The current bill that is being proposed by the House Ways and Means Committee has a proposal that limits how investors can invest their retirement savings. Investors will no longer be able to invest retirement funds in real estate deals and must remove existing capital from these deals.

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Section 138312 of the current bill states the following:

  • Prohibits an IRA from holding any security if that security requires the IRA owner to have a certain minimum level of assets or income (any deal or fund that requires investor accreditation).
  • If an IRA has invested in such securities, that IRA will be disqualified and the investor must pay taxes on that account.
  • The effective date is December 31, 2021 with a 2 year transition period for IRAs already holding such investments to dispose of the asset.

The impact of this bill is significant to our industry and our investors. Real estate sponsors will no longer be able to take IRA money from investors for real estate syndication deals or any type of debt securities.

Even more concerning, any IRA money that is currently held in these types of investments will need to be removed by the investor by December 31, 2023 to avoid their retirement accounts from becoming taxable. So if an investor has invested a portion of their IRA funds in our deal, those funds will need to be exited from the deal to avoid their complete IRA account from becoming taxable

In the last few years, investor desire to diversify their holdings beyond the stock market & into real estate has exploded. This has not gone unnoticed by the companies that make revenue with a constant flow of IRA funds directly to the stock market. Clearly, there are forces working behind the scenes to reverse this trend and Section 138312 is an example of this. 

What can you do:

  • Reach out to your elected officials in the US House of Representatives and the US Senate and tell them that you oppose Section 138312 and that it impacts your investments. 
  • Send an email about this proposed legislation to your other investors and educate them about this change and request they email their elected officials to oppose this legislation because it limits investor choice and diversification.
  • Let your friends and family know about this so they can also oppose this proposal.

Below is additional information on the proposed bill:

Summary of each section of the House proposal: 

Section 138312 of the House bill can be found on the bottom on page 689:

Forbes article:

https://www.forbes.com/sites/jamiehopkins/2021/09/15/7-ways-the-new-tax-bill-could-impact-retirement-planning/?sh=7d80ae705423

Links for investors to search for their elected officials:

https://www.house.gov/representatives/find-your-representative

https://www.senate.gov/senators/senators-contact.htm

Sample text that you can provide your investors to write to their elected officials:

Dear {insert name of official},

As an investor, I am writing to you about my opposition to Section 138312 of the US House bill. This proposal has a direct impact on investor choice and limits my ability to diversify my retirement savings. By not allowing me to invest my retirement savings in private investments, you are requiring me to keep all of my IRA money in the public markets.

Additionally, by forcing me remove this capital from existing deals or lose my tax-free status, you will have a significant impact on my retirement savings. I ask that you oppose this proposal.

Thank you.

{investor name}


We must come together, act with urgency and push back on legislation that clearly is not in the best interest of our industry and our investors. We ask that you join us and get the word out to your professional network and your investors on this proposal and make our voices heard to our elected officials.

If you would like to learn more about Multifamily Real Estate and how to invest, please email me directly at James@jcoreinvestments.com

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