Copyright: Rena Schild

As of early evening on Friday, December 1, the Senate was on the verge of passing tax reform legislation that would make dramatic changes to the nation’s tax code. Once passed, the bill will have to be reconciled with a House version approved November 16. As the House and Senate work out the differences in the bills NMHC/NAA will continue to meet with lawmakers on the critical elements of the code for the apartment industry. A comparison chart outlining the differences between the House and Senate tax bills and additional details can be found here.  

Prior to passage, the Senate is expected to approve an amendment designed to garner the votes of wavering Senators and enhance tax relief for pass-through entities. 

The most likely path forward for reconciling differences between the House and Senate bills is a conference committee. House members plan to identify House conferees by Monday, December 4. Alternatively, the House could decide to simply pass the Senate bill. 

While the House and Senate bills differ, both would largely leave many provisions of critical importance to the multifamily industry intact. For example, both would allow multifamily firms to continue to fully deduct business interest and engage in like-kind exchanges. 

Notably, the House bill also maintains 27.5-year depreciation for multifamily buildings whereas the Senate bill extends the recovery period to 30 years for firms wishing to maintain full deductibility of interest. Initially, the Senate sought a 40-year depreciation period for buildings, but NMHC/NAA were able to secure an amendment during committee markup offered by Finance Committee Chairman Orrin Hatch (R-UT) to reduce the period to 30 years. Notably, the Senate bill would require firms wishing to opt out of interest deductibility to depreciate existing buildings over an additional 2.5 years.

One of the biggest differences between the House and Senate bills centers around the pass-through rate. The House bill enables multifamily firms to see a portion (30 percent, but more if a business is particularly capital intensive) of business income taxed at 25 percent. 

Under the Senate proposal, individuals could take a 23 percent deduction on a portion of pass-through income that would generally be limited to a partner’s share of wages paid by the underlying business.


With regard to carried interest, both the House and Senate would require an asset to be held three years to receive capital gains tax treatment. Notably, the Senate defeated an attempt by Senator Tammy Baldwin (R-WI) to eliminate capital gains treatment of carried interest. NMHC/NAA worked to encourage the Senate to maintain the three-year holding period in the chamber’s bill and to oppose the Baldwin  amendment.

Both chambers would also preserve the Low-Income Housing Tax Credit (LIHTC). However, the House would eliminate private activity bonds, jeopardizing the efficacy of the 4 percent LIHTC. Neither bill, however, addresses the loss of equity the tax credit would raise as a result of cutting the corporate tax rate to 20 percent. 

NMHC/NAA have long supported tax reform that promotes economic growth and investment in rental housing without unfairly burdening apartment owners and renters relative to other asset classes. To this end, the apartment industry has continued to to advocate fora tax reform proposal that:

• Protects Pass-Through Entities from Higher Taxes or Compliance Burdens;

• Ensures Depreciation Rules Avoid Harming Multifamily Real Estate;

• Retains the Full Deductibility of Business Interest;

• Preserves the Ability to Conduct Like-Kind Exchanges;

• Maintains the Current Law Tax Treatment of Carried Interest;

• Preserves and Strengthen the Low-Income Housing Tax Credit; and

• Maintains the Current Law Estate Tax.