UPDATE: Carried Interest - Large Tax Increase on Commercial Real Estate

BOMA San Francisco Members:

On May 28, 2010, the U.S. House of Representatives passed a slimmed-down version of H.R. 4213, legislation which contains a modified version of the carried interest proposal BOMA International and the rest in the commercial real estate community has been aggressively opposing, by a vote of 215-204. The House bill treats carried interest as 50% ordinary income and 50% long-term capital gains for two years, then moves to a permanent 25/75 split (25% long-term capital gains/75% ordinary income) with an effective date of Jan. 1, 2011. Click here for a spreadsheet that breaks down this new proposal by year, taking into account Self-Employment Tax and the recently enacted 3.8% Medicare tax on unearned income included in the health care bill.

The U.S. Senate adjourned yesterday evening and will not consider action on the House bill until it returns from the Memorial Day recess. During the recess, the industry is encouraging members to contact members of both the House and Senate in their states and districts about the negative impacts this tax increase will have on the industry. Efforts are also underway to target Editorial Boards of various newspapers across the country to talk about carried interest using the commercial real estate perspective.