H.R. 1 (President Trump’s so-called “One Big Beautiful Bill”) was officially signed into law Friday, July 4, and with it came sweeping changes to the real estate industry. Some of these changes are extensions of Trump’s Tax Cuts and Jobs Act from 2017 (“2017 Act”). Like all change (and legislation), there is both good and bad, and the real estate industry is seeing plenty of both.
The main benefits of this bill to the commercial real estate industry are:
- Opportunity Zones. The qualified opportunity zones introduced in the 2017 Act are now a permanent fixture of the tax code. However, there will be a redrawing of the opportunity zone map and the income threshold for qualified tracts is going down from 80% to 70% of the area median income. Additionally, areas adjacent to low-income tracts can no longer be included as qualified opportunity zones if they do not meet the parameters alone.
- Bonus Depreciation. The 100% bonus depreciation has been permanently reinstated for qualified property acquired and placed in service after January 19, 2025. The bill also added another elective 100% depreciation allowance for qualified production property placed in service through 2030. This would allow manufacturers to immediately write off qualifying real estate investments, providing a boost to this market sector. Further, the additional elective depreciation applies retroactively to any manufacturing facility construction that began after January 19, 2025, but the facility must remain in operation for at least a decade, or else they lose the qualified status and must pay back the taxes owed.
- Low Income Housing Tax Credits. Low Income Housing Tax Credits are expanding. Qualifying projects must now only have 25% of the development’s costs financed by municipal bonds (down from 50%). This is meant to increase affordable housing by reducing the common pitfall of funding shortfalls for current affordable housing projects.
- New Markets Tax Credits. The New Markets Tax Credits Program is permanently extended to include $5 billion a year instead of choosing a different budget every year.
Although these changes have positive impacts towards the real estate industry, the renewable energy space (and its related real estate implications) is seeing a large diminution:
- Energy Efficient Commercial Building Deduction. Section 179D (often referred to as the energy-efficient commercial building deduction) has been stripped from the bill and rescinds the program for projects that are starting on July 1, 2026, or later.
- Green and Resilient Retrofit Program. All funding that has yet to be spent under the Green and Resilient Retrofit Program has been rescinded and will not be paid out, even if Congress has approved the funds and projects are just waiting on them to be paid out.
- Wind and Solar Projects. Any wind or solar generation projects that do not break ground within a year or are not completed by 2027 will not receive tax credit.
Finally, universities with large endowments are being taxed at higher rates, which affects the real estate market as university endowments historically invest heavily in real estate.
For better or for worse, these are the main impacts that the “One Big Beautiful Bill” will have on the real estate industry, and only time will tell how “beautiful” the bill will prove to be.
A special thanks to Summer Associate Marshall Bergstresser for his contributions to this alert.
