Tax Reform

Comprehensive tax reform of has been a top goal for several presidential administrations and many in Congress ever since the last major reform in 1986. The goals of reform include simplification of the tax code, increasing the global competitiveness of American businesses, and promoting economic growth. Many in Congress also believe that tax reform should address increasing income inequality and raise revenue for additional government spending and investment.

Download NAIOP’s Position on Tax Reform  


The last comprehensive revision of the U.S. tax code was in 1986, when President Ronald Reagan signed the bipartisan Tax Reform Act of 1986. The act lowered tax rates and simplified the code by eliminating preferences and deductions, known as “broadening the base.” Since that time, income tax rates have increased and the code has become more complex. Many in Congress again want to reform the tax code by lowering taxes and broadening the base. In particular, many are focused on reducing the tax rate on corporations in order to increase our international competitiveness. Some also want to increase the capital gains tax rate on investment income of wealthy families to pay for additional tax benefits to lower-income families as a means of reducing income inequality. 

Many elements of tax reform plans introduced in Congress over the last few years would be harmful to the commercial real estate industry. Some would have substantially lengthened existing depreciation rules, subjecting commercial real property, including leasehold improvements, to cost recovery schedules of 40 years or more. The energy-efficient commercial building deduction (Section 179D) would have been repealed, and some plans eliminated or severely limited real estate like-kind exchanges under Section 1031 the tax code. Capital gains treatment for real estate partnership "carried interests" would have been ended by tax reform plans in the Senate.

In December 2015, the "Protecting Americans from Tax Hikes Act of 2015" was enacted into law. Commonly known as the “PATH Act”, the bill achieved many of NAIOP’s long-sought tax goals, including making permanent the temporary provisions for 15-year qualified leasehold improvement depreciation and the energy efficient commercial building deduction, among a number of other formerly temporary provisions that were made permanent. The legislation also extended bonus depreciation provisions, new markets tax credits, and other tax provisions important to commercial real estate.  Making these permanent was important to House and Senate leaders as a first step in facilitating more far-reaching, fundamental and comprehensive reform of the tax code. 


House Speaker Paul Ryan, Ways and Means Committee Chairman Kevin Brady (R-TX), and Senate Finance Committee Chairman Orrin Hatch (R-UT) will continue efforts to develop tax reform plans prior to the 2016 presidential election in order to lay the framework for the next president.


NAIOP supports reform of the tax code to make it simpler and to foster economic growth. We oppose proposals that would unfairly disadvantage investment in real estate as compared to other asset classes. We support maintaining depreciation schedules for leasehold improvements that reflect the true economic life of the assets, and oppose measures to eliminate or curtail the use of Section 1031 tax-deferred exchanges or change the capital gains tax treatment of carried interest compensation. We believe a meaningful differential between tax rates on capital gains and ordinary income is vital to the real estate industry. 


  • Tax reform should lead to increased economic growth and productivity across all economic sectors, and result in a simplified tax code that does not distort investment decisions.
  • A meaningful differential between capital and ordinary income rates, with capital being lower, should be maintained. Lower capital gains tax rates provide a reward for those who take the inherent risk in making long-term capital investments. In real estate in particular, lower capital gains also offset the built-in gain that results from inflation over a long period of time.
  • Cost recovery and depreciation rules should reflect the useable economic life of structures and their component parts. Fifteen-year qualified leasehold improvement depreciation and Section 179D expensing should be maintained as a permanent feature of the tax code.
  • Current rules on tax deferral of like-kind property exchanges (Section 1031 exchanges) should be maintained. Eliminating or curtailing these rules would severely reduce transactions and needed investments in commercial real estate.
  • Real estate partnership “carried interests” should continue to be treated as capital gains and not as ordinary income. This is compensation that is reward for risk in developing a capital asset.
  • Changes in tax rules should not be applied retroactively, and should only apply to property not yet placed in service. Proper and adequate transitions rules that minimize dislocation in real estate markets should be provided.



Aquiles Suarez
Vice President for Government Affairs
703-904-7100, ext. 115