In 2025, the expiration of large portions of the Tax Cuts and Jobs Act (TCJA) will trigger broad consideration of measures to reform the tax code and keep the U.S. economy moving forward. Congress should reject proposals that would harm commercial real estate projects that strengthen our neighborhoods and encourage investment and job creation.

Many of the tax provisions under review have a significant impact on commercial real estate, including ending carried interest, eliminating like-kind exchanges, retaining the 20% pass-through deduction and repealing the stepped-up basis for inherited assets.

Carried Interest

Since 2007, ICSC has worked closely with our members to successfully defeat numerous proposals by Congress to change the tax treatment of carried interest. Carried interest—or “the promote” in real estate terms—is a common feature of many development deals. More than half of partnerships in the U.S. are real estate related. Roughly 70% of ICSC owner-developer members say they have used carried interest in their deals. Eliminating carried interest will create a chilling effect on Main Street real estate development and discourage capital from flowing to higher risk projects, like underserved rural and urban markets, food deserts and complicated redevelopment projects.

ICSC opposes changes to the tax treatment of “the promote”/carried interest.

Carried Interest Issue Brief 

Keeping Section 1031 of the Tax Code (Like-Kind Exchanges)

LKEs facilitate economic development by connecting real estate entrepreneurs with opportunities for community enhancement, increasing property values, taxes and transfer fees for local governments. LKEs have been part of the tax code since 1921 to enable efficient deployment of capital for reinvestment in economic development projects and job creation.

ICSC supports the preservation of Section 1031 (LKEs).

LKE Issue Brief 

20% Pass-Through Deduction (Sec. 199A)

Congress created the 20% pass-through deduction in the 2017 tax reform law to help equalize the tax rate paid by pass-through businesses with the reduced 21% corporate rate. This deduction is set to expire at the end of 2025. Pass-through businesses – including S corporations, partnerships, sole proprietorships and Real Estate Investment Trusts (REITs) – are the bedrock of the American economy, making up about 95% of all business entities.

ICSC supports the full extension of section 199A.

Pass-Through Deduction Issue Brief 

Preserving the Stepped-up Basis

The Biden/Harris Administration’s budgets have consistently included plans to end stepped-up basis and impose capital gains tax on the unrealized gain in excess of $1 million and impose income tax on the gain at death. Under this proposal, death would be a taxable event at far lower asset levels than the current estate tax threshold. This tax is due before the asset is actually sold by the heir. Large estates would also be subject to the estate tax.

ICSC opposes ending stepped-up basis, which would harm family-owned businesses, erode property values and add to existing estate tax requirements.

Stepped-up Basis Issue Brief 

Learn More About the Congressional Tax Writing Committee Members: 

House Ways and Means Committee 

Senate Finance Committee