Category: Budget & Policy Landscape

Congressional Republicans Pass Budget Resolution, Move One Step Closer to a Final Tax Bill 

Posted on by abigail_grenadier

This week, House Republicans approved a major budget framework that moves President Trump’s tax and spending agenda closer to the finish line and set the stage for Congressional Committees to “mark up” the key details in May—including tax cuts, revenue raising provisions, and spending reductions.  

State of Play

  • Despite tight margins, on Thursday House Speaker Mike Johnson (R-LA) was able to corral his caucus into passing a new budget resolution that was approved by the Senate over the prior weekend, bringing the president’s goal of “one big beautiful bill” closer to fruition. (WSJ, April 10)
  • Senate Republicans adopted a budget resolution on Saturday morning after an all-night voting marathon. Senate Republicans unveiled their 70-page budget blueprint last Wednesday.  It lays out a fiscal framework for implementing Trump’s border security, defense, energy and tax priorities. (CBS News, April 9)
  • The budget outline punts many of the hard decisions for lawmakers to hammer out later in the tax-cut negotiations. That could lead to a standoff between the House and Senate at the end of the process, where several Senators are resistant to large cuts in safety-net programs while House conservatives are seeking significant deficit reduction. (Bloomberg, April 10)

Next Steps and Implications for CRE

  • Lawmakers in the House and Senate now turn their attention to “marking up” their respective Committee instructions, as provided in the budget resolution.  The House and Senate instructions do not align, so their differences will have to be resolved later in the process.
  • The budget resolution allows the House Ways and Means Committee to pass a tax cut of up to $4.5 trillion, using a current law budget baseline.   The resolution allows the Senate Finance Committee to pass a $1.5 trillion tax cut, but assumes a current policy baseline in the Senate.  The practical effect of the current policy baseline is to increase the size of the Senate tax cut to $5.3 trillion.

  • On the spending side, the budget resolution directs the House Committees to identify at least $1.5 trillion in spending cuts.  The spending reductions for the Senate Committees are de minimis ($4 billion spread across four committees).
  • Besides tax cuts and spending reductions, the resolution calls for increased spending on the military ($150 billion), along with another $175 billion for border security and immigration enforcement work. (Politico, April 10)
  • The debt limit fight will also shape the legislative timeline. House and Senate Republicans have different reconciliation instructions for increasing the nation’s borrowing authority. (Punchbowl News, April 11)
  • Through meetings, outreach, and aggressive advocacy efforts, The Roundtable and the real estate industry continue to urge lawmakers to reject a revenue proposal to limit the deductibility of state and local business-related property taxes as part of the tax bill.  The proposal could have a devastating impact on property values, rents, the health of the financial system, local communities, and consumer prices.
  • In addition, members in both chambers continue to raise concerns about repealing clean energy tax credits from the Inflation Reduction Act (IRA) as part of the upcoming budget reconciliation bill. This week, four senators sent a letter to Senate Republican Leader John Thune warning that a full repeal would undermine investment, hurt businesses, and threaten jobs. (Punchbowl News, April 11) (RW, March 14)
  • At our Spring Roundtable Meeting, House Ways and Means Chairman Jason Smith (R-MO) engaged with RER members, acknowledging their concerns about proposals to change the treatment of business SALT and carried interest. He emphasized the importance of using data to inform policy discussions and commended RER for its impactful work educating policymakers on the issues.

As the budget process enters its next phase, RER will continue to advocate for key real estate priorities and inform members on policy updates from Capitol Hill and their impact on the industry. 

Senate Budget Deal Advances with Trump Support, Tax Policy in Focus

Posted on by Trey Jackson

This week saw a major announcement from President Trump on sweeping new tariffs and movement in Congress as the Senate advances a compromise budget resolution, with big implications for tax and spending cuts.

Budget Resolution Moves Forward

  • During his tariff announcement, President Trump announced his “complete and total support” for a compromise budget resolution released on Wednesday. The statement came after Senate Budget Committee Chair Lindsey Graham (R-SC) unveiled the updated resolution, paving the way for a vote later this week. (Punchbowl News, April 3)

  • Trump’s public support for the budget resolution was the result of behind-the-scenes negotiations with Senate leadership to move the reconciliation process forward.
  • Senate Majority Leader John Thune (R-SD) and others in the administration brought the meeting together to alleviate the concerns of skeptical deficit hawks who believed the Senate’s budget resolution didn’t do enough to cut spending. (Punchbowl News, April 3)

  • After receiving assurances from Trump about his support for large-scale deficit reductions, Senators John Kennedy (R-LA) and Ron Johnson (R-WI) seemed to get on board with the compromise budget resolution. With key holdouts resolved, Majority Leader Thune appears to have the votes needed to get the resolution adopted. (CNN, April 2)

  • The budget resolution includes separate spending cut instructions for the House and Senate. While House committees are instructed to find $1.5 trillion in spending cuts, the Senate instructions only call for $4 billion. Senate GOP leaders indicate that they still plan to target $1.5 to $2 trillion in spending cuts, giving them greater flexibility but punting lingering issues down the road. (Politico, April 3)

  • A “vote-a-rama” on the budget resolution is expected to begin Friday evening, with final adoption anticipated early Saturday. (Politico, April 2)

Tax Policy Implications

  • The compromise budget resolution incorporates a “current policy baseline” approach that allows the 2017 tax cuts to be permanently extended without needing to offset roughly $4 trillion in costs.

  • The Senate version also authorizes $1.5 trillion in additional tax relief beyond making the tax cuts permanent, allowing tax writers to include other key provisions that business advocates are asking for.

  • The current policy baseline was another sticking point in the Senate resolution that has been punted to later in the process. Senate GOP leadership has opted to assert that the Budget Committee Chair has the authority to choose the baseline used in reconciliation. (Axios, April 1)

  • While this decision allows the compromise budget resolution to move forward, the parliamentarian could still rule on the issue later on. If the parliamentarian rules against the current policy baseline, it would dramatically change the budget resolution landscape and potentially force the GOP to enact a shorter-term extension of the 2017 tax cuts, rather than making them permanent.

  • The current policy baseline also has political implications. Responding to the Senate resolution, House Budget Committee Chair Jodey Arrington (R-TX) and other House tax writers expressed concern that the Senate budget resolution could add as much as $5.3 trillion to the debt. (Politico, April 2)

  • House Speaker Mike Johnson (R-LA) was more optimistic about the compromise budget resolution and the inclusion of the current policy baseline, saying, “We’re in the consensus-building business here… So we’ll have to socialize this with our members and see. Look, I think there’s a large number of House Republicans who expected that would be the final outcome… so it’s not a big surprise.” (Punchbowl News, April 3)

  • In a conversation with Punchbowl News this week, Chairman of the House Financial Services Committee French Hill (R-AR) emphasized that President Trump and House and Senate GOP leaders are united on the urgency to get the reconciliation package done.

  • Rep. Hill also strongly defended the current tax treatment of carried interest. “It’s not a loophole,” he said, calling it an “important component for long-term finance across the country” for many businesses, including commercial real estate, venture capital and energy. (Punchbowl News, April 3)

Looking Ahead
The coming weeks are a critical time for the administration and congressional leaders on key issues, including trade and tax policy. RER will continue to engage with policymakers to advocate for pro-growth policies that support investment, job creation and healthy real estate markets.

Lawmakers Weigh Tax Priorities as Roundtable Emphasizes Need to Protect Deductibility of Property Taxes

Posted on by Trey Jackson

Congress returned to Capitol Hill this week facing a tight window to deliver on a range of policy priorities ahead of its April recess. As discussions intensify, Roundtable advocacy efforts continue to focus on avoiding harmful limitation on the deductibility of state and local business-related property taxes. (Punchbowl News, March 28)

Tax Talks

  • Congressional Republicans are navigating a range of considerations amid pressure from the White House to enact its tax agenda and from conservatives mindful of the deficit. (WSJ, March 26)
  • If Senate Republicans succeed in using the baseline strategy, it would significantly alter the final instructions for the House and Senate tax committees.
  • Under this approach, extending or making permanent many provisions from the 2017 tax cuts would effectively be cost-free. However, GOP deficit hawks may still need offsets for other elements of the tax package.
  • “Business SALT” and potential restrictions on the deductibility of state and local property taxes as a possible revenue offset for the tax bill. (WSJ, March 25)
  • State and local property taxes represent 40 percent of the operating costs of U.S. commercial real estate, a greater expense than utilities, maintenance and insurance costs combined. This tax change could reverse the benefits of the 2017 Tax Cuts and Jobs Act (TCJA) and Section 199A, potentially raising effective tax rates to 1970s-era levels near 50%. (Roundtable Weekly, Feb. 28; March 14) 
  • RER continues to lead advocacy efforts surrounding business SALT. RER members and staff are actively engaging with Congressional leaders on Capitol Hill, and educating lawmakers on the potentially devastating impacts of the proposals under consideration.
  • Earlier this month, RER and sixteen other national real estate organizations wrote to members of the House Ways and Means and Senate Finance Committees urging them to oppose any proposal that would cap or eliminate the deductibility of state and local business property taxes.  (Roundtable Weekly, March 14) (BisNow, March 13)
  • RER members are proactively contacting congressional offices, reinforcing opposition to any legislation that would restrict or eliminate deductions for state and local business property taxes.
  • All RER members are strongly encouraged to amplify this message to their representatives in Congress. Read more here.

State of Play – Budget

  • Congressional Republicans are grappling with how to pay for President Donald Trump’s multi-trillion-dollar tax-cut and immigration reform agenda. (Reuters, March 27)
  • With GOP lawmakers eager to finalize a budget framework for the planned megabill, House Speaker Mike Johnson (R-LA) and Senate Majority Leader John Thune (R-SD) are signaling that they will move forward on the fiscal blueprint without first resolving major disputes over the offsets needed to extend Trump’ s 2017 Tax Cuts and Jobs Act (TCJA). (Politico, March 26)
  • Meanwhile, the Congressional Budget Office (CBO) has projected that the U.S. government may reach its statutory debt ceiling by August or September unless Congress and the president agree to raise or suspend the borrowing limit.
  • Despite ongoing disagreements, an area of consensus has emerged: Speaker Johnson and Leader Thune are aligning around including a debt limit increase in the budget package—a move Senate Republicans had previously resisted. (Politico, March 26)
  • Failure to act could lead to a default on debt, risking economic stability, market volatility and lower property values. (AP, March 26)

Both chambers are targeting the week of April 7 to finalize the budget resolution, which would enable the reconciliation process needed to advance their legislative agenda in the months ahead.

President Trump Signs Budget Deal That Extends Government Funding Until March 23, Lifts Debt Ceiling for One Year and Sets Two-Year Budget Agreement

Posted on by Trey Jackson

During a week of thousand-point gyrations in the stock market and last-minute congressional votes to keep the government open, President Trump this morning signed a budget deal into law that ended a nine-hour government shutdown.  [Bipartisan Budget Act  legislation (H.R. 1892)]

The budget deal and spending measure – which passed the Senate today just before 2:00 AM, followed by a narrow approval vote in the House about 5:30 AM – includes:

The Congress passed the budget deal and spending measure early on the morning of Feb. 9, hours after the government technically shut down.

  • Another short-term Continuing Resolution funding the government through March 23;

  • An increase in the debt ceiling that is expected to last one year, addressing the matter until well after the mid-term elections;

  • An agreement to increase budget caps – and significantly increase spending – by $320 billion over the next two years, split between defense and non-defense domestic spending;

  • Disaster relief funding and renewal of a slew of expired tax provisions.  (The bill does not address the controversial DACA issue – the status of immigrants brought to the U.S. as children.)

Although the measure includes a clean, one-year retroactive extension of the Section 179D tax deduction for energy efficient buildings through 2017, it does not include any technical corrections to the landmark tax overhaul enacted in December. Those corrections are expected later this year in separate legislation.

Next, President Trump is scheduled to submit the Administration’s 2019 budget proposal as House and Senate appropriators begin work on 12 bills that may fund the government beyond March 23 – until the remainder of FY2018 through September 30.

The Senate Finance Committee released its Summary of the Tax Extenders Agreement explaining the extension of several temporary tax provisions.  The Joint Committee on Taxation issued JCX-4-18, estimating that the tax provisions in the Bipartisan Budget Act of 2018will cost about 17.4 billion dollars over the next decade. 

Other real estate-related tax provisions in the bill extend tax credits for energy-saving improvements to homes, continue the income exclusion when home mortgage debt is forgiven, and extend the individual deduction for home mortgage insurance. 

The National Flood Insurance and EB-5 programs are also extended through March 23, 2018.  This is the 12th short-term, status quo extension of EB-5 since Sept 2015.

Next, President Trump is scheduled to submit the Administration’s 2019 budget proposal on Monday as House and Senate appropriators begin work on 12 bills that may fund the government beyond March 23 – until the remainder of FY2018 through September 30.

Omnibus Spending Bill Delayed as Government Funding Deadline Looms

Posted on by Trey Jackson

Lawmakers struggling over policy and program disagreements related to a $1.2 trillion “omnibus” spending bill have pushed a congressional vote to next week – closer to March 23, when current funding expires.

Lawmakers struggling over policy and program disagreements related to a $1.2 trillion “omnibus” spending bill have pushed a congressional vote to next week – closer to March 23, when current funding expires.

After President Trump signed a budget deal in February that ended a nine-hour government shutdown, a fifth Continuing Resolution is in place that funds the government through next Friday.  House and Senate appropriators have since been working on an all-encompassing omnibus, which would fund government programs through September 30, when the FY2018 budget period ends.  (Roundtable Weekly, Feb. 9)

Of importance to commercial real estate, the National Flood Insurance and EB-5 programs are funded through March 23.  EB-5 is operating under its 12th, short-term, status quo extension since Sept 2015.

Disputes over funding for various programs will delay release of the omnibus spending package text until Sunday night or Monday morning.  That timeline would likely result in a House vote on March 21, leaving only two days for the Senate to vote before current funding expires.  (BNA, March 15)

Senate Majority Whip John Cornyn (R-TX) yesterday noted several programs that he does not expect to be included in the omnibus, including a bill that addresses the future of young undocumented immigrants covered by the Deferred Action on Childhood Arrivals program (DACA).  Cornyn also said a border security plan, including funding for a wall on the Mexican border, is also unlikely to be included in any funding legislation. (BNA, March 15) 

When asked if a sixth continuing resolution would be necessary to avoid a government shutdown beyond March 23, Rep. Mario Diaz-Balart (R-FL.), chairman of the House Appropriations Transportation-HUD Subcommittee, responded, “Oh God, please tell me no. I don’t think so. Maybe I’m just an optimist, but no, I really don’t think so.”  (BNA, March 15)

An omnibus spending package could be the last major bill passed by Congress before the 2018 midterm elections.

The government’s FY2018 budget and its effect on programs affecting commercial real estate will be a focus of The Roundtable’s April 25 Spring Meeting in Washington, DC.

Congress Passes Omnibus $1.3 Trillion Spending Bill Funding Government Through September; Two-Week Congressional Recess Begins

Posted on by Trey Jackson

In a week of intense budget negotiations, a $1.3 trillion dollar “omnibus” spending bill (H.R. 1625) to fund the government through September 30 was introduced Wednesday night to avoid a government shutdown today.  The 2,232-page measure passed both the House and Senate by comfortable margins, and President Trump signed it this afternoon.  (Wall Street Journal, March 23)

As Congress leaves for a two-week recess, the omnibus goes into effect with many non-spending policy provisions and others affecting revenue.

As Congress leaves for a two-week recess, the omnibus goes into effect with many non-spending policy provisions and others affecting revenue. Of interest to real estate:

  • Tax technical corrections positively affecting Foreign Investment in Real Property Tax Act (FIRPTA) provisions; partnership audit reform rules; and an expansion of the low-income housing tax credit.  (Joint Committee on Taxation, Technical Explanation Summary.)

  • The National Flood Insurance Program is decoupled from the omnibus and reauthorized through the end of July – as an incentive for policymakers to pass a longer renewal before their August recess.

  • The EB-5 immigration investment program is extended for six months until Sept. 30 –  the 13th extension since Sept. 2015.

  • The Environmental Protection Agency’s Brownfields program is reauthorized as part of the BUILD Act, which includes an expansion of brownfield eligibility to non-profits; makes brownfield sites acquired prior 2002 eligible; and increases funds for cleanup up to $500K (or $650,000 w/waiver).

  • Funding for Infrastructure – although specific funding for a “Gateway” railway project between New York and New Jersey is not included, the omnibus includes billions from a variety of sources that could be utilized for such a project.  (CNN, March 22)

Prior to congressional passage of the bill, it was reported that measures addressing the internet sales tax and joint employer issues were under consideration for inclusion, yet both did not make it in the final legislative text.  

The repercussions of the omnibus will be discussed during the April 25 Spring Roundtable Policy Meeting in Washington, DC.