Big real estate joins the fight over tax hike

WASHINGTON – July 30, 2007 – The House Ways and Means Committee is considering a bill that would dramatically boost the tax rate on companies that forge partnerships; and while the legislation is geared toward private equity firms and hedge funds, real estate firms that partner with investors to finance property acquisitions will be impacted as well.

Under the proposal, managers of such partnerships no longer would be taxed at the 15-percent capital gains rate but instead would face income tax rates of as much as 35 percent.

The Mortgage Bankers Association and the National Association of Realtors are among the trade groups that signed a letter to the House penned by Real Estate Roundtable Senior Vice President Steven Renna, who noted that the bill unfairly targets companies of all size – not just the “super rich.” Renna expects the bill to further weaken the real estate market, spark property-value declines by putting a damper on after-tax returns, and minimize revenues tied to federal capital gains taxes and local transfer taxes.

However, a spokesman for the House Ways and Means Committee says that taxes on investments of actual capital will not be increased. Legislators add that landlords provide services – not capital – and should be taxed accordingly.

Source: New York Sun (07/30/07) Satow, Julie

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