NAHB and more than a dozen other real estate industry groups have sent a joint letter to Congress urging lawmakers to reject the Carried Interest Fairness Act
"This misguided legislation would result in a huge tax increase on countless Americans who use partnerships in businesses of all types and sizes," the letter stated. "It would discourage individuals from pursuing their business vision, encourage debt rather than equity financing, tax sweat equity invested in businesses and slow economic growth. These results would be particularly harmful to the nearly 8 million partners in U.S. real estate partnerships."
H.R. 1735 would require carried interest to be classified as ordinary income rather than a capital gain. A carried (or promoted) interest is a profits interest in a business deal that is larger as a share of the total return than the share of the initial equity investment. Under present law, if the income paid out as the carry is a capital gain, then the carry is taxed at capital gains tax rates (in general, up to 23.8%).
The false narrative surrounding the carried interest issue is that it targets only a handful of hedge fund billionaires and Wall Street executives. The carried interest legislation is far broader and would apply to real estate partnerships of all sizes – from two friends owning and leasing a townhome to a large private real estate fund with institutional investors.
"Taxing carried interest at ordinary income rates would discourage the risk taking that drives job creation and economic growth," the letter to lawmakers stated. "In short, H.R. 1735 would make it more expensive to build or improve real estate and infrastructure, including workforce housing, assisted living communities, and industrial properties, to name just a few. We urge you to reject the misnamed Carried Interest Fairness Act."
For more information, contact J.P. Delmore
at 1-800-368-5242 x8412.