Real Estate Industry Urges Congress to Preserve Carried Interest

As tax negotiations continue this week on Capitol Hill, a coalition of 17 national real estate organizations submitted a unified message to congressional leadership urging preservation of current law on carried interest. (Letter)

Why It Matters

  • The coalition letter, led by the National Multifamily Housing Council and joined by The Real Estate Roundtable (RER) and others, highlighted that taxing all carried interest as ordinary income would raise taxes on 2.2 million real estate partnerships and nearly 9.7 million partners, potentially stalling new housing, infrastructure, and redevelopment projects.
  • Since carried interest and its tax treatment first emerged as a controversial political issue in 2007, RER has consistently opposed legislative proposals to tax all carried interest at ordinary income rates. (Axios, March 24 | NYT, March 8)
  • Research cited in the letter demonstrates that carried interest legislation would lower wages, reduce property values, and undermine economic growth. (Letter)

What’s At Stake

  • “Taxing carried interest at ordinary income rates would discourage the risk taking that drives job creation and economic growth. It would reduce economic mobility by increasing the tax burden on cash-poor entrepreneurs who want to retain an ownership interest in their business. It would have profound unintended consequences for housing affordability and main streets all across our country,” said Jeffrey DeBoer, President and CEO of The Real Estate Roundtable. Roundtable Weekly, Feb. 21)
  • The coalition emphasized that changing the tax treatment would particularly impact small and mid-sized real estate entrepreneurs who contribute sweat equity rather than large capital contributions to their projects.
  • The letter notes that the tax code ”has never, and should never, limit the reward for risk-taking to taxpayers who have cash to invest.”
  • Retroactive application of new tax policies on longstanding partnership agreements could harm small businesses, stifle entrepreneurs and sweat equity, and threaten future improvements and infrastructure in neglected areas.
  • Under the headline “Carried Interest Fight Gets Real,” media outlet Politico wrote that the real estate industry was “laying down a marker as lawmakers begin working to pass a deficit-conscious extension of the 2017 tax cuts.” (Politico, March 27)
  • The signatories of the letter included: National Multifamily Housing Council; American Hotel and Lodging Association; American Resort Development Association; American Seniors Housing Association; CCIM Institute; Council for Affordable and Rural Housing; ICSC Institute of Real Estate Management; Latino Hotel Association; Manufactured Housing Institute; Mortgage Bankers Association; NAIOP, the Commercial Real Estate Development Association; National Apartment Association; National Association of Black Hotel Owners, Operators, and Developers; National Association of Home Builders; NATIONAL ASSOCIATION OF REALTORS®

RER urges lawmakers to retain current law and avoid policies that would disincentivize investment, threaten housing affordability, and penalize job-creating entrepreneurs.

Coalition Urges Treasury to Withdraw FIRPTA Look-Through Rule

On Thursday, The Real Estate Roundtable (RER) wrote to  U.S. Treasury Secretary Scott Bessent encouraging the Treasury Department to withdraw regulations issued last year under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). (Letter)

Why It Matters

  • FIRPTA imposes capital gains tax on foreign investors that invest in U.S. real estate.  The discriminatory tax does not apply to any other asset class. 
  • For several years, RER and other stakeholders have worked with policymakers to reform FIRPTA and remove tax barriers that deter capital formation and investment in U.S. real estate and infrastructure.  In 2015, those efforts led Congress to enact a new exemption from FIRPTA for foreign pension funds and other helpful FIRPTA reforms.
  • In April 2024, however, Treasury issued final regulations that expanded the reach of FIRPTA to common investment structures by redefining what constitutes a domestically controlled entity.
  • The 2024 regulations invented a new look-through rule to determine whether an entity is a domestically controlled REIT exempt from tax under FIRPTA.  The practical effect of the regulations is to subject more foreign investors to U.S. taxation and impede capital formation for job-creating U.S. real estate and infrastructure projects (Roundtable Weekly, July 2024)

Roundtable Advocacy

FIRPTA
  • In a cover letter accompanying a more detailed legal and economic analysis, RER President and CEO Jeffrey DeBoer wrote this week that in issuing the new look-through rule, “Treasury reached well beyond its regulatory authority and invented a rule that contradicts the statute and is damaging the U.S. real estate market.”  (Real Estate Group Seeks Withdrawal of Look-Through Rule, Tax Notes March 20)
  • [T]he Look-Through Rule reversed decades of well-settled tax law, severely misconstrued the statute, and contradicted Congressional intent,” wrote DeBoer
  • The letter described the economic benefits of inbound real estate investment.  “When invested in U.S. real estate, foreign capital puts contractors, tradesmen, and others to work constructing, upgrading, and improving properties. Pooled with U.S. partners and their expertise, foreign investment helps create productive assets, such as shopping centers and apartment buildings, which revitalize communities and increase the supply of affordable housing.”
  • This week’s letter follows repeated efforts by RER and others to stop the regulations from moving forward during the Biden Administration.  House Ways and Means Committee Members Darin LaHood (R-IL) and Carol Miller (R-WV) urged former Treasury Secretary Janet Yellen to drop the regulations when they were in proposed form.  (Roundtable Weekly, Aug. 2023
  • The legal case against the FIRPTA regulations is even stronger today, in the wake of the Supreme Court’s Loper Bright decision in which the Court significantly narrowed the deference to which regulatory agencies are entitled when rulemaking.  
  • RER’s submission included a detailed legal and economic analysis prepared by RER’s Tax Policy Advisory Committee FIRPTA Working Group and principally drafted by TPAC Members David Polster and Nickolas Gianou of Skadden, Arps, Slate, Meagher & Flom LLP.  (Analysis)

In addition to seeking formal withdrawal of the April 2024 regulations, the letter urges the Treasury Secretary to issue sub-regulatory guidance immediately that would allow taxpayers to rely on the forthcoming withdrawal before it is finalized.  The Trump Administration has prioritized removing regulations that unnecessarily impede economic activity.

Real Estate Industry Fights to Preserve Business Property Tax Deductions Amid GOP Tax Negotiations

As House and Senate Republicans work to develop the details of their tax legislation, the real estate industry is mounting a unified defense against possible limitations on the deductibility of state and local business property taxes. (BisNow, March 14)

Why It Matters

  • Last week, The Real Estate Roundtable (RER) and sixteen other national real estate organizations wrote to members of the House Ways and Means and Senate Finance Committees urging them to oppose any proposal that would cap or eliminate the deductibility of state and local business property taxes.  (Roundtable Weekly, March 7)
  • The House Ways and Means Committee is exploring reductions to business-related state and local tax deductions—including property taxes—as part of its effort to offset the costs of a broader GOP tax package. (PoliticoPro, March 11)
  • At a White House meeting on Thursday between President Trump and Senate Finance Committee Republicans, Sen. Ron Johnson (R-WI) said Senators raised corporate SALT as a potential offset.  Several Senators reportedly “pitched Trump on repealing the corporate state and local tax deduction.”  (CQ, March 13; Politico, March 13)
  • A cap on the deductibility of property taxes paid by U.S. businesses could have devastating consequences for commercial real estate owners, developers, and investors nationwide.
  • State and local property taxes represent 40% of the operating costs of U.S. commercial real estate, a greater expense than utilities, maintenance, and insurance costs combined.
  • The potential tax change could reverse the benefits of the 2017 Tax Cuts and Jobs Act (TCJA) and Section 199A, potentially raising effective tax rates on real estate to 1970s-era levels near 50%.
  • With elevated interest rates, rising insurance premiums, and increased operational expenses pressuring property owners across asset classes, industry advocates argue that eliminating the deduction would only deepen existing challenges, resulting in “job losses, pressure on rents, stress on the banking system, and reduced housing construction.” (BisNow, March 14)

Tax Talks

  • Both chambers had a busy week meeting with committee members and Trump administration officials to discuss the overall framework for their respective tax agendas.
  • House Ways and Means Committee Republicans met with Treasury Secretary Scott Bessent on Monday to review tax options, while Senate Finance Committee members separately convened to discuss their approach, revealing significant differences in timeline and strategy. (PoliticoPro, March 10)
  • Ways and Means Committee Chairman Jason Smith (R-MO) has already said that the instructions laid out in the House-approved budget resolution won’t allow for a permanent extension of Trump’s tax cuts, but would allow for an eight- to nine-year extension. (Politico, March 10)
  • GOP lawmakers from high-tax states, including New York, New Jersey, and California, continue to demand that any final tax legislation include lifting or fully repealing the $10,000 SALT cap for individual taxpayers. President Trump has expressed support for repealing the SALT limitation.
  • House and Senate Republicans have yet to reach an agreement on a budget plan that would set the framework for Trump’s legislative agenda.
  • During the White House meeting with Senate Finance Republicans, Trump raised his Gold Visa card concept as a way to pay for the package, along with tariffs and other options.  (PoliticoPro, March 13)

Looking Ahead

  • House Republicans aim to pass legislation extending Trump-era tax cuts by Memorial Day, while Senate Republicans suggest an August timeframe might be more realistic, with Sen. John Cornyn (R-Texas) noting “there’s no consensus” in the Senate. (Politico, March 10)

RER will remain actively engaged with lawmakers, reinforcing the message that preserving full deductibility of business property taxes is essential to protecting jobs, promoting investment, housing affordability, and ensuring continued economic stability nationwide.

Real Estate Industry Urges Congress to Preserve Deductibility of Business Property Taxes

As discussions continue between the House, Senate, and Administration on how to move forward with a tax and fiscal package, The Real Estate Roundtable (RER) and sixteen other national real estate organizations wrote to members of the House Ways and Means and Senate Finance Committees urging them to oppose any proposal that would cap or eliminate the deductibility of state and local business property taxes.  (Letter)

A cap on property tax deductibility could have devastating consequences for commercial real estate owners, developers, and investors nationwide.

Why It Matters

  • Republican lawmakers intend to enact a major tax and fiscal package this year, and they are under pressure to identify additional revenue offsets to finance a growing list of priorities.  Ways and Means Committee Republican Members have scheduled all-day, closed-door meetings next week to discuss the details of their tax plan.
  • Some lawmakers have raised “Business SALT” and potential restrictions on the deductibility of state and local property and income taxes as a possible revenue offset for the tax bill (Roundtable Weekly, Feb. 28)
  • Eliminating the business deduction for property taxes would be the equivalent of raising business owners’ property tax bills by roughly 40 percent, causing employers to owe federal tax on money that they do not have.
  • “Business taxes are fundamentally different from state and local individual income taxes.  State and local business taxes are an unavoidable expense, an inescapable cost of doing business,” said Real Estate Roundtable President and CEO Jeffrey DeBoer.  (Roundtable Weekly, Feb. 21)
  • DeBoer’s comments were echoed this week in analyses from the Tax Foundation and former Congressional Budget Office Director Douglas Holtz-Eakin.  (Tax Foundation, March 3; American Action Forum, March 6).
  • “Firms deduct the costs of generating income—wages, rents, capital costs, etc.—and CSALT is the recognition of those costs. Fully deducting those taxes is … necessary to correctly tax firms. Capping CSALT is professional malpractice,” said Holtz-Eakin.

Effects on CRE and the Broader Economy

  • The ripple effects of this proposal would extend far beyond property owners to impact the broader economy and housing affordability nationwide.
  • U.S. commercial real estate is valued at $18-$22 trillion, supporting 15 million jobs and generating $2.3 trillion in GDP annually.
  • This tax change could reverse the benefits of the 2017 Tax Cuts and Jobs Act (TCJA) and Section 199A, potentially raising effective tax rates to 1970s-era levels near 50%.
  • “A cap on the deductibility of property taxes paid by businesses, “would cause self-inflicted injury to the U.S. economy, including unnecessary job losses, higher rents for families and individuals, and other inflationary pressures,” DeBoer said this week.  “It would lower commercial property values and create new stresses in the banking system. It is a recipe for a recession.”
  • Additionally, the increased tax burdens could discourage new investment, deter housing development, and exacerbate the national housing crisis.

Call to Action

  • RER urges members to amplify this message to their representatives in Congress.
  • Given that U.S. businesses paid $1.1 trillion in state and local business-related taxes in 2023 (including nearly $400 billion in property taxes), the stakes are extremely high.

Next Steps

  • House and Senate Republicans remain divided on several key issues as they work to prevent a March 14 government shutdown and agree on the parameters of a larger tax and fiscal reconciliation bill. (USA Today, March 7)

The impasse centers on whether to pursue one big bill or a two-bill strategy, the size of spending reductions, how to deal with the debt ceiling, and the budget baseline that will determine the need for offsetting tax increases.  The impasse could push resolution of the tax issues into the second half of the year.

Real Estate Challenges: Business SALT, Carried Interest Emerge as Focal Points of Tax and Budget Discussions

As congressional Republicans weigh their budget options and consider competing plans from both the House and Senate, their search for revenue offsets has included proposals to restrict the deduction for state and local taxes (SALT) on businesses and raise the tax rate on carried interest. 

Business SALT

  • Prior to the markup of its budget resolution, the House Budget Committee floated a menu of potential revenue offsets for reconciliation legislation, including a proposal to “eliminate the business SALT deduction.” (New York Times, Jan. 28)

  • Depending on how broadly the business SALT limitation is designed, it could include repealing the deductibility of state and local property taxes paid by commercial real estate owners.  Hill discussions on business SALT have intensified in recent weeks.  (Bloomberg, Feb. 18)
     
  • “Eliminating the business deduction for property taxes would be the equivalent of raising business owners’ property tax bills by roughly 40 percent.  Employers would owe federal tax on money that they do not have.  It would lead to insolvencies and foreclosures. It would cause self-inflicted injury to the U.S. economy, including unnecessary job losses, higher rents for families and individuals, and other inflationary pressures.  It is a recipe for a recession,” said Jeffrey DeBoer, President and CEO of The Real Estate Roundtable.

  • The idea of limiting business SALT has support from several outside organizations and, according to Politico, was initially floated by members of the House Freedom Caucus.  (Politico, Jan. 15)

  • “Business taxes are fundamentally different from state and local individual income taxes.  State and local business taxes are an unavoidable expense, an inescapable cost of doing business,” noted DeBoer. “Property taxes alone are, on average, 40% of operating costs for real estate businesses.  In many cases, capping the deductibility of property taxes would require businesses to pay income tax when their actual income and cash flow is negative.”

  • The Roundtable is working, alongside its real estate trade association partners, to raise awareness among policymakers of the risk and harm that a cap on business SALT poses for the industry and the broader economy.  

Carried Interest

  • President Trump’s recent call on Congress to close the “carried interest tax deduction loophole” has put a national spotlight back on the issue of carried interest and its proper tax treatment.  (Financial Times, Feb. 6)  

  • Trump’s expression of support for raising taxes on carried interest led Senators Tammy Baldwin (D-WI), Elizabeth Warren (D-MA), Bernie Sanders (I-VT) and others to reintroduce legislation, the Carried Interest Fairness Act. The bill would recharacterize all carried interest as ordinary income. (Politico, Feb. 18)

  • Sen. Baldwin filed a nonbinding amendment on carried interest during the Senate budget resolution debate this week but did not offer it for a formal vote.  

  • Carried interest emerged as a political issue in 2007, but remains largely misunderstood to this day. In real estate, carried interest is not compensation for services. General partners receive fees, taxed at ordinary rates, for routine services like leasing and property management. Carried interest is granted for the value the general partner adds, such as business acumen, experience, and relationships. It is also recognition for the risks the general partner takes.   

  • In response to the new legislation, the Americans for Tax Reform—alongside a broad coalition of other taxpayer advocacy groups—penned a comment letter urging lawmakers to consider the negative ramifications of this policy.

  • In the letter, the organizations argue that the proposal would discourage investment and reduce growth, urging Congress to oppose the bill. “The current tax treatment of carried interest is an intentional, pro-growth feature of the tax code for more than 100 years that incentivizes risk-taking and entrepreneurship, benefiting investors, public pension funds and retirees.” (Americans for Tax Reform, Feb. 19)

  • The Tax Cuts and Jobs Act of 2017 extended the holding period required for carried interest income to qualify for long-term capital gains treatment from one year to three years.

  • The false narrative surrounding the carried interest issue is that it targets only a handful of hedge fund billionaires and Wall Street executives. The carried interest legislation is far broader and would apply to real estate partnerships of all sizes.

  • “Taxing carried interest at ordinary income rates would discourage the risk taking that drives job creation and economic growth. It would reduce economic mobility by increasing the tax burden on cash-poor entrepreneurs who want to retain an ownership interest in their business. It would have profound unintended consequences for housing affordability and main streets all across our country,” said DeBoer.

Looking Ahead

As tax negotiations develop, RER will continue to engage with congressional leaders on both sides of the aisle to inform policymakers about the real-world consequences of proposed changes to the deductibility of business SALT and tax treatment of carried interest.  

While the budget debate will move forward, it will likely be several weeks, if not months, before the tax-writing committees mark-up and vote on the actual details of their tax and revenue legislation.

Oral Arguments Heard in Sirius Solutions v. Commissioner Case

This week, the Fifth Circuit heard oral arguments in Sirius Solutions v. Commissioner, a pivotal case that could redefine the self-employment (SECA) tax obligations of many partners in real estate and other limited partnerships.

At issue is the longstanding statutory exception from SECA taxes for limited partners and recent efforts by the IRS to restrict the scope of the limited partner exception to only passive investors. 

Why It Matters

  • The Fifth Circuit’s ruling in Sirius will set a precedent for future SECA tax cases, There are more than 441,000 limited partnerships in the U.S., with over 10 million partners. Nearly half of these limited partnerships are real estate partnerships.
  • If the IRS position prevails, it could result in widespread tax increases on limited partners who engage in any level of activity, directly or indirectly, with respect to the partnership and effectively raise the tax burden on real estate businesses.

Roundtable Advocacy

  • In August 2024, The Roundtable submitted an amicus brief to the Fifth Circuit and argued that the IRS’s interpretation, upheld by the Tax Court, is flawed, pointing to decades of state law that allows limited partners to provide services and still retain their limited partner status. (Roundtable Weekly, September 6)
  • The brief emphasized that pre-1977 state court decisions and the IRS’s own 1994 proposed regulations contradict the government’s position.  The passive investor test is found nowhere in the statute and rests on a fundamental misunderstanding of state laws that Roundtable members and others have relied on for decades.  

Oral Arguments

  • The latest oral arguments on Feb. 6 suggested some judicial skepticism about the IRS’s position. (TaxNotes, Feb. 7).
  • The three-judge panel in the Fifth Circuit Court of Appeals raised the lack of statutory basis for a passive investor test under Section 1402(a)(13) and questioned whether taxpayers had adequate notice of the IRS’s evolving position. 
  • The panel also challenged the workability of the IRS’s multi-factor test used to determine whether a partner is active or passive.  Judge Andrew Oldham noted that IRS forms and guidance have never mentioned a passive investor requirement and called into question whether taxpayers were ever clearly told how the government interprets the law. (Oral Arguments)
  • The Roundtable brief was cited during the oral argument when Judge Oldham asked whether a taxpayer could be both a general partner and limited partner in 1977.

A decision is expected in the next few months. The Roundtable remains committed to protecting entrepreneurs’ ability to flexibly organize in partnerships and other pass-through entities that promote capital formation, risk-taking, and economic growth, and it will remain engaged as the SECA dispute moves forward.   

Tax Policy This Week in Washington: Carried Interest and Budget Talks

As budget negotiations continued this week in the House and Senate, President Donald Trump met with Republican lawmakers on Thursday to discuss his tax priorities.

Tax Talks

  • White House Press Secretary Karoline Leavitt told reporters that during a Thursday meeting with Republican lawmakers, President Trump outlined his tax priorities, including closing the “carried interest tax deduction loophole,” along with other provisions he wants included in a sweeping tax bill this year. (Bloomberg, Feb. 6 | Axios, Feb.7)
  • President Trump also reiterated ideas he promoted on the campaign trail, including ending taxes on tips, overtime and Social Security payouts, as well as adjusting deductions for state and local taxes.
  • Appearing on Fox Business this week, Treasury Secretary Scott Bessent rejected the idea of a short-term extension of President Trump’s tax cuts, emphasizing they should be made permanent. (Fox Business, Feb. 5)

The Roundtable’s Position

  • Since carried interest and its tax treatment first emerged as a controversial political issue in 2007, The Roundtable has consistently opposed legislative proposals to tax all carried interest at ordinary income rates.
  • “The proposals would penalize entrepreneurs, slow housing production, and reduce economic mobility,” said Roundtable President and CEO Jeffrey DeBoer.  “The tax code has never, and should never, limit the reward for risk-taking only to deep-pocketed investors who have cash to deploy.” 
  • “Real estate partnerships of all sizes across the country, small and large, use carried interest.  It is not compensation for services, and it is not comparable to wages. Carried interest is granted for the value a general partner adds beyond routine services, and it is a recognition of the risks a general partner takes, such as funding predevelopment costs, guaranteeing construction budgets and financing, and exposure to potential litigation,” said DeBoer. 
  • Reversing well-established tax law and ending carried interest would raise little revenue. It would, however, reduce construction activity, especially higher-risk and much-needed projects like affordable housing, commercial developments in long-neglected neighborhoods, and the cleanup of contaminated land. 
  • “Today, construction costs are higher than ever and financing remains challenging.  Now is not the time to raise taxes on U.S. real estate,” said DeBoer. 

Senate Proposal

  • Senate Budget Chair Lindsey Graham (R-SC) announced today that his committee will convene Wednesday and Thursday to debate and vote on his budget resolution, setting the stage for a future vote on a bill focused solely on border security, defense, and energy. (Politico, Feb. 7)
  • Their decision comes ahead of a meeting with President Trump at Mar-a-Lago today, where they also plan to discuss budget reconciliation. (Politico, Feb. 5)
  • “This budget resolution jumpstarts a process that will give President Trump’s team the money they need to secure the border and deport criminals, and make America strong and more energy independent,” Graham said in a statement.
  • With a 53-seat majority, Senate Republicans have a bit more flexibility than the House, but still need to unite their party, as some members demand significant spending cuts.
  • Senate GOP leaders plan to revisit the extension of the TCJA 2017 tax cuts later this year through a second reconciliation package.

House Proposal

  • Several House Republicans met with President Trump on Thursday to resolve intraparty spending disputes. House Majority Leader Steve Scalise (R-LA) said the meeting was designed so House Republicans could “get in a place” where they could advance their stalled budget blueprint “next week.” (Politico, Feb. 7)
  • Speaker Mike Johnson had aimed to release a framework today but now says Republicans will be working all weekend to finalize it.

GOP leaders have warned members that full details won’t be available until Monday, and a topline spending agreement remains elusive.

House Freedom Caucus Members Propose Ending Deductibility of State and Local Business Taxes

This week, House Freedom Caucus Members proposed ending the ability of businesses to deduct their state and local business and property taxes on their federal income tax returns.  (Politico, Jan. 15)

Why It Matters

  • The proposal was raised as a potential offset for relief from the SALT cap on individuals. 
  • The proposal was also included in a “menu” of potential policy options prepared by the House Budget Committee for tax and budget reconciliation legislation.  (PoliticoPro, Jan. 17)
  • The Budget Committee has a key role in setting the overall size of any reconciliation bill, but the actual details of tax changes fall under the jurisdiction of the House Ways and Means Committee.

Industry & Congressional Response

  • “Property taxes and other state-level business taxes are a basic cost of doing business.  Denying the deductibility of these business taxes is nonsensical and would be devastating to American businesses, and especially U.S. real estate.  The purpose of the income tax is to measure and tax income.  Under the proposal, we would no longer have an income tax, we would have a tax on gross revenue.  It would penalize existing property owners, artificially distort business decisions, and raise flashing red lights for anyone even considering a long-term capital investment in the United States,” said Jeffrey DeBoer, President and CEO of The Real Estate Roundtable.
  • Senate Democratic Leader Chuck Schumer (D-NY) addressed the proposal on the Senate floor earlier today.  (Senate Democrats, Jan. 17)
  • “There is no scenario under God’s green Earth that New York taxpayers will ever accept another unfair SALT cap like the House Freedom Caucus proposes….I will do everything I can, first to remove the entire SALT cap tax, and second to never let a new proposal that for the first time imposes the SALT cap on businesses, small and large, to be put into effect. I’m going to do everything I can to fight this dastardly proposal,” said the Senator.
  • The House Freedom Caucus is one of many factions in the House Republican Conference that will have significant leverage over any tax changes in 2025 due to Republicans’ extraordinary slim majority in the House.

House Ways and Means Committee Chairman Jason Smith (R-MO) and House SALT Caucus Co-Chair Rep. Tom Suozzi (D-NY) are scheduled to address Roundtable members at the State of the Industry Meeting next week.

Tax Policy 2025: Competing Strategies and CRE Priorities

The Real Estate Roundtable (RER) is focused on advancing a tax code that encourages investment, supports economic growth, and ensures fair treatment for commercial real estate. With significant provisions of the 2017 Tax Cuts and Jobs Act (TCJA) set to expire, tax policy is already dominating early Congressional discussions.

Congressional Dynamics

  • The tax debate is set to kick off on Tuesday, Jan. 14, with the House Committee on Ways and Means’ first hearing on extending key provisions of the TCJA led by Chairman Jason Smith (R-MO).
  • Congress faces the dual challenge of addressing expiring tax provisions while managing fiscal pressures. While bipartisan cooperation is possible on certain issues like affordable housing, divisions over business tax rates, SALT deductions, and the debt ceiling could stall progress.
  • House Speaker Mike Johnson and top House leaders doubled down on their plan to bundle border, tax, and energy policies into a single bill. Meanwhile, Senate leaders are continuing with their two-bill approach, aiming for faster legislative wins for the new administration. (The Hill, Jan. 10)
  • The two chambers are effectively competing to see which strategy can deliver results more quickly.
  • Trump indicated he can live with either approach. “I like one, big, beautiful bill,” Trump said at a press conference on Tuesday. On Wednesday after meeting with Senate Republicans, he told reporters “Whether it’s one bill or two bills, it’s going to get done one way or the other. The end result is the same.” (Axios, Jan. 8 | The Hill, Jan. 8)
  • Speaker Johnson and Republicans are determined to pass their budget blueprint by the end of February. Johnson told reporters Thursday that he’s still working with the Senate to properly “sequence” the massive effort. (PoliticoPro, Jan. 9)
  • On Thursday, Senate Majority Leader John Thune refused to commit to the House’s preferred approach and called it an ongoing conversation. “Obviously we want to give the House as much space as possible,” he told reporters. “They believe they can move and execute on getting a bill across the finish line fairly quickly. But we are prepared to move here, as well.” (PoliticoPro, Jan. 9)
  • “We’re going to be having conversations with each chairman to make sure that the targets they’re given are achievable within their committee, and then ultimately get pulled back into budget reconciliation to give us the ability to do all the things you want to do,” House Majority Leader Steve Scalise told Punchbowl News. (Punchbowl News, Jan. 10)

Senate Bipartisan Outreach

  • Eleven moderate Senate Democrats, led by Sens. Catherine Cortez Masto (D-NV) and Mark Warner (D-VA) wrote to Republican leaders, offering to work with them on extending expiring tax cuts and raising the debt ceiling, proposing bipartisan reforms to balance tax policy and fiscal responsibility. (PoliticoPro, Jan. 10)
  • The letter stated the group was willing to cut spending, protect family-oriented tax policies, maintain competitive business tax rates, — and indicated that they could provide enough votes to allow Republicans to overcome a filibuster in the Senate without having to go through the reconciliation process.
  • While the GOP is unlikely to accept the offer amid internal divisions, the proposal highlights potential avenues for compromise on tax reform and debates ahead.

Roundtable Tax Priorities for 2025

RER encourages lawmakers to ensure that any major tax legislation in 2025 retain or include:

  • The reduced tax rate on capital gains. 
  • Tax fairness for partnerships and pass-through entities.
  • Safeguard like-kind exchanges.
  • Extend, improve, and enact smart tax policies to address the severe housing shortage.
  • Tax rules that encourage, rather than deter, foreign investment in U.S. real estate.

As negotiations and debates continue, RER remains committed to working with lawmakers to ensure the U.S. maintains a competitive tax code that encourages capital formation, rewards entrepreneurial risk-taking, and supports policy objectives, including accessible and affordable housing and safe and healthy communities.

CRE Industry Advocates for Tax Relief to Support Recovery and Stability

As the U.S. commercial real estate sector enters a critical recovery period, industry leaders are urging policymakers to retain key tax policies from the Tax Cuts and Jobs Act of 2017 (TCJA), many of which expire at the end of 2025. (Reuters, Oct. 28)

Tax Landscape

  • The outcome of the November presidential election will play a critical role in shaping year-end tax bill discussions.
  • If either candidate secures the presidency and achieves unified control of Congress, they may urge their congressional allies to delay any tax negotiations until 2025.
  • The Roundtable is preparing for potential tax legislation in the lame-duck session, though action may be delayed until next year’s debate when major provisions in the TCJA expire. (Roundtable Weekly, Oct. 25)
  • In early October, RER submitted comments to Capitol Hill on the pending expiration of the TCJA and ways in which tax policy can support long-term investment, economic stability, and the creation of affordable housing. (Roundtable Weekly, Oct. 4)

Industry Advocacy

  • Speaking to Reuters, Real Estate Roundtable President and CEO Jeffrey DeBoer noted the difficult economic backdrop for real estate as the tax debate has gathered steam, “Over the last 18 months … operating costs have … risen dramatically at the same time the availability of capital and credit have diminished…. All of that creates stress and challenges in the CRE marketplace.” (Reuters, Oct. 28)
  • With the tax reform debate heating up in Washington, maintaining sound tax rules that both reflect the economics of real estate transactions and encourage capital formation is a priority for the CRE industry.
  • “Depreciation deductions and interest expense deductions. They’re not tax breaks. They’re the cost of doing business,” said Ryan McCormick (SVP & Counsel, RER) while discussing housing policy in Politico’s Morning Tax.  (Politico, Oct. 28)
  • RER Member Hessam Nadji (President & CEO, Marcus & Millichap) appeared on CNBC International Squawk Box this week and spoke on the upcoming elections, international investor re-engagement with U.S. CRE, zoning and private-public partnerships, and the impact of government policies, particularly regarding housing.

RER Tax Priorities

Roundtable tax priorities heading into 2025 include:

  • Capital formation and capital gains: Preserving key elements of the tax code (e.g., capital gains preference, like-kind exchanges, step-up in basis at death) that encourage productive real estate investment, risk-taking, and growth.
  • Strong partnership, passthrough, and entity choice rules: Extending tax provisions like section 199A that allow pass-through businesses to compete on a level playing field with public corporations.  
  • Affordable housing and community development incentives: Advocating for tax incentives tied to affordable housing, energy efficiency, Opportunity Zones, and commercial-to-residential conversions.
  • Removing barriers to job-creating foreign investment:  The tax system should avoid discriminatory policies that discourage job-creating foreign investment in US real estate and infrastructure.  

Tax Bill Negotiators to Watch

  • Sen. Mike Crapo (R-ID): If Republicans take control of the Senate, Crapo is poised to lead the Senate Finance Committee in 2025. Given his influence over Senate Republicans, many of whom followed his opposition to this year’s bipartisan tax bill, Crapo’s stance on a year-end tax deal will be pivotal.
  • Sen. Ron Wyden (D-OR): Wyden has shown a willingness to strike deals, as evidenced by his work with Rep. Smith on this year’s agreement. He might be eager to pass as much of that legislation as possible during the lame-duck session.
  • Rep. Jason Smith (R-MO): As chair of the House Ways and Means Committee, Smith’s perspective will be highly influential in the lame-duck session, with Republicans still holding the House majority.

The Roundtable is committed to working with lawmakers to ensure the U.S. maintains a competitive tax code that encourages capital formation, rewards entrepreneurial risk-taking, and supports critical policy objectives, including accessible and affordable housing and safe and healthy communities.