Policy Issues

Property Conversions and Housing Tax Incentives Issue Position Background

The United States is facing a severe shortage of affordable housing. At the same time, certain other commercial real estate assets like office buildings are under significant stress due to pandemic-related issues, including employers’ greater reliance on remote work arrangements. The Roundtable is encouraging lawmakers to help revitalize cities, boost local tax bases, and address housing challenges by enacting a tax incentive for converting older, under-utilized buildings to housing. The Roundtable also supports a meaningful expansion of the low-income housing tax credit.  

Capital Gains Issue Position Background

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.

Taxing Unrealized Gains (“Billionaire Tax”) Issue Position Background

In September 2019, Senate Finance Committee Ranking Member (now Chairman) Ron Wyden (D-OR) proposed a mark-to-market regime for capital assets in which built-in gain is taxed on an annual basis, regardless of whether the asset is sold. The regime would apply to taxpayers with $1 million in income or $10 million in assets for three consecutive years. Two years later, Chairman Wyden released a modified and more detailed version of the proposal focused on “billionaires.”

Pass-Through Business Income Issue Position Background

Real estate generally is owned and operated through “pass-through” entities that allow income to pass through to individual owners rather than taxing the income at the entity level.

Carried Interest Issue Position Background

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.

Foreign Investment In Real Property Tax Act (FIRPTA) Issue Position Background

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. 

Step-Up In Basis Issue Position Background

When an individual dies, the U.S. levies a comprehensive tax on his or her wealth and assets, including unrealized gains, through the estate tax where wealth that exceeds an exemption amount ($6 million in 2022) generally is taxed at a rate of 40%. Separately, for income tax purposes, the basis of assets in the hands of an heir is “stepped up” to fair market value at the time of decedent's death. 

Interest Deductibility Issue Position Background

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.

Like-kind Exchanges Issue Position Background

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.

Opportunity Zones Issue Position Background

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.

Affordable Housing Issue Position Background

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 Issue Position Background