Please be advised of the recent tax reform update details on the recently released Unified Framework for Fixing Our Broken Tax Code, in which the Trump administration and congressional Republican leadership have outlined chief areas of agreement for tax reform legislation.
While House and Senate GOP leaders and members of President Trump’s economic team left many details of the legislation for the tax-writing committees in both chambers to resolve, there are several agreed-upon major provisions of interest to CRE:
- Reduction of the number of tax brackets from seven to three: 12, 25 and 35 percent, leaving open the possibility of an additional higher bracket for the highest-income taxpayers to ensure the share of taxes paid by the wealthy remain the same.
- Reduction of corporate tax rates to a maximum of 20 percent, down from the current rate of 35 percent.
- A top rate of 25 percent applied to the business income of small and family-owned businesses conducted as sole proprietorships, partnerships and S corporations (pass-through entities). The framework contemplates that the committees will adopt measures to prevent any recharacterization of personal income taxed at ordinary rates into business income taxed at the lower pass-through rate, done solely for purposes of avoiding taxation.
- Immediate expensing for new investments in capital assets, not to include structures, but leaving open the possibility for increased expensing for small businesses and modernizing current depreciation schedules for assets not provided immediate expensing.
- Partial limitation for deductibility of interest expenses for C corporations, asking the committees to consider the appropriate levels of deductibility for other types of businesses.
- Elimination of the Alternative Minimum Tax.
- Repeal of the Estate Tax.
We believe that these provisions will spur stronger economic growth and job creation, benefitting our industry in the long term, but many questions remain unanswered.
The framework could result in the repeal of other business credits, and charges the tax-writing committees with determining which to keep or eliminate. Three of our chief issues – 1031 like-kind exchanges, capital gains tax treatment of carried interests, and tax credits for community development – are not specifically addressed.