January 17, 2018 |
Updated January 23, 2018
The landmark tax reform legislation enacted in December included numerous important victories for the multifamily industry, but the signing of the bill by President Trump doesn’t end Congress’ work on the issue or NAA/NMHC’s advocacy on behalf of the industry.
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.
The law 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 NAA/NMHC 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 business interest. NAA/NMHC are asking Congress to affirm that the 30-year depreciation period, which NAA/NMHC secured, apply to existing buildings.
NAA/NMHC 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).
Separate from these implementation issues, NAA/NMHC are working with lawmakers to extend several tax provisions that expired at the end of 2017. Legislation has been introduced in the Senate (S. 2256) that would renew the Energy-Efficient New Homes Tax Credit and the Energy Efficient Commercial Buildings Deduction through 2018. It is hoped that these provisions will be included in legislation needed to fund the government by January 19.