Category: Roundtable Weekly

Lawmakers returned to Washington this week for their post-election “lame duck” session, facing a Dec. 7 government funding deadline that threatens a partial government shutdown.

Lawmakers returned to Washington this week for their post-election “lame duck” session, facing a Dec. 7 government funding deadline that threatens a partial government shutdown.

• Seven FY2019 spending bills await congressional action by next Friday to fund the departments of Agriculture, Commerce, Justice, Homeland Security, Interior, State, Transportation and Housing and Urban Development, and several smaller agencies.  If Congress and President Trump do not reach agreement on an appropriations package for the fiscal year, these departments and agencies may be subject to a partial government shutdown or another short-term extension. Several immigration programs, including the EB-5 investment program, also face expiration on Dec. 7.   (USA Today, Nov. 28)  

• A key issue in the funding negotiations is construction of a wall along the U.S.-Mexican border.  President Trump said he would “totally be willing” to shut down the federal government if $5 billion is not approved for the wall by Congress during a Nov. 28 Oval Office interview with Politico.  Senate Minority Leader Chuck Schumer (D-NY) and other Democratic leaders have pledged $1.6 billion for border security.  (The Hill, Nov. 29)

• The lame-duck session could be the final opportunity for Republicans to pass significant funding for the wall, as Democrats will reclaim the House majority in January.   

• A government program scheduled to expire today – the National Flood Insurance Program (NFIP) – was extended yesterday by Congress for the seventh time in 12 months.  The NFIP extension will also expire Dec. 7 unless Congress attaches a longer-term flood insurance extension to a spending bill, or passes another continuing resolution. (BGov, Nov. 30) 

• The Real Estate Roundtable and 14 other industry groups urged Congress in a June 12, 2017 comment letterto reauthorize and reform the NFIP to help protect the nation’s commercial and multifamily business-owners, their properties, residents, and the jobs they create from the financial perils of flooding.  (Roundtable Weekly, Sept. 14, 2018)
  

  The Roundtable is also part of a coalition advocating for the reauthorization of the Brand USA program – a public-private partnership that markets the United States as a travel destination to international travelers.

• The Roundtable is also part of a coalition advocating for the reauthorization of the Brand USA program – a public-private partnership that markets the United States as a travel destination to international travelers.  The Visit U.S. coalition today sent a letter urging Congress to correct a financial provision that puts Brand USA funding at risk. 

• Legislation is needed to ensure that international visitor fees funding the program will not be diverted to the Treasury Department, as currently scheduled. The fee assessed on international travelers coming to the U.S. is matched 1:1 by funds from the private sector travel industry.  The letter states, “Without this funding, private sector partners of Brand USA are limited, and in some cases deterred, from marketing to highly valued international travelers.”  (VisitU.S. Coalition letter, Nov. 30)  

• Brand USA is estimated to have generated international visitor spending since FY2013 that produced $486 million in federal tax revenue, and another $526 million in state and local tax revenue. (Return On Investment Analysis, Oxford Economics)

Lawmakers are scheduled to stay in session until Dec. 14 to close out the 115th Congress.

President Trump today signed a spending measure to fund the government until Dec. 21, buying time for policymakers to negotiate over the key issue of funding a border wall on the Mexican border.  (RollCall, Dec. 7)

The  115th Congress is now scheduled to end on Dec. 21.

• Today was the original deadline for funding the government’s FY2019 budget (through Sept. 30, 2019).  The short-term Continuing Resolution passed by Congress this week accommodated observances in honor of former President George H. W. Bush.  The extension includes funding for the National Flood Insurance and EB-5 investment programs until Dec. 21.
• Policymakers will now focus on an appropriations package affecting several government agencies, including the Department of Homeland Security.  If an agreement on funding is not reached for FY2019, they may pass another short-term extension or face a partial shutdown.
• A key issue in the funding negotiations is construction of a wall along the U.S.-Mexican border.  The president is scheduled to meet with Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Nancy Pelosi (D-CA) on Tuesday about his initial request for at least $5 billion to build the wall.  Trump told a law enforcement conference today, “Congress must fully fund border security in the year-end funding bill.”  (NBC News and Fox News, Dec. 7)
• Schumer said yesterday that a bipartisan Senate plan for $1.6 billion in border security funding does not include money for a wall, adding that the money “can only be used for fencing” and technology security features.  Pelosi, who is likely to become the next speaker of the House, yesterday referred to the construction of a wall as “immoral, ineffective, and expensive.” (AP, Dec. 6)
• Sen. Lindsey Graham (R-S.C.) met with Trump this morning, tweeting that the president “indicated he supports” adding a bipartisan criminal justice reform bill to the year-end spending measure – potentially adding another complicating factor to negotiations. (CNBC)

Separately, a House GOP tax bill introduced last week, which includes tax “extenders” and technical corrections of importance to commercial real estate, faces an uncertain future in the remaining weeks of the lame duck session.  Congressional tax-writers and leaders do not appear to be any closer to an agreement that would include certain tax provisions in the end-of-year spending bill, such as a technical correction related to the depreciation schedule for nonresidential, interior real estate improvements.  (Roundtable Weekly, Nov. 30 and BGov, Dec. 7)

The 115^th Congress is scheduled to end on Dec. 21.

The federal government will partially shutdown unless Washington policymakers can pass a year-end funding bill by Dec. 21.  Negotiations over a spending measure have deadlocked over President Trump’s request of at least $5 billion for construction of a wall on the Mexican border versus Democrats’ offer of approximately $1.3 billion for border security.  (The Hill, Dec. 13)

A meeting between President Trump and Democratic leaders this week resulted in sharp disagreements over funding for a border wall. (Wall Street Journal, Dec. 11)

• A meeting on Tuesday between President Trump and Democratic leaders resulted in sharp disagreements over the wall that played out before the media.  “I am proud to shut down the government for border security,” Mr. Trump told Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Nancy Pelosi (D-CA) in the Oval Office. “I will take the mantle. I will be the one to shut it down,” Trump said. (Wall Street Journal, Dec. 11)
• Both the House and Senate left Washington today with no votes on a funding bill. The Senate returns Monday and the House on Dec. 19, leaving little time to reach a deal.  A possible partial government shutdown of seven agencies, including the Department of Homeland Security (DHS), would furlough hundreds of thousands of workers and cost taxpayers millions. (Politico, Dec. 13)
• A shutdown would temporarily halt DHS operations of the National Flood Insurance and EB-5 investment programs.
• If approximately 25% of the government shuts down, a decision on funding could be pushed until Jan. 3, when Democrats assume the majority in the House. Minority Leader Nancy Pelosi (D-CA) is likely to be elected House Speaker, push for a stopgap Continuing Resolution and re-open the government. The Senate would likely pass such a measure. 

Prospects for Revised Tax Bill in Doubt; Roundtable, Stakeholders Push for Technical Correction to Depreciation Rules  

• A must-pass spending package could be the last opportunity in 2018 for lawmakers to pass other legislation, such as a revised package of tax provisions introduced Monday by House Ways and Means Chairman Kevin Brady (R-TX).  The new measure does not include extensions of temporary tax breaks, which were part of the initial legislation.  (Wall Street Journal, Dec. 11 and Roundtable Weekly, Nov. 30  /  Reference: 253-page text of the revised tax bill)  
  

  The  Roundtable on Dec. 10, 2018 joined more than 260 stakeholders in a letter to congressional leadership urging a correction of the qualified improvement property (QIP) provision.

• Specific provisions affecting real estate in the revised legislation include technical corrections to fix errors in last year’s Tax Cuts and Jobs Act. The bill would: 
• shorten the cost recovery period for qualified improvement property (QIP)—a new category of depreciable property that covers upgrades and improvements to the interior of nonresidential buildings, and
• clarify that the new 20 percent deduction for pass-through business income extends to REIT dividends received by mutual fund shareholders
• The Roundtable on Monday joined more than 260 stakeholders in a letter to congressional leadership urging a correction of the QIP provision.  A drafting error in the 2017 tax overhaul requires taxpayers to depreciate building improvements over 39 years, instead of one year as contemplated under the Act.  This large difference in the after-tax cost of making improvements is causing a delay in store, restaurant and leasehold remodeling projects, as well as causing retailers to decline opportunities to purchase or lease new store locations that would require substantial improvements. (Comment Letter, Dec. 10 and Marketplace, Dec.  12) 
• Key Senators, such as Finance Committee Ranking Member Ron Wyden (D-OR), suggested the revised House bill was unlikely to be included in a final spending agreement, “To me it is really sort of the equivalent of putting up the white flag of surrender on the idea that you’re going to have a bipartisan tax policy.”  (Washington Examiner, Dec. 10)

If Congress does not pass tax legislation by year-end, the incoming Chairman of the House Ways and Means Committee stated that tax extenders will be a priority in the next Congress.  Ranking minority member Richard Neal (D-MA) referred to retroactive renewal of more than 20 extenders when he told Tax Notes on Dec. 12, “We’ll have to wait and see [how many are considered], but we certainly intend to move on them fast.”

The federal government will partially shutdown unless Washington policymakers can pass a year-end funding bill by midnight tonight.  Negotiations over a spending measure have deadlocked over President Trump’s request of at least $5 billion for construction of a wall on the Mexican border.  (The Hill, Dec. 21)

Negotiations over a spending measure have deadlocked over President Trump’s request of at least $5 billion for construction of a wall on the Mexican border.  (The Hill, Dec. 21)

• The Senate passed a seven-week stopgap bill on Wednesday, which President Trump said he would not sign, due to the fact there was no funding for a wall on the southern border. On Thursday, the Republican controlled House passed its own version of a stopgap measure, which would add $5.7 billion for border security and $7.8 billion for disaster relief. (The Hill, Dec. 21)  The Senate is expected to reject the House-passed measure in votes today – leaving the federal government on the precipice of its third shutdown in two years.

• A December 10 meeting between President Trump and Democratic leaders resulted in sharp disagreements over the wall that played out before the media.  “I am proud to shut down the government for border security,” Mr. Trump told Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Nancy Pelosi (D-CA) in the Oval Office. “I will take the mantle. I will be the one to shut it down,” Trump said. (Wall Street Journal, Dec. 11)

• A possible partial government shutdown of seven agencies, including the Department of Homeland Security (DHS), would furlough hundreds of thousands of workers and cost taxpayers millions. 

• A shutdown would temporarily halt DHS operations of the National Flood Insurance and EB-5 investment programs.
  

  The federal government will partially shutdown unless Washington policymakers can pass a year-end funding bill by midnight tonight. (The Hill , Dec. 21)

• If approximately 25% of the government shuts down tonight at midnight, a decision on funding could be pushed until the new Congress is sworn in on January 3 and Democrats assume the majority in the House. Minority Leader Nancy Pelosi (D-CA) is likely to be elected House Speaker, push for a stopgap Continuing Resolution, and seek to re-open the government at that time if it remains closed over the holidays. 

• In other policy news, the House voted 220-183 to advance legislation that would extend tax breaks for biodiesel and correct errors in the TCJA of 2017, including a provision that unintentionally lengthened the cost recovery period for improvements to the interior of nonresidential real estate.  Both the House and Senate could take-up the legislation again after the new Congress convenes in January.  (Bloomberg, Dec. 20)

In addition, after passing the House and Senate with rare bipartisan support earlier in the week, President Trump signed the First Step Act into law this afternoon. The new criminal justice reform legislation gives judges more leeway at sentencing for federal crimes, increases vocational and rehabilitation opportunities for incarcerated individuals to re-enter society, and expands early release programs.  (New York Times, Dec. 18.)

A partial federal government shutdown over the issue of funding for a wall on the Mexican border continued this week after the new 116th Congress was sworn in and Democrats elected Rep. Nancy Pelosi (D-CA) as House Speaker.  

Democrats elected Rep. Nancy Pelosi (D-CA) as House Speaker at the start of the 116th Congress.

• The shutdown began Dec. 21 after negotiations were unable to resolve President Trump’s request of at least $5 billion for construction of a wall versus Democrats’ offer of approximately $1.3 billion for border security.  
• After taking control of the House yesterday with a 235-199 majority (one seat is still contested), Democrats passed legislation to reopen the government.  Their legislative proposals consist of a six-bill spending package (H.R. 21) to fund a number of agencies for the rest of the fiscal year until September 30 – with a continuing resolution (H.J. Res 1) to fund the Department of Homeland Security (DHS).
• Senate Majority Leader Mitch McConnell (R-KT) stated yesterday he will not allow funding legislation on the Senate floor for a vote unless it is supported by President Trump.  (New York Times, Jan. 4)
• Congressional leaders met with President Trump twice this week in attempts to negotiate a spending deal.  After today’s White House meeting, Trump said he “absolutely” told policymakers that the shutdown could last months or years, but that he hopes planned talks this weekend will lead to an agreement.  (BBC News, Jan. 4)
• The impasse has halted operations for about 25% of government agencies, with approximately 380,000 federal employees on furlough and another 420,000 working without pay. The shutdown affects seven agencies, including DHS, which has temporarily halted operations for immigration programs including the EB-5 investment program.

The partial government shutd own began Dec. 21 after negotiations were unable to resolve President Trump’s request of at least $5 billion for construction of a wall versus Democrats’ offer of approximately $1.3 billion for border security.

• The National Flood Insurance Program, administered by the Federal Emergency Management Agency (FEMA), said it would continue to allow sales of new flood insurance policies during the shutdown.  FEMA Administrator Brock Long noted that Congress reauthorized the flood insurance program through May 31, 2019 and Trump signed the legislation (S. 3628) before the shutdown began.  Brock also cited The National Association of Realtors estimate that the inability to sell new flood insurance policies would affect 1,400 home closings each day. (NAR, Dec. 27 and CQ, Dec. 28)
• White House Council of Economic Kevin Hassett said yesterday that the shutdown will cut U.S. economic output by about 0.1 percent every two weeks. “Our estimate is that GDP in the first quarter could go down by about a tenth if this were to resolve in the next few weeks,” Hassett said at the White House. (Bloomberg, Jan. 3)
• Separately, the new Democratic majority in the House has established a Select Committee on the Climate Crisis, which will be chaired by Rep. Kathy Castor (D-FL).  “We must … face the existential threat of our time: the climate crisis,” Pelosi said in her opening address to Congress Thursday. (Politico, Jan. 3) 
• Additionally, the House Energy and Commerce Committee announced this week that climate change would be the subject of its first hearing in 2019.  (Energy and Commerce, Jan. 3)

The effects of the government shutdown and prospects for policymaking in the new divided Congress will be topics for discussion during The Roundtable’s Jan. 29-30 State of the Industry Meeting in Washington, DC.

Nearly a month into the partial government shutdown, the impasse over funding of a border wall on the Mexican border continues with no sign that an agreement between President Trump and Congress is near. (Axios, Jan. 16

White House Council of Economic Advisers Chairman Kevin Hassett this week doubled the estimate of how the government’s partial shutdown is reducing economic growth. The initial cost to the economy, estimated at 0.1 percentage point in growth every two weeks, was revised to 0.13 percentage point every week.  ( Fox  interview , Jan. 15 /Forbes, Jan. 16 / Vox, Jan. 18 )

• White House Council of Economic Advisers Chairman Kevin Hassett this week doubled the estimate of how the government’s partial shutdown is reducing economic growth. The initial cost to the economy, estimated at 0.1 percentage point in growth every two weeks, was revised to 0.13 percentage point every week.  (Forbes, Jan. 16 and Vox, Jan. 18) 
• Another potential impact of the shutdown may affect landlords who rent to the federal government.  According to Bloomberg Government, the General Services Administration (GSA) usually issues the government’s rental obligations, but with furloughed staff unable to process the checks, the payments may stop.  “The GSA leased more than 190 million square feet in nearly 7,000 buildings nationwide at the start of its 2018 fiscal year, representing roughly $5.6 billion in annual rent payments,” BGov reported Jan. 15. The GSA states it “is aware of concerns from the Lessor community regarding GSA’s ability to make timely rent payments,” and “is diligently exploring all available options.”   
• Federal Reserve Chairman Jerome Powell said last week that if the shutdown is prolonged, it would start to noticeably affect the economy.  “If we have an extended shutdown, I do think that would show up in the data pretty clear.”  Powell added that the full economic impact of closed government agencies is difficult to track because data usually provided by the Commerce Department is not currently available, due to the shutdown.  (Economic Club of Washington  video interview at 13:30 and The Hill, Jan. 10) 
• The results of a Federal Reserve survey of the 12 regional Fed banks through Jan. 7 known as “the beige book” were released this week, showing a generally positive picture for the U.S. economy but revealing an undercurrent of worry.  (WSJ, Jan. 16)  

The Fed’ s  “ beige book ” shows a generally positive picture for the U.S. economy but reveals an undercurrent of worry. (WSJ, Jan. 16)

• According to the Fed report, “Outlooks generally remained positive, but many Districts reported that contacts had become less optimistic in response to increased financial market volatility, rising short-term interest rates, falling energy prices, and elevated trade and political uncertainty.” 
• The report adds that “A number of Districts reported rising home prices, while prices for commercial and industrial space either increased or were flat” while noting that U.S. labor markets were shown to have tightened as businesses struggled to find workers at any skill level. (Reuters, Jan. 16) 

The Fed’s Open Market Committee will meet next on Jan. 29-30, the same time as The Roundtable’s State of the Industry Meeting in Washington.