Political divisiveness on Capitol Hill likely will prevent Congress from passing legislation this year addressing important tax initiatives that affect real estate, including the state and local tax (SALT) deduction and an extension of the Mortgage Forgiveness Debt Relief Act, lobbyists for the National Association of REALTORS® said Wednesday.
Speaking to the association’s Federal Taxation Committee during the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C., NAR policy representatives said a diverse and boisterous freshman class of Congress paired with a deeply divided caucus is stalling movement on key tax issues. Here’s a recap of the issues discussed.
1. Clarification is needed on opportunity zones. Committee Liaison Bob Turner, who visited the White House last month to discuss opportunity zones with Treasury and HUD officials, said confusion remains about how certain aspects of the program are going to work. Turner also noted that REALTORS® need to take a larger role in determining how opportunity zones are used in their communities. “We as REALTORS® know this needs to be a needs-based discussion,” he said. “This needs to be about what the community needs, not what the city wants. We know what the community needs.”
2. Little movement on SALT is expected. Joe Harris, NAR’s federal legislative and political affairs director, said ideological friction in Congress likely will produce little agreement—and action—on raising the SALT deduction cap. In particular, NAR supports doubling the cap for married tax filers, and that idea has broad support in Congress. But other issues, such as health care and Congressional oversight, are taking priority, Harris said, adding that he expects SALT to be a low priority for many lawmakers this year. While the House may propose new legislation in the fall, “the Senate is probably not going to take up any SALT bill the House produces,” Harris said. “[Senate Majority Leader Mitch] McConnell has made it clear his priority is to confirm judges and the president’s nominees.”
3. Mortgage debt relief remains in limbo. Evan Liddiard, NAR’s director of federal tax policy, said that even though underwater homes remain a formidable challenge in some areas of the country, Congress is unlikely to bring back the expired Mortgage Forgiveness Debt Relief Act soon. “Many House Republicans felt like it should have been taken care of with [the 2017 tax reform package],” Liddiard said. He added that getting a legislative package that resurrects mortgage debt forgiveness tax relief “stands a 50-50 chance of passage at best.”
4. Foreign investors are saddled with disproportionate tax burden. Ryan McCormick, senior vice president at The Real Estate Roundtable, a public policy lobbying group, said the Foreign Investment in Real Property Tax Act targets foreign investors who purchase U.S. real estate. Calling it a “discriminatory statute,” McCormick said the law applies only to real estate and not other assets, such as stocks. “The Treasury Department has promised regulations on FIRPTA for 12 years and still has not issued them,” McCormick said. “Real estate markets are increasingly global, and we need foreign investors for new development projects and infrastructure projects.” He cited research in which 76% of foreign investors say they would increase their investment activity in the U.S. if FIRPTA rules were eased. That could generate an extra $65 billion to $125 billion in new investments in America, the research showed.
5. Confusion exists over the 20% business income deduction. Liddiard revealed statistics from NAR’s 2019 Survey on Taxes, which shows that 55% of REALTORS® did not take the 20% deduction for qualified business income this year. “It’s obvious that a lot of people don’t know what the 20% business income deduction is yet,” Liddiard said. Members of the committee suggested that some real estate professionals may have taken the deduction without knowing it because the language on the tax forms was unclear.
Source: magazine.realtor.com
