Daily market intelligence on mortgages, equity raising, investment sales, and CMBS.

Friday, 04 January 2013

Carried Interests Tax Hike Averted in Fiscal Cliff Deal

Written by 
Rate this item
(0 votes)

Commercial Real Estate Direct Staff Report

Investment managers were spared a tax increase under Congress' recently-approved revenue generating legislation that averted the so-called "fiscal cliff," a series of automatic tax increases and federal spending cuts.

The topics up for negotiation in the fiscal cliff negotiations between members of Congress and President Barack Obama had included a proposal to increase the tax on the carried interests of investment partnerships, including real estate investment funds and hedge funds.

Obama has since 2011 voiced his support for increasing the tax on the carried interests of investment partnerships to the same rate as that on ordinary income from its current capital-gains rate. Carried interests represent a portion of partnerships' profits and are paid to general partners as incentive compensation.

The carried interest tax, like most other proposals that appeared capable of increasing government revenues, had been among the discussion points between the president and Congress, said Jeffrey DeBoer, president and chief executive of the Real Estate Roundtable, a trade group for the commercial property industry. He theorized that the two sides passed up on the carried interest tax hike because of complications in determining whether such a hike would help the country by generating additional revenue or hurt it by prompting investors to scale back their activity.

An increase in the carried interest rate has been bantered about by Congress for several decades, but gained traction and publicity in 2011 when Obama proposed that it be included in a bill aimed at creating jobs.

The Jobs Bill, which by some estimates would have increased government spending by $450 billion, died after failing to gain approval in the U.S. Senate.

The Roundtable, based in Washington, D.C., was among a coalition of commercial property forces that lobbied against the proposed carried interest tax hike. They said it would reduce investment activity, which in turn would cripple job growth.

The regular income tax rate that carried interest would have been subject is set to jump to as high as 39.6 percent from 35 percent, while the capital-gains tax rate for long-term investments is being increased to a high of 20 percent from 15 percent.

There is no pending legislation that includes a carried interest tax-rate change, but DeBoer expects the proposal to again surface on Capitol Hill as part of Congress' ongoing debate over how to increase government revenue without hurting business growth.

Comments? E-mail John Covaleski or call him at (267) 247-0112, Ext. 208.



weekly-call-to-action

“The Weekly”

“The Weekly” is Commercial Real Estate Direct’s PDF newsletter, sent to subscribers every Friday morning. With over 100 news stories published on Commercial Real Estate Direct each week, “The Weekly” features the top stories in commercial real estate that industry participants need to know first. “The Weekly” also contains:

  • Breaking mortgage, CMBS, and REIT news

  • Quarterly league tables with rankings of B-piece buyers, book runners, and lenders

  • Industry moves and changes in “The Insider“

Additional Info

  • Syndicate to Realpoint: No
  • Subject: Institutional Investment (INS), Legal Issues (LEGL)
  • Private: No
Read 622 times

Data Digest

 

CMBS DELINQUENCY VOLUME

dqdataFP1

 

CMBS SPECIAL SERVICING VOLUME

sschartfp

Top Bookrunners
Private-Label CMBS - FY2014
Inv Bank #Deals Bal $mln MktShr%
Deutsche Bank 27.1  23,479.37 26.3
JPMorgan 18.6  13,752.01 15.4
Wells Fargo 17.2  13,085.05 14.6
Goldman Sachs 9.0  7,896.25 8.8
Citigroup 9.1  7,526.97 8.4

 

 

MOODY'S/RCA CPPI

 

cppichart FP

 

 

cmbs2spreads

 

Top Loan Contributors
Private-Label CMBS FY2014
Lender Vol $mln MktShr%
Deutsche Bank 14,005.13 16.0
JPMorgan 11,440.63 13.0
Wells Fargo 5,849.16 6.7
CCRE 5,750.69 6.6
Citigroup 5,604.13 6.4

 

 

 

REITCafe

  • West Coast Port Slowdown and Industrial REITs
    After nine months of labor negotiations and worsening cargo congestion at West Coast Ports, U.S. Labor Secretary Thomas Perez stepped in this week to help broker a deal between the union and shippers. The work slowdown is affecting the nation’s supply chain. Honda has reported a production slowdown because of parts....
     
  • New REITs Increase Investor Choices in 2015
    Three REIT IPOs in as many weeks could indicate a strong year ahead for new REIT formation. Robust REIT returns during 2014 created momentum for IPO activity. In addition, the market’s favorable reception of the widely-watched Paramount REIT (PGRE) and STORE Capital (STOR) IPOs in late 2014 has encouraged companies to....

  • REITs Start 2015 Strong
    One month in to 2015, REITs continue to outperform the broader markets. During January, the FTSE NAREIT All REIT Index total return measured 5.59 percent, compared to -3.00 percent for the S&P 500, -3.69 percent for the DJIA, and -2.13 percent for the NASDAQ. REITs are attractive to investors for a...
warehouse-backstage