Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/827208
6 S C T / J U N E 2 0 1 7 T he phrase "tax reform" sounds enticingly benign — except when the reform is not thought through clearly enough. Such was surely the case some 30 years ago. The Tax Reform Act of 1986 created passive-loss rules that restricted dramatically the ways investors could make use of losses from real estate investments. With no transition to the change, property values fell and markets froze. Eventually, the savings-and-loan industry, which had recently been granted the ability to do commercial lending as well as residential, collapsed along with the real estate market. "The Reform Act of 1986 was well intended," said Douglas Wiele, president and founding partner of Foothill Partners, in El Dorado Hills, Calif. "But the process of implementation was a disaster — unintended or otherwise, a total disaster." It remains to be seen what, if ICSC is championing real estate's interests during the tax reform process By Steve Bergsman In your corner GGP SEEKS WAYS TO GE T THE VALUE ITS SHARES DESERVE 8 REITS REPORT STRONG FIRST-QUARTER INCOME 10 T WO NE W 'MARKE TPL ACE FAIRNESS' BILLS ARE BEFORE CONGRESS 12 T H E C O M M O N A R E A N E W S F R O M A LL C O R N E R S O F T H E S H O P P I N G C E N T E R I N D U S T R Y anything, moves forward now in the way of tax reform as various proposals are floated by President Trump and Congress. But whatever gets proposed or acted on, this time ICSC is closely monitoring every detail and development. Meanwhile, ICSC and other groups continue to push Congress for passage of two recently introduced bills to allow states to collect taxes on goods purchased online. There are several items in the House Republican tax reform blueprint that concern the industry, but two others that are not even specifically delineated in the blueprint would be catastrophic if enacted, real estate executives say: the elimination of Section 1031 of the Internal Revenue Code, and any change in the tax treatment of carried interest. "Under the new system envisioned in the blueprint, it's possible that the Section 1031 like-kind exchange would be nonexistent after tax reform," said Phillips Hinch, vice president of tax policy at ICSC. Section 1031 allows sellers of a property to postpone paying capital- gains taxes if they reinvest the proceeds in a similar property within a certain time frame. But Section 1031, which has been around since 1921, is a huge part of the real estate world, or as Jennifer Platt, ICSC's vice president of federal operations, notes: "For a segment of our membership, the 1031 exchange is existential; business models are situated on the 1031 exchange." The Federation of Exchange Accommodators agrees that the 1031 exchange mechanism is integral to the health of the real estate industry. The organization also says the 1031 exchange makes for efficient use of productive capital, contributes to the velocity of investment, and even 0 T A X 1 3 1