House Puts Real Estate Tax Hike in Tax Break Extender
The House last week voted to approve H.R. 4213, the Tax Extenders Act of 2009, legislation that would extend through 2010 some $31 billion in popular tax breaks that are due to expire at year’s end.
Among the provisions that would be extended under the bill is an “exchange” provision for the Low Income Housing Tax Credit (LIHTC) program allowing state housing finance agencies to trade in a portion of their tax credit allocation for grant dollars to support local affordable housing.
The bill, which passed by a vote of 241 to 181, would be paid for by cracking down on international tax evasion and taxing “carried interest,” which would impose a multi-billion-dollar tax increase on real estate at a time when the industry is struggling to emerge from its worst downturn in decades.
Under present law, capital gains income generated by carried interest in a partnership is subject to a tax rate of 15%. Under the House bill, the carried interest would be characterized as ordinary income subject to tax rates up to 35%.
Prior to the vote on the bill, NAHB sent a letter to House members in support of the LIHTC measure but strongly opposing the use of carried interest as its central revenue offset, pointing out that this would result in higher prices for multifamily housing, slower job creation and less community development, especially in underserved areas.
The letter also expressed deep concerns that the legislation would allow the New Energy Efficient Homes Tax Credit (45L credit) to expire, noting that this is “the only incentive in the tax code for increasing energy efficiency in newly constructed homes.”
The bill now goes to the Senate, which has rejected the carried interest proposal in the past.
NAHB will continue to work with leaders in both chambers to ensure that any final bill omits the use of carried interest as a revenue offset to pay for the expiring tax breaks and also urge lawmakers to add the 45L tax credit to the extender package.
To view the legislation, click here and type H.R. 4213 in the box at the upper center of the page.
For more information, e-mail Greg Brown at NAHB or call him at 800-368-5242 x8421.