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Provision in Tax Bill Would Raise Rates on Foreign Companies and Investments

June 18, 2025

Real estate market participants and other industries with a global investor base are concerned about Section 899, a provision that would impose retaliatory income taxes on foreign investments and companies in the U.S. 

• CREFC joined other real estate industry groups in raising concerns about the provision in the House-passed One Big Beautiful Bill (OBBB) to Senate leadership. In a letter to lawmakers, the groups suggested changes to exempt non-controlling foreign debt and equity investments from the retaliatory taxes. Click here for the letter. 
• A CREFC fact sheet on the provision is available here. 
• CREFC will hold a webinar briefing on the issue next week. A separate invite will be sent soon. 

Background: The House Version of OBBB contains a provision—Section 899—that would allow Treasury to impose annual income tax increases of 5% on any foreign individual, government, corporation, trust, foundation, and other similar entities in response to unfair tax treatment by a foreign country against the U.S.

• The provision responds to unfair taxes by increasing the rate of tax generally applicable to certain taxpayers connected to the foreign jurisdiction. The legislation describes a number of per se unfair taxes and also gives the Treasury Secretary authority to designate additional unfair taxes.
• The increased rates in the House version are capped at 20% and the Senate is at 15%, which is in addition to any existing tax the entity pays. The effective tax rate could increase to 45% or 50% for foreign investors or companies. 
• The Senate version would delay implementation of the tax until at least 2027.
• The Senate version includes an explicit 899 exemption for “portfolio interest,” which excludes many debt securities.
• The Senate version of the bill focuses the major retaliatory increases on countries with Undertaxed Profit Rules (UTPR). Countries with only discriminatory or other unfair taxes, like the digital service tax, would be subject to a super Base Erosion and Anti-Abuse Tax (BEAT).

Impact: The provision could chill investment in U.S. real estate debt and equity through a combination of increased costs and uncertainty as to whether the tax will apply to certain countries. Below are the major concerns CREFC members have identified:

• U.S. Real Estate: Potential chilling effect on cross-border capital flows into CRE, which includes $213 billion in the last five years and more than 10% in transaction volumes. Some estimates project foreign investors would need a 15% change in price to account for tax changes at the maximum rate.
• Foreign banks and other lenders: Additional tax on non-U.S. lenders providing financing to U.S. borrowers. 
• Foreign investors in U.S. funds: Additional tax on non-U.S. investors in funds, including debt funds, providing financing and capital to U.S. borrowers. 
• Securitized products: Investors in CMBS may be exempt from 899 under the portfolio interest exemption, but further analysis is being done on the scope of the exemption. There could be structures that exclude or include securitization products.
• U.S. Borrowers: CRE loans frequently include provisions in which the borrower contractually agrees to bear the risk of changes due to international tax law. For existing loans, any additional tax imposed under Section 899 would be the responsibility of the borrower, typically in the form of a gross-up payment to the foreign lender.

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The CRE Finance Council Names Leland Bunch as Chair of Executive Committee

CREFC Welcomes New Members to its Executive Committee and Board of Governors at Annual June Conference

• Chair-Elect: Lissette Rivera-Pauley (Regions Financial Corp.)
• Immediate Past Chair: Bob Foley (TPG Real Estate and TPG RE Finance Trust, Inc.)
• Vice Chair: Elaine McKay (Ares Management LLC) 
• Secretary: Kim Diamond (NYU)
• Treasurer: Adam Behlman (Starwood Property Trust) 
• Long Range Planning & Investment Committee Chair: Daniel Olsen (KeyBank Real Estate Capital) 
• Membership Chair: Toby Cobb (3650 Capital)
• Policy Committee Chair: Rick Jones (Jackstay Ventures)
• Program Committee Chair: Mary Jane Potthoff (Morningstar DBRS)

The association also welcomes and congratulates new members to its Board of Governors, including:

• Nitin Bhasin (KBRA)
• Josh Cromer (Rialto Capital Advisors)
• Marshall Glick (AllianceBernstein)
• David Harrison (Midland Loan Services) 
• Adam Hayden (NY Life Real Estate Investors)
• Spencer Kagan (Barclays)
• Sean Ryan (JLL)
• AJ Sfarra (Wells Fargo)
• Lindsey Wright (KKR)

“We want to welcome the newest members of the Executive Committee and our Board of Governors. We look forward to collaborating with you on key issues that have the greatest significance and directly impact our industry and its members,” added Pendergast.

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The CRE Finance Council Announces New Chairs for Industry Forums 

New Chairs and Chair-Elects Introduced at Annual June Conference

The CRE Finance Council (CREFC) announced new Chairs for the 2025-2026 industry Forums. The new Forum leadership was elected at CREFC’s Annual June Conference in New York City on Tuesday.

CREFC’s Forums represent specific market constituencies that drive the U.S. commercial real estate finance industry. Forums include:

• Alternative Lenders and High-Yield Investors
• CMBS B-Piece Investors 
• CMBS Investment-Grade Bondholders 
• CMBS Issuers 
• CMBS Servicers 
  • Master Servicers
  • Special Servicers
• GSE/Multifamily Lenders 
• Portfolio Lenders
  • Bank Lenders 
  • Insurance Company Lenders 

Each Forum interacts and addresses issues critical to their business sector, while working to achieve solutions that serve a common purpose. CREFC’s Forums manage disparate and converging market views, advocate a consensus of positions to policymakers and lawmakers, educate members, develop market best practices and standards, and work to improve the entire commercial real estate finance market.
  
The incoming slate of Forum leaders includes:

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