Posted on October 6, 2017
Lawmakers in the House and Senate say they’re determined to pass a sweeping tax reform bill this year. But first, for procedural reasons, both houses need to pass a Fiscal Year 2018 budget. FY 2018 began on October 1.
Republicans on the Senate Budget Committee released a draft budget that it says would balance within nine years. But committee members haven’t explained where they would find $5 trillion in spending cuts. That draft budget will be voted on by the full Budget Committee this week, then go to the floor of the Senate later this month. The House drafted a budget plan over the summer and plans to hold a vote on Thursday.
After the two chambers come to an agreement on budgetary spending levels, lawmakers would be able to turn to tax reform, which is a key priority for NAIOP. Throughout the year, NAIOP has met with lawmakers and Hill staffers to deliver the message that all federal spending and tax reform bills should protect the interests of the CRE industry.
Last week, the so-called “Big Six,” Republican leaders from the House, Senate and Trump administration, released details of their tax reform proposal. The proposal would simplify individual returns, reducing the current seven tax brackets to three and doubling the standard deduction. On the corporate side, the framework proposes a 20 percent top rate for corporations and creates a new tax regime for pass-through businesses (those structured as partnerships and S corporations) with a 25 percent top rate.
The framework also allows businesses to deduct the full cost of their investments (except structures) in the first year, rather than over several years. As a trade-off, the deduction for interest expenses would be eliminated.
However, lawmakers may decide to offset the tax rate cuts by eliminating provisions of the tax code used by commercial real estate practitioners. Everything could be on the table, from 1031 like-kind exchanges to the tax treatment of carried interest.
NAIOP representatives will meet with policymakers throughout the process to make the case for genuine reform that simplifies the tax code, broadens the base and protects commercial real estate.