News Type: Roundtable Weekly

RER President and CEO Jeffrey DeBoer Recognized with Commercial Property Executive’s Lifetime Achievement Award

Posted on by Abigail Grenadier
Roundtable President and CEO Jeffrey DeBoer

A “Lifetime Achievement Award” from the national publication Commercial Property Executive recognized the accomplishments of Roundtable President and CEO Jeffrey DeBoer, who spoke about current policy challenges facing the industry, The Roundtable’s evolution, and the industry’s historical effectiveness in Washington. (Watch the Jan. 18 webcast | Read DeBoer’s written comments | CPE article, Jan. 19)

  • DeBoer noted that real estate is entering a period of increased national public policy risks, which include issues such as liquidity, energy and resiliency, tax policy, and more.  
  • DeBoer stated, “[The Roundtable’s] job is to focus on these policy risks, gather the facts, prepare the analysis, develop sound messages, and fine-tune our messages and our message delivery system.”
  • DeBoer added, “It’s very important that everyone in the industry recognize that to ignore Washington in the coming years is to increase business risk.”

Current and upcoming challenges facing the industry will be the focus of The Roundtable’s Jan. 23-24 all-member State of the Industry Meeting in Washington, DC.

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Building Emissions Policies Picking Up Steam in 2024

Posted on by Abigail Grenadier

A confluence of mandatory rules and voluntary guidelines pertaining to real estate’s climate impacts—including a first-ever U.S. definition for the term Zero Emissions Building (“ZEB”) and an imminent Securities and Exchange Commission (SEC) greenhouse gas disclosure rule—will be a key focus of policy makers in 2024.

ZEB Definition

  • On Jan. 9, GlobeSt reported that The Roundtable supports the direction of the Biden administration’s recently released voluntary ZEB draft definition pertinent to private sector existing buildings and new construction. (Roundtable Weekly, Jan. 5)
  • The ZEB definition proposes voluntary criteria for buildings to be highly energy efficient and powered solely by clean energy sources to attain zero emissions status.

  • The Roundtable’s Sustainability Policy Advisory Committee (SPAC) is working on comments (due Feb. 5) in response to the Energy Department’s draft.

SEC & Scope 3

  • The SEC is expected to release its long-anticipated climate risk disclosure rule this spring. (Roundtable Weekly, March 10, 2023) On Jan. 11, Bisnow quoted Roundtable Senior Vice President and Counsel Duane Desiderio about the SEC’s impending rule and its impact on CRE and other industries. 
  • Desiderio explained to Bisnow, “Let’s hope the SEC delivers some workable rules and brings rationality to this space, especially regarding Scope 3 indirect emissions” that cover sources in a company’s supply chain beyond its immediate control. Desiderio added, “The market is certainly moving in the direction of the SEC rule.” (RER Fact Sheets: SEC’s Proposed Rule and California’s Climate Disclosure bills)

179D & BPS

  • Another federal rule expected in the coming weeks concerns the section 179D tax deduction for energy efficient buildings, substantially revamped by the Inflation Reduction Act (IRA). (Roundtable Weekly, Dec. 1).The Internal Revenue Service will propose a regulation for comment that addresses how existing building retrofits may qualify for this incentive.
  • Axios (Jan. 9) reported this week about trends at the local level to enact building performance standards (BPS) such as LL 97 in New York City. While Congress has not granted authority for a national emissions mandate on buildings, more cities and states are expected to run with these efforts in 2024. (Roundtable Weekly, Sept. 15).
  • A report from the Rhodium Group this week shows U.S. GHG emissions decreased nearly 2 percent year-on-year in 2023. The report also notes that emissions from commercial and residential buildings dropped by 4 percent, which the researchers attributed primarily to a mild winter. (PoliticoPro and The Hill, Jan. 10)  

SCOTUS to Consider Federal Agency “Deference”

The Supreme Court
  • A wild card in the effectiveness and durability of federal regulations—not just in the climate arena, but from any U.S. agency—will be at the fore this spring when SCOTUS renders a decision in Loper Bright Enterprises v. Raimondo.
  • Loper will consider whether an administrative law doctrine from 1984 known as “Chevron deference,” which grants wide latitude to federal agencies when crafting rules to implement laws passed by Congress, should be overruled. (SCOTUS Blog, May 1, 2023)
  • The Department of Commerce stated in their brief that overruling Chevron “would be a convulsive shock to the legal system.” Oral argument will take place next Wednesday, with a decision expected by early summer. (SCOTUS Blog, Jan. 8, 2024)

Officials from the White House, the Environmental Protection Agency, the Energy Department and leading non-governmental organizations will address issues at the nexus of buildings and climate policy on January 24 at the Roundtable’s all-member 2024 State of the Industry Meeting.

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Congress Struggles to Assemble Stopgap Funding Measure as Policymakers Negotiate Elements of Potential Tax Package

Posted on by Abigail Grenadier

House and Senate lawmakers are discussing a short-term stopgap measure aimed at avoiding government shutdown deadlines on Jan. 19 and Feb. 2, which would also buy time to negotiate additional funding through the end of the fiscal year on Sept. 30. Meanwhile, with tax filing season slated to begin Jan. 29, congressional tax writers reported making progress this week on a potential tax package that includes measures on business interest deductibility, bonus depreciation, and the child tax credit. (CQ | PoliticoPro | TaxNotes, Jan. 11)

Funding Challenge

  • Sen. John Thune (R-SD), the second-ranking Republican in the Senate, said on Tuesday that a stopgap bill with funding until March might be necessary. “What that looks like next week, and where it originates, House or Senate, remains to be seen.” Thune said. (Roll Call, Jan. 9 and PunchBowl News, Jan. 10)
  • Sen. Majority Leader Chuck Schumer (D-NY) announced yesterday that the Senate will consider a “continuing resolution” to keep the government open. “A shutdown is looming over us, starting on Jan. 19, about a week away. Unfortunately, it has become crystal clear that it will take more than a week to finish the appropriations process.” (CBS News and CQ, Jan. 11)
  • In the House, Speaker Mike Johnson (R-LA) is struggling to obtain the approval of conservative Republicans on a spending agreement announced on Sunday for a $1.66 trillion spending plan for the federal government. (The Hill, Jan. 11 and AP, Jan. 8))
  • Republicans currently hold a 220-seat majority in the House while Democrats control 213, which means Johnson can afford to lose only three votes in his caucus for the GOP to pass legislation in the lower chamber by party-line vote. (AP, Jan 11 | CNN, Jan. 9 | AlterNet, Jan. 2)

Tax Package Negotiations

  • On Wednesday, Senate Finance Committee Chairman Ron Wyden (D-OR) and House Ways and Means Committee Chairman Jason Smith (R-MO), above, presented their members with an outline of a potential, three-year $70 billion tax package. 
  • Disagreements continue over the scope of a potential child tax credit and low-income housing tax credit in exchange for partial restorations of business tax credits such as business interest deductibility and bonus depreciation. (MarketWatch and PunchBowl, Jan. 11 | PoliticoPro and Wall Street Journal, Jan. 10)
  • Issues that remain under consideration include a Roundtable-supported expansion of the low-income housing tax credit and the deductibility of state and local taxes (SALT). Sen. Wyden and senior congressional staff will discuss tax legislation with Roundtable members during The Roundtable’s all-member 2024 State of the Industry Meeting on Jan. 23-24.

Preview of Coming Tax Battles

PWC 2024 Tax Policy Outlook figure 8
  • Current discussions among congressional tax negotiators are a precursor for a much larger challenge next year, when 23 different provisions in the 2017 Tax Cuts and Jobs Act (TCJA) will change or expire at the end of 2025, including the deduction for pass-through business income and the cap on the SALT deduction. (Roundtable Weekly, May 26)
  • PWC emphasized the stakes in next year’s tax negotiations in its “2024 Tax Policy Outlook” released yesterday. PwC’s National Tax Services Co-Leader Rohit Kumar told PoliticoPro that the current tax package under consideration would amount to only a “rounding error” when compared to the value of all the TCJA provisions. Today’s Wall Street Journal estimated there are $6 trillion in taxes at stake in this year’s elections.
  • Policymakers’ efforts to pass government funding and negotiate a tax package come as office vacancies hit a record high in the fourth quarter of last year, according to a Moody’s Analytics released Jan. 8.

The Moody’s report shows the national office vacancy rate rose 40 bps to a record-breaking 19.6 percent. The new record shatters the previous rate of 19.3% set twice previously—and reflects changing trends in business needs and the recent shift towards in remote work arrangements. (Wall Street Journal and ConnectCRE, Jan. 8)

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RER President and CEO Jeffrey DeBoer to Receive Commercial Property Executive’s Lifetime Achievement Award

Posted on by Abigail Grenadier
Jeffrey DeBoer, President and CEO of The Real Estate Roundtable

Real Estate Roundtable President and CEO Jeffrey DeBoer, above, will receive Commercial Property Executive’s Lifetime Achievement Award during CPE’s virtual 2023 Influence Awards on Thursday, Jan. 18 at 1 pm ET, when he will deliver the keynote address. (Register here for the event)

As the founding President and CEO of The Real Estate Roundtable and in previous Washington-based positions, DeBoer has been at the forefront of national policy affecting the real estate industry for the past 40 years.

The prominent Capitol Hill publication, The Hill recently recognized DeBoer as one of the “Top Lobbyists” in Washington, DC for 2023. This was the sixth consecutive year DeBoer has been included in the list. (Roundtable Weekly, Dec. 8)

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Congress Faces Shutdown Deadlines as Domestic Funding and Foreign Aid Priorities Dominate Early 2024 Agenda

Posted on by Abigail Grenadier

Congress faces a looming set of government shutdown deadlines early in the New Year as pressure builds on lawmakers to balance government funding with increased emergency aid requests for the southern border, Ukraine, and Israel. A stopgap bill passed late last year established the first funding deadline on Jan. 19, which could shutter parts of the government—while the second deadline on Feb. 2 could bring a total shutdown, including military operations. (Punchbowl News, Jan. 5 | The Hill, Jan. 1 | Politico, Jan. 2 and Dec. 28)

Tax Legislation

  • Congressional focus on immediate funding priorities adds a degree of uncertainty to an additional tax package that may seek to hitch a ride on any new spending bill early in the year. (Tax Notes and Politico, Jan. 2)
  • Recent discussions between Senate and House tax writers have focused on a package in the $90-100 billion range that would include measures on business interest deductibility, bonus depreciation, and an increase in the child tax credit for low-income families. (Roundtable Weekly, Nov. 17)
  • Senate Finance Committee Chair Ron Wyden (D-OR) is scheduled to discuss funding priorities and tax issues during The Roundtable’s all-member 2024 State of the Industry Meeting on Jan. 23. Additionally, senior congressional staff from both Senate Finance and the House Ways and Means Committees will discuss the outlook for tax, trade, and other economic legislation in 2024 and beyond with Roundtable members.

Congressional Review Act

  • On the regulatory front, the Congressional Review Act (CRA) is a tool a new Congress can use to overturn certain federal agency rules completed during the last 60 session days of the previous Congress. This “lookback” threat of CRA reversal may come to fruition if Republicans win control of Congress and the White House in the November elections. (PoliticoPro, Jan. 2 and Congressional Research Service.)

A CRA initiative could impact Biden administration regulations completed this summer, but an exact date for when new rules would be clear of the CRA “lookback” is unknown at this time. (PoliticoPro, Jan. 2)

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Biden Administration Requests Comments on Draft Definition for “Zero Emissions Buildings”

Posted on by Abigail Grenadier

The Biden administration on Wednesday issued a draft definition for the term “Zero Emissions Buildings.” The voluntary guideline would apply to non-federal, existing buildings and new construction. The U.S. Department of Energy (DOE) requested comments by Feb. 5 from industry and other stakeholders about Part 1 of the draft “ZEB” language, which is focused on “zero operating emissions.” (DOE announcement | National Definition Draft Criteria | Comments Form)

Draft Criteria

  • An eventual, final ZEB definition would be the first federal government guideline providing voluntary criteria for buildings that aspire to zero emissions status. DOE’s proposed draft defines a zero emissions building through three (3) criteria:
    1. Highly energy efficient
    2. Free of on-site emissions from energy use, and
    3. Powered solely from clean energy
  • DOE will hold two public listening sessions on the draft definition. Registration is capped at the first 100 attendees:
    1. Thursday, January 11, 2024 @ 10 a.m. ET – Register
    2. Tuesday, January 30, 2024 @ 10:30 a.m. ET – Register

National ZEB Definition

  • RER plans to submit comments about the draft proposal. A federal definition for ZEB could bring much-needed consistency to help CRE owners and investors establish long-term emissions goals for buildings. (Roundtable Weekly, Sept. 29, 2023)
  • The Roundtable and a coalition of real estate organizations sent a Sept. 14 letter to US-EPA supporting development of standard methods and metrics for buildings and tenants to quantify their emissions.
  • Federal standards, definitions, and tools “are the North Star though which local governments can inform their law-making, and this helps bring some sense and order to the otherwise conflicting patchwork of climate laws and frameworks developed by states, cities, and NGOs,” said The Roundtable’s Sustainability Policy Advisory Committee (SPAC) Chair Tony Malkin (Chairman, President, and CEO, Empire State Realty Trust). (Roundtable Weekly, Sept. 15)
  • Roundtable Senior VP and Counsel Duane Desiderio was quoted on Sept. 28 in the Washington Post about how CRE companies may welcome the idea of a single federal standard. “A workable, usable federal definition of zero-emission buildings can bring some desperately needed uniformity and consistency to a chaotic regulatory landscape,” Desiderio said. (Roundtable Weekly, Sept. 15)

Executive branch officials from the White House, federal agencies, and leading non-governmental organizations will discuss the national ZEB definition on Jan. 24 during sessions on sustainability issues at The Roundtable’s all-member 2024 State of the Industry Meeting.

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FSOC Sees CRE Among Risks to U.S. Economy in 2024

Posted on by Abigail Grenadier

Last week, the Financial Stability Oversight Council (FSOC) released its 2023 Annual Report, identifying commercial real estate among the major financial risks to the U.S. economy in 2024. (FSOC 2023 Annual Report).

Report Findings

  • Developed by the FSOC, the report reviews financial market developments, describes emerging threats to U.S. financial stability, identifies vulnerabilities in the financial system, and makes recommendations to mitigate threats and vulnerabilities.
  • Citing the almost $6 trillion of commercial real estate loans outstanding in the second quarter of 2023, roughly half of which are held by U.S. banks, the report raises concerns about  “a substantial volume” of these loans that are set to mature in the next few years. (Marketwatch, Dec. 14)
  • The report states, “Elevated interest rates, high costs, and potential structural changes in demand for CRE have heightened concerns about CRE. Maturing loans and expiring leases amid weak demand for office space have the potential to strain office sector conditions further, which could cause stress to spread beyond this segment of the CRE market.”
  • The report also cites the July 2023 policy statement by the banking agencies on Prudent Commercial Real Estate Loan Accommodations and Workouts, as requested in the Roundtable’s March comment letter, and notes that accommodations and workouts are often in the best interest of borrowers and lenders.
  • The FSOC recommends that supervisors, financial institutions, and investors continue to monitor CRE exposures and concentrations closely and track market conditions. (U.S. Department of Treasury Press Release, Dec. 14)

Looking Ahead

  • In the op-ed, Rodgers stated, “To help rebalance these maturing loans, it is important to advance measures that will encourage additional capital formation. To that end, it is essential to bring more foreign capital into U.S. real estate by lifting legal barriers to investment, as well as to repeal or reform the archaic Foreign Investment in Real Property Tax Act (FIRPTA). Importantly, policymakers must not hike the tax rate on capital gains, end carried interest, or alter the 1031 like-kind exchange provisions.” (ULI Op-ed Dec. 18)
  • The paper also cited that around one-third of all loans, and the majority of office loans, may encounter substantial cash flow problems and refinancing challenges.
  • RER board member Scott Rechler (RXR) was quoted in the Wall Street Journal this week discussing the outlook for 2024. “In 2024, it’s game time. Owners and lenders are going to have to come to terms as to where values are, where debt needs to be, and right-sizing capital structures for these buildings to be successful.”

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will discuss many of these issues at our State of the Industry Meeting on January 23, 2024.

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Roundup: Lawmakers Seek Action on Affordable Housing Incentives, Senators Push Treasury for EV Recharging Station Guidance, and Joint Tax Committee Releases Long-Awaited “Bluebook”

Posted on by Abigail Grenadier

House Ways and Means Committee members sent a bipartisan letter to House Leadership last Friday urging consideration of the Affordable Housing Credit Improvement Act (H.R. 3238) in any potential tax legislation brought to the floor in 2024. (Letter, Dec. 15)

AHCIA Provisions

  • Since the introduction of H.R. 3238 in May, the bill has garnered strong bipartisan support with 200 cosponsors—100 Republicans and 100 Democrats. (summary of AHCIA)
  • Representatives Darin LaHood (R-IL), Suzan DelBene (D-WA) and others wrote to House leadership urging inclusion of two key changes to the low-income housing tax credit (LIHTC) in any tax legislation that emerges (Tax Notes, Dec. 15):
  • Restoring the 12.5% increase in state allocation of housing credits that expired at the end of 2021, and
  • Lowering the threshold of private activity bond financing (currently 50%) that a project must meet in order to qualify for the maximum amount of 4% housing credits. 
  • The competitive and over-subscribed LIHTC program is a critical federal tool for addressing the widespread lack of affordable rental housing. The arbitrary 50% bond financing requirement creates a barrier to affordable housing production, especially for the growing number of states that fully utilize their private activity bond cap. (Roundtable Weekly, May 19)

Senators Push Treasury to Finalize Rules for EV Recharging Infrastructure Incentives

  • The Roundtable previously submitted detailed comments seeking guidance requesting greater clarity for real estate owners and others contemplating new investments in EV recharging stations.
  • The Inflation Reduction Act generally limits the credit to facilities installed in rural or low-income census tracts. The letter encourages Treasury to adopt an inclusive definition that effectively covers any tract if 10 percent or more of the “census blocks” inside the tract are rural. 
  • The Senators’ letter includes other requests that align with the Roundtable’s comments and aims to help the administration realize its goal of deploying 500,000 chargers by 2030. For example, the Senators urge that the rules treat each port at a refueling property as a “single item” that effectively qualifies for its own credit.

Joint Tax Committee Releases “Bluebook” Describing Recent Tax Laws

Joint Committee on Taxation logo
  • On Friday, Congress’s nonpartisan Joint Committee on Taxation released its long-awaited explanation of recently enacted tax laws.
  • The so-called “JCT Bluebook” is often relied upon by Treasury officials and federal courts when implementing and interpreting tax statutes. 

Congress reconvenes in Washington the week of January 8, where they will face a fast-approaching deadline for fiscal year 2024 spending bills and additional priorities, including a tax package.

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Bipartisan Legislation to Improve REITs’ Flexibility and Competitiveness Gains Traction in the House

Posted on by Abigail Grenadier

A bill to increase the limit on the amount of assets a REIT can own through a fully taxable subsidiary is gaining momentum in the House. The bipartisan measure has picked up 18 additional cosponsors from the tax-writing Ways and Means Committee since its introduction in late August by Representatives Mike Kelly (R-PA) and Brian Higgins (D-NY). (Legislative text of H.R. 5275)

Taxable REIT Subsidiaries

  • In 1999, Congress authorized REITs to create taxable subsidiaries (C corporations) that can engage in activities not otherwise allowed at the REIT level. Common activities undertaken by taxable REIT subsidiaries (TRSs) include services such as landscaping, cleaning, concierge, childcare, and catering, among others. As professional real estate management evolved, the change was necessary to ensure REITs could compete with other full-service real estate businesses.
  • H.R. 5275 would raise the limit on a REIT’s assets attributable to its taxable subsidiary from 20 to 25 percent. The legislation would not change the longstanding REIT income rules requiring that at least 75 percent of the REIT’s total income come from sources like real property rents and interest from real estate mortgages. Similarly, the legislation would not change the REIT asset test, which requires that at least 75 percent of the value of the REIT’s assets consist of real estate, cash, cash items, and government securities.
  • The Roundtable supports the legislation to raise the TRS limitation. The issue is also a tax priority for Nareit, which is leading the outreach effort on Capitol Hill. The current 20 percent limit has created particular challenges for REITs seeking to expand and acquire assets outside the United States, such as digital infrastructure. Raising the threshold to 25 percent would restore the limit to its prior level and allow U.S.-based businesses to continue growing in competitive foreign markets.

The Roundtable and its Tax Policy Advisory Committee (TPAC) will continue working closely with Nareit and other industry partners in support of H.R. 5275 as deliberations continue on tax legislation.

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Roundtable Chairman Raises Concerns About Florida Law Impacting Foreign Investments in Real Estate 

Posted on by Abigail Grenadier
Real Estate Roundtable Chairman John Fish during The Roundtable's Fall 2023 Meeting

Roundtable Chairman John Fish (Chairman & CEO, Suffolk), above, was quoted in media articles this week raising concerns about certain aspects of a new Florida law that would limit and regulate the sale and purchase of certain Florida real property by “foreign principals” from “foreign countries of concern.”

Foreign Investment in Florida Property

  • Fish commented to Bloomberg about Florida’s SB 264, stating, “The law is far-reaching, very, very confusing, and the unintended consequences would be very, very detrimental.” (Bloomberg, Dec. 11 | Bisnow and Inman, Dec. 12)
  • The Real Estate Roundtable urged the Florida Real Estate Commission on Sept. 5 to consider specific concerns about implementing the state law, which could impair capital formation and hinder the important role legitimate foreign investment plays in U.S. real estate, the broader economy, and job growth. (Roundtable Weekly, Sept. 8)

Need for Clarifications

Florida State seal
  • In response, the Florida Department of Commerce on Sept. 21 proposed a positive clarification to one section of the law, which could have implications for similar laws in other states.
  • Montana and Alabama have also passed legislation with similar restrictions to Florida’s that ban the sale or lease of agricultural land, critical infrastructure, and properties near military bases to “foreign adversaries,” including China. (Inman, Dec. 12)
  • Broader prohibitions in another area of Florida’s SB 264—Section 204—generally preclude Chinese investors from acquiring “any interest”in any Florida real property anywhere in the state. The Roundtable is hopeful that Section 204 will be subject to clarification during the rulemaking process. (See highlighted areas in the Notice of Proposed Rule)
  • Roundtable President and CEO Jeffrey DeBoer noted in his Sept. 5 letter, “Our concern with the new law is that U.S.-managed investment funds, which are controlled and managed by U.S. nationals, may now be precluded from pursuing investment opportunities in Florida if there is any level of investor participation in the fund from countries of concern like China.”
  • The Roundtable is seeking a technical clarification that would permit U.S.-managed investment funds, which may include passive investor participation from investors across the globe to continue to pursue investment opportunities in Florida.
  • Non-U.S. investors routinely subscribe for small, generally passive minority interests in these funds. These investors exercise no control over the investments or the operation of the assets. Importantly, the investment decisions are made by the U.S.-managed funds, not by passive investors who simply commit capital for a return, not to control the underlying investments.

Florida Gov. Ron DeSantis has launched the SecureFlorida Portal, where foreign principals from foreign countries of concern like China must register property.

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