Multifamily firms might experience significant negative effects if a proposal by President Barack Obama's administration, focused on changing the corporate tax rate, is enacted.
The plan would lower the corporate tax rate from 35 to 28 percent and finance the change by taxing carried interest at income rates and might require some partnerships to pay corporate tax rates, reduce the deductibility of business interest or revise depreciation schedules. Changes to business and carried interest treatment could impede multifamily operations significantly, according to the National Apartment Association and the National Multi Housing Council.
The organizations note that further discussion is likely before any policy changes are made, given the current political circumstances, and that the reform of the tax code may be beneficial. They stated they will continue to advocate a strong low-income housing tax credit program.
Lawmakers and industry stakeholders are also addressing the concept of treating s-corporations and LLCs the same as C-corporations for tax purposes, which the NAA and NMHC oppose. While some changes might not directly impact rental property management firms, they could still see indirect consequences as tax changes alter the multifamily industry.