Commercial Real Estate Sector Unscathed By Republican Tax Rewrite

Business

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The commercial real estate sector has emerged unscathed from the Republican tax rewrite. For months, the industry of commercial real estate development has been seriously concerned with the tax plan that is in the works. There are fears that the tax plan may make it more difficult or expensive to take out huge bank loans. There is also the possibility for the tax plan to damage demand in the property market.

However, if the tax plan that was unveiled this week by the House Republicans was to be the basis, the industry has little to worry about. According to Thomas Bisacquino, president of NAIOP, a commercial real estate development group, the industry was left as a whole and the old provisions will still work.

Real estate developers were rather fearful of the special tax treatment of “carried interest” fees that are taxed as capital gains instead of income. If there will be an amendment the developers may no longer be able to deduct any interest expenses from their taxable profits. There were also certain concerns that exchanges of commercial property that currently enjoys tax deferral could face immediate taxation.

Developers are thankful because the bill did not include changes to the industry. Taxes have a big effect on the industry. In 1991, a tax overhaul was responsible for sinking prices of commercial real estate. It also ushered in an economic downturn.

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