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.


“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 1983 times

Data Digest







Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44




cppichart FP



CMBS 2.0 Spreads


Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41





  • Challenging Retail Environment Weights on REITs
    Mixed economic news is weighing on retail markets, pushing REIT performance down in 2015. This week, the National Retail Federation announced that back-to-school spending is expected to be down 9.3% in 2015. This news came on the heels of a report from the Commerce Department stating that retail sales declined 0.3%...
  • US REITs Feeling Effects from Turmoil in Greece and China
    International economic forces have taken center stage this week, affecting both US stock markets and REITs. The crash in the Chinese stock market and ongoing concerns about the future of Greece in the eurozone drove markets down during the first half of the week. REITs fared better than the overall market...

  • What Does Increased Construction Mean for Apartment REITs?
    REITs so far this year have raised $17.1 billion of capital through the sale of unsecured notes, bringing the total raised over the past two and a half years to just more than $75 billion. That’s more than they raised during the previous five years. The massive volume shouldn’t be a surprise as it comes while the yield from 10-year Treasury bonds, the benchmark...
shouldn’t be a surprise as it comes while the yield from 10-year Treasury bonds, the benchmark against which most REIT’s price their bonds