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Commercial Real Estate Lobby Ask For Taxpayer Aid To Help Recapitalize Banks Saddled With Billions In Underwater CRE Loans
The problem that nobody is talking about, yet everyone continues keeping a close eye on, namely the trillions in commercial real estate under water, is quietly starting to reemerge. In the attached letter from the Commercial Real Estate lobby, it reminds politicians that the hundreds of billions in loans that mature in the next several years won't roll on their own, and we see the first inkling of the lobby asking congress for much more taxpayer aid, in this case in the form of Shelley Berkley's proposed legislation to "enable banks to convert troubled loans into performing assets through modest tax incentives to attract new equity capital to existing commercial real estate projects." The letter tacitly reminds that there are thousands of regional banks whose balance sheets are chock full with underwater commercial real estate (and for the direct impact of this simply observe the 100+ banks on the FDIC's 2010 failed bank list). So in case taxpayers are wondering where the next fiscal stimulus will end up going, wonder no more: "The new investments would be specifically used to pay down debt,
resulting in lower loan-to-value ratios of existing loans as well as
improved debt coverage ratios." As the CRE lobby concludes: "By giving lenders the ability to responsibly refinance debt and
rebalance capital reserve levels, the CRE Act will provide the
opportunity for additional lending capacity that will help stimulate
lending to small businesses, job formation and economic growth in
communities across the country." In other words, it is time for taxpayers to help purge banks of existing toxic debt, so that these same banks can resume lending like drunken sailors, in unviable commercial real estate projects just to guarantee that the next major market blow up also destroys the regional banking system, in addition to the TBTFs.
Full letter below:
Commercial Real Estate Industry Groups' Letter to Members of Congress on Community Recovery and Enhancement Act (H.R. 5943)
The undersigned commercial real estate industry associations strongly support the Community Recovery and Enhancement Act (CRE Act), important legislation introduced by Congresswoman Shelley Berkley to help incentivize equity investment in distressed commercial real estate assets and to address the pending crisis threatening community banks that currently hold significant real estate debt on their books.
According to the February 11, 2010 report by the Congressional Oversight Panel on the Troubled Asset Relief Program, small and mid-sized banks will bear the brunt of coming losses on commercial real estate loans. The report found that nearly 3,000 banks have concentrations in commercial real estate loans, including 2,115 banks with $100 million to $1 billion in total assets. Banks hold $1.5 trillion, or 45 percent, of the $3.4 trillion of commercial real estate debt in the U.S.
We believe that the CRE Act is a thoughtful and targeted solution to the current credit crisis in commercial real estate. This legislation will enable banks to convert troubled loans into performing assets through modest tax incentives to attract new equity capital to existing commercial real estate projects. The new investments would be specifically used to pay down debt, resulting in lower loan-to-value ratios of existing loans as well as improved debt coverage ratios. Importantly, the CRE Act relies upon market factors and economic incentives, rather than direct government involvement, to determine winners and losers.
Under this temporary tax incentive proposal, qualifying investments must be made before 2013 and only applies to assets purchased before 2009. At least 80 percent of the newly invested project capital must be used to reduce the outstanding balance of debt on the asset, with the balance going toward capital improvements, such as energy efficiency enhancements or leasehold improvements to attract new tenants. The new investment would qualify for a one-time 50% bonus depreciation and investors would be able to deduct any losses associated with the qualifying investment without regard to the passive loss limitations under Section 469 of the IRS Code.
We believe that this proposal has been carefully crafted and will help rebalance the debt vs. equity equation plaguing the commercial real estate and community banking industries. By giving lenders the ability to responsibly refinance debt and rebalance capital reserve levels, the CRE Act will provide the opportunity for additional lending capacity that will help stimulate lending to small businesses, job formation and economic growth in communities across the country.
Signed,
International Council of Shopping Centers
National Multi Housing Council
National Apartment Association
National Association of Realtors®
Institute of Real Estate Management
CCIM Institute
Associated General Contractors
Society of Industrial and Office REALTORS®
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Welcome to the dinner party after all that is left are scraps.
Dear Undercapitalized Banks,
F
U
Sincerely,
The American Taxpayer
If only. The letter is more likely to read:
Dear Undercapitalized Banks,
On behalf of The American Taxpayer, we are happy to inform you that...
you have been pre-approved to rape and pillage to your hearts content at the introductory rate of 0% for the long foreseeable future...
Dear Undercapitalized Banks,
THIS IS YOUR LUCKY DAY! You are the 1000.000 applicant and therefore you shall receive the unlimeted bailout!
Just fill in the coupon at the bottom and you'll receive 50% more then you requested with ZERO interest payments!!!
Hughs and kisses,
The Fed
ps: I you refer to us to friend and family you'll receive 1 lot of 20 bonds we've bought in the last year free of charge!
Oh, to only have a time machine so that I might avoid SRS like the plague that it is...
I especially liked this excerpt:
To whom do I address my letter? I, too, have a troubled loan - my mortgage, now underwater. I'd like to turn it into a performing asset of my own...
put some camera's into the house, 20 asian hookers, take a box of viagra and post the movies on the internet. I don't know how much money you'll make but I bet you'll forget all about your morgage :)
Awww pleeeze, you bailed out the other guys.....Lookie, we have lobby money & campaign contributions for you too!
I'm sorry, we have principles to. You can only have 1 billion for every dinner seat at the campaign tables for 1000$. The American voters wouldn't except anything less.
I live in northern NJ, land of the strip mall. Almost evey one of them has vacancies, some as high as 40%. But, the real mystery to me is this: they keep building more or them. They started clearing land for another one near my house two weeks ago.
FAIL already, these fools don't see that peeps with money are feeling guilty about their consumerism during the last decade and collectively are making it a point to be frugal so they can feel less selfish while half the neighborhood is out of work. I sense it will be the new fad.. look how humble I am, I didn't do this and didnt do that this week go the conversations and feel good pats on the back.
Here is another idea for the politicians: Allow the newly homeless to live in these abandoned or empty commercial buildings. Give the owner a tax break along the lines of $400 per person (with max occupancies obviously). Turn the parking lots into a vegetable garden, cut welfare/food stamps drastically, force these people to live off what they are given. See what happens. I think most people will be alright once they begin to believe in themselves again. For too many years people have been taught to believe in everything but themselves, that needs to change. WWII did that for that generation. WWIII, the current financial war, hopefully teaches that to our current generation.
That's pretty much the case here in Suburban Boston, as well. Though lately it's been about "big mega-centers" (Patriot's Place in Foxboro, the Orwellian-name-inspired "Legacy Place" in Dedham, and there were several more in the works when their world ended in 2008).
They're all the same, all pretty dreadful. And they're going to keep going up so long as Uncle Sugar can keep the much abused US Taxpayer on the hook for any and all losses.
Well, of course you're correct to say "it makes no sense"... in a rational world. However, no way is the current state of affairs rational.
Here is the thinking process that convinces idiots to borrow and lend for "yet-another-mega-shopping-mall project". It is a bit like musical chairs in reverse... sorta.
First, note that interest rates today are just about as low as they will ever get. Therefore, if you borrow now, you lock in the lowest rate ever, and lower than your competitors.
Second, the real (not "talking") economy continues to tank, so the predators-that-be (government, FederalReserve) will probably continue to bail out big borrowers. If you're developing a BIG project, that includes you.
Third, banks simply cannot afford to admit their huge loans are in default... and the government encourages the banks to ignore non-payment and leave the loan on the books at full value (as if everything went right). This is the same reason the banks let home-owners not pay for 1 ~ 2 years or more before they foreclose.
Fourth, everyone knows the elephant in the room will eventually go berserk when the economy crashes further and worse (and/or the debt spiral become utterly unsupportable even with lies, games, fiction and fantasy. At that point, the fed will "print" fiat money like Zimbabwe on steroids to attempt to juice the economy big-time, and inflate away their debts. Well, that includes YOUR debts for the monster shopping mall you constructed, so you'll be able to pay off the entire loan in one year at one penny on the dollar... or less!
So, you see, it makes *perfect sense* to build huge new fancy shopping malls right now. It really does. Which shows how utterly insane and corrupt the government and economy of the USSA has become. Even when the economy stays in the crapper for years and decades, you will still make a nice fat profit, because you will have paid off all your loans and every penny you receive will be profit (outside of some unavoidable minor mantainence).
I'm not saying anyone *should* do this. I wouldn't, because I refuse to live a dishonest life, no matter how much benefit I could realize for taking advantage of the dishonesty and corruption offered by the predators-that-be. But I am saying "it does make sense".
The only downside for someone trying this is... if your timing is off too far (unlikely at this point). Then you hang on as long as you can, hoping it pans out for you before they foreclose (that would be years and years and years the way things are going now). But if your timing is soooo far off that they foreclose, you just walk away and collect unemployment, food-stamps, whatever. Plus you can hide some gold while you're waiting for success, and have that around to augment what you get on the dole.
How is the above worse than "just giving up" or trying to switch to some honest, productive endeavor? Only if you have a shred of honesty, ethics or honor would you not build new shopping malls now. It's the "perfect" time.
Yeah, I know.... sheesh.
The undersigned believes the public interest would best be served if insolvent businesses, individuals, GSEs and other underwater entities were allowed to fail.
Very truly yours,
Oswald Spengler
Print, baby, Print!
We kill zombies in the movies.
In our bizarro universe we buy them hookers and Ferraris.
In our bizarro universe the zombies receive taxpayer dollars so the bonus programs live on while the communities end up eating the shit sandwiches when they have to use Eminent Domain to condemn and bulldoze the properties after so many years of crack whores and rats infesting their empty shells.
+666
Small and medium banks will suffer because they are not part of the members who help/own an interest within the private central bank Federal Reserve. Small banks are not huge counterparties/risk to members of the Federal Reserve (as AIG was). So does the Fed contract the money supply like they have done before to cause massive problems and then swallow up a larger slice of the overall pie or does the Fed QE and thus continue their plan of 'hidden taxation' in making the Federal Reserve Note (US Dollar) devalue further? Either way, it is time to end the Federal reserve as they admitted to illegally purchasing over $1,200 billion of (now devaluating) 'investment' paper of Freddie/Fannie. As this action breaks the law. the Fed's charter should be immediately revoked.
Of course assassinations would surely follow at any real move to revoke the Federal Reserve's central bank charter. Such murders have been done by the Fed quite a few times during the history of the Rothschild's central banking scheme in their quest to dominate control.
RE and CRE are just a continuation of problems caused by the central bank, yet the real question is: What is their 'end game'?
I suggest taking a look at goldman's commercial real estate holdings. reggie middleton had something about it a long time ago. I knoew it would happen then
Thanks for the tip.
BTW, more States need to open/run their own banks, separate from the Federal Reserve. Dakota has done this with great success.
.
I have a problem with any bank that has the ability to control the money and collect money from its citizens. How about just "End The Fed" and the bailouts?
Yeah, I can just visualize California running its own bank, especially if Jerry Brown becomes the new Guvernator. The ATMs will spit out IOUs.
I think you're going to see more money/effort put towards shutting these local/regional banks down (putting them out of their misery). When the TBTF got the initial backstop, it caused an instant panic from small/regional banks into the TBTF because everyone expected they'd be backed no matter what... the reasoning was as sound then as it is now... nothing has changed.
At the time, there was widespread speculation that the local/regional banks would be fed to the TBTF in an effort to prop up/counterbalance the TBTF balance sheets. The dead fed intravenously to the living. This has already started... some of the regionals who are lucky enough to get a spot at the trough have dramatically increased profit margins through consolidation of shitbird locals for pennies on the dollar. This process is going to continue... further insulating the TBTF from break-up...
If the consolidation does not keep the entities alive (including the FED), then their principal actors will be able to feed on the carcasses in the ultimate consolidation. This is what happens with the wealth gap.
All is well. Woosaaa. Woosaaa.
It appears possible to print unlimited quantities of money without any adverse effects whatsoever. That being the case, there is no reason for the government to not pay off all bad debts with new money. No reason to not pay all debts with new money. Furthermore, there is no reason to levy taxes: funding of government expenses can be entirely with newly printed money. Perhaps it won't work, but it's worth a try.
Tell me you wouldn't want to see Trump get a haircut!
A scalping would be a vast improvement for that guy.
I just marvel... a billionaire who chooses to look like he's wearing the matted ass-hair of an orange tabby cat.
I am sensing cynicism in this thread.
See? You are not an idiot as advertised. Your sense would be right.
Don't you just love the "community" aspect of this big-boy bailout? Who could refuse help to the "community"? That would be a community of rich guys about to become poor guys.
Good riddance, and I know a few of them. So what. Every one I know is a cut-throat sociopath.
"Community Recovery and Enhancement Act"
In the strong sense, WHO came up with this name? S/he must be someone's neighbor, son/daughter, parent, fellow lodge member, whatever. As I have for too many years rhetorically asked myself, who knows this fact [s/he came up with this bullshit] and condones continuing relations with said individual?
I do so long for the days of productive shame. If someone does not have the innate sense of right and wrong, there is nothing naturally abhorrent about external forces teaching them the lesson.
Amen.
(I think that's what you're supposed to say when somebody throws a "Hail Mary" pass)
I'm pretty sure Howdy Doody was a puppet.
Whatever happened to the EMH bullshit? You know, the lassez-faire line spewed by "free Market" advocates that the Market is all knowing and self-correcting? Where are these asshats? Art Laffer? When do any holders of SRS (which is down this morning on this wonderful news, BTW) get a bailout for trying to live in economic reality? This is how the Market dies.
It's already dead they just haven't pulled the plug on life support. It's only the machines breathing for the patient now.
"the CRE Act will provide the opportunity for additional lending capacity that will help stimulate lending to small businesses, job formation and economic growth in communities across the country."
It sounds to me like the typical political cat call of "What about the children", instead its "What about the small business". What a load of shit. This bill will not increase small business lending, job formation or any form of economic growth. All it will do is allow banks to breathe one more breath before round two of the residential mortgage implosion kicks in next year. Same dance next year.
This bail out will be an amendment to an amendment to a military bill so nobody will vote against it.
Vote Libertarian
+1
QE2 or, literally, bust. Bust for CRE and regional banks, bust for states and pensions, bust for equity mutual funds, bust for for stock indices, bust for GM IPOs, bust for discretionary spending and retailers.....
And no chance that the solution will be cutbacks, austerity, belt tightening, taxes, low growth and nose to the grindstone. This is the Me Generation we're talking about. Plus the entitled, jaded offspring of the Me Generation who fully expect that the Money Tree is their birthright. We are all too big to fail once we get full enough of ourselves!
Sorry, the gravity of a black hole does indeed suck, but it's a law of Nature -- Congress (and the Fed) cannot violate law(s) of Nature (for very much longer!)
The looting in broad daylight continues.
What would a bank do? What would Goldman do?? They would lend to anyone that needed it under the CAT program....Crazy-Ass-Terms. Need a loan, simple, what have you got? What can you pay? What kind of collateral do you have? Unfortunately, most people had previously earned an exemption to CAT program through an effective lobby campaign, so although the program exists for this very purpose, it will not be enforced and someone will get free money for their problems. One more example of the entire govt/economy revealing itself as a complete circus.
And where, pray tell, is the source of this 'new equity capital'? China? Middle East?
Please. No one throws cash down a rat hole, excepting the Fed.
Dear,
International Council of Shopping Centers
National Multi Housing Council
National Apartment Association
National Association of Realtors®
Institute of Real Estate Management
CCIM Institute
Associated General Contractors
Society of Industrial and Office REALTORS®
Get off your fucking knees!
Signed,
QBz
http://www.youtube.com/watch?v=ii0b2rpXJ5s
Given the sad situation and looming collapse of property values, I wondered why the CRE people were so quiet. This explains it -- a slimy-ass amendment, and my Congressman will vote for it.
I'm about done sharpening the final tine.
Social the debts and privatize the profits... The rich love American socialism. What a farce. And to top it all off while they suck out taxpayers dollars, they refuse to pay a reason tax.
i like the idea of a 'reason tax'
To expand our your thought, Social the debts and loot the society. It's not even worth pretending any of this is profitable anymore.
Social the debts and privatize the profits... The rich love American socialism. What a farce. And to top it all off while they suck out taxpayers dollars, they refuse to pay a reasonable tax on their profits / income.
Exactly.
that's because they are only rich. But once they'll become filthy rich, I bet they start paying taxes! So give those nice people a break.
If you shoot them, don't they bleed to?
I'd expect to see some particpation deals coming back into play... When was the last time; 1989, 1990? Bankster eat part of the loan, the property cashflows and the "equity" runs the deal and participates when they divest.
Your comment makes sense. However, under the rules of the 'new normal' ... this comment is seen as heresy.
We want more liquidity!!! Woo ... hoo! and no bad debts ... too!!
Time go go long torches and pitchforks again.
It's commercial real estate. You'd be hard pressed to get the general public to give a flying fuck about the them.
They'll care, perhaps, when they find out these bastards are about to pick their pocket. Again.
It took me too long to process what you had said.. I agree, when the public sees this happen, they will be pissed.
Long pitchforks and torches indeed!
No worries.
Cheers -
to risky. Go long on the Vaseline, rumor has it they are shipping out 360 million tubes to every american.
That won't get us through the summer at this rate!
Who is this ultra-rich guy 'Taxpayer' who is backing trillions in bad debt? I know of no such person as the american public is totaly bankrupt and unemployed. I hope Mr taxpayer arrives pretty soon from whatever foreign country or other planet he lives on, because things are going from very bad to far worse here.
you didn't take your blue pills today, haven't you SheepDog-One?
Another opportunity for legislators to steer money to contributors...check. Another way to suppress symptoms of the dysfunctional malignant cancer that passes for our financial system...check. Another wealth transfer to dead institutions walking...check. Another opportunity for the executives of said institutions to pillage whatever assets possible before the house of cards falls...check. Continuation of TBTF and no hope for return to any fundamentals that make sense...CHECK!
Dangit, for once I'd like to drink my coffee in the am with some different f'in news!
Unless they're planning on locking up blocks to make strip malls that sell crack, we, the people, are not interested in their cramdown plan.
I lived in Texas in the early 90s, just after they had a similar commercial real estate implosion. All along the freeways you'd see beautiful glass commercial towers where, clearly 'money is no object' was the building motto! No tenants though... One building that reportedly cost $200M to build was sold for $20M. I'm assuming someone ate the debt. As I understood, some banks went tits up but 'the market' moves on. That building and all the others built at the time were passed to new owners who presumably rented office space. My point is, the world doesn't end. THIS time around, it seems like the government just can't bring itself to see anyone 'fail'! Vaporizing billions of taxpayer dollars (like it was some infinite well they could draw from) is NOT preferable to letting the banking system deal with it's own debts. Buildings pass from 'weak hands' to 'strong hands' and the bank takes the loss (I know, it sounds completely Un-American at this stage!) Just too bad private, residential mortgage holders weren't all 'banks' that could go to the 'government' and have their underwater mortgages dealt with! All ZH readers know how this ends...
As soon as the very first bailout was agreed upon, we knew the system would end. This is an obvious next step in all-out collapse....
Therein lies the real issue. It's not even our dollars any more. It's Monopoly money so it doesn't hurt so bad. Unless/until it evolves into cable TV and Doritos costing more it won't matter to J6P. And unless the discontent is transmitted to the NASCAR fan we won't have any resolution.
I think I read somewhere that only about $50 billion or so a year of "Monopoly Money" is actually printed by Parker Brothers.
How much of the real stuff is conjured into existence every year?
Another "sound money" option beside PM's?
Yeah, I didn't mean to malign the good folks at Parker Bros.
Another sound money option besides PMs? No. They have been historically established.
Why try to get inventive. The wheel has already been invented. Don't go getting cheeky.
Speakin' of Cheeky... where is he?
Have the owners of this CRE tried converting office buildings into cheap housing? Why not do the paperwork to turn these properties into cheap apartements?
Better still, have a dual purpose space. All business will be conducted on beds and in bathrooms.
Fuck these assholes. Let's see them share their rental income streams and previous capital gains from sales and developers fees et al with taxpayers, or they can piss off.
Sounds about right if taxpayers pay for it then we should get some return on investment. Of course the banks haven't cut me a check yet for my previous investment.
Dear Commercial Real Estate Industry Groups,
There's a urine drenched bed that needs sleeping in.
Regards
Tax payer with empty pockets turned inside out.
I like the way they come up with names to beg money and loot the public. Community recovery shit... go to hell. But, we all know Ben Bunnake will say that this way the cheapest alternative, others would have cost more and that mean more job losses and people wont be able to get 2 times meal.
The reason TBTF extends to most banks, large, regional and small, is that the US is on the hook via the FDIC to guarantee most depositors deposits, no matter what kind of crap their bank has invested in. The FDIC has nowhere near the money to pay for a general 20 percent plus writedown in bank assets.
The solution is to make banks as we know them depositories only, making their money from deposit account fees, and whatever interest rate spread they can get between what they pay on checking and savings, and fully guaranteed government securities. Right now there is no spread - so the deposits would have to go uninvested, just cash in the vault and deposited at other banks and the Fed.
Investing in risk assets such as loans of any sort, residential and commercial, or any stocks, bonds, derivatives etc. should not be allowed under the charter of a depository only bank. Those types of activities should only be allowed by non FDIC insured entities.
dup...
Just get it over with already. I've been lubed and assuming the doggie position for weeks now. Please Uncle Ben, Be gentle breaking me in. I'm new to this. QE 2 = Money from the fictitious taxpayers.
The Pigs are ganging up on the trough...
If the government is handing out money this fall you want to be sure to get your share.
Mr. Rourke better send Tattoo to the printers, he's gonna need a boatload of cheques for this one.
The solution is simple:
Repeat these steps relentlessly until everything is back to normal.
And don't ask me where all this is supposed to come from, I don't have a PhD.
Yes we can....
Those of you with kids, remember to tell them this: It's ok to be sloppy with your finances. If something goes wrong, someone will always be there to bail you out!
It's the Obamunist way.
Pathetic. Why not let these properties go into liquidation, and then they can be acquired by productive, cash-generating businesses, often the tenants themselves, who can then take an ownership position and cut out the rent-seeking middlemen?
Your rationality is unacceptable in this sea of moral hazard. Get a grip, man!
I saw a billboard on a major Texas Highway this weekend that read something like:
"You can't replace stupidity but you can vote them out".
Not true, unless the office itself were abolished. The holder of the office, regardless of party, is stupid. Therefore, one can replace stupidity -- with more stupidity. The modern politician is riddled with pathology. What a waste of advertising revenue.
“Importantly, the CRE Act relies upon market factors and economic incentives, rather than direct government involvement, to determine winners and losers.”
-- or --
Importantly, the CRE Act relies upon illusion and distraction indirectly orchestrated by our government to benefit George and Michael or similar counterparties.
All is not lost. The parasite will leave us another mojon.
Proposed bill language:
H.R.5943 -- CRE Act of 2010 (Introduced in House - IH)
HR 5943 IH
111th CONGRESS
2d Session
H. R. 5943
To amend the Internal Revenue Code of 1986 to allow a deduction for the portion of any equity investment used to buy down debt on commercial real property.
IN THE HOUSE OF REPRESENTATIVES
July 29, 2010
Ms. BERKLEY (for herself, Mr. NUNES, and Mr. CROWLEY) introduced the following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to allow a deduction for the portion of any equity investment used to buy down debt on commercial real property.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Community Recovery and Enhancement Act of 2010' or the `CRE Act of 2010'.
SEC. 2. DEDUCTION FOR EQUITY INVESTMENTS USED TO BUY DOWN DEBT ON COMMERCIAL REAL PROPERTY.
(a) In General- Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions for individuals and corporations) is amended by adding at the end the following new section:
`SEC. 199A. DEDUCTION FOR EQUITY INVESTMENTS USED TO BUY DOWN DEBT ON COMMERCIAL REAL PROPERTY.
`(a) In General- There shall be allowed as a deduction an amount equal to--
`(1) 50 percent of any qualified debt reduction equity investment made during the taxable year by the taxpayer in a partnership, and
`(2) 50 percent of any qualified debt reduction payment made during the taxable year by the taxpayer with respect to qualified indebtedness on commercial real property held by the taxpayer.
Paragraph (2) shall not apply to any qualified debt reduction payment made by a partnership.
`(b) Maximum Deduction- The deduction allowed by subsection (a) for any taxable year shall not exceed, with respect to each commercial real property, the excess (if any) of--
`(1) the amount of the qualified indebtedness secured by such property as of the beginning of such taxable year, over
`(2) the lesser of--
`(A) 50 percent of the amount described in paragraph (1), or
`(B) the adjusted basis of such property (in the hands of the partnership or the taxpayer, as the case may be) as of the close of such taxable year (determined without regard to qualified debt reduction equity investments and qualified debt reduction payments made during the taxable year and depreciation for such year).
`(c) Qualified Debt Reduction Equity Investment; Qualified Debt Reduction Payment- For purposes of this section--
`(1) QUALIFIED DEBT REDUCTION EQUITY INVESTMENT-
`(A) IN GENERAL- The term `qualified debt reduction equity investment' means the amount of any qualified equity investment which is used by the partnership to reduce the principal amount of qualified indebtedness of the partnership.
`(B) QUALIFIED EQUITY INVESTMENT- The term `qualified equity investment' means any equity investment (as defined in section 45D(b)(6)) in a partnership if--
`(i) such investment is acquired by the taxpayer at its original issue (directly or through an underwriter) solely in exchange for cash,
`(ii) at least 80 percent of such cash is used by the partnership to reduce the principal amount of qualified indebtedness of the partnership,
`(iii) the portion of such cash not so used is used by the partnership for improvements to commercial real property held by the partnership, and
`(iv) the person or persons otherwise entitled to depreciation on such property consent to the basis reduction under subsection (f)(1).
`(C) REDEMPTIONS- A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this paragraph.
`(2) QUALIFIED DEBT REDUCTION PAYMENT- In the case of commercial real property held by a taxpayer other than a partnership, the term `qualified debt reduction payment' means the amount of cash paid by the taxpayer during the taxable year to reduce the principal amount of qualified indebtedness of the taxpayer.
`(d) Other Definitions- For purposes of this section--
`(1) QUALIFIED INDEBTEDNESS-
`(A) PARTNERSHIPS- The term `qualified indebtedness' means, with respect to a partnership, any indebtedness--
`(i) incurred or assumed by the partnership on or before January 1, 2009, and
`(ii) which is secured by commercial real property held by the partnership at the time the qualified debt reduction equity investment is made by the taxpayer.
`(B) OTHER TAXPAYERS- In the case of a taxpayer other than a partnership, the term `qualified indebtedness' has the meaning given to such term by subparagraph (A) determined by substituting--
`(i) `taxpayer' for `partnership', and
`(ii) `qualified debt reduction payment' for `qualified debt reduction equity investment'.
`(2) COMMERCIAL REAL PROPERTY- The term `commercial real property' means section 1250 property (as defined in section 1250(c)); except that such term shall not include residential rental property (as defined in section 168(e)(2)) unless the building contains at least 3 dwelling units.
`(e) Application of Section 1250- For purposes of determining the depreciation adjustments under section 1250 with respect to any property--
`(1) the deduction allowed by this section shall be treated as a deduction for depreciation, and
`(2) the depreciation adjustments in respect of such property shall include all deductions allowed by this section to all taxpayers by reason of reducing the debt secured by such property.
`(f) Special Rules-
`(1) BASIS REDUCTION- The basis of any property with respect to which any qualified debt reduction equity investment or qualified debt reduction payment is made shall be reduced by the amount of the deduction allowed by this section by reason of such investment or payment.
`(2) REFINANCINGS- The indebtedness described in subsection (d)(1)(A)(i) shall include indebtedness resulting from the refinancing of indebtedness described in such subsection (or this sentence), but only to the extent it does not exceed the amount of the indebtedness being refinanced.
`(3) DEBT REDUCTION MUST BE IN EXCESS OF SCHEDULED PAYMENTS- Only amounts paid in excess of the amounts required to be paid under the terms of the loan may be taken into account under this section.
`(4) DENIAL OF DEDUCTION FOR DEBT-FINANCED INVESTMENTS, ETC- No deduction shall be allowed by this section for any qualified debt reduction equity investment or any qualified debt reduction payment to the extent indebtedness is incurred or continued to make such investment or payment.
`(5) RECAPTURE OF DEDUCTION IF ADDITIONAL DEBT WITHIN 3 YEARS-
`(A) IN GENERAL- If a partnership incurs any additional debt within 3 years after the date that the partnership received a qualified debt reduction equity investment, the ordinary income of the taxpayer making such investment shall be increased by the applicable percentage of the recaptured deduction.
`(B) RECAPTURED DEDUCTION- For purposes of this paragraph, the recaptured deduction is the excess of--
`(i) the deduction allowed by subsection (a) on account of a qualified debt reduction equity investment, over
`(ii) the deduction which would have been so allowed if such investment had been reduced by such investment's share of the additional debt.
`(C) APPLICABLE PERCENTAGE- The applicable percentage shall be determined in accordance with the following table:
`If, of the 3 years referred to in subparagraph (A), the additional debt occurs during the:
The applicable percentage is:
1st such year
--100
2d such year
--66 2/3
3d such year
--33 1/3
`(D) Investment's SHARE OF ADDITIONAL DEBT- A qualified debt reduction equity investment's share of additional debt is the amount which bears the same ratio to such additional debt as such taxpayer's qualified debt reduction equity investment bears to the aggregate qualified debt reduction equity investments of all such taxpayers to which subparagraph (A) applies by reason of such additional debt.
`(E) SUBSEQUENT DEPRECIATION- The partnership's deductions under section 168 for periods after a recaptured deduction under this paragraph shall be determined as if the portion of the qualified debt reduction equity investment allocable to the recaptured deduction had never been made.
`(F) SIMILAR RULES FOR QUALIFIED DEBT REDUCTION PAYMENTS- Rules similar to the rules of the preceding provisions of this paragraph shall apply to qualified debt reduction payments.
`(6) EXEMPTION FROM PASSIVE LOSS RULES- Section 469 shall not apply to the deduction allowed by this section.
`(g) Application of Section- This section shall apply to qualified debt reduction equity investments and qualified debt reduction payments made after the date of the enactment of this section and before January 1, 2013.'.
(b) Earnings and Profits- Subsection (k) of section 312 of such Code is amended by adding at the end the following new paragraph:
`(6) TREATMENT OF SECTION 199A- Paragraphs (1) and (3) shall not apply to the deduction allowed by section 199A.'.
(c) Clerical Amendment- The table of sections for part VI of subchapter B of chapter 1 of such Code is amended by adding at the end the following new item:
`Sec. 199A. Deduction for equity investments used to buy down debt on commercial real property.'.
(d) Effective Date- The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.
Not in favor of any more subsidies. Stuff just needs to reprice. One consequence, though, is the effect of wholesale repricing of CRE assets on municipalities' prop tax revenues.
I guess the FRBNY's émergency loan' to Tischman-Speyer
didn't t go unnoticed by these bastards
Geithner twilight zone strikes again. Got a non-performing loan? No problem, borrow some money from the tax payer to pay it off, then pay them back whenever.
This shit makes me seething mad. They own the loans, they own the risk. Nobody is bailing out citizens. Maybe I should open my own bank to cover my mortgage.
So, my taxes will now go to undercapitalized banks to bail them out of commercial real estate loans that went bad on them--through no fault of my own.
You know, if i weren't such a law-abiding citizen, I might consider cheating on my taxes.
But as we all learned from Mr. Geithner, doing something like that could really hurt your career.
Read the bill.
They are/will be allowed to take up to 50% of their debt off as a "tax writedown".
Man! Are these idiots in DC wanting to get shot? How stupid hey be to propose this bill at the same time raising taxes on everybody?
Where were the idiots saying that "violence" is not part of the deal??? These morons INVITE assault!
THIS IS YOUR LUCKY DAY! You are the 1000.000 applicant and therefore you shall receive the unlimeted bailout!
Just fill in the coupon at the bottom and you'll receive 50% more then you requested with ZERO interest payments!!!
Hughs and kisses,
The Fed
ps: I you refer to us to friend and family you'll receive 1 lot of 20 bonds we've bought in the last year free of charge!
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