Trey Jackson – Page 28 – The Real Estate Roundtable

Democrats’ Revised Tax Plan Includes Changes and Improvements Important to Real Estate and Other Pass-through Businesses

Posted on October 30, 2021October 27, 2023 by Trey Jackson

This week’s frenzy of infrastructure negotiations in Washington was capped off by the White House’s release yesterday of a pared down, $1.75 trillion framework agreement on “human” infrastructure legislation, which trimmed back potential tax increases on commercial real estate and other pass-through businesses. (CQ, Oct. 30 and Tax Notes, Oct. 29)

Dynamic Negotiations

By introducing revised legislation – the Build Back Better Act (H.R. 5376) – Democratic leaders hoped to create momentum for a vote on the separate, bipartisan “physical” infrastructure bill. Their effort was unable to secure the necessary support for an immediate vote from House progressives. (Section-by-section bill summary and Washington Post, Oct. 29)
Policymakers did pass a short-term extension of surface transportation programs until Dec. 3– the same day that funding for the government will run out and within the time frame for addressing the current debt ceiling. (Punchbowl News, and BGov, Oct. 30)
Roundtable President and CEO Jeffrey DeBoer commented on the evolving infrastructure legislative developments in an interview this week with American City Business Journals. DeBoer noted that as the bill’s cost has come down, policymakers have eliminated many proposed tax increases.
“We very much want to see the physical bipartisan infrastructure bill pass. It has been tied in the House to the larger human infrastructure bill, and that legislation is slowly winding its way to the finish line. As the larger bill was put forward, we were concerned about some provisions that we felt might target real estate activities and real estate investment. We tracked all of these various proposals such as mark-to-market and wealth taxes. We’re continuing to monitor developments and ensure that nothing comes up without proper vetting or full understanding of how it would impact CRE,” DeBoer said.

What It Means for CRE

The revised reconciliation bill reflects continued progress on a number of tax issues important to real estate and prioritized by The Real Estate Roundtable. Critically, the current bill includes:
- No limitations on like-kind exchanges (sec. 1031),
- No increase in the capital gains tax rate,
- No restrictions on the 20% pass-through business income deduction (sec. 199A),
- No taxation of unrealized gains at death or repeal of the step-up in basis of assets,
- No changes in the tax treatment of carried interest, and
- No restrictions on estate tax valuation discounts.

Additionally, the revised legislation excludes a complex mark-to-market regime to tax the unrealized gains of billionaires, new tax burdens on grantor trusts, and a provision that would have prohibited IRA investment in many non-listed REITS.

For more information on the tax provisions in the original House bill, see The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation. Also watch the recent Marcus & Millichap webcast on tax policy that featured The Roundtable’s Jeffrey DeBoer, above. (Registration required to view the Marcus & Millichap webcast)

Key Tax Revenue Provisions

In addition to provisions aimed at corporate and international business activities, tax provisions in the framework agreement include:
- Expansion of the 3.8% net investment income tax to cover a much broader range of income – such as capital gains and rents – earned by both active business owners (such as real estate professionals), S corp. shareholders, and limited partners.
- A new proposal to impose a 5% surtax on a taxpayer’s modified adjusted gross income (AGI) over $10M and an additional 3% surtax tax on modified AGI over $25 million.
- Restrictions on taxpayers’ ability to deduct more than $250K (individual) or $500K (married couple) of losses incurred in an active trade or business from their portfolio income or wages.
- Modifications to the portfolio interest exception that exempts interest earned on certain U.S. debt obligations from a withholding tax on outbound interest payments. The exception is sometimes used by foreign institutions when investing in US real estate.
- Clarification that limitation on interest deductibility (sec. 163(j)) applies at the partner or shareholder level, not the entity level.
- Clean Energy tax provisions affecting real estate are covered in the Roundtable Weekly story below.

Dropped Tax Incentives

As the cost of the bill came down, certain tax incentives were eliminated from the package: expansion of the low-income housing tax credit and the credit for rehabilitating historic structures, creation of a new tax credit for home construction in low-income communities for low-income buyers, and new infrastructure tax credit bonds and related infrastructure financing provisions.

Legislative changes to the bill could occur next week on crucial issues such as the SALT deduction, but the timing of action on a final agreement remains uncertain. (Bloomberg, Oct. 29)

# # #

Policymakers Exploring Alternative Climate Policies for Reconciliation Package

Posted on October 23, 2021October 27, 2023 by Trey Jackson

The White House and congressional Democrats scrambled this week to find alternatives to address climate change within the multitrillion reconciliation framework after Sen. Joe Manchin (D-WV) rejected the proposed Clean Electricity Performance Program (CEPP). The CEPP has been a centerpiece proposal pushed by the Biden Administration to increase U.S. renewable power supplies by de-carbonizing the electricity grid. (Politico and E&E News, Oct. 20)

Clean Energy and CEPP

The CEPP would offer federal Energy Department incentive payments to utilities that meet an annual target of increasing “clean electricity” by four percent per year through 2030. It is intended to reach the Biden Administration’s goal of powering 80% of the electric grid from renewable sources by 2030. (The Hill, Oct. 18)
Sen. Manchin (above), chair of the Senate Energy and Natural Resources Committee, stated he opposes the CEPP because the electricity sectors’ transition to clean power sources is already underway. Manchin’s opposition has prompted some Democrats to consider a last-ditch effort to expand the program to include coal and gas power plants that capture carbon emissions, in an effort to attract the key West Virginia Senator’s support. (E&E News, Oct .19 and Politico, Oct. 14)
Policymakers are also exploring whether the CEPP could be restructured as a grant program to reward states that increase clean energy output. (Bloomberg, Oct. 20)
U.S. Department of Energy Deputy Secretary David Turk addressed alternative approaches to the CEPP during an Oct. 19 Bloomberg Live event. He said, “There are a variety of discussions right now about how to have different authorities, different funding streams” that support partnerships among states, localities, utilities and the private sector toward the goal of grid de-carbonization. (BGov, Oct 20)

Climate Provisions and CRE

Proposals like the CEPP – which aim to boost electricity from solar, wind, and other non-carbon sources – have become a key energy policy priority for CRE. This is particularly the case in local jurisdictions considering “performance standards” that set regulatory limits on “direct” and “indirect” GHG emissions from buildings. (Roundtable Weekly, April 9)
An evolving, cleaner grid can also help enable real estate assets to reduce and disclose their so-called “Scope 2” emissions that derive from purchased electricity. The Securities and Exchange Commission (SEC) has indicated it will propose regulations that require public companies (and other entities in its jurisdiction) to report on “material” information regarding GHG emissions to the investor community. (Roundtable Weekly, Oct. 1 and June 11)
If a CEPP-type policy is included in a final reconciliation package, it will be critical for federal data to stay up-to-date and forecast how such a program is driving the grid to become cleaner and less reliant on fossil fuels.
The Roundtable’s Sustainability Policy Advisory Committee (SPAC) has thus convened a task force to examine the primary federal data set – known as the Emissions Generation Resource Integrated Database (eGRID) – that reports on the carbon impact of virtually all electric power generated in the U.S.
Roundtable members rely on eGRID to inventory their portfolio-wide carbon emissions. eGRID also provides the data that EPA’s Portfolio Manager benchmarking tool uses to determine a specific building’s indirect Scope 2 emissions that derive from electricity consumption.

While the fate of climate policies – and indeed, the entire reconciliation framework – remains unclear, re-vamped provisions of the federal tax code to incentivize clean energy projects appear to have garnered uniform Democratic support. Particulars vary in Senate and House tax proposals, but credits and deductions to incentivize solar installations, energy storage, EV charging stations, and building retrofit projects are on the table in reconciliation discussions. (See The Roundtable’s latest Policy Issues Toolkit, “Clean Energy Tax Incentives,” p. 25)

# # #

Democrats Struggle to Reach Agreement on “Social Infrastructure” Package as Roundtable’s DeBoer Addresses Real Estate Tax Issues in Play

Posted on October 23, 2021October 27, 2023 by Trey Jackson

Democrats this week struggled to reach agreement on cutting the cost of President Biden’s multitrillion “social infrastructure” proposal as Senator Kyrsten Sinema (D-AZ) opposed any increase in marginal rates for businesses, high-income individuals or capital gains to pay for the package. Democrats aim to pass both the “human” and “physical’ infrastructure packages under a budget reconciliation process that requires approval of all 50 Democrats in the evenly divided Senate. (Wall Street Journal, Oct. 20)

CRE Impact

Real Estate Roundtable President and CEO Jeffrey DeBoer (above) yesterday addressed the fluid nature of the reconciliation bill negotiations during a Marcus and Millichap tax policy webinar. The webcast is available here, but you must be registered to access the discussion.
DeBoer noted that the narrow voting margins in both the Senate and House have created an environment where it is difficult for various factions in Congress to reach consensus. “What we have here is a clash between expectations and reality,” DeBoer said.
He added that the current policy disputes among lawmakers adds uncertainty to the potential outcome. “Could negative tax provisions affecting real estate be put back on the table? Absolutely. What also worries me is that other proposals that we don’t know about yet may suddenly be considered.” (Registration required to view the Marcus & Millichap webcast)
The House Ways and Means Committee voted in September to advance legislation that would finance Biden’s social infrastructure initiatives with a $2.1 trillion tax increase focused on high-income individuals and corporations. The House legislation excluded several tax proposals put forward by the Biden administration and Senate lawmakers that would increase the tax burden on real estate. (Roundtable Weekly, Sept. 17)
The Washington Post today reported that a new “Billionaire Income Tax” proposal from Senate Finance Chair Ron Wyden (D-OR) would “aim to raise hundreds of billions of dollars from the fortunes of America’s roughly 700 billionaires” by applying a tax to those individuals earning over $100 million in income three years in a row. Taxes would be imposed on the increased value of assets such as stocks on an annual basis, regardless of whether those assets are sold. Billionaires would also be able to take deductions for the annual loss in value of those assets. (Washington Post, Oct 22)
Additional tax issues affecting CRE are profiled in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation.

Tax Uncertainty

The Senate has not acted on any revenue-raising proposals to support President Biden’s original $3.5 trillion infrastructure package. Policymakers are now aiming to pare down the overall reconciliation bill cost to approximately $2 trillion before finalizing measures to pay for the package.
Sen. Sinema (above) yesterday spoke with House Ways and Means Committee Chairman Richard Neal (D-MA) in an effort to break the impasse on how to fund certain infrastructure spending priorities in a scaled-down package. Neal said he is optimistic a deal will be reached. “I did point out that it’s the ninth inning. I mean, when are you going to vet these issues?” Neal said. (The Hill, Oct. 21)
The current reconciliation bill in the House would raise the top marginal income tax rate on many pass-through business owners from 29.6% today to 46.4% (a 57% increase). The Roundtable believes this level of increase on pass-through businesses was unintended by Members of Congress and could undercut the bill’s own objectives.

As negotiations continue among policymakers on a reduced topline number for the social infrastructure package – and the specific programs it would support within a multi-trillion reconciliation bill – The Roundtable continues to urge lawmakers to ensure that any tax changes within a final agreement treats pass-through businesses fairly and equitably. (Roundtable Weekly, Oct. 1 and Oct. 15)

# # #

Debt Ceiling Increase Enacted as House Democrats Consider Cuts to $3.5 Trillion Reconciliation Bill

Posted on October 15, 2021October 27, 2023 by Trey Jackson

President Joe Biden yesterday signed a $480 billion increase in the federal government’s debt limit to $28.9 trillion, narrowly avoiding an Oct. 18 national default deadline. The debt increase – passed by the Senate last week and the House on Tuesday – sets the stage for another fiscal cliff negotiation in less than two months, when both the debt limit and funding for the government run out on Dec. 3. (Associated Press, Oct. 14 and Reuters, Oct. 13)

Infrastructure Funding

Democrats this week continued to struggle on how to cut the scope and cost of the $3.5 trillion “human” infrastructure bill, after an intraparty split between moderates and progressives postponed a vote on a scaled-down bill in the House. (Wall Street Journal, Oct. 1)
House Speaker Nancy Pelosi (D-CA) set an Oct. 31 target date to pass revised legislation under the budget reconciliation process, which requires a simple majority in the 50-50 Senate to bypass Republican opposition. (Bloomberg, Oct. 2)

Cuts and Scale

Pelosi sent an Oct. 11 letter to her caucus members as they work to cut Biden’s reconciliation proposal from $3.5 trillion to approximately $2 trillion. “Overwhelmingly, the guidance I am receiving from Members is to do fewer things well,” Pelosi wrote. (PoliticoPro, Oct 13)
On Oct. 12, Pelosi also commented on possible cuts to the length of certain spending programs, stating, “What would be the first to go? … the timing would be reduced in many cases to make the cost lower.” (News conference transcript)
In the Senate, Majority Leader Chuck Schumer (D-NY) yesterday sent a letter to his fellow Democrats urging unity as they consider a scaled-back infrastructure bill. “To pass meaningful legislation, we must put aside our differences and find the common ground within our party. As with any bill of such historic proportions, not every member will get everything he or she wants,” Schumer wrote. (Associated Press, Oct. 14)

Roundtable Concerns

Real Estate Roundtable President and CEO Jeffrey DeBoer will participate in an Oct. 21 Marcus & Millichap webinar on the state of play in infrastructure proposals, the industry’s tax policy concerns and the possible impact on commercial real estate. (Register here)

The tax bill passed by the House Ways and Means Committee does not include restrictions on like-kind exchanges, taxation of gains at death, ordinary income treatment for carried interest, and tax parity between capital gains and ordinary income. The Roundtable argued that these Biden administration tax proposals could harm job growth, local tax revenue, and the economic recovery.

As negotiations continue on a multi-trillion reconciliation proposal, The Roundtable is urging lawmakers to ensure that any final agreement on tax changes to fund a bill would treat pass-through businesses fairly and equitably. The current reconciliation bill in the House would raise the top marginal income tax rate on many pass-through business owners from 29.6% today to 46.4% (a 57% increase).

The Roundtable believes this level of increase on pass-through businesses was unintended by Members of Congress and could undercut the bill’s own objectives of stimulating job growth, improving housing availability, and promoting investment in economically struggling communities, among other priorities.

Roundtable members and others are encouraged to reach out to their Representatives and contact their Senators to urge them to preserve the 20% deduction for pass-through business income (section 199A), which is directly tied to hiring workers and investing in capital equipment and property. Modest adjustments in the legislation would ensure that pass-through businesses will continue contributing to economic growth, innovation, and job creation. Background information and talking points can be found here.

Additional tax issues affecting CRE are summarized in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation.

# # #

Biden Administration to Ease Pandemic Travel Restrictions; Senate Hearing Considers Legislation to Support Travel and Tourism Economy

Posted on October 15, 2021October 27, 2023 by Trey Jackson

The Biden administration today announced that fully vaccinated travelers from Mexico and Canada will be allowed to enter the United States starting Nov. 8 for “non-essential purposes, including to visit friends and family or for tourism.” The easing of travel restrictions provides a renewed opportunity for international travel to boost domestic economic growth. Additionally, next month will see the end of a pandemic-driven, 18-month ban on travel from 33 countries, including members of the European Union. (Reuters, Oct. 15 and New York Times, Oct. 12 | Oct. 8)

Why It Matters

The easing of travel restrictions could help rejuvenate the U.S. tourism industry and commercial real estate’s hospitality and retail sectors, which have been hit hard by the pandemic. Inbound international travel may help CRE through increased spending at hospitality, retail, attractions, health, and investment properties, generating revenues and creating American jobs. According to Marketwatch, relaxed travel restrictions may also
lead to an increase in foreign investment in U.S. real estate.
Secretary of Homeland Security Alejandro Mayorkas stated, “Cross-border travel creates significant economic activity in our border communities and benefits our broader economy.” He added, “This new travel system will create consistent, stringent protocols for all foreign nationals traveling to the United States – whether by air, land, or ferry – and accounts for the wide availability of COVID-19 vaccinations.” (DHS news release, Oct. 12)
Senate Majority Leader Chuck Schumer (D-NY) this week commented, “Since the beginning of the pandemic, members of our shared cross-border community have felt the pain and economic hardship of the land border closures. That pain is about to end.” (Schumer news release, Oct 12)
The American Hotel & Lodging Association (AH&LA) also issued a Sept. 15 report on how hotels are projected to end 2021 with a loss of 500,000 jobs and more than $59 billion in business travel revenue compared to 2019. (AH&LA news release | state-by-state breakdown | market-by-market breakdown)

Bipartisan Senate Efforts

The Senate is preparing legislation to boost inbound travel and tourism to the United States, according to a Sept. 21 Senate Commerce subcommittee hearing chaired by Sen. Jacky Rosen (D-NV), above.
Executives from AH&LA and the U.S Travel Association testified at the hearing, entitled Legislative Solutions to Revive Travel and Tourism and Create Jobs.
Rosen, who leads the Subcommittee on Tourism, Trade, and Export Promotion, announced that bipartisan legislation is in the works to “support the recovery of the travel and tourism economy in the wake of the COVID-19 pandemic and help us build a brighter future for businesses and workers in this key sector for every state in our nation.” (Rosen news release, Sept. 22)
The imminent Omnibus Travel and Tourism Act would establish permanent federal leadership on travel policies, invest in public-private partnerships to increase visits to the U.S., and create a task force to address the pandemic’s impact on air travel. (BGov, Sept. 21)

Full committee ranking member Roger Wicker (R-MS) added his support for the emerging bill, saying that the nation’s travel and tourism challenges are a “bipartisan issue.”

# # #

Roundtable and Business Coalition Weigh In on Legislation Requiring Ransomware Attack Reports

Posted on October 8, 2021October 27, 2023 by Trey Jackson

CyberSecurity graphic

Bipartisan legislation that would require private sector companies to report ransomware attacks to federal authorities was advanced this week by the Senate Homeland Security and Governmental Affairs Committee. A broad, 37-member coalition that includes The Real Estate Roundtable on Oct. 4 provided detailed suggestions to Senate and House congressional committees about provisions that should be included in any bill that would impose a compulsory cyber incident notification program on the business community. (Cybersecurity coalition letter and Committee mark-up)

Why It Matters

The Cyber Incident Reporting Act (S. 2875) – sponsored by Committee Chairman Gary Peters (D-MI) and Ranking Member Rob Portman (R-OH) – would require certain owners and operators of critical infrastructure operators to report hacks within 72 hours and ransom payments within 24 hours to the Cybersecurity and Infrastructure Security Agency (CISA). Organizations failing to do so would potentially banned from doing business with the federal government. (The Hill, Set. 28 and PoliticoPro, Oct. 5)
The committee also approved the Federal Information Security Modernization Act of 2021 (S. 2902), which would require agencies and contractors to report on cyberattacks.
The congressional bills aim to update the Federal Information Security Modernization Act, signed into law in 2014. Sen. Portman noted two reports on issued by the Homeland Security Committee since 2019 that found massive cybersecurity shortcomings at several federal agencies.
The Senate Homeland Security Committee’s leadership may seek to merge their legislation may with a bill (S. 2010) from the Senate Intelligence Committee. Sen. Peters said he may also seek to include S. 2875 in House-passed defense policy legislation (H.R. 4350), which also includes language requiring cyber incidents. (BGov and PoliticoPro, Oct. 5)

Private Sector Concerns

Senate Homeland Security and Governmental Affairs Committee

The business coalition’s Oct. 4 letter to the Senate Committees on Intelligence, Homeland Security and Government Affairs and the House Committee on Home recommended several provisions that should be central to a mandatory reporting regime, including:
- Establish a prompt reporting timeline of not less than 72 hours. Legislation should reflect an appropriate, flexible standard for notifying government about significant cyber incidents.
- Attach reporting to confirmed cyber incidents. Businesses need clarity in reporting requirements, which should be targeted to well-defined and confirmed cyber incidents.
- Confine reports to significant and relevant incidents .A list should be limited in reach—particularly excluding small businesses using existing federal rules—and risk based.
- The business industry comments recommended that federal cybersecurity reporting legislation should also include robust liability protections; consistent federal reporting requirements; restrictive government use of reported data; and guarantee substantial input from industry to protect the rulemaking process.

Identifying Critical Infrastructure

In the House, a separate bill that would identify systemically important infrastructure was introduced Oct. 5 by Homeland Security Committee Ranking Member John Katko (R-NY), Rep. Abigail Spanberger (D-VA) and Rep. Andrew Garbarino (R-NY). (Katko one-pager on the bill)
The bill would authorize CISA to prioritize infrastructure operators considered so crucial to the U.S. economy, public health and national security that a disruption to their operations due to a cyberattack would be considered debilitating. (Katko news release, Oct. 5)

The Roundtable’s Homeland Security Task Force continues to work with key law enforcement and intelligence agencies and the Real Estate Information Sharing and Analysis Center (RE-ISAC) on protective measures that businesses can take to create infrastructure resistant to physical damage and cyber breaches.

# # #

Senate Passes Short-Term Debt Limit Increase as Democrats Aim to Reduce Cost of Human Infrastructure Package

Posted on October 8, 2021October 27, 2023 by Trey Jackson

Capitol building bright

The Senate last night passed legislation (S.1301) on a 50-48 vote that would increase the debt limit by $480 billion and avoid an Oct. 18 national default. (Axios and Wall Street Journal, Oct. 7)

New Fiscal Cliff

The bill would also effectively set Dec. 3 as the new fiscal cliff – when the new debt limit and the current short-term government-spending authorization both expire. (Roundtable Weekly, Oct. 1 and CQ, Oct. 7)
The agreement struck by Senate Majority Leader Charles Schumer (D-NY) and Minority Leader Mitch McConnell (R-KY) this week raises the current national debt to approximately $28.8 trillion to cover spending previously authorized by the federal government. (NPR and CNBC, Oct. 7)
House Speaker Nancy Pelosi (D-CA) wrote to members of her caucus last night that she would call the House back from recess early to vote if necessary. President Biden said this week said he also would support an increase in the debt ceiling. (Wall Street Journal, Oct. 7 and White House remarks, Oct. 6)

Infrastructure Reset

DC landscape sunset

Meanwhile, disagreements among moderate and progressive Democrats on the scope and cost of a $3.5 trillion “human” infrastructure package delayed a vote last week in the House, prompting Speaker Nancy Pelosi (D-CA) to reset the deadline for lawmakers to reach agreement to Oct. 31. (Forbes, Oct 2)
Congressional leaders and President Biden continued negotiations this week with centrist Senate Democrats Joe Manchin (WV) and Kyrsten Sinema (AZ) aimed at reaching a deal that would allow a human infrastructure bill to pass the Senate with 50 votes. Manchin this week added that he is open to a reduction in the reconciliation bill’s cost to between $1.9 trillion and $2.2 trillion. (CNN, Oct 5)

Democrats are now engaged in an intense debate about how to cut the total cost of their human infrastructure bill. Legislation that would raise an estimated $2.1 trillion in taxes from corporations and the wealthy was approved by the House Ways and Means Committee on Sept. 15 to help finance the original $3.5 trillion reconciliation package. (Roundtable Weekly, Sept. 17)
Real Estate Roundtable President Jeffrey DeBoer commented Sept. 17 on the bill’s advancement. “We encourage Congress to review the suggested tax hikes, particularly those on pass-through businesses, and work to ensure that unnecessary and unintended damage is not done to the economy. Substantial commercial real estate activities are conducted by pass-through entities and these activities create jobs, support retirement savings, and boost tax revenue for critical public services provided by local governments.” DeBoer added, “The Roundtable is encouraged, yet cautious, at this still relatively early stage of the legislative process.” (Roundtable Weekly, Sept. 17 | Sept. 24 | Oct. 1)
Roundtable members and others are encouraged to reach out to their Representatives and contact their Senators to urge them to preserve the 20% deduction for pass-through business income (section 199A), which is directly tied to hiring workers and investing in capital equipment and property. Modest adjustments in the legislation would ensure that pass-through businesses could continue contributing to economic growth, innovation, and job creation. Background information and talking points on the pass-through issue can be found here.
Tax issues affecting CRE are summarized in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation.
DeBoer will participate in an Oct. 21 Marcus & Millichap webinar on the latest tax policy developments in Washington and what they mean for CRE. (Register here)

Legislation on human and physical infrastructure, the debt ceiling, government funding and many other policy issues affecting CRE were the focus of discussions between Roundtable members and national policymakers during The Roundtable’s Oct. 5 Fall Business Meeting. (See story above).

# # #

Industry Leaders Engage Lawmakers on National Policy Issues Impacting CRE

Posted on October 8, 2021October 27, 2023 by Trey Jackson

Fall Roundtable Meeting visual

Real Estate Roundtable members on Oct. 5 engaged national lawmakers on compelling policy issues impacting commercial real estate, economic growth and job creation – including tax revenue proposals in the infrastructure reconciliation bill, the debt ceiling, housing, climate change and cybersecurity legislation – during The Roundtable’s 2021 Fall Meeting.

Urgent Policy Issues

Jeff DeBoer and John Fish Fall RT Mtg visual

Roundtable Chair John Fish (Chairman and CEO, Suffolk), right, and Roundtable President and CEO Jeffrey DeBoer, left, launched the meeting and led discussions with members of Congress, including:
- Sen. Mitt Romney (R-UT)
  This discussion focused on colliding policy issues that have been front-and-center this week in Washington, including the debt ceiling and infrastructure. Sen. Romney was part of a small group of leading policymakers who negotiated the bipartisan “physical” infrastructure bill that passed the Senate in August. (Roundtable Weekly, Aug. 13)
- Sen. Mark Warner (D-VA)
  Sen. Warner noted his priorities in the areas of child care and workforce development. He also addressed the need for more affordable housing investment and cybersecurity reporting, described climate change as an “existential threat,” and discussed tax measures such as raising the top marginal rate on many pass-through owners.
- Rep. Josh Gottheimer (D-NJ)
  A discussion with Roundtable Chair Emeritus Randy Rowe (Chairman Green Courte Partners LLC) focused on Rep. Gottheimer’s crucial leadership role with congressional moderates as the Co-Chair of the Problem Solvers Caucus, who are key to passage of the bipartisan “physical” infrastructure framework and the evolving “human” infrastructure bill.
- Rep. Kevin Brady (R-TX)
  Ways & Means Committee Ranking Member Brady discussed the menu of revenue options that Democrats are considering to pay for the “social infrastructure” reconciliation package. (Accounting Today and MSNBC, Oct. 6)
- Rep. Darin LaHood (R-IL)
  Rep. LaHood, a member of the Ways & Means Committee, provided his views on the numerous converging policy deadlines affecting the decision-making process on Capitol Hill through a video interview with DeBoer released ahead of Tuesday’s meeting.

Interactive Town Hall

Fall 2021 Roundtable TownHall discussion

Roundtable members also participated in an open-mic Town Hall session featuring four members of Congress who play leading roles on national tax, energy and housing issues. The dialogue covered a wide range of topics, including transit investment, EB-5, carried interest and capital gains, climate-related measures and energy-efficiency provisions related to greenhouse emissions.
Sen. Bob Menendez (D-NJ) and Reps. Earl Blumenauer (D-OR), Brad Schneider (D-IL) and Peter Welch (D-VT) participated in the Town Hall.
Videos of the discussions with policymakers are available to Roundtable members upon request.

Policy Advisory Committees

Chairs of The Roundtable’s Sustainability Policy Advisory Committee (SPAC), Tax Policy Advisory Committee (TPAC) and Real Estate Capital Advisory Committee (RECPAC) provided updates of the organization’s policy priorities. (See The Roundtable’s Policy Issues Toolkit and Executive Summary)
Members of the Equity, Diversity and Inclusion (ED&I) Committee reported on Roundtable-supported research currently underway, exploring the creation of a potential online marketplace that would connect real estate companies with minority-and women business enterprises that might serve as contractors, suppliers, and venture partners in CRE’s “supply chain.” (ED&I Mission Statement)

The policy committees will gather next during the all-member Roundtable State of the Industry meeting, scheduled for January 25-26, 2022 in Washington, DC. (Roundtable Meeting Calendar)

# # #

Infrastructure Negotiations Continue as Congress Extends Government Funding to Dec. 3; Debt Ceiling Deadline Looms

Posted on October 2, 2021October 27, 2023 by Trey Jackson

U.S. Capitol

Intense negotiations among moderate and progressive Democrats on the scope and cost of the $3.5 trillion “human” infrastructure package continued this week, delaying a vote yesterday on the $1 trillion bipartisan “physical” infrastructure bill. House progressives have insisted they will not vote for the bipartisan bill until Senate centrists commit to support a multitrillion-dollar social benefits package.

Moderates in the Balance

President Joe Biden, House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Chuck Schumer (D-NY) this week engaged moderate Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) in hopes of sealing the support of all 50 Senate Democrats on the “human” infrastructure package. That bill’s passage depends on the budget reconciliation process to bypass Republican opposition. (Reuters, Sept. 28)
Sen. Manchin this week released a document indicating the terms for his potential support of the reconciliation package. Manchin’s conditions, provided to Schumer on July 28, cite a topline cost of $1.5 billion for spending on social programs and climate change – $2 trillion less than the package that Democratic progressives have agreed to support. (Politico, Sept. 30)
The Manchin document included proposals to raise the corporate tax rate to 25% and increase the top tax rate on ordinary income to 39.6%. It also lists as an offset condition to “end carried interest,” raise the capital gains tax rate to 28 percent, and notes that “any revenue exceeding $1.5 trillion” should be used to reduce the national deficit.
Tax issues affecting CRE in the “human” infrastructure package are summarized in The Roundtable’s “Pass-Through Businesses and the Reconciliation Bill” document.
White House Press Secretary Jen Psaki yesterday said, “A great deal of progress has been made this week, and we are closer to an agreement than ever. But we are not there yet, and so, we will need some additional time to finish the work.” (White House Statement, Sept. 30)

CR and Debt Ceiling

Treasury Department

Meanwhile, Congress passed a Continuing Resolution (CR) yesterday to fund the government through Dec. 3. President Biden signed the bill hours before a partial federal shutdown was scheduled to take effect. (BGov and CQ, Oct 1)
The flurry of activity in Washington this week also included action on the debt ceiling. Legislation that would suspend the nation’s debt limit until December 2022 passed the House on Sept. 29 but is expected to fail in the Senate, where 60 votes are needed to advance the bill in the 50-50 upper chamber. Republicans oppose the measure, insisting that Democrats should suspend the debt ceiling through the budget reconciliation process, which requires 50 votes. (CNBC, Sept. 29)

Treasury Secretary Janel Yellen testifying before Congress

The debt ceiling must be suspended by Oct. 18 to avoid the government from defaulting on its financial obligations, according to Treasury Secretary Janet Yellen’s Sept. 28 testimony before the Senate Banking Committee.
Unless Congress increases the government’s authority to borrow more, “It would be disastrous for the American economy, for global financial markets, and for millions of families and workers,” Yellen said. Federal Reserve Chairman Jerome Powell also testified, supporting Yellen’s view about the catastrophic economic consequences if the government were to default. (AP, Sept. 28)

The potential impact of infrastructure policy proposals on commercial real estate markets, employment and investment in communities Washington will be the focus of discussion during The Roundtable’s Fall Meeting on Oct 5.

# # #

Roundtable Encouraging Congress to Ensure Fair Treatment of Pass-Through Businesses in Final Reconciliation Bill

Posted on October 2, 2021October 27, 2023 by Trey Jackson

As negotiations continue on a multi-trillion reconciliation bill, The Real Estate Roundtable is urging lawmakers to ensure that any final agreement on tax changes treats pass-through businesses fairly and equitably.

Why It Matters

The reconciliation bill approved by the House Ways and Means Committee excluded several real estate-related tax proposals put forward by the Biden administration that could cause unnecessary harm to job creation, real estate values, and local communities that rely on property tax revenue. These proposals included restrictions on like-kind exchanges, repealing the step-up in basis of assets at death, and tax parity between ordinary income and capital gains. (Roundtable Weekly, Sept. 17)
At the same time, through the combination of several, independent tax changes aimed at upper-income taxpayers, the current reconciliation bill in the House would raise the top marginal income tax rate on many pass-through business owners from 29.6% today to 46.4% (a 57% increase).

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The Roundtable believes this level of increase on pass-through businesses was unintended by Members of Congress and could undercut the bill’s own objectives of stimulating job growth, improving housing availability, and promoting investment in economically struggling communities, among other priorities.
See The Roundtable’s detailed summary on “Pass-Through Businesses and the Reconciliation Bill.”
“Small and closely held businesses are the principal drivers of job growth and entrepreneurial activity in our economy. The increase in the tax burden on pass-through businesses is disproportionately large relative to the tax changes for large, multinational corporations. The bill would create a historically high differential in the tax rates between pass-throughs and C corps and could put pass-through businesses at a competitive disadvantage in the economy. We do not believe this was the intent of the bill drafters,” said Real Estate Roundtable President and CEO Jeffrey DeBoer.
The dramatic increase in the pass-through tax rate results in part from capping the 20% deduction on pass-through business income (section 199A). Other changes include increasing the top tax rate on ordinary income from 37 to 39.6 percent, expanding the scope of the 3.8% tax on net investment income, and imposing a 3% surtax on incomes above $5 million.
As currently proposed, the rate differential between pass-throughs (46.4%) and C corps (26.5%) would be 20 percentage points, more than twice the level of any period over the last four decades. Real estate partnerships constitute half of the four million partnerships in the United States.

Roundtable members and others are encouraged to reach out to their Representatives and contact their Senators to urge them to preserve the 20% deduction for pass-through business income (section 199A), which is directly tied to hiring workers and investing in capital equipment and property. Modest adjustments in the legislation would ensure that pass-through businesses will continue contributing to economic growth, innovation, and job creation. Additional information and talking points can be found here.

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