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Tax Reform

Tax Reform: Tax Cuts and Jobs Act of 2017

Issue Overview

In December of last year, the President signed into law the Tax Cuts and Jobs Act of 2017 (Jobs Act), the first comprehensive tax reform legislation passed in over 30 years. Unlike the last tax reform bill of 1986 which wrecked the commercial real estate industry for a decade, the Jobs Act left the industry unharmed and actually delivered several victories. That said, our advocacy work goes on. Given the size and scope of the law, the bill’s language will have to be clarified in several areas to function as intended. Of particular interest to apartment firms are provisions related to depreciation and the taxation of pass-through entities. 

As an Owner or Operator, How Does this Affect My Business?

The Jobs Act allows firms to elect to continue to deduct business interest, but requires them to extend a building’s depreciation period from 27.5 years to 30 years. Although we believe Congress intended that that provision would apply to both existing and new buildings, the language is ambiguous and could be read to require the remaining life of existing buildings be depreciated over 40 years when owners opt to deduct the business interest. We are asking Congress to affirm that the 30-year depreciation period applies to the existing buildings.

We are also working to ensure that the bill is correctly interpreted to allow multifamily businesses to fully qualify and receive the benefit of the 20 percent deduction allowed for qualifying income earned by the pass-through entities (e.g., LLCs, partnerships and S Corporations).

Related Issues Fact Sheets

Depreciation of Existing Buildings 

Carried Interest