Debt Ceiling Debate Spotlights Real Estate Tax Issues

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WASHINGTON, DC-August 2nd, not July 8th, is the zero hour for the debt ceiling, but even the recent extension has not given much comfort to real estate industry observers who are wondering what Congress will cut in order to raise the ceiling. To be sure, this is not a debate that will end this summer. Fiscal austerity is the order of the day and the talk over what to cut, what to save and what new rules to implement will be lasting for years.

With that in mind, the Real Estate Roundtable and Deloitte developed a joint report on what issues most important to commercial real estate may become part of the negotiations. Broadly speaking, FIRPTA reform, a reprisal of the carried interest tax characterization change and the many elements that make up the tax extender package passed each session are likely to be brought up. How and what changes could be enacted, though, is impossible to tell, Fred Witt, national director, real estate tax services, Deloitte Tax, tells GlobeSt.com.

"There are a lot of different proposals and a lot of different ways this could go. That is one of the reasons why we wrote this report--we wanted to chronicle the issues involved in one document." Some--many, really--of the important players haven’t even weighed in yet, he observes. The Treasury Department, for example, is set to release its own proposal of tax reform in September, according to Witt. One call he is willing to make: "I would say that carried interest is not going to go anywhere even if it is raised."