strategic Fund Program If your buyer's business creates new full-time jobs paying at or above average wages and satisfies other requirements, it may receive an upfront cash incentive award.
- Enterprise Zone Program If your buyer locates a qualifying business in certain designated enterprise zones, including certain rural counties, that business may be entitled to credits and incentives.
OEDIT is a valuable resource for you and your buyer. The International Trade Office has experts assigned to various global regions who can assist your buyer with many of his questions. The Legal Panel is a good starting point to learn to serve your international clients.
Dick Clark is a partner at RJ&L, working from the Denver office. He and the firm have served as legal counsel to Colorado Association of REALTORS® since 1990. The firm provides legal advice to international companies and foreign investors in such areas as entity selection and business structures, international tax and finance, export controls, import challenges, intellectual property, distribution agreements, liability reduction, and asset protection. He can be reached at 303-628-9531 or by e-mail at rclark@rothgerber.com.