Policy Issues

The Roundtable has developed a tax incentive proposal to encourage energy efficient building improvements – known as “E-QUIP.”

The ability to defer capital gain when a taxpayer exchanges one property for another is an essential feature of the current tax system that spurs capital investment, especially during times of market corrections and liquidity shortages.

FIRPTA applies a discriminatory capital gains tax on foreign investors in U.S. real estate that does not apply to any other asset class.  In so doing, the FIRPTA regime discourages capital formation and investment that could be used to create jobs and improve U.S. real estate and infrastructure. 

The Roundtable has spearheaded a coalition of 14 national real estate organizations to urge members of the House of Representatives not to move forward with the Carried Interest Fairness Act. The bill would limit capital gain treatment only to taxpayers who have cash to invest, making it more expensive to build or improve real estate and infrastructure, including workforce housing, assisted living communities, and industrial properties, to name just a few.

An Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the U.S. Treasury.

The ability to borrow without a tax penalty is critical to the health and stability of real estate markets. The Roundtable’s advocacy helped put the potential harm of changes to the deductibility of business interest front-and-center for lawmakers during the consideration of the tax overhaul.

The low-income housing tax credit (LIHTC) is an effective, market-based tool to help address the shortage of affordable housing in the United States.  The 40 percent reduction in the corporate tax rate indirectly reduced the value of the LIHTC and demand for the credit. 

The Roundtable's policy agenda encourages government programs designed to increase the nation's stock of affordable, low-income and market-rate housing, as opposed to rent control and other measures that constrict residential supplies. 

Tax reform left many major policy decisions in the hands of the Treasury Department.  Real estate owners and investors need guidance from Treasury regarding how the IRS will interpret the new provisions and how they will operate in practice. 

In June, in South Dakota v. Wayfair, the Supreme Court overturned its prior case law and upheld a South Dakota law that imposes sales tax collection requirements even if the seller lacks a physical presence in the State.  The decisions marks a monumental step forward in the effort to create a level economic playing field between internet retailers and Main Street stores.   

In the last Congress, the Fair Accounting for Condominium Construction Act (H.R. 3659) would have corrected the tax accounting treatment of new condominium development.  The Real Estate Roundtable will work with Members of Congress to advance this issue in 2019.

Traditionally, the United States has taxed long-term capital gains at a lower rate than ordinary income (wages, rent, and other compensation). The only exception was a brief three-year period after the Tax Reform Act of 1986 when Congress lowered the top ordinary tax rate from 50% to 28% and created temporary tax parity between ordinary and capital income. Long-term capital gain is currently taxed at a top rate of 20%. However, the rate will increase to 23.8% if the income is subject to a 3.8% tax on net investment income. The net tax investment income applies to real estate gains earned by passive investors and not the income earned from the active conduct of professionals in real estate.

Congress should continue to encourage investment and job creation with a meaningful capital gains incentive.

Maintaining a reduced rate on capital gains decreases the cost of capital, drives long-term investment, encourages productive entrepreneurial activity, draws investment from around the world, and increases U.S. workforce productivity and competitiveness.

We should be taking steps to encourage and reward risk-taking and investment in communities where it is needed, not punishing it.