With the House Ways and Means Committee in the process of marking up reconciliation legislation, NMHC and NAA joined other organizations in signing three letters opposing tax increases that would impact the real estate industry and, ultimately, further exacerbate housing affordability.
Although Ways and Means Committee Democrats are not slated to consider most revenue offsets until September 14 and 15, these letters represent an effort to remind lawmakers about the devastating consequences increasing taxes would have on the real estate industry.
- Taxation of Main Street Businesses: NMHC and NAA joined 118 other trade groups in sending a letter opposing a variety of tax increases, including those targeting pass-through income, capital gains, and unrealized gains at death.
- Taxation of Unrealized Capital Gains at Death: NMHC and NAA joined the Family Business Estate Tax Coalition in sending a letter expressing our opposition to the taxation of unrealized capital gains at death.
- Like Kind Exchanges: NMHC and NAA joined 38 other organizations to request lawmakers avoid targeting like-kind exchanges.
In addition to like-kind exchanges, the multifamily industry also strongly opposes taxing carried interest at ordinary income rates as opposed to capital gains rates. The U.S. Chamber of Commerce on September 7 released a study estimating that such a change would result in the up to 19.55 percent downsizing of the real estate, venture capital and private equity industries. This would result in the loss of up to 4.9 million jobs.
Notably, the study specifically addresses the negative impact taxing carried interest would have on affordable housing: “Perhaps most importantly, since it is a general principle in economics that for a riskier project to be undertaken there must be a potentially higher return, the lower return (due to increased taxes) disincentivizes riskier real estate projects. Such riskier projects often include low-income housing or affordable housing. Also, longer-term projects generally imply more risk; here, the law change would encourage shorter-term, less-risky projects, which are less profitable.”
NMHC is working to educate policymakers on the critical role tax incentives, including like-kind exchanges and the taxation of carried interest at capital gains rates, play in multifamily real estate development. We are encouraging lawmakers to maintain these provisions and avoid unnecessarily constraining capital flows vital to the construction and maintenance of multifamily properties.
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