1. CCIM Institute Board of Directors Meeting May 1, 2014 Tax Reform and Its Effect on Commercial Real Estate Presented by Evan M. Liddiard, CPA Senior Policy Representative – Federal Taxation National Association of REALTORS®

4. Fundamental Tax Reform

5. Comprehensive Tax Reform

6. Incremental Tax Reform

7. Comparison of Tax Reform Types Fundamental Exciting but scary Hard to predict outcome Not politically viable in near term Examples: VAT (total replacement) National retail sales tax Flat tax Incremental Safe but slow Not sexy Hard to focus public attention Example: Student & Family Tax Simplification Act (HR 3393 )

8. Comprehensive Tax Reform Big enough to capture imagination of taxpayers Not so bold as to be too risky or unpredictable If not revenue neutral, risk of looking like tax hike or tax cut in disguise If not distributionally neutral, very hard to get bipartisan support Examples: Camp tax reform draft plan Baucus tax reform discussion draft

9. Other Tax Reform Issues Corporate only reform? Could make losers of pass-thru entities Business reform? May not be politically feasible Corporate and individual reform at same time? Most likely scenario Huge undertaking Will businesses subsidize individuals, as in 1986?

10. Tax Reform – Potentially Dangerous to Commercial Real Estate If revenue neutral, tax rate cuts will have to be “paid for” by cutting back or repealing vital deductions, exemptions, and credits If distributionally-neutral, higher income individuals may face higher tax rates to keep overall system’s progressivity

11. What’s at Stake for Commercial Real Estate?

12. Congress’s Tax Committees

13. Depreciation

14. Like-kind Exchanges

15. Capital Gains Tax Rate on Depreciation Recapture

16. Carried Interest

17. Other Tax Changes on the Horizon

18. Expired Tax Provisions

19. Leasehold Improvements

20. Deduction for Energy Efficient Commercial Buildings

21. FIRPTA Reform? (Real Estate Investment & Jobs Act)

22. Next Year and Beyond

23. New Leadership Ways & Means Committee

24. New Leadership Finance Committee

25. Who Will Control the Senate in 2015?

26. What Will President Do With a GOP-Controlled Congress?