|
Carried Interest in Cross Hairs of House AMT Tax Relief
The House Ways and Means Committee on Nov. 1 marked up and approved H.R. 3996, the Temporary Tax Relief Act of 2007. The primary focus of the bill is to extend short-term relief from the Alternative Minimum Tax (AMT) for another year, which would prevent an additional 20 million Americans from being captured under the tax.
The bill would also extend a number of expiring tax provisions of interest to NAHB such as brownfields expensing, New Market Tax Credits and leasehold improvements.
Earlier this year, the House passed “pay-as-you-go” rules that require offsets for all tax cuts to make them revenue neutral. One of the primary revenue offsets for the one-year AMT patch is changing the taxation of carried interest from the current 15% capital gains rate to ordinary income tax rates that can run as high as 35%.
NAHB opposes this proposal and has been lobbying heavily against it during the past four months because it would disrupt the relationship between investors and developers, particularly multifamily and commercial builders.
Finally, the committee also included in the bill the full text of H.R. 3648, the Mortgage Debt Forgiveness Relief Act of 2007, legislation supported by NAHB because of its critical importance to resolving the subprime mortgage crisis. The bill was passed by the House of Representatives in early October.
This bill was most likely included in H.R. 3996 because the AMT patch legislation is considered a “must-pass” item and is the best vehicle for getting the mortgage debt forgiveness enacted this year. This is also likely an attempt to push the Senate to include the mortgage debt forgiveness provisions in its AMT relief bill.
NAHB sent a letter to the House Ways and Means Committee immediately prior to the markup acknowledging the importance of AMT relief and mortgage debt forgiveness but still expressing significant concerns over the carried interest proposal.
H.R. 3996 was approved by the panel without any changes to the carried interest provision. However, Chairman Charles Rangel (D-N.Y.) and Ranking Member Jim McCrery (R-La.) agreed to work with other members of the panel who expressed support for protecting real estate and perhaps other industries that are true "job creators and engines of the economy" from this tax. Realistically, it could be difficult for them to simply carve out specific industries from the carried interest proposal because there are few other avenues available to raise this revenue.
In the Senate, Finance Committee Chairman Max Baucus (D-Mont.) and several other Democratic members of the committee have expressed discomfort with the carried interest proposal in the House, and Senate Majority Leader Harry Reid (D-Nev.) has even stated that no stand-alone legislation on carried interest will pass the Senate this year.
The Senate has shown more willingness to passing temporary AMT relief without any revenue offsets.
Last week’s House action will not be the final word in this legislative process and even Rangel has predicted a “calamity” over revenue offsets when the House and Senate try to work out the AMT legislation. The AMT patch could ultimately be passed into law without a revenue offset.
NAHB continues to weigh in with both the House and Senate on carried interest as well as gaining swift passage of mortgage debt forgiveness legislation.
To view the legislation, click here and type the bill number in the box at the center of the page.
For more information, e-mail Greg Brown at NAHB or call him 800-368-5242 x8470.
|
