Dozens of lawmakers stand to reap a tax windfall due to a GOP loophole

KEY POINTS

• Dozens of lawmakers stand to reap a tax windfall thanks to a loophole inserted in the sweeping GOP tax overhaul bill, according to a review of federal financial disclosures.
• The provision would also create generous tax saving for President Trump.
• The measure reduces the tax rate on "pass-through" income derived from real estate.
• Those benefits will now go to roughly four dozen Republican House and Senate members who voted for the bill, according to an analysis of personal financial disclosures for CNBC by the Center for Responsive Politics.

Dozens of lawmakers stand to reap a tax windfall thanks to a loophole inserted in the sweeping GOP tax overhaul bill, according to a review of federal financial disclosures.

The provision, which gives favorable tax treatment to a common form of real estate income, would also create generous tax saving for President Donald Trump, who derives much of his personal fortune from real estate.

The measure — added late Friday to the $1.5 trillion package of tax cuts — reduces the tax rate on "pass-through" income derived from real estate. Owners of such businesses are allowed to "pass through" the profits from these enterprises to their individual tax returns, which lowers the amount of tax they owe.

Those benefits will now go to roughly four dozen Republican House and Senate members who voted for the bill, according to an analysis of personal financial disclosures for CNBC by the Center for Responsive Politics. They include Sens. Ron Johnson of Wisconsin, Bob Corker of Tennessee and James Inhofe of Oklahoma and Reps. Diane Black of Tennessee and Vern Buchanan of Florida.

Under federal financial disclosure rules, members of Congress are only required to report their assets in a range of dollar amounts, so a full accounting of lawmakers' holdings isn't available. But GOP lawmakers who voted for the bill had combined real estate assets eligible for pass-through treatment of as much as $390 million in 2015, according to the center's analysis.

The following and other charts in this story show the range of lawmakers' real estate holdings that could benefit from the tax break.

The initial votes Tuesday in the House and Senate split along party lines; no Democrats voted for the measure in either chamber. Among House Republicans with sizable real estate holdings identified by the center's researchers, only Reps. Darrell Issa of California and Rodney Frelinghuysen of New Jersey voted against the tax overhaul bill.

The Senate approved the measure with a 51-48 party-line vote, with Sen. John McCain not voting because of treatment for brain cancer. Tweaks in the Senate bill to conform with rules forced a second vote Wednesday in the House, which once again approval the bill without teh support of Democrats.

Because of a technicality with budget rules, it was unclear when President Trump would sign the bill into law.

Trump will also enjoy a windfall from the new pass-through rules on his large holdings of real estate and other businesses held in a trust for his benefit. Though the overall impact on his tax liability is impossible to estimate independently without reviewing his tax returns, Trump's assets include hundreds of properties held in limited liability corporations that typically report pass-through income.

Like much of the more than 500 pages of new tax rules, the loophole favoring pass-through real estate income is complex. Under current law, certain types of business income can be "passed through" to an individual return, currently taxed at rates as high as 39.6 percent. Under the new rules, some business owners could now pay a rate as low as 29.6 percent on a portion of that income.

To limit the number of businesses eligible for the favorable tax treatment, the authors of the tax bill restricted its application to certain types of businesses and capped the new pass-through tax savings based on the size of a company's workforce. But the change, restoring language originally included in the House version of the bill, also ties eligibility to the value of the property for real estate businesses.

The change coincided with news that Corker, one of a handful of GOP Senate holdouts who had threatened to vote against the tax overhaul, had decided to throw his support behind the measure. Democrats seized on the timing and dubbed the pass-through changes the "Corker kickback."

Corker, backed by his Senate Republican colleagues, responded by saying that he played no role in reviving the provision originally contained in the House version of the bill.

In a letter on Monday, Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee, said that he was the original author of the provision. Corker said in a statement late Sunday that "he is not a member of the tax-writing committee and had no involvement in crafting the legislation."

But Democrats continued to criticize the late change in the final version of the bill after weeks of debate. House Democratic Leader Nancy Pelosi on Monday called it another example of Republicans working "to enrich their donors and themselves" in the tax legislation.

Pelosi, along with more than two dozen House and Senate Democrats who opposed the tax bill, also stand to benefit from the new treatment of pass-through income on real estate holdings.