The thing about focusing on details is that you stumble on doozies. For instance a last minute real estate tax break stuffed in the bill.

Both the Senate and the House tax bills included tax reductions for pass-through entities, however, the Senate included a limitation on that reduction based on wages paid by the entity. The House had no similar limitation. The final conference bill provision in this area is largely similar to the Senate bill, with a key difference: an “or,” followed by much more generous limits.

The change introduced in the conference bill is an enormous boon to real estate investors.

Previous reporting has indicated President Donald Trump and Senator Bob Corker (R-TN) would benefit, but others will as well.

Here’s the Joint Committee on Taxation’s description of the provision:

“The conference agreement modifies the wage limit applicable to taxpayers with taxable income above the threshold amount to provide a limit based either on wages paid or on wages paid plus a capital element. Under the conference agreement, the limitation is the greater of (a) 50 percent of the W-2 wages paid with respect to the qualified trade or business, or (b) the sum of 25 of percent of the W-2 wages with respect to the qualified trade or business plus 2.5 percent of the unadjusted basis, immediately after acquisition, of all qualified property.”

It’s the final piece that matters, “2.5 percent of the unadjusted basis, immediately after acquisition, of all qualified property”.

Even if no wages are paid, the “wage limit” is 2.5 percent of the value of qualified property, which means that for real estate there effectively is no wage limit.

So for example:

Among other holdings, Senator Ron Johnson (R-WI) owns a 100% interest in Ronald H. and Jane K. Johnson, LLC. (as reported on his annual Financial Disclosure Statement). That pass-through entity has a value of $5 million to $25 million, and generates $100,000 to $1,000,000 in income. Assuming the higher values, the 2.5 percent limit is $625,000. So, at least $625,000 of the LLC’s $1 million in income would get the conference tax break. Under the Senate bill, the LLC would have gotten much less (although the amount cannot be determined without knowing the wages paid by the LLC).

Senator Johnson is far from the only lawmaker who has substantive holdings in LLCs. Plenty of Senators and Representatives have substantial LLC holdings that will see substantial benefit from this change.