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Tax Increase Opposed by Real Estate Organizations
The tax treatment of "carried interest" for investment fund managers would change from the current capital gain rate of 15 percent to the ordinary income rate 35 percent, under a bill recently approved by the House Committee on Ways and Means.
Carried interest is the portion of the profits a general partner receives in a partnership.
The bill, H.R. 3996, the Temporary Tax Relief Act of 2007, was approved in a 22-13 vote. According to the Committee, partners and managers would continue to receive a lower rate of taxation on returns derived from money they have personally invested.
Represented by The Real Estate Roundtable, twelve national real estate organizations stated their opposition to the carried interest provision.
“This is the most significant and potentially most disruptive tax on real estate since the 1986 Tax Reform Act,” says Jeffrey DeBoer, president and CEO of The Real Estate Roundtable. “The change in tax treatment of carried interest unfairly hits real estate entrepreneurs throughout the country while leaving other business enterprises using the same investment partnership model unscathed.”
In a letter to the Committee, the Real Estate Roundtable stated that real estate partnerships subject to the tax change hold nearly one quarter of all investment real estate in America, worth over $1 trillion.
“A tax increase on real estate entrepreneurs across the country of over 133 percent will have a pervasive effect on jobs, economic growth and the tax base,” says the letter.
The letter also supported the Tax Act’s proposed extension of Alternative Minimum Tax (AMT) relief and other expiring tax provisions.