Stephen Ashley isn’t sure how much his company will benefit from a 116-word tax break for residential property owners slipped into the omnibus and coronavirus relief package late last month.
But the Rochester, N.Y., apartment developer thinks it will be worth more than the $540,000 his company spent lobbying for what he describes as a technical fix to the 2017 tax code overhaul.
Ashley, whose company owns about 3,000 apartment units in upstate New York, and other real estate developers will benefit from a tweak to the 2017 tax law that had resulted in higher taxes for the more heavily indebted owners of residential rental property.
The fix in last month’s spending package allows certain owners of apartments built or bought before Jan. 1, 2018, to depreciate their investments over 30 years instead of 40 years. The Joint Committee on Taxation estimates the provision, buried on page 2,452 of the massive omnibus package, will cost $3.3 billion over 10 years.
Ashley and others familiar with the 2017 law’s drafting said it wasn’t lawmakers’ intent to subject residential property owners to the longer depreciation period. But the law’s text was clear enough that the Treasury Department couldn’t regulate property owners out of the crosshairs without new legislation, Ashley said in an interview.
“When you sit down and explain the facts to legislators they say, ‘That doesn’t make sense. That wasn’t the right thing to do,’ ” said Ashley, a former Fannie Mae chairman who knows his way around the Capitol. He says he personally lobbied lawmakers for the fix, and Senate records show he also deployed lobbyists from DLA Piper LLP’s Washington office to work the issue.
Ashley’s hometown congressman, Rep. Joseph D. Morelle, D-N.Y., a member of the powerful Rules Committee elected in 2018 after a 27-year stint representing Rochester in the state assembly, was the lead House sponsor of standalone legislation to enact the fix.
Ashley, who calls Morelle a “longtime friend,” was among the lawmaker’s top contributors to his first run for Congress, according to data compiled by the Center for Responsive Politics.
The industry also won big-name support from South Dakota Sen. John Thune, his chamber’s No. 2 Republican and a member of the tax-writing Finance Committee, who introduced the Senate version.
“It’s a pure benefit for people who are already in this situation” of depreciating their property over 40 years, said Michael Wiener, a Los Angeles attorney who advises clients on complex real estate transactions.