As pressure mounts for Congress to address the federal debt and raise the federal debt limit, Congress is beginning to debate comprehensive tax reform. Although legislation is not likely to move until after the 2012 elections, NAA/NMHC are getting in front of the debate by joining several organizations, including the National Federation of Independent Business and the U.S. Chamber of Commerce, in a letter urging Congress to avoid disadvantaging partnerships as part of any possible tax overhaul.
The Obama Administration and some members of Congress are reportedly considering proposals that would force larger partnerships to be taxed as so-called C corporations instead of being treated as pass-through entities and taxed at individual tax rates. Under such a regime, income would be taxed twice: once at the corporate level and again when it is distributed to owners.
Although the revenue generated from such a proposal might be used to lower the 35 percent tax rate applied to large corporations, impacted partnerships would be subjected to significantly higher taxes. While NAA/NMHC strongly support tax reform that simplifies and provides stability in the code, we oppose anything that would disadvantage real estate relative to other industries.