Author: Trey Jackson

House Ways & Means Committee Signals Upcoming Tax Legislation; Roundtable Weighs in Regarding Carried Interest, FIRPTA Repeal

Posted on by Trey Jackson

The House Ways and Means Committee this week signaled its upcoming tax policy priorities after holding a hearing on the 2017 Tax Cuts and Jobs Act (“TCJA”) entitled “The 2017 Tax Law and Who It Left Behind.”  The March 27th hearing was the first one focused on the TCJA since Democrats took control of the House, with policymakers examining which provisions they plan to reverse or refine. 

House Ways and Means Committee Chairman Richard Neal (D-MA) signaled the committee’s upcoming tax policy priorities  . 

  • Ways and Means Chairman Richard Neal (D-MA) on Wednesday also announced the committee will hold its first legislative mark-up next week on bills to encourage retirement savings (H.R. 1007) and bipartisan IRS reform. “Our plan here is to move legislation and we’re going to start doing that next week,” Neal said. He indicated that bills addressing other tax issues, including a tax extender package, must first be negotiated with Senate Finance Chairman Charles Grassley (R-IA).  (BGov and CQ, March 27)
  • A future Ways and Means mark-up may also address “technical corrections” to the TCJA.  On March 26, House Ways and Means Committee members Jimmy Panetta (D-CA) and Jackie Walorski (R-IN) introduced the Restoring Investment in Improvements Act. 

The House bill (H.R. 1869) would correct a TCJA mistake that inadvertently lengthened the cost recovery period for qualified improvement property (QIP).  A companion bill in the Senate (S. 803) was introduced earlier this month by Sens. Pat Toomey (R-PA) and Doug Jones (D-AL).  (Roundtable Weekly, March 15).  The Roundtable strongly supports the legislation.

Comment Letters – Carried Interest and FIRPTA Repeal

The Roundtable and 13 other national real estate organizations sent a letter this week to members of the House Ways and Means Committee about the adverse impact that recently introduced carried interest legislation (H.R. 1735) would have on U.S. real estate and entrepreneurial risk taking.

  • The letter notes how the bill would result in a huge tax increase on Americans who use partnerships in businesses of all types and sizes – and would be particularly harmful to the nearly 8 million partners in U.S. real estate partnerships.  

    The Roundtable and 13 other national real estate organizations submitted comments about recently introduced carried interest legislation (H.R. 1735).

     

  • The March 26 letter states, “The false narrative surrounding the carried interest issue is that it targets only a handful of hedge fund billionaires and Wall Street executives.  The carried interest legislation is far broader and would apply to real estate partnerships of all sizes—from two friends owning and leasing a townhome to a large private real estate fund with institutional investors.”
  • Additionally, The Roundtable and 19 national trade organizations – representing every aspect of constructing, developing, financing, owning, and managing real estate and infrastructure in the United States – wrote to Ways and Means Committee Members and other key House lawmakers on March 28, urging them to support the Invest in America Act. 
  • The legislation would repeal the arcane and punitive Foreign Investment in Real Property Tax Act (FIRPTA) of 1980.  FIRPTA imposes a discriminatory layer of capital gains tax on foreign investment—a tax burden that does not apply to any other asset class.  Private investors cite FIRPTA as a principal obstacle to attracting greater foreign capital for infrastructure projects. (Roundtable  FIRPTA Letter, March 28)
  • Reps. John Larson (D-CT) and Kenny Marchant (R-TX) are expected to introduce the bipartisan legislation soon.

Repealing FIRPTA is a key policy action Congress could take to help spur infrastructure improvements and contribute to economic growth, according to recommendations submitted March 20 by The Real Estate Roundtable to the House Ways and Means Committee.  (Roundtable Statement for the Record)

Senate Banking Committee and President Trump Launch Efforts to Address Housing Finance Reform, Including GSEs

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Senate Banking Committee Chairman Mike Crapo (R-ID) and President Trump this week launched separate efforts aimed at reforming the multi-trillion-dollar financial market for single-family and multifamily mortgages, including the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac.

Senate Banking Committee Chairman Mike Crapo (R-ID) held hearing this week on reforming the multi-trillion-dollar  housing finance markets. 

  • Two days of hearings before the Senate Banking Committee concluded Wednesday, with twelve witnesses testifying about Chairman Crapo’s recent housing reform outline – a proposal that would return the GSEs to private control.  (Roundtable Weekly, Feb. 8)
  • Crapo stated during the hearing, “This outline sets out a blueprint for a permanent, sustainable new housing finance system that: protects taxpayers by reducing the systemic, too-big-to-fail risk posed by the current duopoly of mortgage guarantors; preserves existing infrastructure in the housing finance system that works well, while significantly increasing the role of private risk-bearing capital; establishes several new layers of protection between mortgage credit risk and taxpayers; ensures a level playing field for originators of all sizes and types, while also locking in uniform, responsible underwriting standards; and promotes broad accessibility to mortgage credit, including in under-served markets.” (Senate Banking Committee,  Day One Testimony and Day Two Testimony)

    The Real Estate Roundtable and 27 industry organizations on March 1 submitted principles for reforming the (GSEs).

  • Following the hearings, President Trump released a presidential memodirecting “the Secretary of the Treasury and the Secretary of Housing and Urban Development to craft administrative and legislative options for housing finance reform.”  (Wall Street Journal, March 27)
  • President Trump aims to end the GSEs’ conservatorship, “promote competition in the housing finance market … create a system that encourages sustainable homeownership and protects taxpayers against bailouts.”  The memo also calls for the preservation of the 30-year fixed-rate mortgage. (White House announcement, March 27)
  • The GSE’s received $191 billion in government support during the financial crisis, but since entering conservatorship, they have paid the Treasury $292 billion in dividends,  according to research from Keefe, Bruyette & Woods  (Reuters, March 27)

The Real Estate Roundtable and 27 industry organizations on March 1 submitted principles for reforming the (GSEs).  The coalition’s letter was sent to Acting Federal Housing Finance Agency (FHFA) Director Joseph Otting and Washington policymakers days after the Senate Banking Committee advanced the nomination of Mark Calabria as FHFA Director.  (Roundtable Weekly, March 1)

Calabria is awaiting full Senate confirmation, which is expected soon.

Democrats Reintroduce Legislation to Tax Carried Interest At Ordinary Income Rate

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Legislation to reform the taxation of carried interest was introduced on March 13 by Sen. Tammy Baldwin (D-WI) and House Ways and Means Committee member Bill Pascrell, Jr. (D-NJ).  (News releases: Baldwin and Pascrell)

Legislation to reform the taxation of carried interest was introduced on March 13 by Sen. Tammy Baldwin (D-WI) and House Ways and Means Committee member Bill Pascrell, Jr. (D-NJ). 

  • The Carried Interest Fairness Act of 2019 would reverse decades of partnership tax law by characterizing profits earned through certain investment partnerships as ordinary income.  The legislation would recast capital gains earned by some partners—including gain associated with the sale of appreciated real estate—as income taxable at the maximum individual rate.  The current top capital gains rate is 20 percent and the top tax rate on ordinary income is 37 percent.  
  • Similar legislation was introduced in the 115th Congress.  The 2017 tax overhaul included a change to carried interest taxation, increasing the length of time from one to three years that partners with a carried interest must hold their investment to qualify for long-term capitals gains treatment. (The Hill, March 13)
  • The Democrats’ carried interest bill is under consideration by congressional tax-writing committees as a possible revenue offset for separate legislation to extend temporary tax breaks that lapsed on Jan. 1, 2018.  According to one press report, when asked whether carried interest could be an offset for his tax bill, House Ways and Means Chairman Richard Neal (D-MA) responded, “I think you’re on the right track.”  (CQ password-protected, March 14)

The Real Estate Roundtable opposes proposals such as the Carried Interest Fairness Act.  General partners earning a carried interest in a real estate partnership bear significant risks beyond direct capital contributions.  These risks can include funding predevelopment costs, guaranteeing construction budgets and financing, and exposure to potential litigation over countless possibilities. 

Roundtable’s DeBoer Profiles Industry Policy Agenda, Including TRIA, Infrastructure, FIRPTA

Posted on by Trey Jackson

Roundtable President and CEO Jeffrey DeBoer yesterday discussed the organization’s national policy priorities in the current Congress with Roundtable Board Member Holly Neber (CEO, AEI Consultants and President, CREW Network) during the 2019 Connect Los Angeles conference.  (Watch video of DeBoer’s discussion, March 21)

RER President and CEO Jeffrey DeBoer yesterday discussed the organization’s national policy priorities in the current Congress with Roundtable Board Member Holly Neber during the 2019 Connect Los Angeles conference  . 

The policy discussion, “What’s Next!? What’s Happening in Washington and What Does it Mean for Your Business?” explored topics such as terrorism, infrastructure, foreign investment and tax reform before a standing-room only crowd of more than 500. (Video, LA Connect)

  • DeBoer profiled several compelling policy issues of importance to commercial real estate, including terrorism risk insurance.  DeBoer explained, “… TRIA, the Terrorism Risk Insurance Act, put in place after 9-11 because the direct insurance industry and the resinsurance industry said they couldn’t measure and predict a terrorism attack.  If they can’t measure and predict it, they can’t offer the product.  If they can’t offer the product, businesses can’t get all-risk insurance.  If you can’t get all-risk insurance, you can’t get financing.  So this issue of TRIA being extended … since being in place since 2002, is very important to liquidity. It’s very important to market stability.  And we want to get it extended by the end of this Congress, by the end of 2020.”    
  •  TRIA was enacted in 2002 and was extended in 2005, 2007 and 2015. Without Congressional reauthorization, the program will expire on December 31, 2020.
  • DeBoer also addressed the need for Congress to pass legislation that will address infrastructure improvements on a national level.  “We need to recognize that we are in a new transportation revolution.  And it’s changing and we’re going to change in the next 10, 15 years; the way we access our infrastructure.  We want to get this infrastructure bill done.  We want to get it as broad as possible.  We want to bring in as much private capital as we can,” DeBoer said, emphasizing that public-private partnerships can play a major role in infrastructure improvement projects.  (see Infrastructure story above)
  • He also discussed tax policy priorities, including repeal of the Foreign Investment in Real Property Tax Act (FIRPTA) and recently introduced legislation that would change taxation of carried interest (see Tax Policy story above).

The Roundtable released its 2019 National Policy Agenda during its January State of the Industry Meeting in Washington (Roundtable Weekly, Feb. 1).  

Roundtable Joins Amicus Brief Urging SCOTUS to Address Constitutional Rights in Income-Producing Private Property

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The Roundtable joined the National Association of Home Builders (NAHB) and National Federation of Independent Business (NFIB) today, in an amicus brief requesting the nation’s highest court to accept a case that addresses significant property rights issues.

The Roundtable joined the National Association of Home Builders (NAHB) and National Federation of Independent Business (NFIB) today, in an amicus brief requesting the nation’s highest court to accept a case that addresses significant property rights issues.

  • In Love Terminal Partners, LP v. United States, developers and investors acquired rights to construct and provide flight service from a passenger terminal at Love Field airport near Dallas, Texas.  The venture never proved profitable.  The U.S. Congress subsequently codified a third-party agreement between affected cities, airlines, and the DFW airport regarding interstate air travel to and from the Dallas area.  The Love Terminal investors were not a party to that agreement, which gave the City of Dallas authority to demolish their terminal.  The agreement also provided the terminal could “never” be used for passenger service.
  • The Love Terminal owners thereafter sued the U.S. government for a Fifth Amendment property “taking” by effectuating the agreement in federal law.  At trial, the land owners won a $133.5 million “just compensation” award.  On appeal, however, the Federal Circuit reversed and entirely erased the trial court’s award.  The Love Terminal property owners thus requested the U.S. Supreme Court to hear the case.  The coalition supported that petition today with its amicus brief.
  • Prior Supreme Court precedents determine whether a taking has occurred under these circumstances. Penn Central (1978) considers the economic impact of land-use regulation, and whether the investor has reasonable investment expectations in the property.  Lucas (1992) establishes a “categorical” rule that a taking occurs when government regulations completely “wipe-out” the property’s economic uses.  “[T]his case presents an opportunity … to lay down the law—for the sake of consistency in both Penn Central and Lucas cases—when assessing fair market value for a property that is alleged to have prospective economic value for the buyer,” the brief explains.
  • Notably, the case addresses whether income producing property needs to turn a profit to support a takings claim. In deciding no taking occurred, the intermediate appeals court stressed that revenue never exceeded the owner’s carrying costs.  The amicus brief takes issue with that finding.  It states: “By that standard virtually all start-up companies and development projects would be vulnerable because it often takes years to begin turning a profit on a new venture …. [I]t is improper to ignore the economic realities driving business decisions to invest in a property that will prove profitable in the future.”
  • The brief continues: “Entrepreneurs and business investors typically have a long-term strategy, which assumes a return on investment over an extended period of time. This is especially true for home builders and commercial developers because they bear major upfront financial burdens before they can ever hope to turn a profit …. [I]t is simply wrong to say that negative cash-flow equates to zero value.  Negative cash-flow is commonly an accepted cost of doing business in the beginning of a new venture.”

The Supreme Court will decide whether (or not) it accepts the Love Terminal case likely after its next term starts in October 2019. If it does, briefing on the merits would take place next fall, and a decision would be expected by June 2020.   

Senators Introduce Bipartisan Legislation to Correct Cost Recovery Period for Nonresidential Real Estate Improvements

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This week U.S. Senators Pat Toomey (R-PA) and Doug Jones (D-AL) introduced bipartisan legislation, the Restoring Investment in Improvements Act (S. 803), to correct a mistake in the Tax Cuts and Jobs Act that lengthened the cost recovery period for qualified improvement property (QIP).  

U.S. Senators Pat Toomey (R-PA) and Doug Jones (D-AL) introduced bipartisan legislation, the Restoring Investment in Improvements Act (  S. 803  ), to correct a mistake in the Tax Cuts and Jobs Act that lengthened the cost recovery period for qualified improvement property (QIP).  

  • The unintended drafting error has resulted in a significantly longer 39- or 40-year cost recovery period for most improvements to the interior of nonresidential real estate.  The intent of Congress was to allow the immediate expensing of QIP – or provide a 20-year recovery period in the case of taxpayers electing out of new limitations on the deductibility of business interest.
  • Prior to the law’s enactment, commercial building tenants, retail store owners and restaurant owners could write off the costs of their renovations over a span of 15 years.  The legislation drafted by Sens. Toomey and Jones would allow many businesses to immediately deduct the full cost of interior renovations, and would apply retroactively to January 1, 2018. (The Hill, Mar. 14)
  • The Tax Cuts and Jobs Act included a strict new limitation on the deductibility of business interest expense, but also provided an exception for an “electing real property trade or business.”  In general, taxpayers that develop, rent, manage, or operate real estate are not subject to the interest limits, but are subject to longer cost recovery periods for their real estate and real estate improvements.  The Toomey-Jones bill would ensure that the QIP of an electing real property trade or business is depreciated over 20 years, rather than 40 years.   

  • Roundtable President and CEO Jeffrey D. DeBoer applauded the Senators bipartisan legislation introduced this week. “The Restoring Investment in Improvements Act ( S. 803 ) introduced by Senators Toomey and Jones is a simple and straightforward technical correction to the Tax Cuts and Jobs Act,” he said.

    “The Restoring Investment in Improvements Act (S. 803) introduced by Senators Toomey and Jones is a simple and straightforward technical correction to the Tax Cuts and Jobs Act.  An acknowledged drafting error significantly lengthened the depreciation period for building improvements.  This has caused a large increase in the after-tax costs of modernizing and altering buildings of all types and uses, from shopping centers to office buildings to industrial properties and restaurants.  The result is an immediate and unnecessary drag on building investment, construction activity, and job creation, said Roundtable President and CEO Jeffrey D. DeBoer.  “Congress should act quickly to pass this legislation and reinstate a much shorter cost recovery period for building improvements.”

  • In October 2018, the Roundtable along with 239 businesses and trade groups, wrote to Secretary Mnuchin urging the Treasury Department to provide taxpayers with administrative relief from the drafting error. (Roundtable Weekly, Oct. 12, 2018) 

On Thursday, Treasury Secretary Steven Mnuchin told reporters that he has discussed fixing technical errors in the 2017 tax law with congressional leaders on both sides. “This is something we’re very interested in doing. There’s a lot of demand,” he said following his testimony before the Senate Finance Committee. (Bloomberg, Mar. 14)

Business Coalition Urges Implementation Delay for FASB’s ‘Current Expected Credit Loss Accounting Standard’ (CECL), Pending Impact Analysis

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A business coalition that includes The Real Estate Roundtable on March 5 wrote to the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) to urge a delay in the implementation of the proposed Current Expected Credit Loss (CECL) accounting standard, which may begin to reduce aggregate bank lending as early as next year. (Coalition Letter, March 5)

The March 5 coalition letter cites a 2018 KPMB survey showing companies are struggling to make certain accounting, modeling and data decisions to be in compliance with CECL. (KPMG, Financial institutions feeling the crunch in countdown to CECL implementation)

  • The new CECL model will change the way banks calculate reserves on assets, requiring certain financial institutions to estimate the expected loss over the life of a loan beginning in January 2020.  For real estate, there is concern is that banks may reduce lending volumes as they build up additional capital reserves to be in compliance with CECL. 
  • The accounting rule change was issued by the Financial Accounting Standards Board (FASB) in June 2016 as a result of the 2008 financial crisis.
  • The regulatory change in how banks estimate losses in their allowance for loan and lease losses (ALLL) will require substantial changes in data analytics and financial methodologies.  The March 5 coalition letter cites a 2018 KPMB survey showing companies are struggling to make certain accounting, modeling and data decisions to be in compliance with CECL.  (KPMG, Financial institutions feeling the crunch in countdown to CECL implementation)
  • According to Trepp’s Looking at Historical CRE Losses for CECL, “To benchmark and fine-tune loss methodologies for CECL, the key for banks will be a four-letter word: data.  Unfortunately, many banks have very little in the way of granular historical data, and a number of those that do have good data have taken few to no losses in their history. This has made it difficult for those banks to effectively model future losses.”  (Trepp article by Joe McBride, April 21, 2017)
  • To avoid unintended economic consequences, the coalition states in its letter, “We believe it is important to delay implementation of CECL in order to allow for time to conduct a quantitative impact analysis and to consider potential alternatives, while allowing for post-issuance field testing. Time for further assessment will also allow regulators to better understand and address the key consequences of any proposal for capital and other regulatory purposes.”

The 8 signatories to the coalition letter are the U.S. Chamber of Commerce, American Bankers Association, Bank Policy Institute, The Real Estate Roundtable, Commercial Real Estate Finance Council, Mortgage Bankers Association, National Association of Realtors, Credit Union National Association and National Association of Federal Credit Unions.

House Ways and Means Committee Explores Funding for National Infrastructure Improvements

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The tax-writing House Ways and Means Committee held a hearing this week on the need to launch a national infrastructure improvement program and potential funding sources.  

The Joint Committee on Taxation issued an “Overview Of Selected Internal Revenue Code Provisions Relating To The Financing Of Public Infrastructure.”

    • Highway Trust Fund
    • Airport and Airway Trust Fund Excise Tax
    • Inland Waterways Trust Fund Excise Tax
    • Harbor Maintenance Trust Fund Excise Tax
    • Tax-Exempt Financing for Public Infrastructure; and
    • Public-Private Partnerships

The hearing covered the looming shortfall in the Highway Trust Fund and the viability of potential revenues sources – such as an increase in the gas tax and the imposition of a Vehicle Miles-Traveled fee– to help finance increased infrastructure spending.

House  Ways and Means Chairman Richard Neal (D-MA) said President Trump’s interest in “a massive infrastructure package,” shows Congress has “a real opportunity to work together and do something big here.”  (Chairman Neal statement, March 6)commercial real estate market. 
  • Ways and Means Chairman Richard Neal (D-MA) noted how “meaningful, sustained investments in our nation’s infrastructure” would create more jobs, encourage a more competitive business climate and revitalize local communities.  Neal also said President Trump’s interest in “a massive infrastructure package,” shows Congress has “a real opportunity to work together and do something big here.”  (Chairman Neal statement, March 6)
  • President Trump stated during his January State of the Union address, “I know that Congress is eager to pass an infrastructure bill. And I am eager to work with you on legislation to deliver new and important infrastructure investment, including investments in the cutting edge industries of the future. This is not an option, this is a necessity,” Trump said.  (Roundtable Weekly, Feb. 8)
  • The Roundtable’s 2019 Policy Agenda notes that every $1 billion spent on infrastructure creates an estimated 13,000 jobs.  “The quality of infrastructure systems—including transportation, utilities, and telecommunications—has been cited as the most important factor influencing real estate decisions around the world. The productivity of our cities, towns and workforce depend on systems that safely and reliably transport people, supply power, and share information across the built environment,” according to the report.   (The Roundtable’s 2019 Policy Agenda Infrastructure section.)

The Roundtable sent a comment letter to President Trump in Jan. 2018 offering specific suggestions on how innovative financing sources may be used to help pay for infrastructure improvements – and how restructuring a lengthy permitting process and cutting unnecessary red tape will help control project costs and delays. 

Roundtable Warns of Potential Economic Harm if New Duties are Imposed on Fabricated Structural Steel Imports

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The Commerce Department has initiated investigations into whether a key material used in major real estate and infrastructure projects – fabricated structural steel (FSS) from Canada, China and Mexico – is being sold in the U.S. for less than fair value.  (Commerce Department announcement, Feb. 26)

The Commerce Department has initiated investigations into whether a key material used in major real estate and infrastructure projects – fabricated structural steel (FSS) from Canada, China and Mexico – is being sold in the U.S. for less than fair value.

  • The Roundtable on March 4 wrote to the U.S. International Trade Commission (ITC) urging a cautious approach to the investigation, emphasizing the potential economic harm that new tariffs could cause.  Roundtable President and CEO Jeffrey DeBoer concludes in the letter that “… unless supported by conclusive evidence of unfair dumping or subsidies, I urge you to reject calls for new tariffs on U.S. imports of fabricated structural steel.”  (Roundtable comment letter, March 1)
  • The antidumping and countervailing duty investigations are based on petitions from the American Institute of Steel Construction.  If  Commerce and the ITC affirm that dumped and/or unfairly subsidized U.S. imports of fabricated structural steel from Canada, China, and Mexico are causing injury to the U.S. industry, punitive duties could be imposed on those imports.  (Reuters,  Feb. 26)
  • The Roundtable letter emphasizes the negative effects of FSS tariffs.  “New duties could have a chilling effect on job creation and productive investment, slowing economic growth and reducing employment in industries directly and indirectly affected by real estate development,” DeBoer states.
  • In 2017, imports of fabricated structural steel from Canada, China, and Mexico were valued, respectively, at an estimated $658.3 million, $841.7 million, and $406.6 million  (Commerce Department Fact Sheet).
  • Rising costs due to the shortage of skilled labor are currently putting pressure on new real estate development.  Steel prices in the United States also rose significantly after the imposition of 25 percent tariffs on many steel imports last March. (Roundtable Weekly, March 9, 2018)
  • The declining competitiveness of domestic steel fabricators could be attributed to the unfortunate downstream economic consequences of steel tariffs imposed last year – and may not reflect clear evidence of dumping or illegal subsidies.
  • As The Roundtable letter notes, “… there is significant cross-border integration and cooperation in the fabricated structural steel industry.  Foreign fabricators operate facilities in the United States, utilize U.S.-made steel in their finished products, and regularly form joint ventures with U.S. firms to take on large and complex projects.”
  • DeBoer also states, “… rather than spurring real estate and infrastructure developers to purchase fabricated steel from domestic sources, unjustified government intervention in the form of new duties may lead potential U.S. buyers to shelve projects that would create well-paying jobs and produce a lasting economic impact in communities.”

The ITC is scheduled to make its preliminary determinations by March 21, 2019.

 

Rural-Urban Coalition Supports Legislative Reforms for Stronger EB-5 Investment Program In Lieu of Inadequate Regulations

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Comprehensive legislative reforms to the EB-5 investment program are needed to provide stronger safeguards to combat fraud and safeguard national security while balancing rural and urban areas’ access to the program, according to a coalition of 11 national industry organizations. (Coalition letter, March 8)

A coalition of 11 national industry organizations recommends comprehensive legislative reforms to the EB-5 investment program are needed to provide stronger safeguards to combat fraud and safeguard national security while balancing rural and urban areas’ access to the program. (  Coalition letter  , March 8)

 

  • The coalition—in a letter sent today to the Office of Management and Budget’s (OMB) Director Mick Mulvaney—maintains that regulations proposed during the Obama era lack national security and anti-fraud provisions essential to overhaul the program.  These proposed regulations also do not provide for a “set aside” of EB-5 investment visas for projects in so-called “Targeted Employment Areas” – a key policy component of stakeholder negotiations to encourage fair access to EB-5 capital in urban, suburban, and rural communities.
  • The letter also recommends that EB-5 Targeted Employment Areas should overlap with Opportunity Zones designated by the Treasury Department in June 2018.  Both geographic designations are census tract-based and share the common objective to channel investment capital to the nation’s distressed communities.  “We cannot discern a sound policy basis to establish two different sets of census tract designation criteria to achieve the same policy objective,” the organizations wrote.
  • President Trump on December 12, 2018 signed an Executive Order directing all federal agencies (including OMB) to consider how their programs can enhance revitalization efforts in new Opportunity Zones.  (White House statement and  PBS Video, Dec. 12, 2018)
  • The coalition letter concludes that final publication of these rules by the Department of Homeland Security would undermine congressional efforts to improve and sustain the EB-5 program over the long term.  “Our organizations continue to believe that congressional action is the best way to achieve lasting reform,” the letter states.  

Sen. Tim Scott (R-SC) – who led the effort in Congress for enactment of the Opportunity Zones program – discussed its goals and incentives on Jan. 29 in a discussion with Roundtable member Geordy Johnson (CEO, Johnson Development Associates, Inc.) during The Roundtable’s State of the Industry Meeting (Roundtable Weekly, Feb. 15)