The Capitol

WASHINGTON, DC-After three years, House Ways and Means Committee Chairman Dave Camp, R-MI., unveiled what he clearly sees as his life’s work: a comprehensive, detailed blueprint for Congress to use to gut and rebuild the US tax code.

The plan significantly lowers tax rates. But it also eliminates just about every imaginable tax break, for both individuals and businesses. The commercial real estate industry is, of course, included in this sweep.

Most fundamentally, the proposal capped–but didn’t eliminate–the third rail of tax reform politics, that is, the mortgage interest rate deduction. For this, the industry is grateful. As Geoff Anderson, president and CEO of Smart Growth America (SGA) and Chris Leinberger, the leader of LOCUS, SGA’s coalition of developers, said in a joint statement: “The deduction is meant to encourage homeownership and we believe capping it ensures that incentives are aimed more strategically at those who have the most difficult time achieving home ownership.”

But there is plenty to dislike about the proposal too, from an industry perspective. Anderson and Leinberger point to the changes to the Low Income Housing Tax Credit, which actually would experience increased funding. Some of the changes, however, they say, would undermine the advantage of the increased funding.

Other provisions in the proposal sure to be met with dismay from the CRE industry:

The tax advantages enjoyed by REITs would be curtailed in several ways. It would, for instance, overturn a 2001 ruling by IRS that permits a wide latitude for REITs to satisfy the active trade or business requirement for tax-free spin-off transactions. Such a provision, the plan states, would increase revenues by $5.9 billion between 2014 and 2023.

The plan would eliminate the carried interest tax break for private equity managers. According to the proposal: “The recharacterization formula generally would treat the service partner’s applicable share of the invested capital of the partnership as generating ordinary income … intended to approximate the compensation earned by the service partner for managing the capital of the partnership.” However, the real estate industry appears to be exempt from this provision.

To be frank, few-including probably Camp himself-expect to see the proposal make it into law, at least in the near term. Possible bits and pieces of it may become part of the tax code at some point, although the legislation was designed to be implemented as a whole. In order to pay for the far lower individual and corporate tax rates, the deductions and special interest exemptions must be eliminated. Camp has called his document the jumping off point for a discussion.

Other political observers, even those otherwise sympathetic to the Republican agenda, describe the proposal in even blunter terms. “It is dead on arrival,” David Johnson, CEO of Strategic Vision, tells

“Tax reform, in theory, is a popular subject among many Congress people, but this measure cuts too many sacred cows.”