Category: News

Top U.S. policymakers and industry leaders met this week for The Roundtable’s State of the Industry (SOI) Meeting in Washington, DC to discuss policy issues of compelling interest to CRE.

Launching the SOI meeting on Wednesday, Roundtable Chair William C. Rudin (  Rudin Management Company, Inc.  ), right, and Roundtable President and CEO Jeffrey DeBoer, left,  noted how Roundtable efforts are the result of research and analysis to find correct answers that benefit economic growth and job creation.

The Roundtable also issued its 2018 National Policy Agenda: Building For The Future. Specific issues included in the Policy Agenda were identified after a comprehensive, annual membership survey; frequent meetings held by The Roundtable’s policy advisory committees (see below); and participation by The Roundtable’s Board of Directors. 

Launching the SOI meeting on Wednesday, Roundtable Chair William C. Rudin (Rudin Management Company, Inc.) noted how Roundtable efforts are the result of research and analysis to find correct answers that benefit economic growth and job creation.  Rudin also said that the organization consistently communicates positions to policymakers that illustrate how healthy real estate markets are intertwined with the entire economy.  This approach – “analysis first, followed by advocacy” – will continue to be the model for The Roundtable through 2018 and beyond, Rudin commented. 

Illustrating how The Roundtable relies on member participation, he commented on the organization’s successful 2017 policy year regarding tax policy, sustainability and other efforts: “This past year we had great participation from Roundtable members who traveled to Washington when needed to personally meet with policymakers and discuss the obvious, and sometimes not so obvious, consequences of a policy decision.”   

He added, “We testified, wrote comment letters, led industry coalitions, submitted economic analysis, organized targeted meetings, and continued to brand The Roundtable as a trusted voice on national policy issues.” 

Illustrating how The Roundtable relies on member participation, Rudin spoke about the organization’s successful 2017 policy year regarding tax policy, sustainability and other efforts to the SOI audience.

Rudin also outlined various policy initiatives The Roundtable will focus on in the upcoming fiscal year with the Trump Administration and Congress, including implementation of the new tax law; financial regulatory issues; internet sales tax; infrastructure; attracting overseas tourists through the “Visit U.S.” coalition; and high performance buildings — all vital to spurring job creation and sustaining economic growth. 

Roundtable President and CEO Jeffrey DeBoer then offered an overview of the recent changes in tax law, along with upcoming issues in play.  He also noted the vital role of The Roundtable’s 17 national real estate trade association partners in presenting a unified voice on issues to policymakers in Washington. 

Policy Issues and Meeting Speakers  

Five U.S. Senators were among the featured SOI guests, which included: 

Senate Minority Leader Chuck Schumer (D-NY) engaged Roundtable members on the need for a massive plan to revamp the nation’s airports, bridges, roads, seaports, broadband and other critical infrastructure.

• Senate Minority Leader Chuck Schumer (D-NY) engaged Roundtable members on the need for a massive plan to revamp the nation’s airports, bridges, roads, seaports, broadband and other critical infrastructure. Sen. Schumer emphasized how critical infrastructure improvements are to commercial real estate, job creation and the national economy.  He also spoke about the need to pass the Marketplace Fairness Act to bolster states’ collection of internet sales taxes, which could be used to assist state funding of infrastructure improvements. 

• Sen. Mark Warner (D-VA) emphasized the need for bipartisanship in Congress in light of the recent tax legislation passed by Republicans. He noted that bipartisan efforts on issues such as GSE and housing finance reform could provide relief to the housing affordability crisis, while encouraging capital flows and competition.  Sen. Warner said that regulatory relief on Dodd-Frank was also possible in upcoming months in Congress.  

• Sen. Ron Wyden (D-OR), ranking member of the Senate Finance Committee, spoke about the need for a bipartisan effort to address low income housing needs. Sen. Wyden described the “Build America Bonds” program, which he helped create, as an example of successful legislation that could spur infrastructure investment through innovative tax financing. Temporarily authorized in 2009 and now expired, 181 billion dollars in Build America Bonds were issued in the years immediately following the financial crisis. 
  

  Sen. Ron Wyden (D-OR), left, ranking member of the Senate Finance Committee, spoke about the need for a bipartisan effort to address low income housing needs.

• Sen. Ron Johnson (R-WI)  spoke with Roundtable members on the need for more deregulation and pro-growth policies.  He also described his central role in ensuring that tax reform provided relief for all job-creating businesses, including pass-throughs.  As the chairman of the Senate Homeland Security and Governmental Affairs Committee, Rep. Johnson also discussed the increasing need for cybersecurity in an age where future geopolitical conflicts will increasingly be conducted in cyberspace. 

• Sen. Doug Jones (D-AL)  commented about his recent election, appointment to the Senate Banking Committee and the need for broadband internet access in rural areas as part of an infrastructure program.  Serving his first month in Congress, Sen. Jones noted he is receptive to all approaches to policy that encourage economic growth and looks forward to working with The Roundtable. 

• Jim VandeHei — the co-founder of and CEO of Axios, gave a candid view of upcoming mid-term elections; prospects of the House flipping to Democrat majority; and the news dissemination role of large tech companies like FaceBook in past and future elections. 

• Bob Schieffer —  the former Face the Nation moderator participated in a discussion with incoming Roundtable Chair Deb Cafaro (Chairman & CEO, Ventas, Inc.) about the emerging era of “fake news” within a media landscape of fractured outlets and a deluge of partisan information.

Roundtable Policy Committees

In conjunction with the SOI Meeting, The Roundtable’s Policy Advisory Committees met on Jan. 24-25, discussing policy issues in detail with high-level congressional and agency staff.

In the wake of the most significant tax measures passed in 31 years, TPAC attracted a large audience to address the details of what lay ahead in implementing the new tax law.

• Research and Real Estate Capital Policy Advisory Committee (RECPAC) 
  During this joint committee meeting, two panels of industry experts addressed the current real estate market cycle and provided an update on the state of real estate capital and debt markets.  Participants also discussed High Volatility Commercial Real Estate (HVCRE) and the Roundtable’s response to the recently proposed High Volatility Acquisition, Development or Construction Loans (HVADC) rule, as well as potential GSE reform.
• Tax Policy Advisory Committee (TPAC) 
  In the wake of the most significant tax measures passed in 31 years, TPAC attracted a large audience to address the details of what lay ahead in implementing the new tax law.  A panel of experts from the congressional tax-writing committees described the evolution of the key partnership and real estate-related provisions. Following presentations by TPAC members, Dana Trier, Deputy Assistant Secretary of Treasury for Tax Policy, outlined the rulemaking process going forward and provided insight on how Treasury may resolve certain open questions important to real estate investment. 
  

  SPAC hosted Dr. Joseph Allen, Assistant Professor, Harvard T.H. Chan School of Public Health, right and John Mandyck, Chief Sustainability Officer, United Technologies Corporation, left, who presented new research on the health co-benefits of Green Buildings.

• Sustainability Policy Advisory Committee (SPAC) 
  In addition to other guests, SPAC heard updates from Environmental Protection Agency (EPA) staff on the ENERGY STAR building- and tenant-level recognition programs, which recognizes leased spaces for high-performance design, construction and energy efficiency in CRE assets. 
• Homeland Security Task Force meeting (HSTF) and Risk Management Working Group (RMWG) 
  Representatives of the FBI briefed the Joint Meeting on the current threat picture and discussed psychological profiles of the recent homegrown violent extremists (HVEs).  The Task Force was also briefed on current cyber threat picture and how businesses should be addressing this risk.

Next on The Roundtable’s FY2018 meeting calendar is the Spring Roundtable Meeting on April 25 at The Newseum in Washington, DC.  This meeting will be restricted to Roundtable-level members only.

Without a last-minute funding deal before midnight tonight, much of the federal government will shut down on the one-year anniversary of President Trump’s inauguration. The budget affects issues of importance to commercial real estate such as the National Flood Insurance and  EB-5 foreign investment programs.

In an effort to identify temporary or immediate guidance that would provide a boost to economic growth and jobs, Real Estate Roundtable President & CEO Jeffrey DeBoer yesterday wrote to Treasury Secretary Mnuchin, offering several suggestions aimed at ensuring the long-term success of the Tax Cuts and Jobs Act (TCJA).  [Roundtable Letter, Jan. 18]

Despite White House talks today between Minority Leader Chuck Schumer (D-NY) and President Trump, disagreements on immigration policies such as the Deferred Action for Childhood Arrivals (DACA, or “Dreamers”) program threaten to scuttle a possible Senate vote on a government funding bill.  If a deal is reached, the House is prepared to act again – after passing a fourth “Continuing Resolution” (CR) in FY2018 last night, which would extend government funding through Feb. 15. 

The budget battle comes on the heels of last December’s enactment of the largest overhaul of the tax code in 31 years. As businesses and individuals adjust to the new tax law’s various provisions, it is expected that the IRS will issue guidance on technical questions affecting commercial real estate and other industries.  

In an effort to identify temporary or immediate guidance that would provide a boost to economic growth and jobs, Real Estate Roundtable President & CEO Jeffrey DeBoer yesterday wrote to Treasury Secretary Mnuchin, offering several suggestions aimed at ensuring the long-term success of the Tax Cuts and Jobs Act (TCJA).  [Roundtable Letter, Jan. 18]

The Jan. 18 Roundtable letter is based on input received from real estate leaders across the country, who share the goals of avoiding economic disruptions and reducing inefficient business restructuring or inactivity pending the issuance of final rules.  

The Roundtable letter identifies several areas where rulemaking would reduce uncertainty and  facilitate continued investment, including: 

• the scope of the real estate exception to the new limitation on business interest deductibility;
• the requirements that apply when calculating a taxpayer’s eligibility for the new 20% deduction for pass-through business income; and 
• the applicable cost recovery periods under the new tax law.    

The letter describes each issue and suggests clarifications that would be useful, in the short term, to ensure the new tax law spurs investment, growth and job creation. 

In conjunction with next week’s Roundtable State of the Industry Meeting in Washington, DC, the Tax Policy Advisory Committee (TPAC) will analyze these areas in detail.  Additionally, The Roundtable’s business meeting will feature key congressional leaders, including Senate Minority Leader Schumer, who will engage attendees in a variety of policy discussions, including the current budget situation.

House Republicans this week said efforts on a two-year budget deal to fund government programs and agencies are progressing as the current, short-term government funding extension is set to expire on Jan. 19. 

Consensus on outstanding policy disagreements did not emerge this week, despite a bipartisan meeting at the White House on Tuesday between President Trump and congressional leaders.  (  White House video  , Jan. 9)

Congress may pass a fourth “Continuing Resolution” (CR) for FY2018 to fund the government until mid-February and buy time to address spending limits on military and nondefense programs – including immigration policies such as border security and the Deferred Action for Childhood Arrivals (DACA, or “Dreamers”) program. 

The budget affects other issues of importance to CRE such as the National Flood Insurance and  EB-5 foreign investment programs.  If an agreement among policymakers is not forged next week and another CR cannot be passed, the government will shut-down. 

House Minority Leader Nancy Pelosi (D-CA) told reporters yesterday that a negotiated solution on both spending caps and Dreamers is uncertain. “There is no point in having another CR unless we have an agreement on DACA and funding, disaster aid, a number of issues that have to be dealt with,” Pelosi said.  

House Majority Leader Kevin McCarthy (R-CA) this week said, “I believe we can get to a solution here in the next day or two so we can move forward.  If we’re able to have that budget agreement, we’ll need some time for appropriators to do their work, so we’d have a continuing resolution.” (CQ, Jan. 11) 

Consensus on outstanding policy disagreements did not emerge this week, despite a bipartisan meeting at the White House on Tuesday between President Trump and congressional leaders.  (White House video, Jan. 9)  

Other issues under discussion include the fate of a bill introduced by Senate Finance Committee Chairman Orrin Hatch (R-UT) late last year that would extend various expired energy and other temporary tax provisions. (Wall Street Journal, Dec. 21, 2017) 

A separate tax “technical corrections” bill to address gaps and inconsistencies in last year’s landmark Tax Cuts and Jobs Acts is expected this quarter.

House Ways and Means Chairman Kevin Brady (R-TX) said this week that several extenders may be included in an upcoming CR. “I think it’s important for Democrats and Republicans to really come together on a lot of key issues … I’m hopeful they all stay at the table and bring us either in one or two steps what we need to do,” Brady said. 

It is unclear whether Senate Majority Leader Mitch McConnell (R-KY), with only a slim one-vote majority in the chamber, will be able to attract enough votes to pass a budget resolution. 

A separate tax “technical corrections” bill to address gaps and inconsistencies in last year’s landmark Tax Cuts and Jobs Acts is also expected this quarter.  Republicans would need to attract Democratic votes to reach a 60-vote threshold to pass another tax measure. (Roundtable Weekly, Jan. 5) 

The Roundtable and its Tax Policy Advisory Committee will discuss these issues in detail during The Roundtable’s Jan. 24-25 State of the Industry Meeting in Washington. Among the prominent policymakers who will engage Roundtable members during the business meeting is Senate Finance Committee Ranking Member Ron Wyden (D-OR) and the Treasury Department’s Deputy Assistant Secretary for Tax Policy Dana Trier.

New partnership audit rules will allow real estate investors to continue using tiered partnership structures without the risk of a new entity-level tax on the partnership. 

Proposed Treasury regulations published on Dec. 19 end the two-year uncertainty over whether new partnership audit rules would create a significant tax liability for investors in real estate partnerships.  [  link to regulations  ]

Proposed Treasury regulations published on Dec. 19 end the two-year uncertainty over whether new partnership audit rules would create a significant tax liability for investors in real estate partnerships.  At issue was the question of whether the IRS could require partnerships to pay taxes that are appropriately owed by its individual partners.  The tax code has long recognized that partnerships are “pass-through” entities, and that partners in partnerships are only subject to tax on their share of the partnership’s income.  But under the new partnership audit reform law, some argued that the IRS could impose an entity-level tax burden in certain cases. 

The Treasury regulations clarify that tiered partnerships will be permitted to use the “push-out” method, in which a partnership is relieved of the entity-level tax after an audit as long as it timely transmits revised K-1 tax statements to its partners, including other partnerships.  [link to regulations] [IRS Guidance on Partnership Audit Regime Eases Some Concerns, Accounting Today (Dec. 26, 2017)] 

Real Estate Roundtable Tax Policy Advisory Committee (TPAC) Member Donald Susswein testified specifically on this issue on behalf of The Roundtable at a September IRS hearing.  At the hearing, Susswein stated that, “the most urgent thing is that prospective investors know that they’re only going to be subject to tax on their own tax liability, correctly determined.”  He further testified that, “In order to ensure that this new law does not create a hindrance on the economy, it is very important to reassure investors that there is going to be a push-out method for tiered partnerships.  And that can be done now, in 2017, even if other aspects of the regulations are reserved.”  [Roundtable Weekly, Sept. 22, 2017)  

Real Estate Roundtable Tax Policy Advisory Committee (TPAC) Member Donald Susswein, left, testified on behalf of The Roundtable about the new partnership audit rules at a Sept. 2017 IRS hearing.

Congress enacted new rules for auditing partnerships and collecting partnership tax adjustments in the Bipartisan Budget Act of 2015  (BBA).  An early version of the legislation would have shifted partnership tax liability to the entity level and imposed joint and several liability on individual partners and the partnership for the full amount owed.  

The Roundtable successfully argued, at the time, that entity level taxation of partnerships would disrupt capital formation and discourage business activity, ultimately hurting job creation and economic growth.  The Roundtable was heavily involved in developing the final BBA approach, which allows partnerships to “push out” tax adjustments through partnerships to the appropriate partner.  The legislation was silent, however, on how the rules would apply to tiered partnerships.  

Although enacted in late 2015, the new partnership audit rules will only take effect for audits of 2018 and later years.  The audits themselves are unlikely to start until 2019 or 2020.  Clarity on the application of the new rules for tiered partnerships is important, however, because of the impact on real estate investor decisions and partnership formations.