Feb 18, 2013
by Christian Harden : V.P. Public Affairs
NAIOP Northeast Florida joined over 300 NAIOP leaders from chapters across the country in Washington, D.C. for the annual Chapter Leadership & Legislative Retreat held February 11-14.
After two days of meetings, our chapter sent a group of representatives to Capital Hill for scheduled visits with elected officials from Northeast Florida to promote issues important to the commercial real estate industry. The following members were on the trip:
-Traci Jenks, President
-Wyman Duggan, President-
-Christian Harden, VP, Public Affairs
-Vince McCormick, Programs Chair
-David Smith, Developing Leaders Chair
-Carmel Buchanan, Chapter Executive
NAIOP was able to attend meetings with the following Legislators and/or their aides:
-Senator Bill Nelson
-Representative Ron DeSantis
-Representative Ander Crenshaw
-Representative Ted Yoho
The meetings were very productive, as our legislators recognize the importance of commercial real estate development in creating a healthy business climate n Florida, one of the leading contributors to the domestic economy.
Some of the issues discussed were carried interest, tax extenders and waterways funding to allow federal authorization of Mile Point funding for the port.
• Carried Interest, also known as a “promoted interest” or a “promote” in the real estate industry, is a financial interest in the long-term capital gain of a development given to a general partner by the investors in the partnership.
• Currently taxed as capital gains, proposals to change the tax treatment of carried to ordinary income would result in a dramatic tax increase (from 15 percent to as high as 35 percent) for many real estate development partnerships.
• More importantly, if enacted, such a change would significantly hinder future commercial real estate development activity.
• NAIOP strongly opposes changing the tax treatment of carried interest from capital gains to ordinary income.
• Numerous business tax provisions that enjoy bipartisan support expired at the end of 2011 when Congress failed to agree on legislation extending the provisions. One of the primary concerns is allowing for 15 year leasehold improvement depreciation.
• Leasehold Improvement Depreciation is the ability to deduct the cost of the customized improvements a building owner makes to a rental space to configure it for a tenant’s needs.
• The current 15-year depreciation schedule automatically reverts to a 39-year depreciation schedule.
• Failure to extend 15-year qualified leasehold improvement depreciation will result in higher capital costs for many building owners, creating disincentives to upgrade and modernize the space for their tenants.
• Because the provision is not a permanent part of the tax code but is only addressed annually as part of broad “tax extenders” legislation, Congress is repeatedly forced to address the issue, denying businesses the level of certainty needed for better long-term planning.
• NAIOP supports extending and making permanent 15-year leasehold improvement depreciation, which is in closer alignment with the economic reality of the leasehold improvements’ typical lifespan.