Regarding Sections 138312 & 138314 of the House Ways and Means summary for the FY2022 Budget Resolution
Dear Senator/Congressman/Congresswoman __________,
Thank you for your contributions and political leadership in our community and our state.

I wish to bring your attention proposed changes in retirement plan rules that will harm average investors like me.  The stated objective for changes to Individual Retirement Accounts is to curtail the use of these tools by the wealthy for tax avoidance. I support that goal.  One proposed change will penalize me for making a legal and prudent investment with my IRA.

I am referring to sections 138314 of the House Ways and Means draft changes to section 408 of the US tax code.  This new language will prevent the ability to invest in any entity where the IRA investor has director level control.

I am not a particularly wealthy individual.  I am a retied police officer.  I worked hard for many years serving my community and have saved diligently so I can live comfortably in my retirement.  

I have chosen to invest a portion of my IRA in rental property.  I believe this asset is a smart way to protect the principal of my savings while producing regular cash flow I can use to take IRA distributions and support myself.  I sleep better at night knowing my nest egg is invested in a solid asset that won’t evaporate with the next stock market correction.

I have used a plan setup referred to as a checkbook IRA to make this investment.  It is the most efficient and cost-effective means to administer my IRA’s investment in a rental property.  This structure has been in use since the early 1990’s and was a legal investment when I setup my plan in 2015.  My IRA is invested into an LLC for which I am the manager.  I have to follow existing IRS rules to keep my investments at arm’s length, and have always done so.  

This format allows me to react quickly as needs arise and effectively administer my IRA’s property investment.  I recently had to have a water heater replaced in my IRA’s rental, and I was able to arrange for a plumber to make the repair the same day.  If I did not have the LLC structure, my IRA’s tenant might have been without water for as long as a week while I waited for a 3rd party IRA administrator to issue a check for the repair.

Section 138314 will prohibit the use of this IRA-owned LLC where I act as manager in a purely administrative role.  This will force me into an expensive and inadequate alternative and reduce the benefit of what has been a safe and productive investment for my IRA.  I will likely be forced to sell this investment property, as acting through a 3rd party processing firm will be too cumbersome and costly.

What benefit is produced by this act?  None.

I respectfully ask that you work to eliminate this harmful language from the proposed legislation.

Best regards,