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Philadelphia February 2021 – Key Takeaways

  • It is expected the Biden Administration will propose changes to the tax code, but the only available information is from their website and the campaign trail.  (Jennifer DeMasi, Devorah Greenfield / EisnerAmper)
  • Based on speculation from his campaign, it is expected that changes to the tax code will not affect households earning under $400K per year, which is the threshold used most often in discussions from the Biden Administration regarding tax changes.  (Jennifer DeMasi, Devorah Greenfield / EisnerAmper)
  • These are some possible key changes: 
    • Raising the top tier tax brackets from 37% to 39.6% and possibly eliminating the 35% bracket. 
    • Eliminating the Qualified Business Income (QBI) deduction for any household earning over $400K per year. 
    • Increasing taxes on Long Term Capital Gains and Qualified Dividends to ordinary rates for taxpayers with income over $1 million. 
    • Enacting Social Security tax on wages over $400K (but not between the current $137,700 and $400,000, creating a “donut hole” between those amounts). 
    • Limiting Itemized Deductions.
    • Reducing the Lifetime Exclusion on the amounts taxpayers can gift to others free of tax during their lifetime. 
    • Eliminating of the stepped-up basis of appreciated property at death. 
    • Increasing the corporate tax rate to 28%.
    • Creating a 15% minimum tax for corporations that have $100,000,000 or more in book profits. 
    • Elimination of Like-Kind Exchanges for all property types for taxpayers with AGI in excess of $400K.
    • Increasing Tax Credit / Incentive Programs such as the New Markets Tax Credit (to encourage investment in low income communities), Low Income Housing Credit, Community Development Block Grants, increased regulations and reforms to the Opportunity Zones, a First Time Homebuyer’s Tax Credit and a Renter’s Credit.
  • Proposed changes to the tax code may impact decisions of individuals and corporations to defer losses. (Jennifer DeMasi, Devorah Greenfield / EisnerAmper)
  • Changes were made to the CARES act, the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC) that affect eligibility and businesses should be aware of the changes so they can make most efficient use of the credits. (Jennifer DeMasi, Devorah Greenfield / EisnerAmper)
  • Multi-Family, Industrial and Life Sciences markets continue to thrive. (Bart Mellits / Ballard Spahr, Mark Celoni / Pennoni Associates, Carlo Batts / Rittenhouse Appraisals)
  • The unemployment rate edged down but there are still many reporting not working or working less due to the pandemic. (Paul Flora / Federal Reserve Bank of Philadelphia)
  • Despite employment issues, there is still a tight labor market in some sectors. (Paul Flora / Federal Reserve Bank of Philadelphia)
  • There is increased activity in many areas since the end of 2020, including leasing rates, utility infrastructure, investor demands, new proposals and development opportunities. There is a lot of spec development in the Philadelphia market in the Life Sciences sector. (Christian Dalzell / Counter Management, Mark Celoni / Pennoni Associates, Matt Hoffman / Chatham Financial, Carlo Batts / Rittenhouse Appraisals, Jim Karmolinski / Kelly Maiello, Robert Bright / Talson Solutions)
  • The maintenance expenses in office buildings have gone down and some tenants are receiving refunds while other landlords are grossing up and normalizing expenses.  Landlords and tenants should pay close attention to reconciliations. (Ed Opall / EisnerAmper)
  • The transition from LIBOR to SOFR will likely be delayed until the middle of 2023, but it’s best to be proactive. (Matt Hoffman / Chatham Financial)
  • There is interest in hedging future financing risk against future inflation and rising rates. (Matt Hoffman / Chatham Financial, Patrick Acox / Chatham Financial)
  • Owner-occupied industrial users have had trouble finding new space that fits their needs and the opportunity to move isn’t there.  Many are looking into renovating other spaces. (Carlo Batts / Rittenhouse Appraisals)
  • Many companies are looking to hire and Kelly Maiello is looking for more project architects. (Jim Karmolinski / Kelly Maiello)
  • The Navy has signed agreements allowing housing in the Navy Yard and there is a lot of activity in that area. (Jim Karmolinski / Kelly Maiello)
  • There are numerous RFPs across the country, including Philadelphia, LA and Denver.  It seems people waited to put out requests until the end of 2020. (Robert Bright / Talson Solutions)
  • There is optimism that the transportation sector will receive more funding. (Robert Bright / Talson Solutions)
  • It is unclear what staffing and office use will look like when the pandemic ends.  Some have already returned to offices, some suspect it will be difficult to get staff to come back to the office, and there is no way to know how this will affect the office market in the end. (Bart Mellits / Ballard Spahr, Robert Bright / Talson Solutions, Jim Karmolinski / Kelly Maiello)
  • Cornerstone Community Partners is an organization focused on transformational community development initiatives.  They are excited about the enhancement of low income housing and new market credits. (Chris Gigliotti / Cornerstone Community Partners)

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