USA - FLORIDA Law and Practice Contributed by: Jeffrey R Margolis, Marc S Shuster, James L Berger and Evan Rosenberg, Berger Singerman LLP
to implement a capital lease or “synthetic” lease, which is generally treated as a sale transaction (and not an operating lease) for financial and tax accounting purposes, including Florida sales tax purposes. 8.4 Income Tax Withholding for Foreign Investors Taxation of Non-US Person’s Sale of US Real Property FIRPTA (the Foreign Investment in Real Property Tax Act of 1980) is a taxing statute that subjects a non-US person (both individuals and non-US entities) to tax with respect to the sale or dispo - sition of real property situated in the USA (more broadly, the sale of US real property interests – USRPIs). In establishing the basis for taxation, FIRPTA classifies the seller for this purpose as being engaged in a trade or business within the USA during the tax year of the sale, and classi - fies the gain or loss realised on the sale as being effectively connected with the trade or busi - ness. Specific withholding requirements apply to the sale of a USRPI by a non-US person, as described below. Equity and profit participation interests in legal entities that hold USRPIs constitute USRPIs as well, if held by the non-US person not solely in the capacity as a creditor. Such interests may include, for example, corporate stock, an LLC interest, a partnership interest, certain ben - eficial interests in a trust, rights to share in the appreciation of such equity interests, and rights to share in the appreciation in the value of or income, profits or proceeds from the underlying real property. Planning Considerations Special rules apply where a non-US corporation generates earnings and profits from the direct conduct of a business in the USA. The USA
generally taxes such income when repatriated from the USA or withdrawn from the US trade or business through a branch profits tax (BPT), which generally applies at a fixed statutory rate of 30% of the non-US corporation’s “dividend equivalent amount”, unless a treaty provides a lower rate or eliminates the BPT. 8.5 Tax Benefits The US income tax treatment of real estate own - ership, including real property used in connec - tion with an active trade or business, generally remains favourable in terms of cost recovery and other income tax attributes. Under the Tax Cuts and Jobs Act of 2017, qualifying property acquired and placed in service after 27 Septem - ber 2017, is eligible for 100% bonus deprecia - tion in the year placed in service. The 100% rate drops by 20% per year beginning in 2023, until it is eliminated in 2027. Under the Tax Cuts and Jobs Act of 2017, 100% expensing now is available (for the first time) for both new and used property. Eligible assets for bonus depreciation are those with a depreciable life of 20 years or less including without limita - tion “qualified improvement property” (QIP) – ie, certain improvements to the interior of a non- residential building that occur after the building is placed in service. Drafting Error As a result of a drafting error contained in the Tax Cuts and Jobs Act of 2017, Congress did not assign a 15-year class life to QIP (from the 39-year class life applicable under prior law), which drafting error precluded QIP from qualify - ing for 100% expensing. However, Section 2307 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) corrected that drafting error by reducing the recovery period of QIP to 15 years, thereby making QIP immediately eligible
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