Action Needed on Proposed Carried Interest Tax Hike
Legislation (H.R. 2834) introduced in the House and expected in the Senate would tax the return on all carried interests allocable to a partnership as ordinary income rather than capital gains. Because this includes the carried interest held by general partners in real estate investment partnerships, the legislation would have a significant negative impact on the multifamily housing industry and on the bottom lines of companies that use these partnerships.
Under present law, capital gain income generated by carried interest in a partnership is subject to a tax rate of 15%. If the proposed law were to be enacted, such carried interests would be characterized as ordinary income subject to tax rates up to 35%.
Multifamiily builders are being urged to contact their legislators and the members of the House Ways and Means Committee, which is considering this bill. A sample letter from NAHB explains why this bill will have a negative impact on the multifamily segment of the industry.
The best ways to educate legislators on this issue, in order of effectiveness, are:
- If you know legislators personally — either those who represent you or those in districts in which you do business — call and discuss the issue with them. (E-mail Multifamily to provide information on who you have contacted.)
- Write a letter. The gold standard for communication to legislators is a hard-copy letter, on letterhead, from a constituent or a company doing business in the member’s district. NAHB staff members have prepared a sample letter that can be printed out on letterhead and adapted to include personal comments. Please have all of your officers, directors and key associates send letters as well. (Again, let Multifamily know who you contacted.)
- An electronic letter, sent through a service such as NAHB’s BuilderLink. Log onto the BuilderLink site and fill in the registration section (so that the service can identify your legislators) and click on the sample letter concerning this issue. BuilderLink automatically records your contact.
To read the leigslation, click here and enter H.R. 2834 in the box at the center of the page.
For more information on this issue, e-mail Greg Brown at NAHB, or call him at 800-368-5242 x8421.