Real estate group hammers tax increase on carried interest

Over 1 million real estate investment partnerships will be negatively affected by the proposed tax increase on carried interest included in legislation extending several tax and spending measures, the Real Estate Roundtable announced Friday.

"This is a sea change in the way real estate is taxed," said Jeffrey DeBoer, the group's president, in prepared remarks. "This tax increase could not come at a worse time." 

Under the bill, carried interest for the first 2 years will be taxed at ordinary income and capital gains rates — a 50/50 split, which amounts to a tax rate of roughly 30 percent. That split changes to 75/25 after 2 years, which amounts to a 35 percent rate.

DeBoer said the tax increase will ruin any chance of an economic recovery in the real estate industry, which is currently struggling to recover from a historic market correction.  

"Make no mistake -- this gigantic tax increase is a direct hit on more than one million real estate partnerships in the country, both large and small," he said, adding, "That means less investment, fewer projects and a greater loss of jobs in the private sector... We are disappointed with this proposal in the House and urge that it be rejected."

The House is expected to be vote on the legislation early next week.