Trey Jackson – Page 16 – The Real Estate Roundtable

Advisory Panel Endorses SEC Proposed Disclosure Rule

Posted on September 23, 2022March 8, 2024 by Trey Jackson

A Securities and Exchange Commission (SEC) advisory panel on investor issues this week endorsed the agency’s proposed climate disclosure rule, including a requirement for registered companies to support Scope 3 indirect emissions “if material” to investors. (Bloomberg Law and advisory panel recommendation, Sept. 21)

Scope 3 & CRE

The Investor Advisory Committee’s recommendations are not binding, although the SEC could adopt final rules on corporate climate reporting requirements this fall. (BGov, Sept. 21)
The Real Estate Roundtable submitted comments on June 10 objecting to the Commission’s Scope 3 approach. The comments noted that real estate companies neither control nor have access to data regarding emissions from third parties in their “value chains.” (Roundtable Weekly, June 10 and June 24)
A joint industry letter filed on June 13 from 11 national real estate trade groups also opposed the SEC’s proposed approach, emphasizing that corporate disclosures on indirect Scope 3 emissions should be voluntary.

SEC Authority & EPA Funding

Litigation is expected to challenge any final Commission regulation—especially in light of a recent Supreme Court decision in West Virginia v. EPA that questioned whether the SEC has “clear” authority from Congress to regulate climate matters.
House Financial Services Committee Ranking Member Patrick McHenry (R-NC) and other Republican committee members wrote to SEC Chair Gary Gensler this week to request the SEC provide a list of all pending and upcoming rulemakings with the specific Congressional authority supporting each action. (Policymakers’ letter, Sept. 20)
Apart from the SEC, the Environmental Protection Agency (EPA) received a modest sum from Congress ($5 million) under the recently enacted Inflation Reduction Act (IRA) to help standardize voluntary corporate commitments to reduce greenhouse gas (GHG) emissions.
The new EPA funds are not “meant to create a parallel program … in case the SEC rule is scrubbed,” but will rather be used for climate models and software to hold companies “accountable” for the climate commitments they are already making. (BGov, Sept 21)
EPA backed the SEC’s climate disclosure proposal in a recent letter— stating the Commission has “broad authority to promulgate disclosure requirements that are ‘necessary or appropriate … for the protection of investors.’”

The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will remain engaged with policy makers on climate risk disclosure rules that affect commercial real estate.

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House Republicans Unveil Tax Agenda for 2023

Posted on September 23, 2022October 27, 2023 by Trey Jackson

In advance of the November midterm elections, House Republican Leader Kevin McCarthy, above, and the House GOP Conference released their Commitment to America today in Pittsburgh. The platform includes forward-looking tax and economic policy proposals that, if enacted, would impact commercial real estate in important ways. (Document and video, Sept. 23)

GOP Tax Proposals

The Commitment to America is the product of months of work by task forces created by the House Leader to develop a policy agenda to unify House Republicans. The tax proposals are outlined in a document entitled “Growth Through Innovation” developed by Republicans’ Jobs and the Economy Task Force. (Bloomberg Sept. 23; ABC News Sept. 22)
The proposals are aimed at providing more tax relief to individuals and small businesses. Proposals affecting real estate include:
- Permanently extending 20% deduction for pass-through business income enacted in 2017,
- Enacting additional estate tax relief for family-owned businesses, and
- Extending rules that facilitate the full deductibility of business interest expense.

Other areas of focus include middle class tax relief, increasing tax incentives for R&D, bringing jobs back to the United States, and tax simplification.

TCJA Tax Cuts

Senior Ways and Means Republican Rep. Vern Buchanan (R-FL), above, introduced legislation this week to make permanent tax cuts for individuals and small businesses enacted as part of the Tax Cuts and Jobs Act (TCJA) of 2017. The Buchanan legislation was endorsed in House Republicans’ Commitment to America released today. (Buchanan news release, Sept. 21)

The TCJA Permanency Act (H.R.8913) also includes several technical fixes. Without Congressional action, 23 different provisions of the 2017 Republican tax law are set to expire after 2025.
The current deduction for qualified business income (Section 199A) was part of the TCJA. Designed to ensure pass-through businesses received tax relief alongside the large tax cut for public corporations, the provision allows real estate and other pass-through businesses to deduct up to 20% of their net business income.”

Buchanan, the most senior member on the House Ways and Means Committee, is running to become the next top Republican on the powerful tax policy panel. (The Hill, April 15, 2021)

CRE Policy Webinars

“Implications of the Inflation Reduction Act for CRE” will be the focus of a CRE Finance Council webinar on Sept. 28 featuring Real Estate Roundtable SVP & Counsel Duane Desiderio. (CREFC registration)

Desiderio will also participate in another Sept. 28 virtual briefing on the Inflation Reduction Act’s clean energy tax incentives, hosted by the Urban Land Institute (ULI registration). The webinar features members of The Roundtable’s Sustainability Policy Advisory Committee (SPAC)—Immediate Past SPAC Vice Chair Dan Egan (Managing Director, Real Estate ESG – Americas, Blackstone), Suzanne Fallender (VP Global ESG, Prologis), and ULI EVP Billy Grayson.

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Fed Seeks Comment on CRE Loan Accommodations and Workouts Policy Statement

Posted on September 23, 2022October 27, 2023 by Trey Jackson

Federal regulators are inviting comment on an updated policy statement that addresses: (1) short-term commercial real estate loan accommodations; (2) revisions and additions to examples of CRE loan workouts; and (3) accounting developments for estimating loan losses. (Federal Register, Sept. 15 and GlobeSt, Sept. 19)

Why It Matters

The Fed’s proposal would build on existing guidance around the need for financial institutions to work prudently and constructively with creditworthy borrowers during times of financial stress.
The “Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts” was developed jointly by the Federal Reserve’s Board of Governors, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) in consultation with state bank and credit union regulators.
The Fed Board aims to update and expand the 2009 federal regulators’ statement on prudent commercial real estate loan workouts for CRE borrowers experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties. (FFIEC news release, Oct. 30)

Update & Expand

This month’s proposed Fed policy reaffirms two key principles from the 2009 statement:
- Financial institutions that implement prudent CRE loan accommodation and workout arrangements—after performing a comprehensive review of a borrower’s financial condition—will not be subject to criticism for engaging in these efforts, even if these arrangements result in modified loans that have weaknesses that result in adverse credit classification.
- Modified loans to borrowers—who have the ability to repay their debts according to reasonable terms—will not be subject to adverse classification solely because the value of the underlying collateral has declined to an amount that is less than the loan balance.

If finalized, the proposed statement would supersede the 2009 statement for all supervised financial institutions. The proposal would also revise language to incorporate current industry terminology and include updated references to other federal supervisory guidance.

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) plans to work on comments, which are due by November 14, 2022.

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Senators Challenge SEC Chair on Proposed Climate Rule

Posted on September 16, 2022March 8, 2024 by Trey Jackson

Senate Banking Committee members challenged Securities and Exchange Commission (SEC) Chair Gary Gensler, above, during an oversight hearing yesterday about the agency’s proposed climate disclosure rule. (CQ, Sept. 15 and Yahoo Finance, Sept. 16)

SEC Authority Questioned

Committee Ranking Member Pat Toomey (R-PA) opened the hearing by stating, “The SEC is wading into controversial public policy debates that are far outside its mission and its expertise.”
Toomey pressed Gensler about a June Supreme Court ruling that executive branch agencies “cannot use novel interpretations of existing law to pretend they have legal authority to support sweeping policy changes, including on climate change, that Congress never intended.” (Toomey Opening Statement)
Toomey asked, “In light of the EPA v. West Virginia case, have you given any consideration to rescinding that rulemaking?” Gensler replied that the Commission is “seriously” considering the high Court ruling and 14,000-plus public comments to assess its legal authorities to ensure that registered companies provide material, decision-useful information about climate risks to investors. (SEC docket with list of organizations and individual comments)

Senator Jon Tester (D-MT) explained that the SEC’s proposal would require farms and other small businesses to estimate and disclose carbon emissions because they sell products and services to public companies. Senators Mike Rounds (R-SD) and Steve Daines (R-MT) shared Tester’s concerns (CQ, Sept. 15)

A CRE Priority

The SEC’s climate proposal, if finalized, would require all SEC registrants to quantify direct GHG emissions (“Scope 1”) and emissions attributable to electricity purchases (“Scope 2”) through annual 10-Ks and additional filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22)
The SEC also proposed that a company would need to report on “Scope 3” indirect emissions if they are “material” to investors. In June 10 comments, The Roundtable objected to the Commission’s proposed Scope 3 approach because real estate companies neither control nor have access to data regarding emissions from third parties in their “value chains.” (Roundtable Weekly, June 10 and June 24)
A joint letter filed on June 13 from 11 national real estate industry trade groups echoed the issues raised by The Roundtable in its earlier comments.

The SEC is expected to issue a final climate reporting disclosure rule sometime this fall. If the Commission votes to regulate Scope 3 emissions, the recent SCOTUS decision in West Virginia v. EPA is likely to spark litigation, raising questions as to whether the SEC has authority from Congress to regulate climate disclosures and emissions.

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Increased Pace of Fed’s Quantitative Tightening Raises Concerns About Liquidity Stress in Banking System

Posted on September 16, 2022October 27, 2023 by Trey Jackson

As the Federal Reserve accelerates the unwinding of its nearly $9 trillion balance sheet this month, there is growing concern about the impact that quantitative tightening (QT) may have on credit market liquidity and the overall economy. (Financial Times, Sept 14 and Reuters, Sept. 15)

QT & Liquidity

The Fed launched its QT initiative on June 1 with initial caps set for $30 billion in U.S. Treasuries and $17.5 billion in agency mortgage-backed securities—but scheduled the caps to increase this week to $60 billion and $35 billion, respectively. (Federal Reserve, Plans for Reducing the Size of the Federal Reserve’s Balance Sheet, May 4)
The increased QT pace of up to $95 billion per month has sparked concerns about how contracting liquidity conditions could impact the overall economy and whether the Fed may seek an early exit from QT. (Financial Review, Sept. 14 and BGov, Sept. 12)
The QT increase prompted a Bank of America warning to clients this month that strain on bond market liquidity is “one of the greatest threats to global financial stability today, potentially worse than the housing bubble of 2004-2007.” (MarketWatch, Sept 15 and New York Times, Sept. 11)
The Fed’s expected policy interest rate increase by 75 to 100 basis points next week would keep borrowing costs elevated as the central bank’s scheduled QT effort increases.

Soft Landing Challenge

The challenge for the Fed is whether it can achieve a “soft landing”—reducing the inflation rate while avoiding a recession—while the U.S. economy faces volatile inflationary factors from the war in Ukraine, high energy costs, and supply chain disruptions.
Rising interest rates and various market conditions around the world could lead to a global recession next year, resulting in “lasting harm” to emerging and developing economies, according to an analysis released today by the World Bank. (Financial Times and UPI, Sept. 16)
“Recent tightening of monetary and fiscal policies will likely prove helpful in reducing inflation,” said Ayhan Kose, the World Bank’s Acting Vice President for Equitable Growth, Finance, and Institutions. “But because they are highly synchronous across countries, they could be mutually compounding in tightening financial conditions and steepening the global growth slowdown.” (World Bank news release and analysis, Sept. 16)
Roundtable Board Member Barry Sternlicht (Chairman and CEO, Starwood Capital Group), above, appeared on CNBC’s Squawk Box yesterday to discuss the Fed, inflation, and the U.S. economy. Sternlicht stated the economy is “braking hard” and that prices will begin to decrease after recent Fed measures.

The Roundtable’s Fall Meeting next week in Washington will include a discussion on the Fed’s actions and economic conditions with Dr. Austan Goolsbee, former White House Chairman of the Council of Economic Advisers from 2010-2011 and a member of President Barack Obama’s cabinet.

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Senate to Consider Stopgap Funding Bill as Parties Signal Contrasting Tax Agendas After Mid-Term Elections

Posted on September 16, 2022October 27, 2023 by Trey Jackson

The end of the government’s fiscal year is only two weeks away as congressional leaders continue to work on the scope of a Continuing Resolution (CR) that would extend federal funding into mid-December.

CR Scope

The Senate will move first to determine if other bills will be attached to the stopgap—the final legislative package before November’s mid-term elections. (House Majority Leader Steny Hoyer (D-MD) website, Sept. 12)
The process of moving the funding package has been complicated by a deal reached last month between Senate Majority Leader Charles Schumer (D-NY) and Sen. Joe Manchin (D-WV) to consider permitting rules for energy pipelines and exports. The agreement was reached to secure Manchin’s support for the Inflation Reduction Act. (Roundtable Weekly, Aug. 12 and Manchin’s Outline of Energy Permitting Provisions)
Sens. Schumer and Manchin are working to gather support for permitting legislation, which would require 60 votes to pass the Senate. In the House, a coalition of 77 Democrats recently expressed their disapproval of linking a permitting reform bill to the “must-pass” CR. (Reuters and The Hill, Sept. 13)
House Speaker Nancy Pelosi (D-CA) addressed the possibility of a permit bill yesterday. “We have agreed to bring up a vote, yes. We never agreed on how it would be brought up, whether it be on the CR, or independently or part of something else. We’ll just wait & see what the Senate does,” Pelosi said. (E&E News, Sept. 15)
A CR that expires in December could be followed by consideration of a FY2023 “omni” spending package —with possible extensions of certain tax provisions—during a lame-duck session.

Post-Election Tax Agendas

House Republicans plan to unveil an outline of their “Commitment to America” platform on September 23 in anticipation of the November 8 midterm elections. (Tax Notes, Sept. 15)
Rep. French Hill (R-AR), a member of the GOP Jobs and the Economy task force, told Tax Notes there will be a “skinny version” of the House GOP Platform and a less widely circulated “deep blueprint for legislative work to lay out that first year of Congress.”
Extending portions of the Tax Cuts and Jobs Act past their December 31, 2025 expiration will be at the core of the the House Republican tax plan— including 2017’s tax reductions for individuals, the 20 percent rate cut on pass-through income, and bonus depreciation. (Tax Notes, Sept. 15)
The White House released its own economic blueprint last week, reciting recent accomplishments and signaling tax measures it plans to pursue, including tax increases on capital gains, carried interest, and the step-up in basis of assets at death, as well as a new minimum tax on billionaires’ wealth. (White House news release and blueprint, Sept. 9)
Meanwhile, the Biden administration announced plans on Wednesday to distribute $900 million throughout the country to build electric vehicle infrastructure across 53,000 miles of the national highway system—funding that is part of last year’s bipartisan infrastructure law. (PoliticoPro, Sept. 14)
Transportation Secretary Pete Buttigieg said, “With the first set of approvals we are announcing today, 35 states across the country—with Democratic and Republican governors—will be moving forward to use these funds to install EV chargers at regular, reliable intervals along their highways.” (Approvals and each state’s deployment plan for 2022)

The CR, midterm elections, and the legislative outlook for the lame-duck session will be among the topics of discussion during The Roundtable’s Fall Meeting on Sept. 20-21 in Washington.

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National Counterterrorism Center Offers Private Sector a Preview of New Platform to Protect Against Threats

Posted on September 9, 2022October 27, 2023 by Trey Jackson

The National Counterterrorism Center (NCTC) on Sept 28 will preview its new aCTknowledge platform, designed to deliver timely situational awareness notifications covering terrorist events that may impact local communities.

How to Participate

CRE participants can join the preview here:

Wednesday, September 28 from 1:00–2:00 pm (ET)
Zoom link
- Meeting ID: 833 6363 8044
- Passcode: 591990

The aCTknowledge platform will provide significant tactics, techniques, and procedures to support homeland security, law enforcement, and community first responder efforts aimed at protecting against terrorist threats. Additionally, NCTC’s aCTknowledge will offer reference guides to aid in rapid response and deployment, helping with private sector efforts. (See fact sheet about the new platform)

Roundtable Efforts

The Roundtable—through our Homeland Security Task Force (HSTF) and partnership with the Real Estate Information Sharing and Analysis Center (RE-ISAC)—remains focused on increased cross-agency information sharing and cooperation with key law enforcement and intelligence agencies that benefit the industry.

The RE-ISAC sends a daily report to members to share actionable information on a variety of potential cyber and physical threats. Additionally, The Roundtable’s HSTF works closely with federal, state, and local law enforcement, intelligence agency partners, and the RE-ISAC on risk mitigation measures that CRE businesses may consider to help protect critical infrastructure.

See The Roundtable’s 2022 Annual Report’s Homeland Security section.

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Senators Propose New Restrictions on Conservation Easement Donations

Posted on September 9, 2022October 27, 2023 by Trey Jackson

Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) released legislative text yesterday with new restrictions on conservation easements as a revenue offset for their new retirement savings bill.

Easement Restrictions

Section 1104 of the Senate Finance committee’s summary of the Enhancing American Retirement Now (EARN) Act states that since 2016, the IRS “has identified certain syndicated conservation easement transactions involving pass-through entities as ‘listed transactions’ carrying a high potential for abusive tax avoidance.” (Legislative text)
The EARN provision would disallow a charitable deduction for a qualified conservation contribution if the charitable deduction claimed exceeds two and one half times the sum of each partner’s relevant basis in such partnership— unless the contribution meets a three-year holding period test. (Section-by-section summary of the EARN Act)

What’s Next

The Senate Finance Committee adopted the conservation easement proposal in June during consideration of the EARN Act, which passed on a 28-0 vote. The House passed its retirement legislation by a wide margin in March. The two packages will have to be reconciled. (PoliticoPro and TaxNotes, Sept. 9)

Conservation easement changes, retirement-related legislation, expiring tax provisions, and potentially other tax proposals could gain momentum during the “lame duck” legislative session following the November mid-term elections.

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The Roundtable Opposes NASAA Proposal Affecting REITS, Multifamily Industry, Capital Formation

Posted on September 9, 2022October 27, 2023 by Trey Jackson

The Real Estate Roundtable submitted comments today to the North American Securities Administrators Association (NASAA) in opposition to proposed rules that would place new restrictions on the market for public non-listed REITs. (Roundtable comment letter and Roundtable Weekly, July 29)

CRE Impact Concerns

NASAA’s proposal could have a profound impact on the $20.7 trillion U.S. commercial and multifamily real estate market.
These proposed revisions to the NASAA Statement of Policy Regarding Real Estate Investment Trusts could have the unintended and unnecessary consequence of impeding real estate capital formation, undercutting economic growth, and weakening the strength and stability of U.S. real estate capital markets. (NASAA Request for Public Comment, July 12)
The proposed revisions also have the potential to influence other sets of NASAA Guidelines under development, including those for Asset-Backed Securities, Commodity Pools, Equipment Leasing, Mortgage Programs, and Real Estate Programs other than REITs. (NASAA Request for Public Comment, July 12)

NASAA’s Proposed Changes

Since nontraded real-estate investment trusts are not listed on stock exchanges, investors purchase shares through financial brokers. Federally regulated, public non-listed REITs (PNLRs) raised a record $35.4 billion last year. (Wall Street Journal, Aug. 30)
The NASAA proposal would negatively affect publicly registered, non-traded REITs by linking conduct standards for brokers selling non-traded REITs to the SEC’s Best Interest conduct standard.
The proposal has four revisions that would affect individual net income and net worth requirements; add a uniform concentration limitation; and include a new prohibition against using gross offering proceeds to fund distributions. (Roundtable Weekly, July 29 and the Institute for Portfolio Alternatives)

Roundtable Response

Roundtable President and CEO Jeffrey DeBoer, above, emphasized in his letter to NASAA that PNLRs are a growing source of capital for the acquisition and development of affordable housing, commercial properties for small businesses, and other types of real estate that supports economic growth and employment.
“The Roundtable encourages NASAA to conduct or at a minimum to address the economic impact of the proposal in its justification before considering adoption,” DeBoer stated. (Roundtable comment letter, Sept. 9)
The Roundtable’s letter also notes the proposal would impose arbitrary restrictions that would limit investor choice during a time of stock market volatility and high inflation.
The NASAA rules would also negatively impact highly regulated investment vehicles—including mutual funds, exchange-traded funds, interval funds, tender offer funds and business development companies.

The Roundtable’s letter concludes by urging NASAA to withdraw their proposal and engage industry participants to craft regulations that will help ensure NASAA’s goals without stifling investment in commercial real estate—nor limit investors’ ability to diversify their portfolios.

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Congress Focuses on Stopgap Federal Funding to Avoid Government Shutdown

Posted on September 9, 2022October 27, 2023 by Trey Jackson

U.S. Capitol

Congress this month will consider a $47 billion emergency funding request from the White House as part of a “continuing resolution” (CR) spending bill that would avoid a partial government shutdown starting Oct. 1. (Roll Call, Sept. 6, White House request, Sept. 2)

Legislative Timing

Senate Majority Leader Chuck Schumer (D-NY) said this week, “We’re hoping the CR would go to about mid-December and then we might do an omnibus”—a bill that would fund the government through the remainder of the federal fiscal year (Sept. 30, 2023). However, the November mid-term elections could push consideration of an omnibus budget to the congressional lame-duck session. (Reuters, Sept. 7)
The CR may also include legislation to fast-track federal permits for energy projects, which Schumer and Sen. Joe Manchin (D-WV) agreed to last month in principle as part of the Democrats’ effort to pass the Inflation Reduction Act of 2022 (IRA).
Schumer said on Wednesday, “Permitting reform is part of the IRA, and we will get it done.” (PoliticoPro, Sept. 7 and E&E Daily, Sept. 8)

The IRA & CRE

The IRA, passed on strict party-line votes in both chambers last month, is a $790 billion tax-and-spending package that includes the largest federal clean energy investment in U.S. history. (Roundtable Weekly, Aug. 12)
Roundtable fact sheets detail the IRA’s impact on Clean Energy Tax Incentives and Revenue Provisions affecting commercial real estate.
The Real Estate Roundtable has encouraged Congress for several years to develop clean energy tax incentives that are more usable for building owners, managers, and financiers—and more impactful to help meet national carbon reduction goals.
The Roundtable will stay engaged with lawmakers as the Treasury Department proposes rules and guidance on a range of issues to implement the IRA’s provisions.

Clean Energy Spending

John Podesta

The Biden administration confirmed last week that its top climate advisor Gina McCarthy is leaving her post. The White House also announced that John Podesta, above, will become a senior advisor for clean energy innovation, oversee the implementation of the IRA’s climate and energy spending, and serve as chair of President Biden’s National Climate Task Force. Podesta led former President Barack Obama’s climate strategy. (Wall Street Journal and CNBC, Sept. 2)
Private sector investments in battery factories, solar panel manufacturing and other projects in the weeks since President Biden signed the IRA are part of the New York Time’s Sept. 7 article, “Clean Energy Projects Surge After Climate Bill Passage.”

Roundtable members will meet in Washington, DC on Sept. 20-21 to discuss the IRA’s impact on CRE, the outlook for the midterm elections, and other topics, such as the Federal Reserve’s concurrent meeting on monetary policy.

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