Author: Trey Jackson

Portman-Shaheen Energy Efficiency Bill Considered In Senate Hearing

Posted on by Trey Jackson

Senators Jeanne Shaheen (D-NH) and Rob Portman (R-OH)

The Senate’s Energy Subcommittee on Wednesday held a hearing that considered bipartisan legislation to help further advance energy efficiency in U.S. buildings without federal regulations – but through data-driven, voluntary measures.

  • The Senate panel assessed the Energy Savings and Industrial Competiveness (ESIC) Act (S. 2137) – co-sponsored by Senators Jeanne Shaheen (D-NH), above at left, and Rob Portman (R-OH), right,  –along with nine other energy policy bills at the subcommittee’s Wednesday hearing. The Roundtable is a strong supporter of the Portman-Shaheen bill.
  • Sen. Portman testified at the hearing, noting that the ESIC Act passed the Senate by an overwhelming margin in a prior session of Congress.  He remarked that the legislation contains no “heavy-handed mandates” and that its building code sections are “completely voluntary.”  He added that the measure would result in “greenhouse gas emissions reductions [that] are equivalent to taking about 11 million cars off the road.”  (Portman press release, Sept. 11.)
  • Sen. Shaheen’s testimony emphasized that “energy efficiency is the cheapest, fastest way to deal with our energy needs,” and that the bill would produce a policy trifecta to reduce emissions, protect the environment, and create jobs.  (Shaheen press release, Sept. 11.)
  • The Roundtable submitted a letter for the hearing’s record to reiterate its support for the bill.  Roundtable President and CEO Jeffrey D. DeBoer also spoke in support of the bill when it was announced at a press conference in July.  (Video of DeBoer’s statement on Portman-Shaheen)
  • The ESIC Act “is exactly the kind of smart, forward-looking policy that will help building owners respond to our modern, evolving economy” DeBoer stated in a Senate news release upon the bill’s introduction this summer.  “The needs of business tenants have changed dramatically since the turn of the century to power the data centers, IT, and communications systems upon which our workforce depends.  Building owners are meeting their tenants’ 24/7 energy demands while constructing and managing their assets more efficiently – and reducing their carbon footprints.” (Roundtable Weekly, July 19, 2019)  

Companion legislation to S. 2137 is pending in the House (H.R. 3962), sponsored by Peter Welch (D-VT) and David McKinley (R-WV).  As the next step in the Senate’s process, a mark-up of S. 2137 by the full Senate Energy Committee is expected this fall.

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Top Senate Democratic Tax-Writer Proposes New Capital Gains Regime, Ending Preferred Rate

Posted on by Trey Jackson

Sen. Ron Wyden (D-OR)

On Thursday, Senate Finance Committee Ranking Member Ron Wyden (D-OR) presented and released a detailed white paper outlining his plan to reform the taxation of capital gains.  (News Conference Video, Center for American Progress Action Fund, Sept. 12)   

  • Entitled “Treat Wealth Like Wages,” the proposal is billed by the top Democratic tax-writer in the Senate as “a plan to fix our broken tax code, ensure the wealthy pay their fair share, and protect Social Security.”  Sen. Wyden’s proposal would end the preferred tax rate for capital gains and impose annual mark-to-market taxation of capital assets for taxpayers above certain income thresholds.
  • Both proposals represent dramatic departures from existing tax law.  They are direct challenges to two fundamental principles that support capital formation, entrepreneurship, and long-term investment: (1) tax on capital gain should be deferred until it is realized, and (2) capital gain should be subject to a reduced tax rate.
  • The mark-to-market rules, which Sen. Wyden refers to as “anti-deferral accounting rules, would apply to taxpayers averaging $1 million in income or $10 million in assets over the last 3 years.  “Tradable” assets such as stocks and bonds would be subject to annual taxation of unrealized gains. Taxpayers could take a deduction for unrealized losses.
  • While “non-tradable” assets like real estate would not be subject to mark-to-market on an annual basis, they would be subject to an additional layer of tax – a “look-back charge” – for the theoretical benefit of the tax deferral when the asset is sold, or certain other revaluation events occur.  This look-back charge would be in addition to the capital gains tax, which would be set at the top ordinary income tax rate. 
  • The structure of the look-back charge is undefined.  Sen. Wyden’s paper describes a few options:  (1) an interest charge on deferred tax; (2) a yield-based tax designed to eliminate the benefits of deferral; or (3) a surtax based on an asset’s holding period.  The look-back charge would also be imposed at death, even if the asset is not sold (the basis of the asset would step up at death).
  • Special rules would apply for pass-through entities.  For example, the Wyden proposal would require a partnership to calculate the lookback charge when real estate is contributed to or distributed from the partnership – and report each partner’s share.
  • Built-in gain on existing assets would be subject to the tax, paid over an unspecified transition period.  The estimated $1.5 – $2 trillion of revenue raised from the proposal would be dedicated towards shoring up the long-term solvency of Social Security.  (CNBC, Sept. 12)

  • “Congress should strengthen tax rules that promote capital formation, not weaken them, which is what Sen. Wyden’s proposal would do,” said Real Estate Roundtable President and CEO Jeffrey DeBoer.  He added, “Rewarding risk-taking, long-term investment, and entrepreneurship is at the heart of the American economic model. By eliminating any tax incentive to pursue projects that have a pay-off that is far in the future, the proposal would discourage businesses and individuals from undertaking the long-term, capital-intensive investments that drive productivity and economic growth by deepening and enriching our Nation’s capital stock, including its commercial real estate.”   

    Sen. Wyden invited comments about the proposal on a wide variety of issues, such as how to calculate the look-back charge and whether debt should reduce the value of property when measuring a taxpayer’s aggregate assets.   The Roundtable’s Tax Policy Advisory Committee (TPAC) plans to review the proposal in detail and submit comments.  

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Senate Banking Committee and Administration Weigh In On GSE Reform Plan; FHFA Announces New Multifamily Cap Structure

Posted on by Trey Jackson

Treasury's Housing Reform Proposal - Sept. 2019

The Senate Banking Committee’s September 10 hearing on “Housing Finance Reform: Next Steps” focused on the Trump Administration’s efforts to reform the U.S. housing finance system, including their proposal to overhaul the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac.  

  • Treasury Secretary Steven Mnuchin testified before the committee about the Administration’s Housing Reform Plan released last week to revamp and recapitalize the GSEs before releasing them from conservatorship.  The Administration’s goal is to reduce the federal government’s footprint in housing finance, increase the role of the private sector and private capital in the market and, eventually, return Fannie Mae and Freddie Mac to private shareholder ownership.   Mnuchin testified that if Congress fails to act, the Administration will pursue an agreement with the GSEs’ regulator, the Federal Housing Finance Agency (FHFA) to change the terms of the government’s bailout agreements reached 11 years ago.
  • The FHFA announced today a revised cap structure on the multifamily businesses of Fannie Mae and Freddie Mac.  The new multifamily loan purchase caps will be $100 billion for each organization, a combined total of $200 billion in support to the multifamily market, for the five-quarter period Q4 2019 – Q4 2020.  The new caps are significantly higher than the existing ones and apply to all multifamily business – no exclusions. To ensure a strong focus on affordable housing and traditionally underserved markets, FHFA directs that at least 37.5 percent of the Enterprises’ multifamily business be mission-driven, affordable housing.
  • After Fannie and Freddie received $191 billion in government support during the financial crisis of 2008 and entered conservatorship, they have become profitable.  Under the Administration’s plan, Fannie and Freddie profits would no longer go to Treasury, but would be dedicated to building their capital bases.  (Wall Street Journal, Sept. 10)
  • Mnuchin also testified that Treasury’s plan “would preserve the longstanding government support of the 30-year, fixed-rate mortgage loan.”  The Treasury plan acknowledges the disincentives posed by regulatory barriers such as rent control and calls for enhancing private involvement in multifamily lending by refocusing the GSEs on affordable and workforce housing.
  • Democratic senators clashed with Republicans during Tuesday’s hearing, emphasizing the reform outlines would raise home borrowing costs and neglect lower-income homeowners.  Sen. John Kennedy (R-LA) called for a specific Administrative proposal, stating, “This whole thing is a car wreck. It’s a dumpster fire…We spent $190 billion of taxpayer money, and we’re in worse shape.”  (AP, Sept. 10)
  • The Roundtable submitted comments this week in advance of the hearing (Roundtable letter, Sept. 9).   The Roundtable and 27 industry organizations also submitted principles for reforming the GSEs in March. (Roundtable Weekly, March 1)

The path to reaching bipartisan consensus on housing finance reform remains unclear, especially before the 2020 presidential election.  Housing finance reform will be a focus of discussion with Housing and Urban Development (HUD) Secretary Ben Carson during The Roundtable’s Fall Meeting on October 30 in Washington.

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Congress Returns to Packed Agenda, Funding Deadlines

Posted on by Trey Jackson
U.S. Capitol

Congress returned this week from recess to a full legislative agenda and a September 30 government funding deadline.  (Roll Call, Sept. 10) 

  • None of the 12 annual discretionary spending bills have been signed into law yet.  Lawmakers  still must negotiate appropriations affecting contentious issues such as funding for a wall on the southern border, which is overseen by the Department of Homeland Security.  Disagreements over wall funding led to the historic 35-day partial government shutdown in 2018–2019. (Politico, Jan. 25) 
  • Of interest to real estate, funding for the EB-5 Immigrant Investor Regional Center Program and the National Flood Insurance Program (NFIP) is also set to expire September 30 – the end of the current fiscal year.  FY’20 begins October 1.  (Roundtable Weekly, Feb. 15). 
  • In order to give lawmakers more time to negotiate spending levels and policy differences, congressional leaders have endorsed a stopgap funding bill, or Continuing Resolution (CR).  The CR emerging from discussions between House and Senate appropriators is expected to run through November 22.  Both EB-5 and NFIP are expected to be included within a funding extension measure.  (Wall Street Journal, Sept. 10 and The Hill, Sept. 9)   
     
  • Several tax priorities are also vying for attention and could form the basis for an end-of-year agreement on tax legislation.  These issues include tax extenders, clean energy incentives and tax technical corrections. 
     
  • On September 4, the National Multifamily Housing Council, The Real Estate Roundtable, and other industry organizations sent a letter to Congressional tax-writers urging them to enact a technical correction related to the cost recovery period for residential rental property.  The correction would clarify that taxpayers electing out of the new limitation on business interest deductibility can depreciate their existing rental properties over 30 years, rather than 40 years.  The 30-year period applies to newly acquired or constructed residential rental properties, and should also apply to existing holdings.  (Letter on Cost Recovery Period for Residential Rental Property under Section 163(j), Sept. 4) 

Congress is scheduled to be in legislative session for three weeks in September, three weeks in October and a few weeks in November.  Both chambers aim to adjourn for the year by December 13, 2019.

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Test

Posted on by Trey Jackson

2018 -Department-of-Treasury border

A bipartisan bill reintroduced July 17 by Sens. Rob Portman (R-OH) and Jeanne Shaheen (D-NH) includes provisions to advance energy efficiency standards for U.S. real estate by fostering market incentives, data-driven research, and open government procedures.  

  • Roundtable President and CEO Jeffrey D. DeBoer joined other industry and environmental group leaders at a press conference Wednesday in the Senate to support the Energy Savings and Industrial Competitiveness (ESIC) Act.  (Video of DeBoer’s statement and entire press event)
  • The ESIC Act is a revived version of comprehensive energy efficiency legislation introduced in prior sessions of Congress. (Bill summaryand  text.)  
  • The Real Estate Roundtable has long endorsed the ESIC Act.  The bill contains no mandatory federal building or climate-related regulations.  It aims to improve energy efficiency across U.S. buildings by:  
    • Importing new economic, cost, and small business impact considerations into the process by which the U.S. Department of Energy (“DOE”) proposes revisions to “model” building energy codes, that state and local bodies may ultimately adopt;  
    • Providing stakeholders with opportunities to comment on code revisions suggested by DOE – to correct the currently closed process by which federal code proposals are developed without industry input;  
    • Clarifying standards for real estate appraisers and banks to consider energy efficiency capital investments when determining an asset’s market value; and
    • Creating a voluntary program that can lead to lower interest rates and greater qualifications for buyers seeking mortgages on new energy efficient homes.

            

  • The Portman-Shaheen bill also includes new Section 103 , strongly supported by The Roundtable.  This provision would require coordination by federal agencies to gather and report higher quality data on energy consumed by U.S. buildings, through the nationwide Commercial Building Energy Consumption Survey (CBECS).   Data from CBECS provides the underpinning for EPA’s ENERGY STAR scores.  (See Roundtable Weekly  energy policy story above)
  • In a July 18 Senate news release , 15 business and energy efficiency sector leaders expressed support for the latest Portman-Shaheen bill – including DeBoer and Henry H. Chamberlain, President and CEO, Building Owners and Managers Association (BOMA) International.
  • DeBoer stated in the Senate news release, “The [ESIC Act] is exactly the kind of smart, forward-looking policy that will help building owners respond to our modern, evolving economy.  The needs of business tenants have changed dramatically since the turn of the century to power the data centers, IT, and communications systems upon which our workforce depends.  Building owners are meeting their tenants’ 24/7 energy demands while constructing and managing their assets more efficiently – and reducing their carbon footprints.”
  • During the July 17 news conference, Sen. Portman added that the bill would save consumers $13 billion a year – the equivalent in emissions savings of taking 11 million cars off the road within 15 years. (Video of press event, July 17)

In a positive sign, a swath of energy efficiency bills are moving through both the Senate and House, indicating that energy policy could pass in a divided Congress.  ( The Washington Examiner , July 18) 

 

Senate Finance Committee Task Force Proposes Making Tax Deduction for Energy Efficient Buildings (sec. 179D) Permanent

Posted on by Trey Jackson

A bipartisan group of Senate Finance Committee policymakers this week recommended the tax deduction for energy efficient commercial buildings (section 179D) should become a permanent provision in the federal tax code.  Section 179D expired at the end of 2017.  ( BloombergTax , Aug. 13) 

Senate Finance Chairman Chuck Grassley (R-IA), right, and Ranking Member Ron Wyden (D-OR), left, set up five bipartisan task forces in May to consider long-term solutions for more than 40 temporary provisions in the federal tax code that repeatedly expire and come up for renewal.
  • Senate Finance Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) set up five bipartisan task forces in May to consider long-term solutions for more than 40 temporary provisions in the federal tax code that repeatedly expire and come up for renewal.   
  • Three of the task forces released reports on Wednesday, addressing the areas of cost recovery (e.g., sec. 179D) and energy (e.g., sec. 45L credit for energy-efficient new homes).   In addition to recommending permanency for section 179D, the Cost Recovery Temporary Tax Policy Task Force led by Senators Mike Crapo (R-ID) and Ben Cardin (D-MD) noted that further improvements to the provision would accelerate its positive impact.
  • The reports refer to extensive comments from stakeholders, including The Real Estate Roundtable and industry coalitions.  The committee also posted further information about the temporary tax policies that the task forces examined.  
  • The task forces’ “thorough and bipartisan approach will form the foundation of the committee’s work to provide more certainty to temporary tax policy,” Grassley said. “The next step will be to put together a legislative package based on the proposals that the taskforces received, the areas of consensus among the taskforce members and continued bipartisan discussions.” (SFC news release, Aug. 13) 
  • In the House, the Ways and Means Committee on June 20 passed legislation to extend a host of expired and expiring tax credits through 2020, including section 179D.  (Markup of House Tax Legislation and Roundtable Weekly, June 21)  The Taxpayer Certainty and Disaster Tax Relief Act of 2019 (H.R. 3301) includes other provisions affecting real estate:  

    •  Credit for construction of new energy efficient homes (sec. 45L)

    •  Credit for energy efficient improvements to existing homes (sec. 25C)

    •  Exclusion of mortgage debt forgiveness (sec. 108(a)(1)(E))

    •  Deductibility of mortgage insurance premiums (sec. 163(h)(3)(E))

    •  New markets tax credit (sec. 45D)  

    •  Empowerment zone tax incentives (sec. 1391-97)

      Building Owners and Managers Association (BOMA) International President and Chief Operating Officer, Henry Chamberlain, testified before Ways and Means last year to support Section 179D’s permanence.  ( BOMA testimony -March 14, 2018)
    • Building Owners and Managers Association (BOMA) International President and Chief Operating Officer, Henry Chamberlain, testified before Ways and Means last year to support Section 179D’s permanence.  (BOMA testimony, March 14, 2018) 
    • On a separate track from extenders and 179D is an energy efficiency tax proposal urged by The Roundtable and a broad coalition of real estate and environmental organizations.  The groups urge House and Senate tax writers to establish an accelerated depreciation schedule for a new category of Energy Efficient Qualified Improvement Property installed in buildings – or “E-QUIP” – with a 10-year cost recovery period (Coalition E-QUIP Letter, May 8) 
    • Roundtable President and CEO Jeffrey DeBoer stated, “The purpose of establishing a new E-QUIP category in the tax code is to stimulate productive, capital investment on a national level that modernizes our nation’s building infrastructure while helping to lower greenhouse gas emissions.”  (Roundtable Weekly, May 10) 

    When Congress returns on September 9 from summer recess, additional changes to the Ways and Means extenders bill may be made as it moves to the House floor, and then to the Senate.  However, passage of spending bills to fund the government beyond September 30 are considered must-pass legislation.  Whether an extenders bill can be attached to an FY’20 appropriations bill is uncertain at this time.    

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    Senate Committee Advances Legislation to Reauthorize “Brand USA” Tourism Marketing Program

    Posted on by Trey Jackson

    The Senate Committee on Commerce, Science and Transportation on July 24 overwhelmingly passed  S. 2203 , the Brand USA Extension Act  to reauthorize the organization that promotes the U.S. globally as a travel destination. 

    Brand USA - RW

    Brand USA is a public-private partnership  that attracts international travelers to the U.S. to encourage tourism spending at America’s hospitality, retail, attraction and other properties.  The Brand USA marketing organization operates at no expense to taxpayers.  Private sector contributions fund the program, matched by U.S. government fees collected from foreign visitors who enjoy visa-free entry to the U.S.
    • Brand USA is a public-private partnership  that attracts international travelers to the U.S. to encourage tourism spending at America’s hospitality, retail, attraction and other properties.  The Brand USA marketing organization operates at no expense to taxpayers.  Private sector contributions fund the program, matched by U.S. government fees collected from foreign visitors who enjoy visa-free entry to the U.S. 
    • The federal portion of Brand USA funding runs out next year.  S. 2203 would extend the federal cost-share until 2027, and increase the foreign traveler fees that pay for the federal portion. 
    • The bill’s bipartisan co-sponsors are Sens. Roy Blunt (R-MO), Amy Klobuchar (D-MN), Cory Gardner (R-CO), Catherine Cortez Masto (D-NV), Dan Sullivan (R-AK), Lindsey Grahan (R-SC), and Jacky Rosen (D-NV).  Nearly 50 senators signed-onto a bipartisan May 2019 “Dear Colleague” letter to support reauthorizing and extending Brand USA. 
    • The Real Estate Roundtable is part of the Visit U.S. Coalition which advocates for Brand USA reauthorization.  The coalition, led by the U.S. Travel Association (USTA) and the American Hotel and Lodging Association, also includes the American Resort Development Association and the U.S. Chamber of Commerce.  The importance of international travel to the domestic economy, job growth, and CRE was the focus of a panel discussion during The Roundtable’s 2018 Annual Meeting. (Roundtable Weekly, June 15, 2018). 
    • A study released last year shows that Brand USA’s marketing efforts brought in 6.6 million incremental international visitors to the U.S. between 2013 and 2018, at a return-on-investment of $28 in visitor spending for every $1 the agency spent on marketing. 
    • S. 2203 is introduced at a crucial time, as recent travel trend figures forecast steady declines in the U.S.’s share of the international travel market through at least 2022.   The decline in market share represents estimated losses to the domestic economy of 14 million international visitors, $59 billion in international traveler spending and 120,000 U.S. jobs. (USTA news release, Aug. 1) 
    • Other travel policy legislation is pending in the House.  Reps. Mike Quigley (D-IL) and Tom Rice (R-SC) on April 9 reintroduced the bipartisan Jobs Originating through Launching Travel (JOLT) Act of 2019 (H.R. 2187) to improve national security, increase international tourism, and reform visa laws.  (Roundtable Weekly, April 26, 2019) 

    When Congress returns from its summer recess on Sept. 9, policymakers will face the task of setting FY’20 federal appropriations for individual agencies and departments – before current funding runs out on September 30.  It is uncertain which individual programs such as Brand USA could be addressed within these funding bills, or whether Congress will need to pass an extension of current funding levels via a “Continuing Resolution.”  (Roundtable Weekly, Aug. 2)

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    Commercial Real Estate Executives Report Stable Market Conditions for Q3

    Posted on by Trey Jackson

    Despite Positive Sentiment About Q3 and Future Market Conditions, Industry Remains Cautious

    (WASHINGTON, D.C.) — Commercial real estate industry leaders continue to see balanced and stable economic market conditions, according to The Real Estate Roundtable’s 2019 Q3 Sentiment Index released today. 

    “As our Q3 Index shows, industry executives are entering the second half of the year with confidence in stable market fundamentals, supported by a solid economy with low employment,” said Real Estate Roundtable President and CEO Jeffrey DeBoer. “Although there is political uncertainty and the economic recovery is historical in length, commercial real estate market dynamics remain sound, with balanced supply and demand in most markets, and debt and equity readily available, particularly for high grade investments,” DeBoer added.

    The Roundtable’s Q3 2019 Sentiment Index’s registered a score of 50 — a one point decrease from the previous quarter. [The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive.]  Both the Current-Conditions Index of 53 and Future-Conditions Index of 48 for this quarter remained the same from the previous quarter, reflecting the stabilized real estate market conditions and the overall economy.

    The report’s Topline Findings include:

    • The Real Estate Roundtable Q3 2019 Sentiment Index registered a score of 50 – a one point decrease from the previous quarter. Survey participants are confident in today’s market dynamics. However, many respondents feel the US real estate market has become fragmented during this cycle and is more accurately examined as a group of separate but correlated markets distinguished by geographic location and property type.
    • Many respondents feel a change in the market is imminent, but are unable to identify a definitive potential cause for a decline as they recognize economic fundamentals appear strong. Nearly half of respondents suggested market conditions one year from now would be similar to the prevailing conditions today.
    • Asset prices remain high for the best assets in the best locations. Many question whether the real estate cycle may be nearing an end and prices could decline in the near future. Sixty percent of respondents believe real estate asset values will be the same one year from now.
    • Availability of debt and equity capital remains strong for high grade investments. Respondents identified a trend of renewed construction financing availability from financial institutions which had previously pulled back from the market.

    While 50% of survey participants reported Q3 asset values today are “about the same” compared to this time last year, 60% of respondents believe that one year from now, values will be “about the same” suggesting real estate asset pricing will remain steady through the remainder of the year. Some respondents believe there is still opportunity for growth for high quality assets in certain markets. 

    Data for the Q3 survey was gathered in July by Chicago-based FPL Associates on The Roundtable’s behalf. 

    View Full Report

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    Environmental, Social and Governance (ESG) Risk Disclosure Gaining Interest Among Policymakers

    Posted on by Trey Jackson

    A recent hearing by a House Financial Services subcommittee reflects a growing interest among policymakers regarding environmental, social, and governance (ESG) reporting by public companies.  (” Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social and Governance (ESG) Disclosures ,” July 10 hearing) 

    Rep. Carolyn Maloney (D-N.Y.) – chairwoman of the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets – stated during the July 10 hearing, “Investors overwhelmingly want companies to disclose ESG information, especially because there’s now considerable evidence that companies that perform better on ESG metrics, also perform better financially.”  
    • ESG disclosures generally address issues in the areas of environmental sustainability (e.g., climate change); social (e.g., human rights and labor practices); and governance (e.g., executive- and board-level diversity) matters.  ( Financial Services Committee memorandum , July 5)  Nareit’s ESG Dashboard  identifies and tracks key performance indicators to better measure and quantify best ESG practices for the U.S. REIT industry.  
    • Rep. Carolyn Maloney (D-N.Y.) – chairwoman of the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets – stated during the hearing, “Investors overwhelmingly want companies to disclose ESG information, especially because there’s now considerable evidence that companies that perform better on ESG metrics, also perform better financially.” 
    • She added, “I believe the best way to improve the quality and consistencies of these disclosures is for the Securities and Exchange Commission (SEC) to establish standards for ESG Disclosure that would apply to all public companies in the United States.” (Video of entire hearing, July 10) 
    • During the hearing, policymakers considered the merits of five draft bills that would require public companies to disclose information on several ESG topics – including climate change risk, political expenditures and human rights risk.  ( DavisPolk , July 11)   
    • Issues raised included whether the draft bills would mandate this type of disclosure for all public companies. Other issues included:

    • Whether mandated disclosure is necessary given current voluntary disclosure practices; 

    •  The potential increased regulatory burden of these disclosures, which could negatively impact U.S. IPO markets; and 

    •  Whether ESG issues qualify as material information for investors.  

    • In the Senate, the Committee on Banking, Housing and Urban Affairs held a hearing in April 2019 on the application of ESG principles in investing. 
    • Regulators also are considering ESG topics. The Commodity Futures Trading Commission last month voted to establish a Climate-Related Market Risk Subcommittee to address climate-related financial risks. (CFTC, July 10)
    • SEC Chairman Jay Clayton in a recent interview said that not all ESG matters are created equally. “Matters considered to be in the G category tend to be a lot closer to the core governance issues that investors have come to expect in terms of disclosure from our public companies. In contrast, matters considered to be in the E category, such as regulatory risk, and risk to property and equipment vary widely from industry to industry and country to country,” Clayton said.  (Directors & Boards, July 22) 

    According to a recent report by  US|SIF , ESG factors in the United States continue to play an increased role in investment decisions. Total US-domiciled assets under management using ESG strategies grew from $8.7 trillion at the start of 2016 to $12 trillion at the start of 2018, a 38 percent increase.  This represents 26 percent-or 1 in 4 dollars-of the total US assets under professional management.  (US|SIF,  2018 Report on US Sustainable, Responsible, and Impact Investing Trends ).

    President Trump Signs Debt Limit, Budget Caps Deal After Senate Passage; Congress In Recess Until Sept. 9

    Posted on by Trey Jackson

    President Trump signed major bipartisan legislation today that allocates more than $2.7 trillion in discretionary federal spending over two years; suspends the debt ceiling until July 2021; and permanently eliminates the prospect of strict “sequestration”
    spending caps imposed under the Budget Control Act of 2011. ( The Hill , Aug. 2) 

    After passing the budget deal yesterday, the Senate left for summer recess, following the House’s exit last week.  Congress will reconvene on September 9.
    • The legislation – a result of weeks of negotiations between Democratic congressional leaders and the White House – passed the Senate yesterday by a vote of 67-28 after the House last week approved it 284-149.  (Roundtable Weekly, July 26).  President Trump tweeted yesterday
      in support of the bill. 
    • Senate Majority Leader Mitch McConnell (R-KY) yesterday commented on the bill: “In recent weeks, key officials on President Trump’s team engaged in extensive negotiations with Speaker Pelosi and the Democratic House.  Given the exigencies of
      divided government, we knew that any bipartisan agreement on funding levels would not appear perfect to either side. But the administration negotiated a strong deal.” (CNN,
      August 1) 
    • Notably, the budget deal puts an end to the threat of sequestration, which would have imposed a mandatory 10 percent cut on all programs if budget targets were not met.  Senate Minority Leader Chuck Schumer (D-NY), said yesterday, “For too long,
      the arbitrary, draconian limits of sequester have hampered our ability to invest in working Americans and in our military readiness. This deal ends the threat of sequester permanently. That is huge.” (Schumer Floor Remarks, August
      1) 
    • President Trump has indicated he wanted to eliminate budget brinkmanship in Washington that last year resulted in the longest partial government shutdown in U.S. history – while obtaining a two-year budget allocation until after the 2020
      presidential election.  (Wall Street Journal, August 1) 
    • After passing the budget deal yesterday, the Senate left for summer recess, following the House’s exit last week.  Congress will reconvene on September 9. 
    • Policymakers will face a tight deadline upon their return as they will need to set federal appropriations for individual agencies and departments for FY’20.  Current FY’19 funding runs out on September 30, as does legislative authority for the
      National Flood Insurance and EB-5 investment programs.  

    If Congress and President Trump cannot agree on how to allocate the $1.37 trillion in discretionary money allotted for the new fiscal year beginning October 1, a stopgap funding measure (or “Continuing Resolution”) may be required.