Author: Trey Jackson

Senate Efforts Pursue Two-Track Approach to Infrastructure Package

Posted on by Trey Jackson

Senate members announced this week that they are pursuing a two-track approach in assembling an infrastructure package in response to President Biden’s original multitrillion dollar proposal – a pared-down bipartisan plan, and a much larger Democratic plan that could advance on a narrow, party-line vote path. 

Bipartisan Framework

  • In the wake of failed negotiations last week between the White House and Senate GOP leaders, a group of five Democrats and five Republicans began work on an alternative plan focused on “core, physical infrastructure.” The bipartisan Senate group expanded this week to 21 members, including 11 Republicans. At least 10 Republicans in the 50-50 Senate must approve a bill to reach the 60-vote threshold for passage. (Bloomberg and Washington Post, June 16)
  • A draft outline of the bipartisan group’s infrastructure proposal published on June 16 by Politico revealed a framework that would cost $974 billion over five years, including $579 billion in new spending.
  • President Biden originally proposed $2 trillion in new infrastructure spending, then signaled a compromise closer to $1 trillion. (Roundtable Weekly, June 11)
  • The Senate group’s framework also includes numerous funding sources, such as unspent coronavirus relief aid and public-private partnerships. Since the document’s release, Republicans have provided assurances that a final framework would not include indexing the national gasoline tax to inflation, a proposal opposed by President Biden and House Speaker Nancy Pelosi (D-CA). (Politico and The Hill, June 17)

The Reconciliation Path

U.S. Capitol at sunset
US Capitol building at sunset, Washington DC, USA.
  • Meanwhile, Senate Majority Leader Chuck Schumer (D-NY) this week met with Democratic senators on the Budget Committee to trigger the budget reconciliation process, which would allow a party–line majority vote of an infrastructure package, eliminating the need for Republican votes. (Associated Press, June 17)
  • According to the AP, “Sen. Tim Kaine (D-VA) said the Budget Committee was unified in putting together a package that ‘gives us a latitude to do what we need to do — we can shrink it if there’s a bipartisan deal, we could do the broader deal if there isn’t.’”
  • Schumer said he would like to pass next month both a bipartisan infrastructure package and a larger budget blueprint, which would address a follow-up Democratic legislative. (BGov, June 17)
  • Additionally, Senate Budget Chairman Bernie Sanders (I-VT) said he is seeking a $6 trillion measure that would fund both Biden’s infrastructure proposals, including reforms targeting climate change and an expansion of Medicare. (Wall Street Journal and Washington Post, June 17
  • Sen. Mark Warner (D-VA), a member of the bipartisan group leading infrastructure negotiations, said, “I know there needs to be reconciliation. But that also doesn’t mean that I accept all of what the president proposed and all of what Sen. Sanders has proposed.” (BGov, June 17)
  • The Real Estate Roundtable, along with 16 other national real estate trade organizations submitted detailed comments in May to the Senate Finance Committee and House Ways and Means Committee as part of hearings on how to fund the administration’s infrastructure proposals. (Roundtable Weekly, May 21)

The Roundtable’s Annual Meeting this week also featured discussions with policymakers on the evolving infrastructure debate – and the organization plans to remain fully engaged with lawmakers on any eventual legislative proposal that could affect commercial real estate. 

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National Policy Issues Dominate Roundtable Annual Meeting; John F. Fish Succeeds Debra A. Cafaro as Roundtable Chair

Posted on by Trey Jackson
2021 Annual Roundtable Meeting image

National lawmakers and industry leaders this week discussed a wide range of policy issues – including cybersecurity, infrastructure, climate, taxes, and post-pandemic reopening of businesses – during The Real Estate Roundtable’s 2021 Annual Meeting, where John F. Fish (Chairman and CEO, Suffolk) was elected as Roundtable Chair, effective July 1. (Watch Incoming Chair Fish’s remarks) 

Leadership:

Policy Issues & Featured Speakers  

  • Sen. Chris Coons (D-DE) discussed the administration’s infrastructure proposal, aid for low-income renters, and more.
  • Sen. Ben Sasse (R-NE) focused on bipartisan congressional efforts on infrastructure, return-to-work issues, and national security threats.
  • White House National Climate Advisor Gina McCarthy, above, and Roundtable Sustainability Policy Advisory Committee Chair Tony Malkin (Chairman, President and Chief Executive Officer, Empire State Realty Trust) focused on the commercial real estate industry’s role in climate policy. (watch the discusssion)
  • Rep. Stephanie Murphy (D-FL) discussed tax policies that could encourage economic recovery and avoid unintended consequences.
  • “Current Market Challenges and Coming Opportunities” – above – featured the following industry leaders in a discussion on challenges facing markets during a recovering economy, reopening strategies, and cybersecurity concerns for CRE: (watch the discussion)
    • Thomas M. Flexner (Vice Chairman and Global Head of Real Estate, Citigroup)
    • Kathleen McCarthy (Global Co-Head of Blackstone Real Estate)
    • Mark J. Parrell (President & Chief Executive Officer, Equity Residential) and
    • Owen D. Thomas (Chief Executive Officer, Boston Properties)

Policy Advisory Committees

  • Sustainability Policy Advisory Committee (SPAC) – above
    The outlook for energy efficiency legislation was a focus of discussion with key Hill staff representing Senator Jeanne Shaheen (D-NH). Additionally, officials from the Department of Energy’s Better Buildings initiative and the Environmental Protection Agency’s ENERGY STAR program updated SPAC.  
  • Research and Real Estate Capital Policy Advisory Committees (RECPAC)
    Sen. Steve Daines (R-MT) discussed the importance of enacting measures to encourage job creation and pro-growth tax policy, and the importance of developing a clear strategy to address global and national security threats, including cyber and ransomware attacks.
  • Tax Policy Advisory Committee (TPAC)
    Tax legislative priorities affecting CRE were the focus of discussion with congressional staffers – including proposals to eliminate or limit the use of carried interest and Like-Kind Exchanges, along with increasing the capital gain rate.
  • Homeland Security Task Force (HSTF) and Risk Management Working Group (RMWG)
    This joint meeting was briefed on “Civil Unrest: Challenges for Communities” by Terry Monahan, Senior Advisor for Recovery and Safety Planning for New York City – and an FBI official discussed the current threats of ransomware and cyber challenges.

The Roundtable’s 2021 Annual Report will be distributed in July. Next on The Roundtable’s Meeting Calendar is the Oct. 5 Fall Meeting in Washington, DC. (Roundtable-level members only)

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Roundtable Comments to SEC on Corporate Climate Risk Disclosures

Posted on by Trey Jackson

SEC website image on ESG

The Real Estate Roundtable on June 9 commented on the unique challenges facing commercial real estate businesses if the Securities and Exchange Commission (SEC) eventually requires corporate issuers to report on climate-related financial risks. (See SEC’s 15 Questions for Consideration and The Roundtable’s responses) 

  • The SEC’s March 15 request for public comments is not unique to real estate, but seeks information from all corporate stakeholders on climate change reporting and metrics.  “It’s time to move from the question of ‘if’ to the more difficult question of ‘how’ we obtain disclosure on climate,” said former Acting Chair Allison Herren Lee. (SEC speech, March 15) 
  • On May 6, the new SEC chair, Gary Gensler, testified before the House Financial Services Committee that he intends to propose new rules on corporate climate risk disclosures in the second half of 2021. (Reuters, May 6) 

Roundtable Comments

logo - U.S. Securities and Exchange Commission

  • The Roundtable’s comments recommend a “principles-based” approach to corporate climate risk disclosures as opposed to a prescriptive “one size fits all” reporting standard. It coordinated closely with Nareit in developing its submission to the SEC.
  • More specifically, The Roundtable’s comments provide:
    • Energy consumption and associated emissions from any particular building or portfolio depend on a range of variables – such as a building’s age, location, asset-type, and tenant mix.  The SEC should be flexible in developing reporting standards for companies that develop, own and operate income-producing real estate.
    • The GHG metrics that building owners can most accurately measure and quantify arise from their direct and immediate operations of assets they manage and control on a day-to-day basis. Building owners should not be compelled to measure, quantify or report on indirect emissions that derive from off-site facilities, or the actions of tenants or other third-parties beyond the owner’s immediate control.

    • The SEC should allow a marketplace of reporting frameworks to thrive, flourish, and evolve. No single reporting framework should be mandated.

House Legislation

U.S. Capitol

  • The House Financial Services Committee on May 12 advanced the Climate Risk Disclosure Act of 2021. The bill would direct the SEC to issue rules within two years that require public companies to disclose: 
    • Direct and indirect greenhouse gas emissions;
    • Total amount of fossil-fuel related assets that it owns or manages;
    • How its valuation would be affected if climate change continues at its current pace, and;
    • Risk management strategies related to the physical risks and transition risks posed by the climate crisis.
  • The House bill would also direct the SEC to tailor disclosure requirements to different industries. (JD Supra, May 17). The bill likely faces a more difficult path forward in the Senate.

Investment Industry Comments

  • The Investment Company Institute (“ICI”), which represents firms including BlackRock, Vanguard and JPMorgan Chase, submitted comments to the SEC on June 4. ICI believes “using a combination of principles-based and prescriptive elements is particularly apt in the context of climate-related information.” (Reuters, June 8).
  • While ICI recommends that companies within the SEC’s jurisdiction should report on “direct” emissions (“Scope 1”) and emissions due to electricity purchases (“Scope 2”), it does not believe that companies should be mandated to report on so-called indirect “Scope 3 emissions” at this time.
  • PoliticoPro (June 7) reported that “ICI made the recommendations as investors increasingly demand that companies follow certain environmental, social and governance reporting standards so they can channel capital to green projects and workplaces that promote equity and inclusion.”

The Real Estate Roundtable’s Sustainability Policy Advisory Committee (SPAC) – which meets remotely on June 16 in conjunction with The Roundtable’s June 15 Annual Meeting – will continue to work with policymakers in Congress and the Administration on energy and climate issues of importance to commercial real estate. 

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White House Urges Companies to Build Cyber Defenses as Ransomware Attacks Increase; Commercial Facilities Cyber Working Group Sharing Information on Threats

Posted on by Trey Jackson

Anne Neuberger White House Deputy National Security Advisor for Cyber and Emerging Technology

The increasing frequency and size of ransomware cyberattacks on U.S. companies prompted the White House on June 2 to issue a stark warning urging businesses to take “immediate steps” to increase their ransomware defense based on the federal government’s best practices. (White House  Deputy National Security Advisor for Cyber and Emerging Technology Anne Neuberger, above)

A National Threat

  • Ransomware is a type of malicious computer network attack where criminals encrypt an organization’s data and demand payment to restore access. In some instances, attackers may also steal an organization’s information and demand additional payment in return for not disclosing the information to the public.
  • The document from the White House’s Neuberger notes, “All organizations must recognize that no company is safe from being targeted by ransomware, regardless of size or location. Much as our homes have locks and alarm systems and our office buildings have guards and security to meet the threat of theft, we urge you to take ransomware crime seriously and ensure your corporate cyber defenses match the threat.” (White House, What We Urge You To Do To Protect Against The Threat of Ransomware and Readout of Neuberger Meeting)
  • In the past month, $15 million in cyber-ransom was paid to hackers in bitcoin by Colonial Pipeline and JBS USA, the world’s largest meat-processing company. The U.S. Justice Department reported on June 7 that it had retrieved $2.3 million paid by Colonial. (Axios, June 9 and CNBC, June 8)
  • In an interview with the Wall Street Journal this week, FBI Director Christopher Wray compared the challenge of countering the threat of ransomware to the 9/11 terrorist attacks and that the agency was currently investigating about 100 different types of ransomware.
  • Wray also testified on June 10 before the House Judiciary Committee that companies should not make ransomware payments to hackers but instead contact the FBI for help to restore stolen data. Wray said, “There are a whole bunch of things we can do to prevent this activity from occurring, whether they pay the ransom or not, if they communicate and coordinate with law enforcement right out of the gate. That’s the most important part,” he added. (AP, June 10)
  • Additional hearings this week on ransomware and other cyber threats to infrastructure where held by the Senate Homeland Security and Governmental Affairs Committee on June 8 and the House Homeland Security Committee on June 9.

CRE and Cybersecurity

REISAC logo x475

  • The RE-ISAC has worked with InfraGard National Capital Region (InfraGardNCR) to establish the Commercial Facilities Cyber Working Group (CCWG), a virtual effort to share cyber threat intelligence. The group shares threat reports, ransomware victim examples, and other information on a regular basis. 

Resources and Reference

cybersecurity control room

For more information, contact Gate 15 Managing Director and RE-ISAC staff Andy Jabbour or The Roundtable’s RE-ISAC Executive Director and HSTF Liaison Chip Rodgers.

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Infrastructure Negotiations Shift to Bipartisan Congressional Groups; House, Senate Committees Advance Surface Transportation Bills

Posted on by Trey Jackson

Capitol Hill trees clouds in the evening

Months of negotiations on bipartisan infrastructure legislation between President Biden and Republicans led by Sen. Shelley Moore Capito (R-WV) collapsed this week – and talks have shifted to alternative approaches from bipartisan groups of congressional policymakers. Meanwhile, House and Senate committees are moving forward on spending bills to meet the nation’s surface transportation needs before current funding expires on Sept. 30. (White House statement, June 8 and CQ, June 10) 

Alternative Paths 

  • President Biden recently reduced his original infrastructure package proposal from $2.3 trillion to $1.7 trillion – and requested at least $1 trillion in new spending from Republicans. The Senate GOP group counteroffered with nearly $1 trillion, which included only $330 billion in new spending and the rest from repurposed COVID-19 relief funding signed into law earlier this year. Biden cancelled the talks after the gap over the package’s scope and funding could not be bridged. (The Hill and AP, June 8)
  • Yesterday, a bipartisan group of 10 senators said they would propose a plan focused on “core, physical infrastructure” infrastructure that would cost $974 billion over five years, or $1.2 trillion over eight years, including about $579 billion in new spending. (CQ and New York Times and Washington Post, June 10)
  • According to Axios, “The group proposes paying for it through unspent coronavirus relief aid, public-private partnerships, indexing the gas tax to account for inflation and allowing states to borrow necessary money through a revolving loan fund.”
  • A joint statement released by the senators said, “[We] reached a bipartisan agreement on a realistic, compromise framework to modernize our nation’s infrastructure and energy technologies. This investment would be fully paid for and not include tax increases.” (Joint statement, June 10)

  • In the House, the Problem Solvers Caucus, which has 29 Democrats and 29 Republicans, on June 9 released a $1.25 trillion infrastructure spending framework, including $761.8 billion in new spending over eight years – yet did not include any details about how to pay for the proposal. (News release, Building Bridges Infrastructure  Framework and section-by-section summary)
  • The co-chairs of the House caucus – Reps. Josh Gottheimer (D-NJ) and Brian Fitzpatrick (R-PA) – are also in contact with a key group of bipartisan group of senators, including Bill Cassidy (R-LA), Kyrsten Sinema (D-AZ), Rob Portman (R-OH) and Joe Manchin, (D-WV) about developing a bipartisan, bicameral infrastructure package. (CQ, June 9)

  • White House Press Secretary Jen Psaki this week said, “[President Biden] feels it’s encouraging to see multiple proposals put out there, both from Republicans in the House and the Problem Solvers Caucus, as well as a bipartisan group that’s working on a proposal. Both will have increased numbers over what we’ve seen and been negotiating to date. Those are all positive steps.” (White House Press Gaggle, June 9)

Surface Transportation Legislation 

road construction and workers

  • Yesterday, the House Transportation and Infrastructure (T&I) Committee advanced a five-year, $547 billion surface transportation bill by a vote of 38-26 that included two supporting Republican votes. (Section-by-section summary of the INVEST in America Act)
  • Although the House Ways and Means Committee needs to address how to fund the bill’s costs, many of the provisions align with Biden administration transportation priorities – and could serve as a possible cornerstone for a larger infrastructure package. (CQ and BGov, June 10)
  • House Majority Leader Steny Hoyer (D-MD) said the chamber will take up the T&I committee bill the week of June 28.  A reauthorization bill for surface transportation is considered must-pass legislation as current funding expires Sept 30. (Washington Post, June 10)
  • In the Senate, several committees have jurisdiction over portions of that chamber’s surface transportation bill. The Environment and Public Works Committee unanimously voted on May 26 to advance a $303.5 billion bill over the next five years to fund the nation’s roads, bridges, tunnels, and mass transit projects. (Roundtable Weekly, June 4)
  • The Senate Commerce, Science and Transportation Committee is scheduled to consider rail and safety issues on June 16. Separately, a spokeswoman for Senate Banking, Housing and Urban Committee said Chairman Sherrod Brown (D-OH) said he continues to work with Ranking Member Patrick Toomey (R-PA) “in hopes of reaching a bipartisan agreement on a robust transit title for a surface transportation bill.” (CQ, June 10)

Reconciliation

Schumer fists podium

  • Democrats are also considering the use of the budget “reconciliation” process, which would allow them to bypass the Senate’s 60-vote requirement to pass legislation and push through an infrastructure package on a party line vote. (Roundtable Weekly, June 4)
  • Senate Majority Leader Charles Schumer (D-NY), above, said yesterday, “We continue to proceed on two tracks. A bipartisan track and a reconciliation track — and both are moving forward.” (Washington Post, June 10)
  • Schumer said last week that he wants to move forward on an infrastructure bill in July, whether it is bipartisan or not. (The Hill, May 25)
  • A National League of Cities’ 2021 State of Cities report released this week supported the need for infrastructure investment nationwide. Of the 600 mayors who provided information for the report, 91 percent said they did not have the funds to make needed infrastructure investments. (NLC news release, June 10)

The Roundtable will focus on the evolving infrastructure negotiations and their possible impact on CRE during its June 15-16 Annual Meeting and Policy Advisory Committee Meetings in Washington, DC.

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Senate Committee Unanimously Reauthorizes Highway Trust Fund; “Gateway” Hudson Tunnel Project Reaches Major Milestone

Posted on by Trey Jackson

Senate Environment & Public Works Comittee

The Senate Environment and Public Works (EPW) Committee’s unanimous vote last week to advance $303.5 billion over the next five years to fund the nation’s largest source for roads, bridges, tunnels, and mass transit may help advance negotiations over President Biden’s infrastructure proposal. (BGov, May 26)

A Bipartisan Signal

  • Senate EPW Ranking Member Shelly Moore Capito (R-WV) is the lead GOP negotiator on the White House’s infrastructure proposal, which includes $115 billion for repairing Main Street roads, highways and bridges. (White House Fact Sheet: The American Jobs Plan, March 31)
     
  • Sen. Capito said the 20-vote committee vote to advance the Surface Transportation Reauthorization Act “… is further proof that a bipartisan infrastructure deal is possible. I’m hopeful this bipartisan product can be the anchor of a larger infrastructure package moving forward.” (Senate EPW Markup and news release, May 26)
     
  • The Senate committee’s measure would set a new baseline funding level for the Department of Transportation’s Highway Trust Fund – an increase of more than 34 percent from the last reauthorization to pass Congress in 2015.  (Full text of the EPW bill and one-page summary)

Time Considerations

Road Construction ramp

  • The Senate EPW Committee only has jurisdiction over the surface transportation bill’s highway section. The Senate Commerce Committee is next, with a markup expected the week of June 14. The Senate Finance Committee will eventually address how to pay for the measure and the Senate Banking Committee will consider sections dealing with mass transit programs.
     
  • In the House, Democrats on the Transportation and Infrastructure Committee  introduced the INVEST in American Act today and plan to mark up their surface reauthorization bill on June 9. (Bill Text | Fact Sheet | Section-by-Section and Washington Post, June 4)
  • The Biden administration was encouraged by the Senate EPW vote. White House Press Secretary Jen Psaki said during a May 25 briefing that the$303 billion dollar bill “is a great down payment” for a broader infrastructure package. (BGov, May 26)
     
  • However, the administration has expressed it is on a tighter deadline to advance a comprehensive infrastructure proposal. Transportation Secretary Pete Buttigieg recently said, “I think we are getting pretty close to a fish-or-cut-bait moment.” (CNN, May 30) 

Gateway Progress

Gateway Hudson Tunnel Project

  • The Biden Administration on May 28 approved a key step allowing the multi-billion dollar “Gateway” rail tunnel project between New York City and New Jersey to move forward, ending years of delay and clearing the way for state officials to apply for federal funding.  (New York Times, May 28)
     
  • The administration’s approval of a long-awaited environmental impact statement clears the way for pre-construction activities to begin on the crucial infrastructure project, which aims to repair tunnels damaged by Superstorm Sandy. (Politico, May 28)
     
  • Transportation Secretary Buttigieg commented on the approval – clearing the way for the project to advance to the next steps such as engineering, final design development, and property acquisition, as well as construction. “This is a big step for the Northeast, and for the entire country, as these tunnels connect so many people, jobs, and businesses,” he said. (DOT statement, May 28)

Senate Majority Leader Chuck Schumer (D-NY) said, “It’s probably the most important public works project in America. If those tunnels fail and can’t be used, 25 percent of our economy would be at risk from Boston to Washington.” (Politico, May 28) 

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Policymakers Remain Far Apart on Bipartisan Infrastructure Package; Senate Ruling Limits Reconciliation as Fast-Track Option

Posted on by Trey Jackson

President Biden and Sen. Capito

Policymakers this week remained far apart on the scope and cost of a possible bipartisan infrastructure package, as President Biden floated a 15% minimum corporate tax to partially fund his pared-down proposal. Meanwhile, a recent Senate Parliamentarian ruling would limit the use of a fast-track budget process called “reconciliation” that could allow Democrats to bypass Republicans and pass legislation on a party-line vote. (Washington Post, June 3, The Hill and New York magazine, June 2)  

[Photo above: President Biden discusses infrastructure with Sen. Shelley Moore Capito (R-WV)]

Seeking New Spending

  • President Biden recently reduced his original infrastructure package cost from $2.3 trillion to $1.7 trillion – and is now looking for at least $1 trillion in new spending from Republicans on infrastructure. Biden this week proposed raising these funds partially through a new 15% minimum corporate tax, which would replace his initial proposal to raise the corporate income rate to 28% from 21%. (BGov and New York Times, June 3)
  • Sen. Shelley Moore Capito (R-WV), who is leading GOP lawmakers in negotiations with the White House, last week counteroffered with $928 billion – although it limits new spending to $257 billion for traditional “hard” infrastructure such as roads, bridges and other public works. Republicans proposed the remaining $671 billion come from repurposed funding previously passed as part of the American Rescue Plan Act’s Covid-19 relief effort. Democrats have rejected repurposing of funds. (Roundtable Weekly, May 28 and AP, May 27)
  • The U.S. Conference of Mayors, National League of Cities and National Association of Counties recently expressed their “adamant opposition to any proposal that would detrimentally recoup and repurpose funds allocated to local governments” from coronavirus relief funds. (NLC news release, June 1 and joint letter, May 27)
  • The coalition’s joint letter to congressional leadership, stated, “Local governments are using these critical recovery funds to invest in public safety, vaccine distribution, housing and rental assistance, local economic support, economic and workforce development, broadband expansion, social safety-net services, hospitality and tourism development, and hazard pay for public employees.”

Time is Short

The White House with Washington Monument

  • White House Press Secretary Jen Psaki this week said, “Patience is not unending, and [President Biden’s] wants to make progress. His only line in the sand is inaction. He wants to sign a bill into law this summer.” (White House Press Briefing, June 2)
  • The No. 3-ranked House Democrat, Rep. Jim Clyburn of South Carolina, yesterday said time is short to complete negotiations on a bipartisan package. “I don’t think we should run the risk of not getting something done because the other side is not cooperating.” (Bloomberg’s Balance of Tower, June 3)
  • Sen. Ben Cardin (D-Md.) on Thursday added that Democrats would soon take actions to use the budget reconciliation process to bypass the Senate’s 60-vote requirement to pass legislation and push through a bill on a party line vote.  Cardin said that Democrats are “going as far as we can with Republicans and not delay[ing] it beyond this work period without seeing some action.” (Politico, June 3)
  • Senate Majority Leader Charles Schumer (D-NY) said last week that he wants to move forward on an infrastructure bill in July, whether it is bipartisan or not. (The Hill, May 25)

Limits on Reconciliation

Senate side - Capitol Building

  • The Democrats’ alternative plan to use reconciliation to bypass Republican opposition on infrastructure legislation may be slowed by a recent Senate Parlimentarian ruling. Congressional Democrats used reconciliation in March to pass the administration’s $1.9 trillion pandemic relief package. (Roundtable Weekly, March 12)
  • Senate Parliamentarian Elizabeth MacDonough’s four-page opinion, issued to Senate staff on May 28, stated, “overuse and over-reliance on a hyper-fast track procedure in the ordinarily deliberative Senate … will change the culture of the institution to the detriment of the committee and amendment processes and the rights of all Senators.” (CQ, June 2)
  • The new guidance adds that lawmakers intended the reconciliation provision to be used only “in extraordinary circumstances and not for things that should have been or could have been foreseen and handled” in a regular budget resolution. 

The ruling suggests that Democrats will be restricted to one additional opportunity this year to use reconciliation to pass a filibuster-proof legislative package.  (Roll Call, June 2 and The Hill, June 4)

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Realtor Coalition Submits Emergency Appeal to Supreme Court to Reject CDC Eviction Moratorium Ban

Posted on by Trey Jackson

The U.S. Supreme Court building

A coalition of Realtor associations on June 3 submitted an emergency appeal to the Supreme Court to reject the U.S. Centers for Disease Control and Prevention (CDC) national eviction moratorium, which is scheduled to expire June 30. (SCOTUSblog, June 3)

Why It Matters

  • The federal eviction moratorium – originally enacted by Congress more than a year ago in the CARES Act – was extended by both the Trump and Biden Administrations by executive orders to prevent mass evictions in the face of a public health emergency. A further extension by President Biden is likely. 
  • The Supreme Court appeal in Alabama Association of Realtors v. Department of Health and Human Services comes after a DC Circuit court this week upheld a federal judge’s May 5 ruling, which allowed the moratorium to remain in effect. (Roundtable Weekly, May 7)
  • The Realtor coalition argued in its 35-page pleading to the high court that “Congress never gave the CDC the staggering amount of power it now claims.” (NBCNews and CNN, June 3)
  • The filing also emphasized that the CDC’s moratorium “shifted the pandemic’s financial burdens from the nation’s 30 to 40 million renters to its 10 to 11 million landlords—most of whom, like applicants, are individuals and small businesses—resulting in over $13 billion in unpaid rent per month.” (Case number 21-5093 in the U.S. Court of Appeals for the D.C. Circuit.)
  • National Multifamily Housing Council CEO Doug Bibby on June 2 told Connect CRE that rental housing is dominated by non-institutional, ‘mom and pop” property owners. Bibby stated, “When eviction moratoria policies are treated as ‘rental holidays,’ these individual property owners tend to suffer disproportionately – as do renters, who end up with fewer options.”
  • Bibby added, “While federal policymakers ultimately provided $46.5 billion for emergency rental assistance, the continuation of eviction moratoriums has renewed focus on broader questions of eviction practices, as well as raised concerns about the disruption in the market once the moratoriums expire.” (ConnectCRE, June 2)
  • The Federal Housing Finance Agency announced yesterday that it is extending for a third time the ongoing moratorium on evictions on multifamily properties backed by Fannie Mae and Freddie Mac, which the agency oversees. The housing regulator’s extension is now in effect until the end of September, preventing affected housing providers from evicting tenants for not paying rent, or charging late fees for unpaid rent. (Reuters, June 3)

Distribution Problems 

Capitol Dome Dusk

  • Congress approved $25 billion of emergency rental assistance in December 2020 under the Consolidated Appropriations Act. An additional $21.6 billion was allocated in March 2021 under the American Rescue Plan Act. The Treasury Department announced on May 7 that it was releasing the second allocation, along with new guidance for local municipalities administering emergency rental assistance programs. (Roundtable Weekly, May 14)
  • State and local authorities have been overwhelmed with how to allocate the influx of funds, leaving many tenants and housing providers waiting weeks or months for the assistance. (Washington Post, June 4 and Wall Street Journal, April 13)
  • The Roundtable is part of a broad real estate coalition that has urged state, county and municipal officials to distribute the allocated federal funds as soon as possible. (Coalition letter, April 15)
  • The coalition letter emphasized the need “to quickly and fully allocate available American Rescue Plan federal funds to provide assistance to renters, consumer-facing small businesses, and impacted industries such as retail, tourism, travel, and hospitality that are having trouble paying rents, mortgages or remaining viable enterprises due to the COVID-19 pandemic.”
  • The letter adds, “Such assistance would make a big difference in the lives of thousands upon thousands of COVID-19 affected renters and businesses in their cities, counties, and states – and would also provide stability to the buildings and communities in which they live.”

As this week’s emergency appeal is considered by to the Supreme Court, there are several states that will continue to ban evictions beyond June 30. Additionally, the state of Washington last month guaranteed tenants facing eviction the right to counsel. Maryland and Connecticut are considering similar measures. (CNBC, June 3)

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Senate Finance Committee Advances Energy Tax Bill with Enhanced Incentive for Energy Efficient Building “Retrofits”

Posted on by Trey Jackson

The Senate Finance Committee on Wednesday advanced an improved energy efficiency tax deduction for commercial buildings (Section 179D) that would make the incentive more usable for “retrofits” of older buildings, multifamily structures, and REITs. (Clean Energy for America Act (S. 1298), mark-up video and supporting documents)

 Section 179D & CRE 

  • The modified bill introduced by Chairman Ron Wyden (D-OR), above,  included amendments originally proposed by Sen. Ben Cardin (D-MD) to improve Section 179D. Overall, the bill would replace a patchwork of more than 40 energy tax policies with incentives for commercial and residential energy efficiency, clean electricity, and clean transportation fuels, and eliminate fossil fuel subsidies. 
  • The Section 179D enhancements would allow:
    • A retrofit project tax deduction for efficiency investments that lower an existing building’s energy consumption from a “pre-retrofit” baseline measured through EPA’s Portfolio Manager benchmarking tool;
    • All multifamily buildings to qualify for the Section 179D incentive;
    • REITs to benefit from the incentive by allowing the amount of the 179D tax deduction to reduce earnings and profits (“E&P”) in the year that energy efficient equipment is placed in service. 
       
  • The legislation also includes new rules requiring that taxpayers claiming Section 179D or other tax benefits in the bill comply with the Department of Labor’s prevailing wage standards and use qualified apprentices for at least 15 percent of the labor hours associated with any construction, alteration, or repair work on the project.  

Roundtable Recommendations

Davis-Bacon Prevailing Wage Concerns

  • The  Roundtable’s letter opposed new prevailing wage mandates proposed by the bill. The Roundtable warned that the excessive costs from Davis-Bacon compliance will greatly exceed the amount of any tax deduction that Section 179D might provide to incentivize an energy efficient construction project.
  • “Davis-Bacon has never been applied simply because the Internal Revenue Code provides a deduction to lower a private entity’s taxable income,” the letter stated. “The Roundtable recommends that the Clean Energy for America Act avoid unchartered territory that would transform the Internal Revenue Code into a ‘Davis-Bacon Related Act.’”
  • Committee Ranking Member Mike Crapo (R-ID), above, said, “I cannot support attaching labor requirements to energy tax policy. Linking labor policy to energy-related tax credits is unprecedented, and I have concerns not only about the policy, but also about the dangerous precedent it sets for amending the tax code.” 
  • After the committee voted 14-14 along party lines to advance the $260 billion energy tax bill, Chairman Wyden said he would place the bill on the Senate calendar. (CQ, May 26).
  • The bill’s prospects in the full Senate are uncertain, yet specific elements within the bill could be incorporated into a larger economic package proposed by President Biden. Wyden has not said whether he will work to roll the measure into the president’s infrastructure plans. (BGov, May 26)

Energy and tax policies affecting commercial real estate will be a focus of discussions during The Roundtable’s June 15 all-member Annual Meeting – and during its June 16 Tax Policy Advisory Committee (TPAC) and Sustainability Policy Advisory Committee (SPAC) Meetings.

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Congressional Briefing on Section 1031 Exchanges; ‘Stand with Cities’ Event Focuses on Economic Growth

Posted on by Trey Jackson

A broad business coalition that includes The Real Estate Roundtable held a virtual briefing this week on the economic importance of like-kind exchanges (LKEs) for members of Congress and their staff. Additionally, several Roundtable members focused on the future of urban areas and economic growth during a “Stand With Cities” webcast.

  • The May 27 briefing focused on the longstanding, positive role of like-kind exchanges in the economy and the potential negative unintended consequences of limiting section 1031. (View video of the briefing)
  • DeBoer said that as Washington policymakers consider whether and how to pay for infrastructure, clean energy, education, child care, housing and other policy goals,  various tax provisions are under consideration, including the Section 1031 exchanges. He also noted how LKEs have been used to finance economic development and support local communities for 100 years – the provision is nearly as old as the income tax itself. (Exeter, history of Section 1031)

LKE Examples & Data

  • Nadji described the practical uses of LKEs, which help small business, partnerships and family farms to reinvest profits—in this case, the capital gain earned in a real estate business or investment—on a tax-deferred basis so that a business can continue to grow. He noted that if the exchanges are restricted, it would stifle transactions and hamper the marketplace.
  • Mayor Chirico gave real-world examples of how like-kind exchanges have provided an essential tool for attracting economic investment to his community. He stated that because of 1031, Naperville was able to secure a Costco store, which has produced jobs and as much sales tax revenue as their entire downtown business district. “The halo effect of all the Mom and Pop businesses that have now occupied vacant spaces in that very worn-out and distressed area that we once had – it has now been transformed, and it happened during the pandemic,” Chirico said.
  • Professor Petrova addressed her extensive research into the macro-economic impact of LKEs with Dr. David Ling. In their recent study, “The Tax and Economic Impacts of Section 1031 Like-Kind Exchanges in Real Estate,” data shows how LKEs have helped preserve capital, allowed investors to upgrade their portfolios and make capital improvements.
  • Petrova’s research also demonstrates how elimination of LKEs would likely lead to a decrease in CRE prices, less investment in real estate, greater use of leverage and a decrease in liquidity.
  • Dr. Carroll discussed his recent study on the “ Economic contribution of the like-kind exchange rules to the US economy in 2021.” His key results focused on the positive economic activity supported by LKEs; employment supported by the exchanges, listed by industry; and taxes paid by and related to businesses that make use of Section 1031.

Stand With Cities

Like-Kind exchanges and economic growth proposals under consideration by Washington policymakers will be a focus of discussion during The Roundtable’s June 15-16 Annual Business Meeting and Policy Advisory Committees Meetings (all remote).

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