IRS tax rules require developers to pay up on projects they’re still building. That new burden on a cooling market could slow down the pace of new construction.
This could be a devastating burden for developers that could have significant ripple effects for condominium projects. If a developer completes 50 percent of construction in a project’s first year and sells 50 percent of its units, the company would be expected to pay tax on 25 percent of its projected profits for the entire tower. But the developer won’t actually see the cash-flow needed to pay the tax until the building is finished, which could take several years.