It’s amazing what does not get widely reported …Here’s a news positive blurb that just may be an answer (or at least a good jump start) to head off the potential Commercial Real Estate (CRE) collapse and the related demise of small to mid-sized regional banks with huge commercial loan porfolios.

In January 2010 a little noticed bill was introduced into Congress by Rep. Joseph Crowley (D-NY), called the Real Estate Revitalization Act of 2010 which would eliminate certain taxes that were part of the Foreign Investment Real Estate Property Tax of 1980, or FIRPTA — which requires foreign investors to pay as much as a 55% tax on capital gains from the sale of U.S. real estate or shares in real estate investment trusts and real estate operating companies.

It’s widely believed that repealing the tax may get rid of a major hurdle to foreign investment in the sector and could open the floodgates to new liquidity at a time when commercial real estate loan defaults pose a serious risk to the nation’s recovery. If it does pass, U.S. REIT’s and real estate operating companies could be big winners.

Investors have become particularly sensitive to the tax in the current environment, where property values, occupancies and rents have fallen, which increases risk and lowers potential returns. Industry analysts say there is a pent-up demand from foreign investors looking for opportunistic investments. But currently, foreign investors only make up about 10% of the acquisitions of U.S. commercial real estate.

Further CRE Weakness: Experts predict values will fall another 10% to 20% on average before the sector bottoms, with even steeper declines in weaker markets. As MarylandCommercialTitle.com has reported previously, approximately $1.4 trillion in U.S. real estate loans will come due between 2010 and 2014, with nearly half of those loans currently “underwater,” according to a Congressional Oversight Panel report released earlier this month.

One thing for lawmakers to consider: Scrapping the tax would also eliminate a source of government revenue at a time when politicians are scrounging for ways to pay down the deficit. Experts estimate the cost of repealing the tax at about $8.3 billion over 10 years. But proponents argue the benefits the bill would offer the country’s fragile real estate market and overall economy would more than offset the lost revenue.

The Overriding Issue: “A wave of commercial real estate loan failures could threaten America’s already-weakened financial system … and… trigger economic damage that could touch the lives of nearly every American,” according to the Congressional Oversight Panel report.

Tags: Real Estate Revitalization Act of 2010

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