Withholding may be reduced from the standard 15% to an amount that will cover the tax liability, upon application in advance of sale to the Internal Revenue Service.

To ensure tax collection from foreign taxpayers, FIRPTA requires U.S. real property interest buyers to withhold 15% of the sales price.

The seller may apply to the Internal Revenue Service (IRS) to reduce this 15% to the amount of tax estimated to be due.

Provisions of the law preventing recognition of gain generally do not apply unless the seller receives a U.S. real property interest in a qualifying nonrecognition exchange.

[citation needed] Before 1981, foreign people (nonresident, non citizen individuals, and non-U.S. corporations) often were exempt from U.S. tax on sale of real estate in the nation.

Congress passed FIRPTA to require all foreign people to pay tax on dispositions of any interests in U.S. real estate.

[6] Under FIRPTA, however, foreign persons are subject to tax on gains from disposition of U.S. real property interests (USRPIs).

[16] Regulations provide limited exceptions treating certain partnership interests as USRPIs, and thus nonrecognition.

As of February 17, 2016, buyers of U.S. real property interests are required to withhold 15% of the full sales price on any purchase of a USRPI; an increase from the previous 10% rate.

Such certification is permitted only if the seller applies to the IRS for reduced withholding by filing Form 8288-B no later than the closing date of the sale.