Tag: bonus depreciation

New Tax Law to Spur Housing Construction and Property Improvements as Congressional Leaders Explore Options for Next Tax Bill

Posted on by abigail_grenadier

President Donald Trump signed the One Big Beautiful Bill Act (OBBB Act) into law on July 4, the culmination of months of work by congressional Republicans to reshape federal tax and spending policies. The legislation included provisions long advocated by The Real Estate Roundtable (RER), such as a significant expansion of affordable housing tax incentives, accelerated depreciation for property improvements, and reform of tax accounting rules for condominium construction.

RER Summary of Real Estate Related Provisions

Affordable Housing Boost

  • The OBBB Act enacts landmark changes to address the nation’s housing shortage through enhancements to long-standing development incentives. (Roundtable Weekly, July 3)
  • The OBBB Act expands the Low-Income Housing Tax Credit (LIHTC) by permanently increasing state LIHTC allocations by 12% and reducing the private activity bond financing requirement for 4% LIHTC projects from 50% to 25%. The latter provision will allow more affordable housing projects to receive tax credits without a direct allocation from the state.
  • The bill’s overhaul of tax provisions is projected to support the development of up to 1.2 million affordable rental units over the next decade. (PoliticoPro, July 9)
  • These changes to the LIHTC represent “the single largest increase in affordable housing development resources in at least 25 years,” said Peter Lawrence, chief public policy officer at Novogradac. (PoliticoPro, July 9)

Other OBBB Tax Changes Will Stimulate Housing Construction, Property Upgrades, and Real Estate Investment

  • Bonus Depreciation: The new tax law permanently restores immediate 100% expensing of qualifying capital expenditures, including appliances, fixtures, leasehold improvements, and interior improvements to nonresidential property. The provision will encourage capital investment and spur real estate improvements by reducing the after-tax cost of modernizing and upgrading existing properties. (RER Summary of Real Estate Related Provisions)
  • Condominium Construction: OBBB ends a discriminatory tax accounting rule that unfairly created phantom income for condo developers with respect to the pre-sale of units. The prior rule requiring condo developers to use the percentage of completion method of accounting raised hurdles for construction financing and discouraged new housing construction. OBBB will allow developers to use the completed contract method, aligning tax liability with actual receipts.
  • Opportunity Zones (OZs): OBBB permanently extends the Opportunity Zones (OZ) tax incentives, establishes a new designation of OZ census tracts every 10 years, and going forward, creates a 5-year rolling deferral period for capital gains invested in opportunity funds. Since their enactment in 2017, OZs have attracted over $120B in capital for low-income communities, with most investment going towards new housing and other productive real estate development. (Joint Committee on Taxation, 2024; Novogradac, Feb. 2025; Economic Innovation Group, March 2025)
  • On the latest episode of the Walker Webcast’s Most Insightful Hour in CRE, RER member Willy Walker (Chairman and CEO, Walker & Dunlop) and economist Dr. Peter Linneman (Principal, Linneman Associates) discussed the OBBB Act, tariffs, impacts on construction costs, affordable housing, single and multifamily supply, CRE markets, and much more. (Watch Webcast) (ConnectCRE, July 9)

State-Level Initiatives Strengthen Federal Housing Efforts

  • Rising construction costs and ongoing affordability challenges have prompted states to complement federal initiatives like LIHTC.
  • States such as Tennessee, Georgia, and Michigan have introduced innovative financing programs—including state-level tax credits and tax increment financing (TIF), leveraging future tax revenues generated by increased property values to sustainably fund and accelerate housing projects. (GlobeSt. July 11)
  • This week, RER member David O’Reilly (CEO, Howard Hughes Holdings) appeared on CNBC to discuss interest rates, housing market, and consumer demand.
  • Florida will eliminate its longstanding tax on commercial rents effective Oct. 1, 2025, becoming the first and only state to repeal the tax. The move is expected to reduce costs for tenants across office, industrial, and retail sectors, enabling businesses to reinvest capital into operations, local communities, and real estate. (GlobeSt. July 10)

Looking Ahead

  • Senate Finance Committee Chair Mike Crapo (R-ID) said this week that Republicans are eyeing a second party-line reconciliation package this fall to pursue policy priorities left out of the final OBBB Act.
  • “I’ve always been in favor of a three-bill strategy and there’s a ton of things that we need to do,” Sen. Crapo said (Politico, July 9).
  • GOP leaders have discussed reworking provisions flagged by the Senate parliamentarian during OBBB Act negotiations, potentially reviving items such as additional tax reforms and deeper spending cuts.
  • House Speaker Mike Johnson (R-LA) and House Budget Chair Jodey Arrington (R-TX) are also pushing for fall action, though Sen. Crapo cautioned that timelines remain fluid. (Politico, July 8 | Fox News, July 6)
  • “We’ve been planning a second reconciliation bill for the fall attached to the next fiscal year, and then potentially one in the spring,” Speaker Johnson said on Fox News Sunday. “That’s my plan. Three reconciliation bills before this Congress is over. I think we can do that.” (Fox News, July 6)

“Revenge Tax” Provision

  • The final OBBB Act excluded a provision opposed by The Roundtable that would have raised taxes on foreign investment that originated in countries deemed to have unfair tax policies. Proposed Section 899 could reappear, however, if international tax talks to exempt US companies from a global tax deal falter. (Roundtable Weekly,  June 27)

The G7 agreement to agreement is still only a “statement of intent,” with implementation details unresolved, raising the risk that Section 899 could return in a future reconciliation package, according to Tax Notes. “Republicans made clear they’d bring it back if G7 partners slow-walk the deal,” said Danielle Rolfes of KPMG. (Tax Notes, July 10)

Congress Delivers Historic Tax and Budget Package to Trump’s Desk for July 4th Signing

Posted on by abigail_grenadier

After months of high-stakes negotiations, Congress this week passed the sweeping One Big Beautiful Bill Act, a comprehensive reconciliation package that overhauls tax policy, restructures federal spending, and advances numerous Real Estate Roundtable (RER) priorities as it heads to President Trump’s desk for signature. (Roll Call, July 3)

State of Play

  • The House passed the final version of the One Big Beautiful Bill Act this afternoon, following a narrow vote of 218–214, capping off weeks of negotiations and delivering a legislative victory to Republican leaders ahead of the July 4 deadline. In the end, two Republicans—Reps. Thomas Massie (R-KY) and Brian Fitzpatrick (R-PA)—joined all Democrats in opposing the bill. (The Hill, July 3)
  • “With one big, beautiful bill, we are gonna make this country stronger, safer, and more prosperous than ever before, and every American is going to benefit from that,” said House Speaker Mike Johnson (R-LA). “Today we are laying a key cornerstone of America’s new golden age.” (Politico, July 3)
  • The Senate passed the sweeping budget bill in a 51-50 vote on Tuesday, after almost 24 hours of debate, amendments, and a “vote-a-rama” that ended with Vice President JD Vance casting the tiebreaking vote in favor of passage. Three GOP senators—Rand Paul (R-KY), Thom Tillis (R-NC), and Susan Collins (R-ME) voted no. (Axios, July 2)
  • In an interview after the bill’s Senate passage, Senate Majority Leader John Thune (R-SD) acknowledged that the decision to make the measure’s business tax cuts permanent impacted its savings and overall strategy. “We really believed that permanence was the key to economic growth because it creates certainty,” he said. “All the models that we saw showed that you got more growth with permanence.” (PoliticoPro, July 1)

Roundtable Advocacy

  • The final legislation advances a broad array of policies that support capital formation, real estate investment, and housing development, while repealing harmful proposals like Section 899 and preserving longstanding tax rules vital to CRE.
  • “This legislation represents a meaningful step toward strengthening communities, expanding housing opportunities, and supporting long-term economic growth,” said Jeffrey DeBoer, President and CEO of RER. “By advancing policies that encourage investment and preserve small business tax parity, Congress is helping to revitalize neighborhoods, create jobs, and ensure all Americans benefit from a stronger built environment.
  • DeBoer added, “We are, of course, disappointed that the overall bill is predicted to increase the deficit and national long-term debt. However, we hope that the pro-growth aspects of the bill will narrow both by significantly growing the economy and providing revenues greater than those now projected.  Likewise, we are concerned with predictions by some regarding the impact of spending cuts on research and needed health care for Americans.”
  • RER’s advocacy efforts were particularly successful in eliminating several provisions that would have severely impacted CRE, including Section 899, known as the “revenge tax,” and harmful limitations on state and local tax deductions for pass-through businesses.
  • Speaking to Bisnow regarding the impact of the tax provisions on real estate, Ryan McCormick, RER’s SVP and Counsel, said, “From the bill’s investment in housing and low-income communities to its fair treatment of entrepreneurial and pass-through businesses, the legislation strikes the right balance … it should spur job-creating capital investments in commercial properties across the nation.” (BisNow, July 1)

Tax Policy

  • The final legislation includes several tax provisions that will provide significant benefits to commercial real estate and support long-term economic growth:
  • Permanent Business Tax Cuts: The bill makes permanent several business tax deductions from the 2017 Tax Cuts and Jobs Act (TCJA), including the Section 199A deduction for pass-through businesses and interest deductibility rules under Section 163(j).
  • Section 899: Late last week, lawmakers removed the Section 899 provision known as the “revenge tax” from the bill after the Treasury Department secured an international tax agreement with G7 countries. RER strongly advocated for changes to the measure, warning that the tax would have deterred foreign investment in U.S. commercial real estate and weakened capital formation.  (Roundtable Weekly, June 27) (BisNow, July 1) (Commercial Property Executive, July 1)
  • Opportunity Zones: OZs are now a permanent feature of the tax code, though deferral periods for eligible gains are shortened through the end of 2026—a technical issue that RER will continue to address in discussions with Congress and Treasury.
  • Low-Income Housing Tax Credit (LIHTC): The bill preserves and enhances the LIHTC program, supporting the construction of affordable housing nationwide.
  • Bonus depreciation & expensing: Full expensing and 100% bonus depreciation for qualifying property are restored and made permanent, providing significant cash flow benefits for property owners undertaking capital improvements.
  • SALT workarounds preserved: The final bill drops proposed changes to state and local tax deductibility on pass-through business income, preserving current law that allows deductibility through state pass-through entity tax regimes.
  • Condominium construction tax accounting: The legislation includes provisions the RER has advocated for since 2015, allowing condo developers to use the completed contract method of accounting, aligning tax liability with actual receipts.
  • Excess business losses: The revised Senate bill avoids a controversial proposal from earlier drafts that would have permanently siloed active pass-through business losses, instead opting to extend current law under Section 461(l) without restricting taxpayers from using those losses against wages and investment income. This approach preserves flexibility for entrepreneurs, start-ups, and two-earner households and avoids undermining the principle of measuring true net income.

Energy Tax Credits

Sustainable Renewable Energy Concept With Wind Turbines, Solar Panels And City Buildings Background.
  • For months, clean energy tax incentives enacted under the Inflation Reduction Act (IRA) have been a point of contention in both the House and Senate, with several Republican lawmakers urging leadership to take a more targeted approach to scaling back the IRA’s provisions—while maintaining incentives that support both traditional and renewable energy sectors. (RW, April 25) (CBS News, July 1)
  • Ultimately, the final legislation significantly scales back the IRA’s clean energy tax incentives by accelerating the phase-out of wind and solar credits, while dropping a controversial excise tax on projects using foreign components and preserving eligibility for already planned or approved developments that begin construction before mid-2026. (PoliticoPro, July 1) (Bloomberg, July 1)
  • The Section 48E Investment Tax Credit (ITC) for wind and solar projects remains in the tax code, but projects that begin construction 12 months after the bill’s enactment must be placed in service by the end of 2027.
  • The Section 179D deduction for energy-efficient commercial building construction and retrofits is now limited to projects that begin construction by June 30, 2026.
  • Similarly, the 45L tax credit for energy-efficient new residential construction expires for homes “acquired” after June 30, 2026.
  • Importantly, ENERGY STAR’s current budget for FY2025 was not affected by any of the funding rescissions in the final bill.
  • At this week’s BOMA International Conference, RER’s SVP and Counsel Duane Desiderio joined John Boling (VP, Advocacy & Building Codes, BOMA International) for a panel discussion on ENERGY STAR Portfolio Manager, highlighting the program’s legal foundation, bipartisan economic appeal, and importance to real estate stakeholders. (Commercial Property Executive, July 2)
  • RER will continue engaging with lawmakers through the annual appropriations process to ensure that FY2026 federal funding bills (for spending starting October 1) support ENERGY STAR. (Commercial Property Executive, July 2)

What’s Next

  • With the One Big Beautiful Bill Act heading to the president’s desk, attention now turns to the appropriations process and additional reconciliation opportunities.
  • Speaker Mike Johnson has expressed interest in pursuing additional budget reconciliation efforts, a process that Congress can undertake at the end of the fiscal year.
  • In an interview on Fox News Tuesday, Johnson said, “This is just a step in a sequence of events. We’re intending to do more reconciliation work. The plan is to do one in the fall for FY26 budget year and we can also squeeze in a third one for FY27 before this Congress is up.” (Politico, July 2) (Punchbowl News, July 2)

RER will continue to provide in-depth analysis in the coming days and weeks on the reconciliation bill’s implications for commercial real estate, including technical implementation, market impacts, and policy recommendations.

Bipartisan Tax Bill Stalls in Senate

Posted on by Trey Jackson

Yesterday, the Senate failed to pass a bipartisan $79 billion tax package, the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). The House-passed legislation seeks to extend various expiring tax provisions from the 2017 and pandemic-related tax bills. (WSJ, Aug. 1 | The Hill, Aug. 1)

Key Points

  • Bipartisan Effort: Senate Finance Committee Chair Ron Wyden (D-OR) and House Ways and Means Committee Chair Jason Smith (R-MO) crafted the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). The bill passed the House on Jan. 31 by an overwhelming 357-70 vote.
  • Senate Opposition: Despite bipartisan support, the bill faced significant opposition in the Senate, where critics argued it failed to adequately address long-term fiscal concerns and prioritized short-term fixes.
  • Roundtable Support: The bill included Roundtable-supported measures on business interest deductibility, bonus depreciation, and the low-income housing tax credit (LIHTC).
  • Other provisions in the agreement: Reforms to the child tax credit, the expensing of R&D costs, disaster tax relief, a double-taxation tax agreement with Taiwan, and a large pay-for that creates significant new penalties for abuse of the employee retention tax credit (ERTC) rules and accelerates the expiration of the ERTC. (RW, Jan. 19)

Roundtable Advocacy

  • In February, The Roundtable and a large coalition of housing and other real estate groups sent letters to Congress in support of the tax bill. (RW, Feb. 16)
  • The Roundtable and the Housing Affordability Coalition’s letter emphasized the importance of advancing provisions in the bill that strengthen the low-income housing tax credit (LIHTC)—along with various real estate investment measures that would benefit families, workers, and the national economy.
  • The coalition noted how the bill would increase the housing supply as a positive response to the nation’s housing affordability crisis. It would also suspend certain tax increases on business investment that took effect in 2022 and 2023. 

Congress will return to Washington on September 9, with several critical legislative priorities on the agenda, including decisions on key housing policies and potential new regulations impacting the commercial real estate industry.

Roundtable and Housing Affordability Coalition Urge Senate to Pass Tax Package

Posted on by Trey Jackson
Housing Affordability Coalition logos

This week, The Real Estate Roundtable and 21 other industry organizations urged the Senate to pass a tax package that was approved by the House in an overwhelming bipartisan vote (357-70) on Jan. 31. (Coalition letter, Feb. 15)

Tax Provisions in the Senate

  • The Housing Affordability Coalition’s letter to all Senators emphasized the importance of advancing provisions in The Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) that strengthen the low-income housing tax credit (LIHTC)—along with various real estate investment measures that would benefit families, workers, and the national economy.
  • The coalition noted how the bill would increase the supply of housing as a positive response to the nation’s housing affordability crisis. It would also suspend certain tax increases on business investment that took effect in 2022 and 2023. 
  • The Feb. 15 letter focused on details of the bill’s provisions that positively impact the LIHTC, deductibility of business interest, bonus depreciation, and small business expensing.
  • The Roundtable also joined the National Multifamily Housing Council (NMHC) and a large coalition of housing and other real estate groups in a Jan. 26 letter to Congress in support of the tax package. That letter also focused on the bill’s important improvements to the LIHTC, which will significantly increase the construction and rehabilitation of affordable housing over the next three years.

Congressional Timing

U.S. Capitol building
  • Senate Republicans considering the House tax package have called for an amendment process that would be time consuming. (The Hill, Feb. 2)
  • With Congress in recess until the last week of February, there will be limited legislative vehicles available the bill could ride on, just days before a set of government funding deadlines hit on March 1 and 8. The best chances the package could have for inclusion in other legislation include a potential funding bill to prevent an early March government shutdown or a bill to reauthorize the Federal Aviation Administration on March 8.
  • If the tax package is pushed beyond March, it may not be considered until a lame duck session after what is expected to be a contentious election season.

SALT Reform Pinched

  • On Feb. 14, a procedural rule to advance the SALT Marriage Penalty Elimination Act (H.R. 7160) to a floor vote in the House fell short of a majority vote needed to pass.
  • The effort by House lawmakers to double the $10,000 cap on state-and-local tax deductions (SALT) for married couples earning up to $500,000 failed by a vote of 195-225. (RollCall and CQ, Feb. 14)

The tax package (H.R. 7024) passed by the House last month did not address the SALT cap, which led to this week’s consideration of a separate reform measure. The current SALT cap is scheduled to expire at the end of 2025, along with many other measures passed as part of the Tax Cuts and Jobs Act (TCJA) of 2017.

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