On April 7, NMHC/NAA submitted the apartment industry’s recommendations on tax reform to the Senate Finance Committee. The Committee is examining proposals for reform, establishing five working groups to analyze the tax code. The working groups will deliver recommendations that include stakeholder input to Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) in May. Tax reform is a key issue for the multifamily industry because real estate depends on the free-flow of capital and after-tax rates of return.
We proposed that Congress consider, but also look well beyond, lowering statutory tax rates. Specifically, we emphasized they focus on the ability of a reformed tax code to efficiently allocate capital and drive job-creating business investment.
We believe that any tax reform proposal must:
- Protect Pass-Through Entities from Higher Taxes or Compliance Burdens;
- Ensure Depreciation Rules Avoid Harming Multifamily Real Estates;
- Retain the Full Deductibility of Business Interest;
- Preserve the Ability to Conduct Like-Kind Exchanges;
- Maintain the Current Law Tax Treatment of Carried Interest;
- Preserve and Strengthen the Low-Income Housing Tax Credit;
- Maintain the Current Law Estate Tax;
- Reform the Foreign Investment in Real Property Tax Act to Promote Investment in the Domestic Apartment Industry; and
- Improve Incentives for Energy Efficiency in Commercial Buildings and Large Multifamily Properties.
However, prospects for tax reform in 2015 are uncertain because of divisions between President Obama and Republican lawmakers. The President and GOP remain divided over whether reform should be comprehensive or focus only on America’s largest corporations.
An agreement would also have to be reached over how much additional revenue, if any, an overhauled system should raise. And members of both parties would have to be prepared to limit popular tax incentives to lower rates. But the work being done now by the Finance Committee is likely to influence any future proposal.