Congress Debates Limiting Property Tax Deductions

Congress is drafting a tax legislation to extend large portions of the 2017 tax law, the Tax Cuts and Jobs Act, passed in President Donald Trump’s first term. One alarming proposal being given serious consideration would cap or eliminate the ability of a business to claim a federal tax deduction for its state and local property tax payments (a concept known as Business SALT or B SALT).

Generally, business taxpayers have been able to deduct ordinary and necessary business expenses–including taxes paid to state and local governments–from their federal taxable income. The Business SALT deduction has been part of the tax code since the inception of the income tax in 1913.

The proposal would be a serious tax increase on commercial real estate. State and local property taxes represent, on average, 40% of the operating expenses of U.S. commercial real estate businesses. These taxes are a cash outlay that are due regardless of whether a business has actual profits.  Because of that, firms could end up owing federal taxes on money that they do not have.

ICSC is working with other national real estate organizations to urge Congress to reject any cap or limitation on the deductibility of state and local business-related property taxes. This tax increase would likely lead to the insolvency and foreclosure of many properties and discourage investment in our communities.

During the ICSC Federal Fly-In in March attendees met with Congressional offices to ask lawmakers to oppose this proposal. Additional “Mini Fly-Ins” will be taking place throughout the spring and summer to continue educating legislators on the devastating  impact this tax increase would have on commercial real estate.  

Click here to send a message to your elected officials in Washington, DC, and urge them to oppose this measure.

For more information contact Phillips Hinch at phinch@icsc.com.