June 13, 2025 • 27 mins
Trump’s One Big Beautiful Bill is being negotiated in the Senate, and how it gets hammered out could have major implications for commercial real estate. The breadth of possible impacts are huge, from the return of bonus depreciation, which could finally make the math work on deals, to qualified business income deductions allowing CRE to write off more debt and a possible ban on state regulations on AI, which could kill local rules on rent-setting software and change the data center map.
On this episode, EisnerAmper partner Ryan Sievers broke down what CRE needs to have its eye on to maximize profit and get deals moving in a new tax environment.
Register on Bisnow.com to join next Friday's conversation live, or check back here for the conversation after it airs.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mark Bonner (00:11):
All right. Welcome, welcome on another beautiful day
in commercial real estate, andwelcome to Draft Live. It's
Friday, June 13. Friday thethirteenth, in fact. We're
thrilled to have so many of youtuning in from across North
America and Europe, and weappreciate all of you staying up
very late across the pond.
Thank you. We're also streaminglive right now across social
media. I am your host, MarkBonner, Bisnell's editor in
(00:34):
chief, and I'm coming to youlive from New York. On today's
program, we're digging intoTrump's monster tax and spending
bill currently barreling its waythrough the Senate and why CRE
might end up the big winner orthe biggest cautionary tale.
We're talking QBI deductions,bonus depreciation, the SALT tax
deduction, and a rent algorithmfight that's about to go
(00:57):
federal.
And finally, what does it allmean for all of us, commercial
real estate? Joining us today tohelp break it all down, Eisner
Amper, real estate taxwhisperer, Ryan Sievers. He's a
partner in the firm's NationalReal Estate Group who advises on
REITs, funds, and private equitydeals. And he also just
coauthored a deep dive on theone big beautiful bill and all
(01:20):
of its real estate provisions.You can check it out right now
on eisneramper.com.
Ryan, welcome to the program. Iknow you're dialing in from
Dallas.
Ryan Sievers (01:28):
Thank you, Mark. Appreciate it. Glad to be here,
and thanks for having me.
Mark Bonner (01:33):
Thank you. Okay. Before we dive in, a quick
reality check. The big beautifulbill is still very much in
motion. The senate is activelydebating it.
And while July 4 is the target,even Republicans have admitted
this week that might be astretch. Key pieces, SALT, clean
energy tax credits, and businessdeductions, they're still on the
(01:55):
table. So nothing's final yet,but we're going to break it down
today as it is. It's a movingtarget, but one with extremely
large implications for the realestate industry. With that,
let's jump on in.
Bonus depreciation. It's back.For years, developers have
relied on bonus depreciation tomake profit math work, project
(02:18):
math work. The house wants tobring back full 100% write offs
through 2029, but the senatemight change the timing or make
it permanent. Ryan, forcommercial real estate folks
waiting on the sidelines, isthis really the spark to restart
acquisitions and construction,or is debt still too expensive
and timelines too unpredictable?
Ryan Sievers (02:39):
Well, I think, you know, debt is obviously
expensive, but bonusdepreciation and the deductions
that come along with it are hugein terms of making some of the
math work, penciling out dealsand seeing if they make sense.
I've had a conversation with aclient or a prospective client
actually a couple of days ago,and this was one of their main
(03:00):
topics was we made deals in'twenty two, 'twenty three that
don't necessarily make sensetoday because bonus is tiered
down. So right now, bonus is setto expire at the end of twenty
six, at which point it goes tozero. The house bill right now
would, as you said, put thatback at a 100% through 2029. So
(03:22):
it effectively kicks the candown the road three years.
You get full expensing, now,unless you get it in twenty
seven, twenty eight, twentynine. The senate has indicated a
desire or a preference to makethat permanent. It's incredibly
expensive to do. So it may nothappen, but that's the lay of
the land. I think it absolutelyhelps the math in terms of does
(03:44):
a deal make sense of it or canwe squeeze it through and what
is the tax consequence of thatinvestment?
So I think it's probably, from areal estate standpoint, one of
the biggest elements, in myopinion, of this bill.
Mark Bonner (03:58):
Is it enough to get deals moving again?
Ryan Sievers (04:01):
I mean, that's going to depend on the deal
makers and the deal teams. Mean,does it do enough to move the
needle for them? I don't know,but I certainly think it can't
hurt.
Mark Bonner (04:11):
Okay. Okay, let's move on. More interest
deductibility. The 2017 tax lawstarted limiting how much
interest you could write off.Now the House wants to reverse
that, letting borrowers onceagain deduct more of their
financing costs.
But the Senate is stillnegotiating how permanent that
should be. Are your clientstaking this as a green light to
(04:32):
layer on more debt again? Or arelenders and capital partners
still in proceed with cautionmode?
Ryan Sievers (04:38):
Yeah, I haven't seen clients looking at this
from a let's lever upstandpoint. Excuse me. I see it
more of a, you know, real estateso the Tax Cuts and Jobs Act is
what create a lot of theseprovisions that we're talking
about today. And then that waseffective back in '18 in Trump's
term. And January, which is whatwe're talking about here, was
(05:03):
created in that law.
And the real estate lobby or thereal estate group industry fared
pretty well in that bill. Andthey were given certain avenues
to avoid applicability of01/1963. Can make an election to
completely disregard it. And youdo that by taking slightly
(05:24):
longer depreciation lines. Sowhen that depreciation
amortization add back end in'twenty two, we saw a lot more
entities, a lot more taxpayersthat were suddenly faced with a
limitation.
They didn't have to make anelection before, but maybe now
they did. And so they make thatelection. They're still not
subject to interest expenselimitation, but they have a
(05:46):
little bit slower depreciation.Adding that back in now, I
think, makes that math relevantagain. In other words, you're
likely to have taxpayers thatagain have to make the decision
of, well, we haven't made anelection out yet.
The limitation is now increased,so we may not have to. In other
words, you can still deduct yourinterest, and you can have a
(06:07):
little bit shorter lifedepreciation on your assets.
Now, that may not be the case.It's going to be taxpayer
specific. But real estate, Ithink, fares pretty well under
the 163 J rules, and thiscertainly helps.
But the depreciation under theelection versus not, it doesn't
slow down that much. Fornonresidential, it goes from 39
(06:28):
to 40. From residential, it goesfrom 27 out to 30. So outside of
QIP, which is its own littlestory, the pay for isn't huge.
So a lot of what One BigBeautiful Bill does on the real
estate front is tweaking aroundthe edges, frankly, in a lot of
things that were institutedbecause of TCGA.
(06:49):
And this is one of them. It'scertainly helpful, but for real
estate, I don't know if it's amassive boost, let's put it that
way.
Mark Bonner (06:58):
So you don't think that this will create a leverage
situation where everything couldcome roaring back?
Ryan Sievers (07:05):
It doesn't strike me as that significant of a
change for real estate. Itmight, it's always taxpayer
specific. Your facts say, theanalysis of whether they make
this election or not is alwaysgoing to include an analysis of
QIP because that's subject tobonus. So it's going to depend
on what kind of asset you'replacing in service and when, how
(07:28):
leveraged you are, which of alimitation without it. But in
and of itself, it makes adifference.
But it's just a lot of realestate companies are already
making this election, and sothis is a moot point to them.
Mark Bonner (07:41):
Okay. Another line item in here, a QBI deduction
rising to 23%. A lot of realestate pros, as you know,
operate through LLCs orpartnerships. The house wants to
make the pass through tax breakpermanent, bumping it from 20%
to 23%. But in the real world,does that extra 3% make anyone
change how they structure adeal?
Ryan Sievers (08:02):
So on a pure pass through, it's about a one and
change tax rate difference,because you're 23% on 37% is a
little over a percent, somethinglike that. It makes a
difference. I think whenthinking about this bill, what's
important to think about is notjust comparing it to what the
(08:23):
state of events or state of lawis today, but also what would
happen if we did nothing. Right?So today it's a 20% deduction,
but it's going to expire at theend of twenty five, at which
point it's a 0% deduction.
Right? So, you know, in TCJA,they reduced the corporate tax
rate from 35 to to 21. It's ahuge decrease. And so
(08:45):
effectively, they had to dosomething to equalize holding an
investment via corporate versusnot. And QBI was a way to align
those rates so that youeffectively weren't punished for
the form of business in whichyou chose to make your
investment, I.
E. Pass through versuscorporate. Increasing the rate
(09:06):
from 20 to 23 is helpful. It,again, shifts the balance of
power to the partnership flowthrough side away from
corporate, which I'm partial topartnerships. So I like that.
I also think QVI 19A is huge fordebt funds and REITs because a
REIT is I call it super status,a dividend from a REIT
(09:28):
automatically qualifies for QBIregardless of income level,
regardless of anything. It'sjust instantly in. And so debt
funds, because of TCJA, a lot ofthem instituted restructures,
and it's very beneficial tothem. So to see that extended is
huge.
Mark Bonner (09:47):
So it sounds like it's just a line on a K-one,
something that you might see intax prep software at the end of
the year.
Ryan Sievers (09:54):
Yeah. Income from a flow through is going to tell
you if it's QBI or not. And ifit is and you can support it
with, wages and and and basis,then, yeah, you get to deduct if
this passes 23% of your income.So you're paying tax effectively
on a net 77%. That's a huge win.
Mark Bonner (10:16):
Okay. Let's move on to SALT. The House raised the
cap on state and local taxdeductions to $40,000 but only
for people making under a half amillion dollars. That's a tough
threshold for many CRE pros inplaces like New York or
California or Illinois. And nowthe Senate may water it down
even more.
(10:36):
Is this provision just apolitical chess piece or will it
actually help people in theindustry?
Ryan Sievers (10:41):
So I think a couple of things. So it's at 40
right now in the house and itphases out starting with incomes
of $500. The Senate has proposedthe last March, not proposed,
but they've discussed makingthat more like 30. And the real
issue here is increasing thesalt cap is incredibly expensive
(11:04):
to do. And so if you're lookingfor an easy lever to pull to
help you balance some math,adjusting the salt cap by a
little bit equates to a lot ofchange.
So you're absolutely right. Itprobably doesn't help a lot of
people that would phase out ofit. But I think why it's
relevant is because it is such aexpensive proposition, and it is
(11:28):
so important to quite a fewmembers in the house. In other
words, they cannot vote for abill that doesn't include
something on the SALT piece. Andso when the Senate is over here
pulling this lever and saying,well, we can free up hundreds of
billions of dollars by loweringthe SALT cap, they can't lower
it too much because then theHouse is going to say, well, we
just can't vote for that.
So it becomes this verypolitical issue that they're
(11:52):
going to have to figure out howto thread a needle on. The SALT
cap, the home mortgage interestdeduction, again, doesn't always
impact commercial real estate,but it impacts people's cost of
using our product, frankly. Andso to the extent those items
aren't deductible, increases thecost of using them. One thing I
(12:12):
will point out, the originalhouse version, there was
discussion about limitingbusiness self deductions. So
that could be corporate incometaxes and even potentially
property taxes.
And that would have been,frankly, catastrophic to real
estate because for a lot of realestate companies, that is an
enormous expense and would flipyou from a loss or small income
(12:35):
to a lot of income. And so Ithink in this bill, there's good
things, there's bad things, andthen there's frankly omissions
that are great. And that's oneof them, is that that stayed off
the table because that couldhave been really devastating to
the industry.
Mark Bonner (12:49):
So as it stands, and again, this is a moving
target, right? Who would benefitfrom this in real estate?
Ryan Sievers (12:54):
So if your taxable income is over $500, you're
phasing out, think it's 500 to$600. I have to refresh from
that. Basically, if yourincome's over that, you're
dropping back down to $10,000Now, what I mentioned earlier,
you have to compare where we arenow versus where we would be if
we did nothing. And there's goodthings in this bill. There's bad
things in this bill.
I think this one's kind of both,frankly, because, yeah, people
(13:18):
in the upper middle class orwhatever income range you wanna
describe that as, they're gonnaget some deduction for their
property taxes and maybe somestate income taxes. Incomes
above that aren't gonna getanything, and and they're gonna
be stuck at $10. That's kind ofgood. What's bad is, is think
about what if we did nothing?This provision would expire
(13:38):
entirely, and the $10,000 capgoes away, and we're back to
deducting everything.
So we're happy about $40,000,really some people are, but
you're thinking about where weare today and not where we came
from and that we used to be ableto deduct absolutely everything.
Okay.
Mark Bonner (13:56):
If you're just joining us, we're talking big
beautiful bill, the monsterbudget bill currently
percolating through the USSenate and all of its
implications for commercial realestate. We're talking to Ryan
Sievers from Eisner Amper. Let'smove on. Loss limits locked in,
Ryan. Big projects usually meanbig paper losses early on, and
for years, developers could bankthose as net operating losses to
(14:20):
offset future income.
The House wants to cut that offand make loss limitations
permanent. If that survivesSenate, what does it mean for
how projects get capitalized orsequenced?
Ryan Sievers (14:31):
Yep. So the way TCGA approached this was
business losses, trader businesslosses net were capped at
500,000 for a married couple,obviously indexed for inflation.
And that was set to expire here,I think in 'twenty eight, have
to refresh on that. But what itdoes is the tax law just really
(14:54):
quick, it's really good atcreating silos or buckets. And
they put income and deductionsin certain buckets and they
don't let you offset themagainst each other.
And that's a really sneaky kindof backdoor tax increase. In
other words, if you just lookedat your net taxable income and
applied a rate and you weredone, okay, fine. But if they
say, hey, you've got this lossover here, but you can't use it
(15:14):
against this other income. Youend up with net income. That's
the same, that's a tax increase.
Right? And so $4.61 l is justanother silo, another bucket. So
right now, to deduct losses, youhave to have basis. You have to
have at risk basis. You've gotpassive activity loss
limitation.
These are all buckets that youhave to get through. And And now
we've added four sixty one L,yet another bucket. And how it
(15:36):
works now is, well, that wouldbe expiring here soon. So again,
remember where we are todayversus where we could be. And
the right now, if you have aexcess business loss, which is a
loss in excess of that 500,000,basically, the next year it
converts to an NOL, which meansyou can use it for all sorts of
(15:59):
things.
And this bill, the house bill,would would change that and say,
no. It stays a $4.61 l loss. Andso basically, that sits there
until you have four sixty one lincome in the future to absorb
that loss. So it creates anothersiloed bucket that just sits
there by itself. So I'll behonest with you, TCJA came out,
(16:23):
we went through those provisionsabout the NOL conversion and
frankly sat there and said,well, that has to be wrong.
They couldn't have possiblymeant that. So I think this is
one where maybe they meant thisto be the way it works, but they
didn't draft it that way. So nowthey're putting it to actually
reflect that. But yeah, it's asignificant one as well,
(16:44):
potentially.
Mark Bonner (16:45):
So what bottom line? Should ground up
developers be nervous?
Ryan Sievers (16:50):
I mean, a good tax answer is always it depends, and
I hate to give you that answer,but it's going to depend on
owner or partner level activity.In other words, if they have
significant income from othersources, then it could impact
them. They may not be able toutilize that trader business
loss against other sources ofincome, and it could be
(17:10):
significant. So obviously, Ithink what's important is to
model that out and plan andthink about what other sources
of income do I have? Get withyour tax provider, your tax
whoever, and just model that andsay, hey, I've got this coming.
Here's what I have in additionto it. How does it all fit
together? And make sure youunderstand that.
Mark Bonner (17:30):
Okay. So let's move on. AI moratorium versus local
zoning. Data centers arebooming. Everyone knows it.
They're a little controversialtoo. In some markets, they're
already maxing out the grid,sucking up water, or facing
noise complaints. Now the Housebill includes a federal ban on
local governments regulating AI,which critics say could tie
officials' hands when trying tocontrol where data centers go.
(17:54):
If this moratorium sticks, arewe headed for more lawsuits? And
how should developers thinkabout citing and power access?
Ryan Sievers (18:03):
Yeah, it's a great question. And I'll be honest
with you. I did not know thatthat was in there in the bill
until we talked the other day.And I've been thinking about it
since. I think it's a reallyinteresting issue in and what
does it do?
You know, from from myperspective, how I'm thinking
about it is, you know, if thestates don't have the ability to
(18:26):
regulate, you're creatinginefficiencies there. I don't
know how that works its waythrough the system. I think AI
and its impact on a lot ofthings, public accounting being
one of them, like, how does thisall play out? I think it will be
fascinating. I can tell you Ihave a lot of I shouldn't say a
lot, but I have clients in inthe in the data warehouse space
(18:49):
and and businesses booming.
But how this impacts it, Ithink, will be interesting to
see.
Mark Bonner (18:54):
Yeah, well, I mean, look, data centers are going
through the roof. The wholeindustry has been turbocharged.
We've all seen the headlinesthat trillions of dollars have
been invested. But I thinkwhat's underreported and
unappreciated is that in allthese sites across The United
States, they're running intomajor headwinds, right? So I
mean, in your opinion, now thatyou've thought about it for a
bit, Ryan, mean, this just goingto be another fight that the
(19:15):
data center industry has towage?
Ryan Sievers (19:17):
Well, I think just like anything, the pendulum
probably swings too far one way,then swings back. Everyone gets
really excited about somethingand everyone rushes in. And then
potentially reality sets in andyou realize that it's not as
easy as we thought. Andpotentially that is where data
centers could be in the momentis it was this everybody's
rushing in. It's the next wave.
Maybe it was the industrial oftwenty twenty one or twenty
(19:40):
twenty two, whatever it was. Soeverything goes in ebbs and
flows and cycles, and this mightbe one. It's hard to say.
Mark Bonner (19:49):
Okay. Let's get into the federal ban on rent
algorithms. In some cities,local laws have cracked down on
algorithmic rent pricing tools,saying they drive up costs, but
the House bill would ban thoselocal restrictions for ten
years. That could be a hugewindfall for multifamily owners
if it survives dissenting. Areyour clients rethinking how they
(20:11):
sent rents in light of this?
Ryan Sievers (20:12):
I'm not aware of any yet. I'm actually would be
interested to have thoseconversations with them and and
see how they're interpretingthis. Again, you know, it could
impact pricing decisions andstrategies and things like that
and potentially efficiency indoing so, But I'm not aware of
anybody considering this yet. SoI think we're still early on in
(20:35):
that.
Mark Bonner (20:36):
Okay. So I've got a question from the audience. Does
this apply to passive investorslike me that own rental property
directly, or is it just traderbusiness taxpayers? Which I'm
not sure what that's exactly inreference to.
Ryan Sievers (20:50):
If it's four sixty one l, I believe it would apply
to all. It's not just passive.In other words, it's gonna go
through all those buckets, andit applies.
Mark Bonner (20:58):
K. Now one other thing that we have on our list
here is the IRA clean energycredits facing the acts
potentially. Right? Theinflation reduction acts spurred
billions in clean energymanufacturing as well as
offering tax breaks to upgradehousing and other buildings. But
the House bill got so many ofthose credits, and now the
Senate is weighing whether tofollow suit or soften the blow.
(21:21):
If those credits vanish, whathappens to the pipeline for
gigafactories, officerenovations, SPAC labs, and
warehouses that are banking onthat support?
Ryan Sievers (21:30):
Yeah, mean, it's obviously impacted. When looking
at all these provisions, I kindof actually went through and
categorized good versus bad andranked them in terms of how good
and how bad. And I think that'sobviously a significant impact
because just like bonusdepreciation, just like one
thing we didn't talk about,01/1979, the depreciation is
increasing this bill. So all ofthese things that give back your
(21:55):
investment dollars in a quickfashion via a deduction or a
credit. A credit is a deductionon steroids.
It's a dollar for dollar. Thoseinherently impact the economics
of the deal, of the development.So think there's no way that it
doesn't have some sort ofimpact. Exactly quantify that,
(22:15):
think it's difficult to say, butit certainly has an impact.
Mark Bonner (22:18):
Okay. The House wants to raise low income
housing tax credit allocations,especially for rural and tribal
communities. But materials arestill expensive. Labor is hard
to find, and interest rateshaven't budged much. I guess
we're going to find out nextweek if that comes to pass.
Even if the credit passes, willdevelopers jump at them or wait
(22:39):
for a better financing climate?
Ryan Sievers (22:41):
So what I've heard on the low income housing piece,
and that's not an area that Iunfortunately spend much time.
We have a group of partners thatdeal exclusively in that. And
there's a lot of appetite forthe low income housing credit. I
think everybody likes it. Sothere's, you know, some of these
provisions are sticky.
Some people like them, somepeople don't. And by people,
(23:03):
obviously, representatives andsenators, I think there's broad
based support for this. It'slikely to go through. Like we
said, any credit, anyenhancement to a credit program
is going
Mark Bonner (23:15):
to be
Ryan Sievers (23:15):
beneficial. Specifically, how that's
received by the market, I mean,it's got to be a positive, but
specifically, I can't say.
Mark Bonner (23:23):
Right. And obviously, the the multibillion
dollar, maybe even multitrillion dollar question here
is, will it actually lead tomore housing in The United
States? I guess we're gonna haveto wait and find out. Right?
Okay.
Last question here. I know youdon't have a lot of experience
here, but there's a lot ofpeople in our audience that are
really focused on thisOpportunity Zone two point o
proposal. The new version of theOZ program in the House Bill
(23:45):
dials back some of the perks.Right? We're talking about those
8,700 tracks across The UnitedStates to spur development in
communities everywhere,especially for ordinary income
deferral and basis step ups.
Does the real estate industrystill see OZ as a strong tool or
have the changes dimmed investorappetite?
Ryan Sievers (24:07):
Yeah. I think so what we have here is is kind of
QOZ two point o. It's the nextiteration of of the program.
Excuse me. And so your 105%basis adjustments that were
under the old program, those arelimited with a single 10% base
up now.
I think what's interesting inthis program is there's an
(24:28):
enhanced emphasis on ruralareas. In other words, there's a
30% step up rather than 10%, sothat can be an attractive tool
to help spur rural investment.And you mentioned the $10,000
ordinary income piece. That'snot eligible for that step up.
But I think $10,000, in myopinion, isn't going to make
(24:53):
anybody move unless they werealready doing something.
But if you're going to throw anextra $10, why not? But yeah, I
think that's a fairly de minimisnumber there. But, you know, I
think it keeps the program goingwith a real emphasis or
enhancement extension of kind ofthe rural element of the QSU
(25:15):
piece.
Mark Bonner (25:17):
Yeah. And are they still worth it? Right? I mean,
do your clients ask you aboutthis, Ryan?
Ryan Sievers (25:21):
Well, what's funny is if you have a property that
the zone runs down the middle ofthe street, a property on the
left side of the street that'snot in the zone and the property
on the right hand of street thatis in the zone, the one on the
right side probably costs more.So just like a lot of tax
benefits or tax consequences anddeals, the tax benefits or costs
(25:42):
are at least somewhat factoredinto that equation. So again,
all of those things will comeinto the analysis of does it
help? Does it make sense? Anddoes it spur investment?
Probably does.
Mark Bonner (25:57):
Yeah. I think we have time for one more question.
I got a question from theaudience. Ryan, I'm curious to
know how you project interestrates to change based on this
bill, when we could expect tochange, and how much the federal
deficit might increase. Do youhave a projection here?
Ryan Sievers (26:13):
I personally do not. I mean, you can look at
estimates from the CBO andthings like that. And I think
it's it's pretty unanimous thatit does expect it to add to the
deficit. As far as interestrates, I mean, that's a a just a
completely loaded question. Youknow, I think
Mark Bonner (26:33):
We're gonna find out next week. Right?
Ryan Sievers (26:35):
Yeah. People are calling for them to go down.
Will they will they go down? Youknow, I'm a betting person, I
guess my bet would be probablynot. But again, that's not
something that I'm reallystudying on daily or weekly
basis, just kind of dealing withwith the tax consequences of of
(26:55):
the decisions that are beingmade by everybody on this call.
So
Mark Bonner (26:59):
Okay. I'm getting the hook here from my producer,
Ryan. So I think that's all thetime we have today. I wanna
thank you for being here today.We're gonna be back with another
episode of Draft Live next week,so don't miss out.
You can sign up now atbisnell.comfront/events. And by
the way, you can catch all thereplays and highlights of
today's episode on our site andsocials. You can find Live on
(27:23):
your favorite podcast app too. Ilike Spotify personally. We hope
to see you all here at the sametime, same place next Friday.
This is Live. Have a greatweekend y'all, and happy
Father's Day.
All right. Welcome, welcome on another beautiful day
in commercial real estate, andwelcome to Draft Live. It's
Friday, June 13. Friday thethirteenth, in fact. We're
thrilled to have so many of youtuning in from across North
America and Europe, and weappreciate all of you staying up
very late across the pond.
Thank you. We're also streaminglive right now across social
media. I am your host, MarkBonner, Bisnell's editor in
(00:34):
chief, and I'm coming to youlive from New York. On today's
program, we're digging intoTrump's monster tax and spending
bill currently barreling its waythrough the Senate and why CRE
might end up the big winner orthe biggest cautionary tale.
We're talking QBI deductions,bonus depreciation, the SALT tax
deduction, and a rent algorithmfight that's about to go
(00:57):
federal.
And finally, what does it allmean for all of us, commercial
real estate? Joining us today tohelp break it all down, Eisner
Amper, real estate taxwhisperer, Ryan Sievers. He's a
partner in the firm's NationalReal Estate Group who advises on
REITs, funds, and private equitydeals. And he also just
coauthored a deep dive on theone big beautiful bill and all
(01:20):
of its real estate provisions.You can check it out right now
on eisneramper.com.
Ryan, welcome to the program. Iknow you're dialing in from
Dallas.
Ryan Sievers (01:28):
Thank you, Mark. Appreciate it. Glad to be here,
and thanks for having me.
Mark Bonner (01:33):
Thank you. Okay. Before we dive in, a quick
reality check. The big beautifulbill is still very much in
motion. The senate is activelydebating it.
And while July 4 is the target,even Republicans have admitted
this week that might be astretch. Key pieces, SALT, clean
energy tax credits, and businessdeductions, they're still on the
(01:55):
table. So nothing's final yet,but we're going to break it down
today as it is. It's a movingtarget, but one with extremely
large implications for the realestate industry. With that,
let's jump on in.
Bonus depreciation. It's back.For years, developers have
relied on bonus depreciation tomake profit math work, project
(02:18):
math work. The house wants tobring back full 100% write offs
through 2029, but the senatemight change the timing or make
it permanent. Ryan, forcommercial real estate folks
waiting on the sidelines, isthis really the spark to restart
acquisitions and construction,or is debt still too expensive
and timelines too unpredictable?
Ryan Sievers (02:39):
Well, I think, you know, debt is obviously
expensive, but bonusdepreciation and the deductions
that come along with it are hugein terms of making some of the
math work, penciling out dealsand seeing if they make sense.
I've had a conversation with aclient or a prospective client
actually a couple of days ago,and this was one of their main
(03:00):
topics was we made deals in'twenty two, 'twenty three that
don't necessarily make sensetoday because bonus is tiered
down. So right now, bonus is setto expire at the end of twenty
six, at which point it goes tozero. The house bill right now
would, as you said, put thatback at a 100% through 2029. So
(03:22):
it effectively kicks the candown the road three years.
You get full expensing, now,unless you get it in twenty
seven, twenty eight, twentynine. The senate has indicated a
desire or a preference to makethat permanent. It's incredibly
expensive to do. So it may nothappen, but that's the lay of
the land. I think it absolutelyhelps the math in terms of does
(03:44):
a deal make sense of it or canwe squeeze it through and what
is the tax consequence of thatinvestment?
So I think it's probably, from areal estate standpoint, one of
the biggest elements, in myopinion, of this bill.
Mark Bonner (03:58):
Is it enough to get deals moving again?
Ryan Sievers (04:01):
I mean, that's going to depend on the deal
makers and the deal teams. Mean,does it do enough to move the
needle for them? I don't know,but I certainly think it can't
hurt.
Mark Bonner (04:11):
Okay. Okay, let's move on. More interest
deductibility. The 2017 tax lawstarted limiting how much
interest you could write off.Now the House wants to reverse
that, letting borrowers onceagain deduct more of their
financing costs.
But the Senate is stillnegotiating how permanent that
should be. Are your clientstaking this as a green light to
(04:32):
layer on more debt again? Or arelenders and capital partners
still in proceed with cautionmode?
Ryan Sievers (04:38):
Yeah, I haven't seen clients looking at this
from a let's lever upstandpoint. Excuse me. I see it
more of a, you know, real estateso the Tax Cuts and Jobs Act is
what create a lot of theseprovisions that we're talking
about today. And then that waseffective back in '18 in Trump's
term. And January, which is whatwe're talking about here, was
(05:03):
created in that law.
And the real estate lobby or thereal estate group industry fared
pretty well in that bill. Andthey were given certain avenues
to avoid applicability of01/1963. Can make an election to
completely disregard it. And youdo that by taking slightly
(05:24):
longer depreciation lines. Sowhen that depreciation
amortization add back end in'twenty two, we saw a lot more
entities, a lot more taxpayersthat were suddenly faced with a
limitation.
They didn't have to make anelection before, but maybe now
they did. And so they make thatelection. They're still not
subject to interest expenselimitation, but they have a
(05:46):
little bit slower depreciation.Adding that back in now, I
think, makes that math relevantagain. In other words, you're
likely to have taxpayers thatagain have to make the decision
of, well, we haven't made anelection out yet.
The limitation is now increased,so we may not have to. In other
words, you can still deduct yourinterest, and you can have a
(06:07):
little bit shorter lifedepreciation on your assets.
Now, that may not be the case.It's going to be taxpayer
specific. But real estate, Ithink, fares pretty well under
the 163 J rules, and thiscertainly helps.
But the depreciation under theelection versus not, it doesn't
slow down that much. Fornonresidential, it goes from 39
(06:28):
to 40. From residential, it goesfrom 27 out to 30. So outside of
QIP, which is its own littlestory, the pay for isn't huge.
So a lot of what One BigBeautiful Bill does on the real
estate front is tweaking aroundthe edges, frankly, in a lot of
things that were institutedbecause of TCGA.
(06:49):
And this is one of them. It'scertainly helpful, but for real
estate, I don't know if it's amassive boost, let's put it that
way.
Mark Bonner (06:58):
So you don't think that this will create a leverage
situation where everything couldcome roaring back?
Ryan Sievers (07:05):
It doesn't strike me as that significant of a
change for real estate. Itmight, it's always taxpayer
specific. Your facts say, theanalysis of whether they make
this election or not is alwaysgoing to include an analysis of
QIP because that's subject tobonus. So it's going to depend
on what kind of asset you'replacing in service and when, how
(07:28):
leveraged you are, which of alimitation without it. But in
and of itself, it makes adifference.
But it's just a lot of realestate companies are already
making this election, and sothis is a moot point to them.
Mark Bonner (07:41):
Okay. Another line item in here, a QBI deduction
rising to 23%. A lot of realestate pros, as you know,
operate through LLCs orpartnerships. The house wants to
make the pass through tax breakpermanent, bumping it from 20%
to 23%. But in the real world,does that extra 3% make anyone
change how they structure adeal?
Ryan Sievers (08:02):
So on a pure pass through, it's about a one and
change tax rate difference,because you're 23% on 37% is a
little over a percent, somethinglike that. It makes a
difference. I think whenthinking about this bill, what's
important to think about is notjust comparing it to what the
(08:23):
state of events or state of lawis today, but also what would
happen if we did nothing. Right?So today it's a 20% deduction,
but it's going to expire at theend of twenty five, at which
point it's a 0% deduction.
Right? So, you know, in TCJA,they reduced the corporate tax
rate from 35 to to 21. It's ahuge decrease. And so
(08:45):
effectively, they had to dosomething to equalize holding an
investment via corporate versusnot. And QBI was a way to align
those rates so that youeffectively weren't punished for
the form of business in whichyou chose to make your
investment, I.
E. Pass through versuscorporate. Increasing the rate
(09:06):
from 20 to 23 is helpful. It,again, shifts the balance of
power to the partnership flowthrough side away from
corporate, which I'm partial topartnerships. So I like that.
I also think QVI 19A is huge fordebt funds and REITs because a
REIT is I call it super status,a dividend from a REIT
(09:28):
automatically qualifies for QBIregardless of income level,
regardless of anything. It'sjust instantly in. And so debt
funds, because of TCJA, a lot ofthem instituted restructures,
and it's very beneficial tothem. So to see that extended is
huge.
Mark Bonner (09:47):
So it sounds like it's just a line on a K-one,
something that you might see intax prep software at the end of
the year.
Ryan Sievers (09:54):
Yeah. Income from a flow through is going to tell
you if it's QBI or not. And ifit is and you can support it
with, wages and and and basis,then, yeah, you get to deduct if
this passes 23% of your income.So you're paying tax effectively
on a net 77%. That's a huge win.
Mark Bonner (10:16):
Okay. Let's move on to SALT. The House raised the
cap on state and local taxdeductions to $40,000 but only
for people making under a half amillion dollars. That's a tough
threshold for many CRE pros inplaces like New York or
California or Illinois. And nowthe Senate may water it down
even more.
(10:36):
Is this provision just apolitical chess piece or will it
actually help people in theindustry?
Ryan Sievers (10:41):
So I think a couple of things. So it's at 40
right now in the house and itphases out starting with incomes
of $500. The Senate has proposedthe last March, not proposed,
but they've discussed makingthat more like 30. And the real
issue here is increasing thesalt cap is incredibly expensive
(11:04):
to do. And so if you're lookingfor an easy lever to pull to
help you balance some math,adjusting the salt cap by a
little bit equates to a lot ofchange.
So you're absolutely right. Itprobably doesn't help a lot of
people that would phase out ofit. But I think why it's
relevant is because it is such aexpensive proposition, and it is
(11:28):
so important to quite a fewmembers in the house. In other
words, they cannot vote for abill that doesn't include
something on the SALT piece. Andso when the Senate is over here
pulling this lever and saying,well, we can free up hundreds of
billions of dollars by loweringthe SALT cap, they can't lower
it too much because then theHouse is going to say, well, we
just can't vote for that.
So it becomes this verypolitical issue that they're
(11:52):
going to have to figure out howto thread a needle on. The SALT
cap, the home mortgage interestdeduction, again, doesn't always
impact commercial real estate,but it impacts people's cost of
using our product, frankly. Andso to the extent those items
aren't deductible, increases thecost of using them. One thing I
(12:12):
will point out, the originalhouse version, there was
discussion about limitingbusiness self deductions. So
that could be corporate incometaxes and even potentially
property taxes.
And that would have been,frankly, catastrophic to real
estate because for a lot of realestate companies, that is an
enormous expense and would flipyou from a loss or small income
(12:35):
to a lot of income. And so Ithink in this bill, there's good
things, there's bad things, andthen there's frankly omissions
that are great. And that's oneof them, is that that stayed off
the table because that couldhave been really devastating to
the industry.
Mark Bonner (12:49):
So as it stands, and again, this is a moving
target, right? Who would benefitfrom this in real estate?
Ryan Sievers (12:54):
So if your taxable income is over $500, you're
phasing out, think it's 500 to$600. I have to refresh from
that. Basically, if yourincome's over that, you're
dropping back down to $10,000Now, what I mentioned earlier,
you have to compare where we arenow versus where we would be if
we did nothing. And there's goodthings in this bill. There's bad
things in this bill.
I think this one's kind of both,frankly, because, yeah, people
(13:18):
in the upper middle class orwhatever income range you wanna
describe that as, they're gonnaget some deduction for their
property taxes and maybe somestate income taxes. Incomes
above that aren't gonna getanything, and and they're gonna
be stuck at $10. That's kind ofgood. What's bad is, is think
about what if we did nothing?This provision would expire
(13:38):
entirely, and the $10,000 capgoes away, and we're back to
deducting everything.
So we're happy about $40,000,really some people are, but
you're thinking about where weare today and not where we came
from and that we used to be ableto deduct absolutely everything.
Okay.
Mark Bonner (13:56):
If you're just joining us, we're talking big
beautiful bill, the monsterbudget bill currently
percolating through the USSenate and all of its
implications for commercial realestate. We're talking to Ryan
Sievers from Eisner Amper. Let'smove on. Loss limits locked in,
Ryan. Big projects usually meanbig paper losses early on, and
for years, developers could bankthose as net operating losses to
(14:20):
offset future income.
The House wants to cut that offand make loss limitations
permanent. If that survivesSenate, what does it mean for
how projects get capitalized orsequenced?
Ryan Sievers (14:31):
Yep. So the way TCGA approached this was
business losses, trader businesslosses net were capped at
500,000 for a married couple,obviously indexed for inflation.
And that was set to expire here,I think in 'twenty eight, have
to refresh on that. But what itdoes is the tax law just really
(14:54):
quick, it's really good atcreating silos or buckets. And
they put income and deductionsin certain buckets and they
don't let you offset themagainst each other.
And that's a really sneaky kindof backdoor tax increase. In
other words, if you just lookedat your net taxable income and
applied a rate and you weredone, okay, fine. But if they
say, hey, you've got this lossover here, but you can't use it
(15:14):
against this other income. Youend up with net income. That's
the same, that's a tax increase.
Right? And so $4.61 l is justanother silo, another bucket. So
right now, to deduct losses, youhave to have basis. You have to
have at risk basis. You've gotpassive activity loss
limitation.
These are all buckets that youhave to get through. And And now
we've added four sixty one L,yet another bucket. And how it
(15:36):
works now is, well, that wouldbe expiring here soon. So again,
remember where we are todayversus where we could be. And
the right now, if you have aexcess business loss, which is a
loss in excess of that 500,000,basically, the next year it
converts to an NOL, which meansyou can use it for all sorts of
(15:59):
things.
And this bill, the house bill,would would change that and say,
no. It stays a $4.61 l loss. Andso basically, that sits there
until you have four sixty one lincome in the future to absorb
that loss. So it creates anothersiloed bucket that just sits
there by itself. So I'll behonest with you, TCJA came out,
(16:23):
we went through those provisionsabout the NOL conversion and
frankly sat there and said,well, that has to be wrong.
They couldn't have possiblymeant that. So I think this is
one where maybe they meant thisto be the way it works, but they
didn't draft it that way. So nowthey're putting it to actually
reflect that. But yeah, it's asignificant one as well,
(16:44):
potentially.
Mark Bonner (16:45):
So what bottom line? Should ground up
developers be nervous?
Ryan Sievers (16:50):
I mean, a good tax answer is always it depends, and
I hate to give you that answer,but it's going to depend on
owner or partner level activity.In other words, if they have
significant income from othersources, then it could impact
them. They may not be able toutilize that trader business
loss against other sources ofincome, and it could be
(17:10):
significant. So obviously, Ithink what's important is to
model that out and plan andthink about what other sources
of income do I have? Get withyour tax provider, your tax
whoever, and just model that andsay, hey, I've got this coming.
Here's what I have in additionto it. How does it all fit
together? And make sure youunderstand that.
Mark Bonner (17:30):
Okay. So let's move on. AI moratorium versus local
zoning. Data centers arebooming. Everyone knows it.
They're a little controversialtoo. In some markets, they're
already maxing out the grid,sucking up water, or facing
noise complaints. Now the Housebill includes a federal ban on
local governments regulating AI,which critics say could tie
officials' hands when trying tocontrol where data centers go.
(17:54):
If this moratorium sticks, arewe headed for more lawsuits? And
how should developers thinkabout citing and power access?
Ryan Sievers (18:03):
Yeah, it's a great question. And I'll be honest
with you. I did not know thatthat was in there in the bill
until we talked the other day.And I've been thinking about it
since. I think it's a reallyinteresting issue in and what
does it do?
You know, from from myperspective, how I'm thinking
about it is, you know, if thestates don't have the ability to
(18:26):
regulate, you're creatinginefficiencies there. I don't
know how that works its waythrough the system. I think AI
and its impact on a lot ofthings, public accounting being
one of them, like, how does thisall play out? I think it will be
fascinating. I can tell you Ihave a lot of I shouldn't say a
lot, but I have clients in inthe in the data warehouse space
(18:49):
and and businesses booming.
But how this impacts it, Ithink, will be interesting to
see.
Mark Bonner (18:54):
Yeah, well, I mean, look, data centers are going
through the roof. The wholeindustry has been turbocharged.
We've all seen the headlinesthat trillions of dollars have
been invested. But I thinkwhat's underreported and
unappreciated is that in allthese sites across The United
States, they're running intomajor headwinds, right? So I
mean, in your opinion, now thatyou've thought about it for a
bit, Ryan, mean, this just goingto be another fight that the
(19:15):
data center industry has towage?
Ryan Sievers (19:17):
Well, I think just like anything, the pendulum
probably swings too far one way,then swings back. Everyone gets
really excited about somethingand everyone rushes in. And then
potentially reality sets in andyou realize that it's not as
easy as we thought. Andpotentially that is where data
centers could be in the momentis it was this everybody's
rushing in. It's the next wave.
Maybe it was the industrial oftwenty twenty one or twenty
(19:40):
twenty two, whatever it was. Soeverything goes in ebbs and
flows and cycles, and this mightbe one. It's hard to say.
Mark Bonner (19:49):
Okay. Let's get into the federal ban on rent
algorithms. In some cities,local laws have cracked down on
algorithmic rent pricing tools,saying they drive up costs, but
the House bill would ban thoselocal restrictions for ten
years. That could be a hugewindfall for multifamily owners
if it survives dissenting. Areyour clients rethinking how they
(20:11):
sent rents in light of this?
Ryan Sievers (20:12):
I'm not aware of any yet. I'm actually would be
interested to have thoseconversations with them and and
see how they're interpretingthis. Again, you know, it could
impact pricing decisions andstrategies and things like that
and potentially efficiency indoing so, But I'm not aware of
anybody considering this yet. SoI think we're still early on in
(20:35):
that.
Mark Bonner (20:36):
Okay. So I've got a question from the audience. Does
this apply to passive investorslike me that own rental property
directly, or is it just traderbusiness taxpayers? Which I'm
not sure what that's exactly inreference to.
Ryan Sievers (20:50):
If it's four sixty one l, I believe it would apply
to all. It's not just passive.In other words, it's gonna go
through all those buckets, andit applies.
Mark Bonner (20:58):
K. Now one other thing that we have on our list
here is the IRA clean energycredits facing the acts
potentially. Right? Theinflation reduction acts spurred
billions in clean energymanufacturing as well as
offering tax breaks to upgradehousing and other buildings. But
the House bill got so many ofthose credits, and now the
Senate is weighing whether tofollow suit or soften the blow.
(21:21):
If those credits vanish, whathappens to the pipeline for
gigafactories, officerenovations, SPAC labs, and
warehouses that are banking onthat support?
Ryan Sievers (21:30):
Yeah, mean, it's obviously impacted. When looking
at all these provisions, I kindof actually went through and
categorized good versus bad andranked them in terms of how good
and how bad. And I think that'sobviously a significant impact
because just like bonusdepreciation, just like one
thing we didn't talk about,01/1979, the depreciation is
increasing this bill. So all ofthese things that give back your
(21:55):
investment dollars in a quickfashion via a deduction or a
credit. A credit is a deductionon steroids.
It's a dollar for dollar. Thoseinherently impact the economics
of the deal, of the development.So think there's no way that it
doesn't have some sort ofimpact. Exactly quantify that,
(22:15):
think it's difficult to say, butit certainly has an impact.
Mark Bonner (22:18):
Okay. The House wants to raise low income
housing tax credit allocations,especially for rural and tribal
communities. But materials arestill expensive. Labor is hard
to find, and interest rateshaven't budged much. I guess
we're going to find out nextweek if that comes to pass.
Even if the credit passes, willdevelopers jump at them or wait
(22:39):
for a better financing climate?
Ryan Sievers (22:41):
So what I've heard on the low income housing piece,
and that's not an area that Iunfortunately spend much time.
We have a group of partners thatdeal exclusively in that. And
there's a lot of appetite forthe low income housing credit. I
think everybody likes it. Sothere's, you know, some of these
provisions are sticky.
Some people like them, somepeople don't. And by people,
(23:03):
obviously, representatives andsenators, I think there's broad
based support for this. It'slikely to go through. Like we
said, any credit, anyenhancement to a credit program
is going
Mark Bonner (23:15):
to be
Ryan Sievers (23:15):
beneficial. Specifically, how that's
received by the market, I mean,it's got to be a positive, but
specifically, I can't say.
Mark Bonner (23:23):
Right. And obviously, the the multibillion
dollar, maybe even multitrillion dollar question here
is, will it actually lead tomore housing in The United
States? I guess we're gonna haveto wait and find out. Right?
Okay.
Last question here. I know youdon't have a lot of experience
here, but there's a lot ofpeople in our audience that are
really focused on thisOpportunity Zone two point o
proposal. The new version of theOZ program in the House Bill
(23:45):
dials back some of the perks.Right? We're talking about those
8,700 tracks across The UnitedStates to spur development in
communities everywhere,especially for ordinary income
deferral and basis step ups.
Does the real estate industrystill see OZ as a strong tool or
have the changes dimmed investorappetite?
Ryan Sievers (24:07):
Yeah. I think so what we have here is is kind of
QOZ two point o. It's the nextiteration of of the program.
Excuse me. And so your 105%basis adjustments that were
under the old program, those arelimited with a single 10% base
up now.
I think what's interesting inthis program is there's an
(24:28):
enhanced emphasis on ruralareas. In other words, there's a
30% step up rather than 10%, sothat can be an attractive tool
to help spur rural investment.And you mentioned the $10,000
ordinary income piece. That'snot eligible for that step up.
But I think $10,000, in myopinion, isn't going to make
(24:53):
anybody move unless they werealready doing something.
But if you're going to throw anextra $10, why not? But yeah, I
think that's a fairly de minimisnumber there. But, you know, I
think it keeps the program goingwith a real emphasis or
enhancement extension of kind ofthe rural element of the QSU
(25:15):
piece.
Mark Bonner (25:17):
Yeah. And are they still worth it? Right? I mean,
do your clients ask you aboutthis, Ryan?
Ryan Sievers (25:21):
Well, what's funny is if you have a property that
the zone runs down the middle ofthe street, a property on the
left side of the street that'snot in the zone and the property
on the right hand of street thatis in the zone, the one on the
right side probably costs more.So just like a lot of tax
benefits or tax consequences anddeals, the tax benefits or costs
(25:42):
are at least somewhat factoredinto that equation. So again,
all of those things will comeinto the analysis of does it
help? Does it make sense? Anddoes it spur investment?
Probably does.
Mark Bonner (25:57):
Yeah. I think we have time for one more question.
I got a question from theaudience. Ryan, I'm curious to
know how you project interestrates to change based on this
bill, when we could expect tochange, and how much the federal
deficit might increase. Do youhave a projection here?
Ryan Sievers (26:13):
I personally do not. I mean, you can look at
estimates from the CBO andthings like that. And I think
it's it's pretty unanimous thatit does expect it to add to the
deficit. As far as interestrates, I mean, that's a a just a
completely loaded question. Youknow, I think
Mark Bonner (26:33):
We're gonna find out next week. Right?
Ryan Sievers (26:35):
Yeah. People are calling for them to go down.
Will they will they go down? Youknow, I'm a betting person, I
guess my bet would be probablynot. But again, that's not
something that I'm reallystudying on daily or weekly
basis, just kind of dealing withwith the tax consequences of of
(26:55):
the decisions that are beingmade by everybody on this call.
So
Mark Bonner (26:59):
Okay. I'm getting the hook here from my producer,
Ryan. So I think that's all thetime we have today. I wanna
thank you for being here today.We're gonna be back with another
episode of Draft Live next week,so don't miss out.
You can sign up now atbisnell.comfront/events. And by
the way, you can catch all thereplays and highlights of
today's episode on our site andsocials. You can find Live on
(27:23):
your favorite podcast app too. Ilike Spotify personally. We hope
to see you all here at the sametime, same place next Friday.
This is Live. Have a greatweekend y'all, and happy
Father's Day.
Popular Podcasts
New Heights with Jason & Travis Kelce
Football’s funniest family duo — Jason Kelce of the Philadelphia Eagles and Travis Kelce of the Kansas City Chiefs — team up to provide next-level access to life in the league as it unfolds. The two brothers and Super Bowl champions drop weekly insights about the weekly slate of games and share their INSIDE perspectives on trending NFL news and sports headlines. They also endlessly rag on each other as brothers do, chat the latest in pop culture and welcome some very popular and well-known friends to chat with them. Check out new episodes every Wednesday. Follow New Heights on the Wondery App, YouTube or wherever you get your podcasts. You can listen to new episodes early and ad-free, and get exclusive content on Wondery+. Join Wondery+ in the Wondery App, Apple Podcasts or Spotify. And join our new membership for a unique fan experience by going to the New Heights YouTube channel now!
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!
Fudd Around And Find Out
UConn basketball star Azzi Fudd brings her championship swag to iHeart Women’s Sports with Fudd Around and Find Out, a weekly podcast that takes fans along for the ride as Azzi spends her final year of college trying to reclaim the National Championship and prepare to be a first round WNBA draft pick. Ever wonder what it’s like to be a world-class athlete in the public spotlight while still managing schoolwork, friendships and family time? It’s time to Fudd Around and Find Out!