Dozens of tax provisions that were set to expire at the end of 2009, including the NAA/NMHC-supported provision that allows firms to expense costs associated with cleaning up brownfield sites, were extended according to HR 4213, a bill totaling approximately $30 billion, which passed Dec. 9 in the U.S. House of Representatives.
It also would extend for one year the Tax Credit Exchange Program (TCEP) that allows state housing agencies to exchange up to 40 percent of their Low Income Housing Tax Credit allocation for cash grants from the U.S. Treasury Department. (A summary of the bill is at http://bit.ly/f5OlSiC.)
Unfortunately, the bill pays for the tax extensions with a major tax increase on real estate partnership "carried interest" or the developer's promote. Specifically, the measure would tax carried interest at ordinary income tax rates instead of as a capital gain as current law provides. Opposing the carried interest tax increase proposal has been a top priority for NAA/NMHC for several years.
Originally designed as a way to rein in wealthy hedge fund managers, the legislation is written so broadly that it would affect all real estate partnerships. NAA/NMHC have been educating lawmakers about the unintended consequences the proposal would have on the nascent economic recovery and the struggling commercial real estate markets.
A carried interest tax increase has passed the House twice, but has never had enough support to pass the Senate and is unlikely to be included in the Senate tax extenders bill. Even without Senate support in 2009, a carried interest tax increase will be on the table again in 2010 when lawmakers begin debate on an overhaul of the tax code.
Please visit www.naahq.org for updates on federal legislative progress on this bill.