Late last night, Senator Charles Schumer (D-NY) announced that proposed changes to the tax treatment of carried interest, strongly opposed by the commercial real estate industry, would be removed from the Inflation Reduction Act. This is the latest in a string of unsuccessful efforts in Congress in the last decade or so to change the tax treatment of carried interest. The changes would have unfairly penalized projects that use financing from outside investors. Undertaking costly brownfield remediation and redevelopment requires substantial upfront risk and costs. Disincentivizing this risk-taking would have especially impacted the commercial real estate industry’s ability to reposition office and retail properties that have been impacted by remote work, e-commerce and the pandemic. The Senate is expected to start the voting process on the Inflation Reduction Act this weekend, with final passage of this significant legislation possible by the end of next week.
