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
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
Donald Trump with sons Eric and Don Jr. and 1125 South Ocean Boulevard (Getty, Google Maps/Illustration by Alexis Manrodt for The Real Deal)
Trump lists beachfront mansion next to Mar-a-Lago for $49M
Trump lists beachfront mansion next to Mar-a-Lago for $49M
Photo illustration of Donald Trump at Mar-a-Lago (iStock, Getty/Illustration by Kevin Rebong for TRD)
Trump argues to live in Mar-a-Lago — as an employee
Trump argues to live in Mar-a-Lago — as an employee
535 North County Road and Mark Pulte with former President Donald Trump (Google Maps; Pulte Family Foundation; Getty)
Spec home built on Trump’s former Palm Beach property under contract for $140M
Spec home built on Trump’s former Palm Beach property under contract for $140M
Trump Plaza’s condo board votes to remove ex-president’s name from West Palm towers
Trump Plaza’s condo board votes to remove ex-president’s name from West Palm towers
Trump Plaza’s condo board votes to remove ex-president’s name from West Palm towers
arrow_forward_ios

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

Loading...