Policy Issues

Roundtable Comment Letter Urges Treasury to Simplify, Streamline New Pass-Through Deduction Regulations

September 30, 2018

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The Real Estate Roundtable on Monday submitted detailed recommendations to the Treasury Department on simplifying and streamlining  the new 20 percent tax deduction for pass-through businesses. 

Passed as part of last year's tax overhaul, the deduction can reduce the top tax rate on qualifying pass-through income, including rental income, to 29.6 percent.  Once it is fully implemented, section 199A will be a powerful incentive for capital investment and job growth.

The comment letter from Roundtable President and CEO Jeffrey DeBoer suggests four major simplifications that would provide greater certainty, lessen the need for wasteful restructuring, and reduce taxpayer-government controversies. 

The final regulations should clarify that rental income from real property held for the production of rents, within the meaning of section 62(a)(4), will be considered a trade or business for purposes of section 199A;

The final regulations should allow taxpayers to treat all qualifying real estate rental activities, whether held directly or through a pass-through entity, as if held in a single “trade or business” for purposes of section 199A; 

When assets with associated unadjusted basis immediately after acquisition (UBIA) are transferred in a non-recognition transaction (such as a like-kind exchange or the contribution or distribution of assets involving a partnership or S corporation), the general rule should be that the UBIA of an asset (and its duration) carries over; and

The final regulations should provide rules to help taxpayers ascertain when multiple activities (including multiple activities conducted in a single entity) constitute discrete trades or businesses.