Roundtable Weekly
OB3 Act Ends “Phantom Income” Tax Penalty on Condominium Development
September 25, 2025

A new PwC analysis highlights the significance of tax accounting reforms in the One Big Beautiful Bill (OB3) Act, which end a long-standing burden on condominium developers—a change long advocated by The Real Estate Roundtable.

Why It Matters

  • The OB3 Act expands eligibility for the completed contract method (CCM) of accounting, allowing residential condominium projects to defer income recognition until projects are substantially complete. (PwC Study, Sept. 18)
  • This reform aligns tax liability with actual receipts and ends the problem of phantom income that often arises when condo units are pre-sold to buyers prior to completion. The change closely tracks standalone legislation, the Fair Accounting for Condominium Construction Act, long championed by RER. (RER Annual Report, July 2025)
  • Mixed-use projects with a substantial residential component can also qualify if 80% or more of the costs are tied to dwelling units. (PWC Study, Sept. 18)
  • Prior tax rules forced developers to use the percentage-of-completion method (PCM), requiring them to pay taxes on projected profits before projects were completed or units were sold.
  • PwC notes the expansion “opens the door” for general contractors and subcontractors to benefit, particularly in high-cost urban markets where new housing is most needed.

Roundtable Advocacy – Condominium Construction

  • Since 2015, RER has sought to promote housing construction by repealing the discriminatory tax accounting rule that unfairly creates phantom income for condo developers.
  • New condominium developments can take years to complete. Developers often market units and collect deposits to secure financing, but contractual restrictions typically limit access to those funds until closing.
  • Recent sponsors of the Fair Accounting for Condominium Construction Act have included Rep. Vern Buchanan (R-FL) in the House and Sen. Todd Young (R-IN) in the Senate.

RER will continue advocating for policies that encourage capital formation, housing construction, and rational taxation of real estate.