On June 27, the Chairman of the Senate Finance
Committee, Max Baucus (D-MT) and Ranking Member Orrin
Hatch (R-UT) announced their plan for tax reform
legislation in the United States Senate. A letter to all
Senators announced their intention to “mark-up” (create
legislation in the committee) a tax reform bill this
fall and that they would be starting with a “blank
slate.” This proposal mirrors the path outlined by Ways
and Means Chairman Dave Camp (R-MI) in the House of
Representatives.
What is the blank slate?
A “blank slate” means that as a starting point, all tax
expenditures
(including tax deductions such as the mortgage interest
deduction (MID), tax exemptions such as the capital
gains exemption on the sale of a primary residence, and
tax credits such as energy efficiency tax credits)
will be removed from the tax code. Senators will have to
request tax expenditures be added to the reform
legislation. Using the “blank slate” approach allows the
Senate Finance Committee to highlight just how much tax
rates could be reduced by eliminating all the tax
expenditures. Adding any tax expenditures back into the
code would ratchet the rates up.
This Process Will Affect REALTORS®
There are a wide range of provisions in the tax code
that affect residential, investment, and commercial real
estate. The National Association of REALTORS® (NAR) will
be taking the lead in ensuring that each of those tax
provisions is defended. In the coming days, NAR will
work with its friends in the United States Senate, as
well its allies in other real estate associations to
identify champions for each provision. Additionally, NAR
will be on offense working to improve certain provisions
or make some temporary provisions permanent.
Next Steps
Each Senator has been asked to submit, in writing, any
tax expenditures they wish to see kept in the code.
Senators have until July 26 to submit the requests to
the Finance Committee. Once all submissions are
received, NAR believes the professional staff of the
Senate Finance Committee will begin drafting a tax
reform package. The drafting of the package will occur
during the August congressional recess. The expected
goal is for the Committee to present a completed draft
for review and possible legislative action in September.
Media Noise
In the coming days, there will be a lot of chatter in
the media, social media, blogs, and commentary that
provisions like the MID are being eliminated.
REALTORS® should know that NAR is working hard to make
sure that real estate tax provisions are maintained in
any rewrite of the tax code.
Passage of tax reform is far from certain. Many of the
reports you see will be attempts to predict what might
happen.
There will be lots of speculation and it is important to
remember that it is just speculation.
That being said, NAR is not taking anything about tax
reform for granted.
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