A heated debate over how profits from partnerships will be taxed could have an adverse impact on the income of general, or operating, partners in most real estate partnerships. The bill, H.R. 2834, would eliminate the currently favorable tax treatment for all carried interest received by any partner or fund manager who provides "investment management services" to a partnership or fund.
Historically, carried interest has been taxed as a capital gain. H.R. 2834 specifies that those who provide services to manage and operate real estate partnerships must now pay taxes on the carried interest at ordinary income rates. If this bill becomes law, it could significantly increase the tax burden for commercial real estate practitioners who act as an operating partner for a partnership. A companion bill in the Senate, S. 1624, would focus only on private equity and hedge funds and would apply exclusively to publicly traded partnerships.
NAR is operating on two fronts to address this significant threat to the incomes of many commercial real estate practitioners. An informal network representing some 100 organizations in dozens of industries is making an aggressive effort to defeat this legislation. In addition, NAR and the other real estate organizations have joined forces to ensure that real estate partnerships are exempt from any new rule modifying the treatment of carried interest as capital gains. If this proposed legislation would negatively affect your business, don't hesitate to let your congressional representatives
known your concerns. To read more about the issue and get future updates, visit the RCA page on REALTOR.org.