Consultant: Tax break could boost Miss. real estate investments
Published 5:21 pm Tuesday, November 20, 2007
A real estate consultant says a new state tax break could prompt investors to put money into “trophy properties” like retail centers, multifamily complexes and office buildings in Mississippi.
Legislators this year made the state income tax law conform with federal law dealing with certain exchanges of property.
“The Legislature passed a bill eliminating a state tax for properties exchanged in and out of the state,” said real estate consultant John David Hurt. “This is very beneficial for the growth of Mississippi, especially in real estate.”
Before the change, Mississippi would impose a 5 percent state tax on any person who exchanged real property from Mississippi to another state, he said.
“The idea was that if money was leaving the state of Mississippi, it should be taxed,” Hurt said. “What was not considered is that this tax made Mississippi unattractive for real estate companies and new businesses looking to expand in our state.”
Hurt is a Columbus resident with a Tupelo-based real estate consulting firm. StrategicREAL Properties specializes in tax-deferred property exchanges that are guided by Section 1031 of the federal tax law.
“To some it doesn’t sound like much, but when (the tax) is imposed on a $10 million-$25 million property, it is very important to consider,” Hurt said. “The tax would be passed on to the underlying investors in the property, which would decrease the overall rate of return.”
Gov. Haley Barbour signed the bill in March and the new law was retroactive to Jan. 1.
Republican Barbour, re-elected this month for another four years, said he wants the Legislature to enact more tax cuts. He plans to have a tax study done in the first year of his second term, which starts in January.
“The first thing we need to do is a comprehensive study of the tax system in Mississippi that includes what Mississippians pay in federal taxes as well as what Mississippians pay in local taxes,” Barbour said.
The bill is House Bill 1585.