HERNDON, Va., May 28, 2010 – Thomas J. Bisacquino, president of NAIOP, the Commercial Real Estate Development Association, issued the following statement following the House of Representative's passage of the "American Jobs and Closing Tax Loopholes Act" (H.R. 4213) . This legislation changes the treatment of taxation on carried interest compensation, severely negatively impacting many partners in real estate development ventures:
"NAIOP and members of the commercial real estate development industry are deeply troubled by Congress' actions to further damage the recovery of the nation's economy by significantly increasing the taxes paid by real estate partnerships. The passage of this legislation was done without the full consideration of the resulting harmful impact to one of the largest contributors to the nation's GDP.On Friday, May 28, the House of Representatives passed a bill that changes the tax treatment of "carried interest" income from its current treatment as capital gains (at 15 percent) to a mix of capital gains and ordinary income. Beginning in 2011 through 2013, carried interest will be taxed 50 percent as capital gain; 50 percent as ordinary income. Thereafter, carried interest would be taxed at 25 percent capital gains, and 75 percent ordinary income.
This significant tax increase is inflicted upon non-guaranteed income resulting from real estate partnerships. At a time when the real estate industry and the nation's economy are struggling, this is a severe blow to entrepreneurs who would otherwise be contemplating undertaking new deals - ultimately the source for much of the industry's job creation. Candidly, many development projects will now not be taken on due to this legislation.
NAIOP will continue the important work of ensuring that members of Congress better understand the importance of a healthy real estate economy. NAIOP members have been extremely active in this fight, writing thousands of letters and communicating with elected officials. These efforts are not in vain and will simply augment NAIOP's continued strategy to protect the interests of commercial real estate.
A healthy real estate economy is vital to a prosperous U.S. economy and produces an immense ripple effect with job creation and personal earnings that quickly roll over into increased consumer spending. Before the most recent economic downturn, total real estate construction spending reached $1.16 trillion - approximately 8.5 percent of the nation's Gross Domestic Product. Commercial development supports 4.89 million full-time equivalent jobs in the United States and generates personal earnings of $170.1 billion."
About NAIOP
NAIOP, the Commercial Real Estate Development Association, is the leading organization for developers, owners and related professionals in office, industrial and mixed-use real estate. NAIOP comprises 15,000 members in North America. NAIOP advances responsible commercial real estate development and advocates for effective public policy. For more information, visit www.naiop.org.