- It is too early to predict which tax plan changes may take effect.
- The current political situation may prevent any significant new tax code changes in 2021.
- Corporate tax rate increase proposals are not slated to return to pre-2017 levels.
Possibilities and unknowns. Those are words that got Howard Altshuler, Partner-in-Charge, Real Estate Services for Weaver, and Rob Nowak, Partner, Tax Services for Weaver, thinking about the future of tax plans and policy with the coming of a new administration. Now that a new administration is in place, Altshuler and Nowak wanted to address the situation and provide some context to what they think it all means in terms of taxes from an overall and a real estate perspective.
“I think we know a little bit more than we did before the election,” Nowak said. “Do we have some firm direction on which aspects of the Biden administration’s tax plan are likely to see traction? Again, we know what’s out in the marketplace. We know it’s been published whereby the administration and congress will be seeking an increase in tax rates on all types of tax, on ordinary income, capital gains, qualified, dividends. On the corporate side, we know we’ll be looking at an increase potentially in the corporate tax rate. And several provisions will specifically impact real estate such as whether or not differed exchanges will continue to be a viable strategy to differ gains.”
And while Altshuler recognized the Democratic administration’s desire for increased taxes in certain areas, it isn’t something that can be automatically accomplished given the current political situation. “One unknown is how the new power-sharing agreement that’s been brokered by senator Schumer and senator McConnell will play into this,” Nowak said. “And how set will the democratic caucus be on pushing this agenda forward unilaterally, rather than seeking to make it a bipartisan effort.”
The one area where Democrats could pass legislation affecting tax policy could be through the reconciliation process. However, with COVID relief taking up the largest focus of congressional efforts to pass a bill through reconciliation, it is unlikely a lot of tax policy changes will find their way into final legislation through that endeavor.