APARTMENT ADVOCATE
Net Investment Income Tax
The proposal would expand the currentlaw 3.8 percent net investment income tax to include net investment income ( i . e ., capital gains , interest , dividends , annuities , royalties , and rents ) earned in the ordinary course of a trade or business by single filers earning over $ 400,000 and married couples earning over $ 500,000 . It would not apply to any wages on which FICA is currently imposed .
Excess Businesses Losses
The proposal makes permanent a provision limiting excess business losses that was otherwise set to expire at the end of 2026 . Under current law , a non-corporate taxpayer is considered to have an excess business loss if their total business deductions exceed business income plus $ 250,000 for single filers and $ 500,000 for joint filers . Additionally , while current law allows excess businesses losses to be treated as a net operating loss , the proposal would modify this treatment and not allow losses to offset wages or portfolio income in future years . Losses , however , could be carried forward .
Tax Increases Not in the Framework
Left out of the Framework are tax increases affecting :
• • Like-kind exchanges . NMHC and NAA have long advocated to maintain currentlaw relative to like-kind exchanges to encourage investors to remain invested in real estate while still allowing them to balance their investments to shift resources to more productive properties , change geographic location , or diversify or consolidate holdings .
• • Carried interest . The House Ways and Means Committee ’ s “ human infrastructure ” bill would have imposed a three-year holding period on so-called Section 1231 real estate gains .
• • Taxation of unrealized capital gains at death . NMHC and NAA support the retention of current-law stepped-up basis rules . Changes to current law could either diminish or discourage the ability of heirs to make improvements to inherited property . Affordable housing inventory could be lost as a result .
• • Estate taxes . Notably , NMHC and NAA signed an October 28 letter opposing changes to grantor trusts and valuation rules in the House Ways and Means Committee ’ s “ human infrastructure ” bill . That bill proposed to bring grantor trust a decedent owns into that decedent ’ s taxable estate . Additionally , the bill would have prohibited the use of valuation discounts when non-business assets , including real estate , are transferred .
• • Modifications to the types of investments accredited investors may make with IRAs . The House Ways and Means Committee ’ s “ human infrastructure ” bill would have restricted the use of IRAs to make certain types of real estate investments .
Low-Income Housing Tax Credit & Rehabilitation Tax Credit
While the House Ways and Means Committee ’ s version of “ human infrastructure ” legislation included provisions to expand the Low-Income Housing Tax Credit ( LIHTC ) and the Rehabilitation Tax Credit , these provisions are not included in the new framework .
We joined an October 25 letter sent by the A Call To Invest in Our Neighborhoods Coalition to President Joseph Biden , Speaker Nancy Pelosi ( D-CA ), and Senate Majority Leader Charles Schumer ( D-NY ) asking that final legislation expand LIHTC authority by more than 50 percent . The letter also expresses support for reducing to 25 percent ( from 50 percent ) the amount of a project that must be financed by tax-exempt private activity bonds in order to access 4 percent LIHTCs . The House Ways and Means Committee-passed reconciliation bill includes these provisions as part of its proposed changes to LIHTC , and it is estimated the bill would provide an additional 1.4 million units .
Energy Efficiency Tax Incentives
Energy Tax Incentives
The proposal would modify energy tax incentives available to the multifamily industry . Firms meeting baseline requirements would
58 | TRENDS NOV / DEC 2021 www . aamdhq . org