Here’s how Trump’s tax plan could help leveraged RE firms

Miami /
Aug.August 19, 2016 12:45 PM

From the New York website: Donald Trump hasn’t released his own tax returns yet, but the GOP presidential candidate’s tax plan for the country looks like it could be a huge windfall for debt-laden real estate companies.

The plan would effectively provide negative tax rates for leveraged investments by allowing businesses to deduct interest and file immediate write-offs (known as expensing) for investments in equipment and buildings, the Wall Street Journal reported. Ultimately, that could push developers toward projects that only make sense with tax benefits. Under current law, companies must spread deductions over several years.

“It is insane to do expensing and continue to allow interest deductions,” said NYU law professor Lily Batchelder, a former aide to President Barack Obama. “This is converting the tax code basically into a direct spending program for anything that people can get a tax lawyer to say is debt-financed business investment.”

She added: “The people that would benefit most from this are people that would use a lot of debt and are in real estate.”

Trump has not officially announced the proposal, and the campaign has indicated it will release more details in the coming weeks. But last week Trump said he supported full expensing.

The real estate mogul has resisted ending interest deductions. “He just thought it would be hard for businesses to capitalize without this,” according to Trump economic team advisor Stephen Moore.

Expensing has become popular among Republicans as a way to spur business, while Democrats are concerned it could result in potential revenue loss.

According to the Congressional Budget Office, allowing immediate interest deductions could result in negative 61 percent tax rates.

“I guess the pro would be you really would encourage investment in plants and equipment,” said Steve Rosenthal, a senior fellow at the Tax Policy Center, said. “The con is that you would open up huge arbitrage opportunities.” [WSJ] — E.B. Solomont


Related Articles

arrow_forward_ios
Donald Trump, Eric Trump and Donald Trump Jr with 1125 South Ocean Boulevard (Premier Estate Properties, Getty)
Trump’s Palm Beach estate listed for rent asking $208K a month
Trump’s Palm Beach estate listed for rent asking $208K a month
A photo illustration of prominent guests at the Witkoff wedding (via Instagram)
Nuptials Mar-a-Lago style: Donald Trump, Don Peebles, Barry Sternlicht among real estate elite at Witkoff wedding
Nuptials Mar-a-Lago style: Donald Trump, Don Peebles, Barry Sternlicht among real estate elite at Witkoff wedding
Donald Trump and Grant Cardone (Cardone Enterprises)
Presidential surprise: Donald Trump kicks-off Grant Cardone’s 10X Growth Conference
Presidential surprise: Donald Trump kicks-off Grant Cardone’s 10X Growth Conference
Donald Trump and The Mar-a-Lago Club in Palm Beach (Getty Images, LoopNet, iStock/Illustration by Steven Dilakian for The Real Deal)
Trump’s toilet triumph: Guests of the former No. 1 will have more places to go No. 2
Trump’s toilet triumph: Guests of the former No. 1 will have more places to go No. 2
Eric and Lara Trump with 502 Bald Eagle Drive in Jupiter (Getty, Google Maps)
Trump town: Eric and Lara buy home near Don Jr. in Jupiter
Trump town: Eric and Lara buy home near Don Jr. in Jupiter
Fontainebleau Miami Beach, Jeffrey Soffer and former President Donald Trump (Ebyabe/Wikipedia, Getty, iStock)
Gambling portability a no-go in Florida this year for Jeffrey Soffer, Trump
Gambling portability a no-go in Florida this year for Jeffrey Soffer, Trump
Gil Dezer (Photos by Sonya Revell)
The Closing: Gil Dezer
The Closing: Gil Dezer
Brad Parscale and 2319 Desota Drive (Getty, Google Maps)
Brad Parscale, ex-Trump campaign manager, sells Fort Lauderdale home
Brad Parscale, ex-Trump campaign manager, sells Fort Lauderdale home
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...