Foreign Investment in Real Property Tax Act of 1979

(Reported to Senate from the Committee on Finance with amendment, S. Rept. 96-499)

=Title I: Taxation of Foreign Investment in United States Real Property= - Foreign Investment in Real Property Tax Act of 1979 - Amends the Internal Revenue Code to impose upon nonresident alien individuals or foreign corporations a tax equal to one-third of 28 percent of the excess of gains over losses realized from the sale of United States real property interests. Exempts taxpayers whose net gain for a taxable year is less than $5,000.

Defines "U.S. real property interest" as (1) an interest in real property located in the United States; or (2) any interest in a U.S. real property holding organization (a business entity in which a controlling interest is held by ten or fewer individuals and of which U.S. real property interests constitute more than 50 percent of the fair market value of the organization). Includes within the term "interest in real property" fee ownership and co-ownership of land or improvements thereon, leaseholds of land or improvements, and options to acquire such leaseholds of land or improvements.

Requires individuals who acquire a U.S. real property interest from a nonresident alien or a foreign corporation to withhold an amount equal to the smaller of: (1) one-third of 28 percent of the amount realized on the transaction; (2) the amount of the seller's maximum tax liability; or (3) the fair market value of the proceeds of the sale which are within the withholding agent's control. States that the purchaser is not required to withhold any amounts unless he knows that the seller is a foreign person, or has received a notice to that effect. Requires sellers who are foreign persons, and their agents, to notify purchasers of their status as foreigners.

Provides an exemption from the withholding requirements of this Act if: (1) the seller of a property interest provides the buyer with a statement that any tax liability with respect to the sale has been satisfied or does not exist; (2) the transaction involves the acquisition of stock in a corporation which is effected through the medium of an organized stock exchange; and (3) the transaction involves the sale of property used as a single family principal residence and the amount realized upon disposition does not exceed $150,000.

Authorizes the Secretary of the Treasury to prescribe reduced amounts of withholding under specified conditions.

Allows nonresident aliens and foreign corporations a refundable income tax credit for tax withheld with respect to dispositions of U.S. real property interests and taxfree covenant bonds.

Requires an organization whose U.S. real property interests constitute more than 40 percent of the fair market value of its assets and which is controlled by not more than ten individuals, one or more of whom are foreign persons, to file an informational return with the Secretary concerning the holdings and transactions. Prescribes civil penalties for organizations which fail to file such returns.

Overrides, for taxable years after December 31, 1984, tax treaties which would exempt foreign investors from the requirements established by this Act.

=Title II: Other Provisions= - Amends the Internal Revenue Code to provide a tax exclusion from personal income earned abroad by an individual performing qualified charitable services for a tax-exempt employer. Limits such exclusion to an amount not to exceed a figure computed on a daily basis at an annual rate of $20,000. Sets a formula for the maximum amount of exclusion for an individual who performs such charitable services and also performs other services while residing in a camp located in a hardship area.

Permits the use of the retirement- replacement-betterment method for determining the allowable amount of the depreciation deduction for railroad track assets.

Permits the furnishing of services by a private foundation to a disqualified person, without excise tax penalties for self-dealing, if: (1) such services are furnished in the capacity of trustee for an irrevocable trust established prior to October 9, 1969, designating the foundation as trustee; (2) the foundation may not, under the laws of the State of its incorporation, act as trustee of a trust, other than one in which it possesses a beneficial interest; (3) the foundation receives a reasonable compensation for its services as trustee; and (4) the disqualified person attained that status solely because of the operation of a trust instrument which was irrevocable prior to October 9, 1969.

Exempts from any form of Federal, State, or local taxation any settlement lands received by the Rhode Island State Corporation pursuant to the Rhode Island Indian Claims Settlement Act, while such lands are held by the Corporation. Provides for the deferral of the tax on any capital gains from the sale or disposition of private settlement lands pursuant to such Act.