Wednesday, April 23, 2014
Douglas Shackelford (University of North Carolina, Kenan-Flagler Business School) presents The Impact of Foreign Withholding Taxes on REIT Investors and Managers at Pennsylvania today as part of its Center for Tax Law & Policy Seminar Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:
Exploiting a 2004 reduction in a unique capital gains withholding tax for foreign investors in U.S. REITs, this paper explores both the sensitivity of real estate investors to changes in their own taxes and the reaction of real estate managers to changes in their investors’ taxes. We find that both foreign investors and REIT managers responded to the tax change. This is consistent with taxes both restricting the flow of foreign capital into U.S. REITs and affecting the management of their real estate properties. To our knowledge, this is the first paper documenting that U.S. managers change their U.S. operations in response to the tax positions of foreign investors. This work should spur further study of the interplay between real estate and income taxes, the role of taxes on foreign portfolio investment, and the role of taxes on real managerial choices. It also should aid policymakers who are considering further relaxing the discriminatory tax treatment for foreign investors in U.S. real estate.