• The reconciliation bill approved by the House Ways and Means Committee excluded several real estate-related tax proposals put forward by the Biden administration that could cause unnecessary harm to job creation, real estate values, and local communities that rely on property tax revenue. These proposals included restrictions on like-kind exchanges, repealing the step-up in basis of assets at death, and tax parity between ordinary income and capital gains. (Roundtable Weekly, Sept. 17)
  
  
• At the same time, through the combination of several, independent tax changes aimed at upper-income taxpayers, the current reconciliation bill in the House would raise the top marginal income tax rate on many pass-through business owners from 29.6% today to 46.4% (a 57% increase). 

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• The Roundtable believes this level of increase on pass-through businesses was unintended by Members of Congress and could undercut the bill’s own objectives of stimulating job growth, improving housing availability, and promoting investment in economically struggling communities, among other priorities.
  
  
• See The Roundtable's detailed summary on "Pass-Through Businesses and the Reconciliation Bill." 
  
  

• “Small and closely held businesses are the principal drivers of job growth and entrepreneurial activity in our economy.  The increase in the tax burden on pass-through businesses is disproportionately large relative to the tax changes for large, multinational corporations. The bill would create a historically high differential in the tax rates between pass-throughs and C corps and could put pass-through businesses at a competitive disadvantage in the economy. We do not believe this was the intent of the bill drafters,” said Real Estate Roundtable President and CEO Jeffrey DeBoer.  

• The dramatic increase in the pass-through tax rate results in part from capping the 20% deduction on pass-through business income (section 199A).  Other changes include increasing the top tax rate on ordinary income from 37 to 39.6 percent, expanding the scope of the 3.8% tax on net investment income, and imposing a 3% surtax on incomes above $5 million.
   
• As currently proposed, the rate differential between pass-throughs (46.4%) and C corps (26.5%) would be 20 percentage points, more than twice the level of any period over the last four decades. Real estate partnerships constitute half of the four million partnerships in the United States.