Significant Transition Rules Imperative; Policymakers Must Beware of Unintended Economic Consequences
March 21, 2013
/PRNewswire-USNewswire/ -- With congressional tax-writers intensifying their efforts to overhaul the U.S. tax code, The Real Estate Roundtable today urged a pro-growth approach to tax restructuring that recognizes commercial real estate's vast economic contributions and includes appropriate "transition rules" to help minimize disruptions to real estate and other economic sectors.
"The nation's tax laws need to be revamped to unleash entrepreneurship, investment, capital formation and job creation," Roundtable President and CEO
Jeffrey D. DeBoer
stated in his letter today to House Ways & Means Committee Chairman
(R-MI). "But this process poses risk and, therefore, it must be undertaken with great care," he added. "We urge the Ways and Means Committee to be mindful of how proposed changes in commercial real estate taxation can dramatically affect the health of the U.S. economy, jobs, retirement savings, lending institutions, pension funds, and, of course, local communities."
As an example of the unintended consequences of tax reform, DeBoer noted the destabilizing effect of the 1986 Tax Reform Act on commercial real estate values, financial institutions and tax bases — due largely to significant policy changes that were applied to pre-existing real estate investments. "It took years for the overall industry to regain its productive footing, and certain aspects of the economy never recovered," DeBoer wrote.
The Roundtable letter also called on tax-writers to recognize commercial real estate's historic role as a driver of broader U.S. economic growth. Commercial real estate is both a major contributor to — and a reflection of — the U.S. economy. Thus, when commercial real estate markets are healthy and in balance so, too, is the broader economy. "Rational taxation of real estate assets and entities promotes job creation and facilitates sound, environmentally-responsible real estate investment and development, which contributes to strong property values and well-served, livable communities," DeBoer explained.