For our part , the apartment housing industry ’ s primary objective in reform is to support legislation that promotes economic growth and investment in rental housing without unfairly burdening apartment owners and renters relative to other asset classes . To this end , we are pushing lawmakers to ensure the following priorities are reflected in any bill that moves forward .
Tax reform must protect “ flow-through entities ” ( e . g ., LLCs , partnerships , S Corporations , etc .), which are the dominant business structure in our industry . Under this model , a firm ’ s earnings are passed through to the partners who pay taxes on their individual tax returns . Accordingly , Congress must not reduce corporate tax rates financed by forcing flow-through entities to pay higher taxes by subjecting them to a corporate-level tax or by denying credits and deductions .
It is also a priority for the apartment housing industry to maintain “ like-kind exchanges ” where property owners can defer tax on the gain on sale of an asset if , instead of selling their property , they exchange it for another comparable property . These rules encourage property owners to remain invested in the real estate market . Such an important tool for investment must be maintained in a reformed tax code . Notably , with the exception of land , the expensing proposal in the House Republican Blueprint provides for de facto like-kind exchanges .
Tax reform should also take care to preserve investment incentives . Borrowing is a central part of how apartment housing is financed ( a typical development project could be financed with 1 / 3 capital and 2 / 3 debt and the tax code has long provided a full deduction for interest . Indeed ,) without business interest deductibility , the cost of debt financing would increase and shift many real estate business models . This would inhibit development activity at a time when we face significant affordability challenges .
Policymakers should also take care when making changes to cost recovery rules like depreciation so they do not harm real estate investment . Apartment buildings are current depreciated on a 27.5-year schedule . While House Republicans are proposing to allow buildings to be immediately expensed , others have suggested extending the current-law depreciation period . This would surely lead to reduced development and investment and ultimately undermine real estate values and stifle job creation .
Finally , protecting the Low-Income Housing Tax Credit ( LIHTC ) is a priority for the apartment housing industry . The LIHTC is the central vehicle producing housing for moderate- and low-income families . We are in a period of crisis in housing affordability and need stronger incentives like the LIHTC to effectively respond . This program must remain a vital part of the strategy to address our nation ’ s housing needs .
You will notice some overlap between what is being proposed , at least in the House GOP Blueprint , and the apartment housing industry ’ s priorities . It is important to remember that policymakers are truly looking to reshape how taxes are levied in this country and that perhaps what they propose could effectively replace what is in the tax code now and keep the apartment housing industry whole . We remain open minded on this point as we continue to press for our top priorities and evaluate in detail what tax reform proposals mean for our business .
Every member of the apartment housing industry must be engaged in the advocacy campaign on tax reform . That means contacting your members of Congress and communicating our message . Changes to the tax code will impact all of us , and it is our responsibility to ensure whatever reform is passed does not harm our ability to provide housing to one-third of the nation . Your relationships with lawmakers and your willingness to act on those relationships will make the difference between success and failure on tax reform .
Call for your Free Estimate .
We stand behind our work !
aviroofing . com
303-296-8551
Laura Westhoff Direct extension 127 | Mobile 303-916-9052 lwesthoff @ aviroofing . com
FLAGS BY SUSAN
WWW . FLAGSBYSUSAN . COM ORDER ONLINE TODAY !
( 303 ) 317-3612
• Custom Flags
• Affordable Flagpoles for Apartments
• No Helium Balloons
• Banners / Signs
• Quality U . S ., State and Country Flags www . aamdhq . org FEBRUARY 2017 • TRENDS | 35