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On June 16, the Senate Finance Committee released their much-anticipated text of the tax provisions of the One Big Beautiful Bill Act. ICSC’s major legislative priorities, including the 199A Passthrough Deduction, Carried Interest, 1031 Exchanges, 100% Bonus Depreciation and the Estate and Gift Tax Exemption remained either untouched or improved from existing tax law. While the text is not yet final and has not yet been signed into law, ICSC is pleased with the bill in its current form.
During visits with key Senators on June 18, ICSC President and CEO Tom McGee, joined by EDENS CEO Jodie McLean raised two issues in the bill that could be improved.
First, the Senate’s version of the tax bill includes some significant changes to the deductions for state and local taxes (SALT). The bill would maintain the existing $10,000 cap on SALT for individuals. However, it would also cap the pass-through entity owner’s state income taxes at 50% when those taxes are paid at the entity level. This amounts to a backdoor tax increase on pass-through businesses. Importantly, ICSC advocacy efforts were successful at retaining full deductibility of state and local property taxes for pass-through businesses.
Second, proposed Section 899, included in both House and Senate bills, would increase taxes on foreign investment from certain countries. At its core, the section is a retaliatory measure aimed at nations that many in Congress and the Trump Administration believe impose unfair taxes on U.S. businesses operating overseas. ICSC is concerned that disincentivizing foreign investment in the United States will reduce the flow of capital that would otherwise be available for our industry, potentially driving rates up and property values down. ICSC recently joined 10 other national real estate organizations in requesting a carve out from this tax for passive investment activities.
The Senate may vote on its bill before July 4. Any changes would need to be approved by the House by another vote. The legislation is on the fast track, with the goal of passage by the end of July.
ICSC remains actively engaged on these and other issues with lawmakers in Washington. If you have any questions or would like to get involved in advocacy efforts, please contact Phillips Hinch, VP of Tax Policy at phinch@icsc.com.