'Could' is the operative word. Results aren't just about proclaimed policies that could easily change after an election, but the difficult process of passing tax legislation.
As an industry, commercial real estate has a particularly keen eye on tax policy, especially during elections. So, what's likely to happen on Tuesday, November 5, 2024, when the nation chooses between Kamala Harris and Donald Trump?
The answer is maybe nowhere near as much as one would think.
Developers, investors, owners, brokers, and others involved in CRE have a heavy interest in tax policy for some basic reasons. Projects typically require financing of large debt amounts. Legal depreciation of buildings can run decades or, in the case of land itself, may not be depreciable. That leaves money tied up for a long time.
"Given that the nature of real estate is not super liquid, anything that raises costs now would come at the worst possible time," David McCarthy, managing director and head of legislative affairs at the Commercial Real Estate Finance Council, told Reuters.
Major tax changes happen infrequently, with the last large reassessment of the tax codes having happened in 2017, largely due to the House under the direction of former House Speaker Paul Ryan. Then-President Trump signed the bill, but his administration wasn't a large force in structuring the legislation and strategy.
There have been attempts since to change such areas as capital gains, step-up basis, like-kind exchanges, and pass-through deductions, with little substantial accomplishment. But 2025 is the year that some major tax breaks were created through the 2017 Tax Cuts and Jobs Act.
According to Reuters, McCarthy said that a key provision the industry wants to be reauthorized is the 199A — or qualified business income deduction. Trump has said he wants tax cuts made permanent although but hasn't made his views on the 199A explicit. Harris hasn't said how she would treat pass-through deductions, though she has said she wants to roll back some of the 2017 changes for the richest in the country.
That degree of uncertainty might explain why, when it comes to the real estate sector alone, contributions to the two major candidates are almost equal, according to the election financial site OpenSecrets.org, even though Trump has made his money in commercial real estate. Harris has received $17,802,455, with Trump getting $17,314,604.
Reuters added CRE contributions to those from the finance and insurance sectors, which showed Trump ahead of Harris by $234.9 million over $117 million.
However, tax cut changes depend on multiple factors, not just the presidential election. Tax policy is notoriously difficult to pass through legislation. One way of ensuring modifications is for a political party to hold the presidency, enough of a House majority to ensure at least a 51% vote on a bill, and at least 60 members of the Senate who won't rock the boat because that is enough to pass a cloture vote. Another is to have two-thirds of the House and Senate willing to vote in favor, which gives enough backing to override a presidential veto.
If there is a majority of the given party in the Senate, even if lacking 60 members, as well as a majority in the House and a sitting president of the same party, then a reconciliation bill, which requires only a simple majority in the Senate, can work. That's how the 2017 tax bill passed.
If Republicans gain control of the Senate, keep it in the House, and win the presidency, then passing a given tax bill is possible. Suppose any of those three conditions fall through. In that case, getting any tax deal will become considerably harder and must include bipartisan support — and all the backroom dealing that would be needed to get a compromise.