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Coalition Calls on Congress to Allow Business Income to Qualify for Pass-Through Rate

The US Capitol building

NAA/NMHC joined a coalition of trade associations on October 27 to ask Congress to allow all legitimate business income to qualify for a lower pass-through rate as part of forthcoming tax reform legislation. This is critical for the multifamily industry as it is dominated by pass-through entities such as LLCs, partnerships and S-corporations. 

The Trump Administration and Congressional Republican leaders released a tax framework in late September calling for a 25 percent tax rate on business income. To prevent wage income, which would be taxed at higher rates, from being mischaracterized as business income, the Coalition’s letter acknowledges guard rails will have to be put in place. However, the letter opposes arbitrary rules such as requiring 70 percent of business income to be taxed at ordinary rates and 30 percent at the lower pass-through rate, from being enacted. 

Instead, the letter asks that Congress to:

  • Allow all business income received by passive investors to qualify for the pass-through rate.
  • Enable active partners who are similarly situated to passive partners to qualify for the pass-through rate.
  • Enact rules enabling business owners who invest in workers and capital to receive the pass-through rate as such investment is distinct from wages. 

NAA/NMHC believe all legitimate business income should qualify for lower business tax rates so as to promote investment in multifamily housing. 

Provided by NMHC as part of the NAA/NMHC Joint Legislative Program