Today, the highly-anticipated tax reform legislation, The Tax Cuts & Jobs Act, was introduced by Ways & Means Committee Chairman Kevin Brady (R-TX) in the House of Representatives. The bill is the first formal step in delivering on the long-promised tax reform by the GOP. The Committee expects to markup (or debate) and vote on the bill (and any amendments) on November 6th. Click here for the bill text. A section-by-section analysis is included here.

Notable provisions include continued allowance of deduction of interest expense, IRS Section 1031 exchanges and existing the commercial property cost-recovery/depreciation regime. CREFC considers these key provisions as a major steps in the advocacy effort to allow for continued CRE market liquidity and supply/demand balance.

Last week, House Leadership unveiled their proposed (aggressive) timeline to pass tax reform through Congress and get it to the Senate before the Thanksgiving holiday (please see below for a detailed timeline). We remain skeptical that such fundamental changes to the tax code can be passed into law in that short of a timeframe due to both the size and complexity of the proposed changes (see: health care “Repeal/Replace”).

We expect a flurry of Congressional activity up until Thanksgiving, the aforementioned (and likely dramatic) Ways & Means Committee markup of the bill. However, we caution that uncertainty will be the order of the day until the bill either advances to the Senate (working on their own legislation) or gets stymied by member opposition.

CREFC (and numerous other organizations) have encouraged Congress to preserve current tax provisions (such as interest deductions, cost recovery/depreciation and Section 1031 Exchanges) and to permanently reform the tax code so as not to damage liquidity or entrepreneurship

Other areas of CRE interest include cost recovery/depreciation (page 30), net interest deduction (page 33) and IRS Section 1031 Exchanges (page 35). 

We reiterate how profound an effect this effort could have on commercial real estate finance. CREFC members and their associates should call their elected officials’ Washington offices and offer their full support of the current treatment for commercial loan interest deductibility. Simply call the Capitol switchboard at (202) 224-3121 and ask for your member of Congress, which you can find here.

Timeline: A proposed timeline based on Congressional leaders’ comments is below. We caution that this is highly optimistic and subject to change.

Proposed Tax Reform Timetable

10/26: House [barely] passed Senate Budget 216-212

10/23 - 10/27: Members briefed behind closed doors

10/30 - 10/31: Final review of proposed draft

11/2: Introduction of new tax legislation from House Ways & Means Cmte

11/2: Members go to "tax camp" to learn draft details

11/6 - 11/10: Ways & Means formally considers (conducts a "markup") tax legislation

11/6 - 11/10: "Response Teams" sell package to constituents

11/13: House action (vote?) on tax reform bill

11/14 - 11/17: Senate Finance Committee markup of tax reform bill

11/20: Possible Senate action/vote on tax reform bill (if they choose to spend Thanksgiving week in DC)

CREFC is currently analyzing the bill and will follow-up shortly with a detailed analysis of the provisions affecting commercial real estate.   Please contact Marty Schuh or Christina Zausner with any questions. 

The legislation also contains numerous changes on the personal tax side. For a Ways & Means Committee summary of the changes, click here.