Tax Provisions Under Consideration

The House Ways & Means Committee Chairman, our own Richie Neal, released the outline of tax provisions under consideration this week.  This is part of the infrastructure legislation for spending up to $3.5 trillion dollars over ten years, on human infrastructure items, including health, education, climate change, and economic security.  There was some good news, and some items that might be concerning for you and your clients) NAR has a simple draft summary of the proposal – the good the bad and the ugly to help you understand what is at stake.

NAR’s lobbyists have been educating Members of Congress all year long. We were greatly relieved to see that many of the items NAR has fought against were not included. For example, the changes to 1031 like-kind exchanges were left out of the draft . And so was the proposal to repeal the step-up in basis by taxing unrealized capital gains at death. These are huge preliminary victories.

There were some proposals that were much less harmful than originally proposed. For instance, the capital gains tax increase proposal was modified to be increased only to 25% maximum rate, instead of 39.6%. Also, the change in tax treatment for carried interest largely exempts real estate investment. And the limitation on the deduction of qualified business income was included, but at thresholds far higher than had been proposed by President Biden. Thus, far fewer NAR members would be impacted.

NAR analysts say, “While it is still too early to say that the real estate sector has dodged a bullet on these tax increases, the early signs are very good compared to what might have been included in the bill.  The Ways & Means Committee could make changes to the draft bill, and there could be further changes on the House floor. Then, assuming the bill is approved by the full House, it will have to be conferenced with the bill the Senate develops, which could include different tax increase provisions, some of which could harm real estate investment. 

Due to the on-going negotiations as the bill progresses through the House and Senate, we cannot and will not relax our efforts. Indeed, a limited Call for Action is continuing this week where NAR’s Federal Political Coordinators (FPCs) are reaching out to key Members of the House Ways & Means and Senate Finance Committees to ensure we protect tax incentives for real estate investment.”

That said, the early signs indicate very good news in that many of our largest concerns have been heard.