News Type: Roundtable Weekly

Senate Finance Committee Chair Aims to Include Workforce Housing Tax Incentive in 2024 Tax Package

Posted on by Abigail Grenadier
Sen. Ron Wyden (D-OR)

The Roundtable and 12 other national real estate organizations wrote to congressional tax writers on Dec. 8 in strong support of the Workforce Housing Tax Credit (WHTC) Act (S. 3436), which would create a new tax incentive aimed at increasing the supply of moderate-income rental housing. The Senate’s top tax writer, Finance Committee Chair Ron Wyden (D-OR), above, said this week that there is a “real window of opportunity” to pass bipartisan housing legislation in the coming months that could be folded into a possible 2024 tax package. (WHTC bill summary, Dec. 7 | Coalition letter, Dec. 8 | Wyden’s Senate floor remarks, Dec. 12 | Tax Notes, Dec. 13)

Affordable Housing Tax Credits

  • Sen. Wyden told Tax Notes that housing tax credits “will be part of the discussions we’ll have to have” with House Ways and Means Chairman Jason Smith (R-MO) as they discuss elements for a possible tax package in the new year.
  • The Senate Finance Committee Chairman also commented on the Senate floor about his introduction last week of the WHTC Act (S. 3436) with Sen. Dan Sullivan (R-AL), Rep. Jimmy Panetta (D-CA) and Rep. Mike Carey (R-OH). “Our bipartisan proposal, based largely on the success of the Low Income Housing Tax Credit (LIHTC) would help spur a juggernaut of new housing construction,” Wyden said. (Video of floor remarks | Roundtable Weekly, Dec. 8)
  • Led by the National Multifamily Housing Council, the Dec. 8 industry coalition letter stated, “We believe that the Workforce Housing Tax Credit Act will only serve to complement the LIHTC.” The organizations emphasized that the WHTC would spur the development of housing targeted to renter households who face affordability challenges yet are ineligible for federal subsidies.

WHTC & LIHTC

  • The WHTC would build on the successful LIHTC by enabling state housing agencies to issue similar tax credits to developers for the construction or rehabilitation of income-capped rental housing. (One-page Senate Finance Committee summary and WHTC bill text)
  • WHTC credits could be used to build affordable housing for tenants between 60% and 100% of the area median income, or transferred to the State’s LIHTC allocation for housing aimed at lower-income tenants (generally below 60% of area median income). (Congressional Research Service summary of the LIHTC, April 26)
  • Roundtable President and CEO Jeffrey DeBoer stated, “Tax policy should support and encourage private sector investment that boosts the supply of affordable and workforce housing. The Workforce Housing Tax Credit Act would build on time-tested tax incentives like the low-income housing tax credit and further facilitate the conversion of underutilized, existing buildings to housing. We welcome this positive step forward for our nation’s housing supply.” (Roundtable Weekly, Dec. 8)
  • In the House this week, Rep. Jimmy Gomez, D-CA), reintroduced the Rent Relief Act of 2023, which would create a new tax credit for renters of a personal residence to cover part of the gap between 30 percent of their income and actual rent. Tax Notes, Dec. 13)

Rep. Gomez told Tax Notes this week that House tax writers hope to include the rent relief bill, along with Gomez’ Revitalizing Downtowns Act (H.R. 419) in bipartisan discussions about a potential tax package. H.R. 419 would provide an investment tax credit for 20 percent of the cost of converting office buildings to other uses.  (Rep. Gomez news releases, July 28 and Dec. 12 | news release, Dec. 12 | Roundtable Weekly, Aug. 11)

#  #  #

Senate, House Bills Introduced to Spur Workforce Housing Development

Posted on by Abigail Grenadier

Bills introduced yesterday in the Senate and House would create a new tax incentive aimed at increasing the supply of moderate-income rental housing. The legislation seeks to expand the construction and rehabilitation of housing for middle-class families and young people starting their careers, while enabling workers to live in communities where they are employed. (Senate Finance Committee news release and bill summary, Dec. 7)

Workforce Housing Tax Credit

  • Senate Finance Committee Chair Ron Wyden, (D-OR) and Sen. Dan Sullivan (R-AL), along with Reps. Jimmy Panetta (D-CA) and Mike Carey (R-OH), introduced the bipartisan Workforce Housing Tax Credit (WHTC) Act to build on the successful Low-Income Housing Tax Credit (LIHTC) by enabling state housing agencies to issue tax credits to developers, which would subsequently be sold to investors. (1-page Senate Finance committee summary and WHTC bill text)
  • WHTC credits could be used to build affordable housing for tenants between 60% and 100% of area median income, or transferred to LIHTC for tenants generally below 60% of area median income. (Congressional Research Service summary of the LIHTC, April 26)
  • State housing finance agencies could allocate WHTC credits to developers through a competitive process. The tax credits could also be provided to developers with a 15-year compliance period and 30-year extended commitment.  (Committee summary)

Roundtable Support

  • The Roundtable strongly supports the WHTC. Roundtable President and CEO Jeffrey DeBoer stated, “Tax policy should support and encourage private sector investment that boosts the supply of affordable and workforce housing. The Workforce Housing Tax Credit Act would build on time-tested tax incentives like the low-income housing tax credit and further facilitate the conversion of underutilized, existing buildings to housing. We welcome this positive step forward for our nation’s housing supply.”

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) has formed an Affordable Housing Working Group, which is working with the Research Committee to develop proposals on expanding the nation’s housing infrastructure.

#  #  #

Taxation of Unrealized Gains is Focus of Senate Democratic Bill and Supreme Court Case

Posted on by Abigail Grenadier

Senate Finance Committee Chairman Ron Wyden (D-OR), above, and 15 of his Senate colleagues recently introduced the Billionaires Income Tax Act (S.3367), which would tax the appreciation of wealthy individuals’ assets. On Tuesday, the Supreme Court heard oral arguments in Moore v. United States, a case challenging the federal government’s authority to tax unrealized gains under the 16th Amendment.

Billionaires Income Tax Act (BITA)

  • Under BITA, tradable, liquid assets would be marked-to-market and taxed annually on their appreciation, while illiquid assets would be subject to a “deferral recapture” tax when sold—or if certain other currently nontaxable events occur, such as death, a transfer to a trust, or a like-kind exchange. (One-page summary; section-by-section summary). (CQ, Nov. 30)
  • As drafted, the bill would apply to taxpayers with more than $100 million in annual income or more than $1 billion in assets for at least three consecutive years. (Tax Notes, Nov. 30).
  • The legislation is not limited to future appreciation of assets. It would reach back in time and apply the tax to accumulated, unrealized gains at the time of enactment.  The tax on built-in gains could be paid over a five-year period. Mark-to-market losses could be carried back for three years and applied against taxable market-to-market gains.
  • The appreciation of partnership assets (including built-in gains) and gains or losses from partnership transactions would flow through and taken into account at the partner level.
  • Related legislation was introduced in the House by Reps. Steve Cohen (D-TN) and Don Beyer (D-VA). 

Roundtable Position and Outlook

  • Real Estate Roundtable President and CEO Jeffrey DeBoer said, “Taxes rarely remain targeted, and like the income tax, this targeted proposal could be revised and expanded over time to apply to everyone. Moreover, taxing unrealized gains would upend over 100 years of federal taxation, require an unprecedented IRS intrusion into household finances, and create unknown and potentially unintended consequences at a time of economic uncertainty. Deferring the taxation of gains until an asset is sold supports entrepreneurs while encouraging the type of patient, long-term investing and productive risk-taking that drives our economy forward.”
  • In the last Congress, efforts to enact a mark-to-market regime were unsuccessful when they ran into resistance from moderate Democrats. Sen. Wyden (D-OR) acknowledged that his bill, which lacks bipartisan support, would not be part of any year-end tax legislation. (CQ, Nov. 30)

Moore v. United States

  • On Tuesday, the Supreme Court heard oral arguments in Moore v. United States, which challenges the federal government’s constitutional authority to tax unrealized income.
  • The petitioners in Moore argue that the mandatory repatriation tax in the Tax Cuts and Jobs Act exceeds Congress’s authority under the 16th Amendment to lay and collect taxes on incomes. They argue that because the tax is based on the accumulated, undistributed earnings of a foreign corporation, there is no income realization event for the Moores, who are a non-controlling minority shareholder of the corporation. (Roundtable Weekly, Oct.13)
  • Depending on the outcome and the scope of the decision, the Moore case could have implications for other forms of taxing unrealized gains, such as the appreciated value of real estate and other assets directly owned by a taxpayer.

A majority of the justices signaled they are hesitant to weigh into the broader debate of how to define income for tax purposes. A decision in Moore is not expected until June 2024. (USA Today and PoliticoPro, Dec. 5 | Tax Foundation, Aug. 30)

#   #   #

GAO Reports All Federal Agencies at Less Than 50 Percent Occupancy

Posted on by Abigail Grenadier
Government Accountability Office

More than half of the federal workforce is not working in their agency offices, according to the Government Accountability Office (GAO). Sen. Joni Ernst (R-IA) released a list this week based on the GAO data that shows federal space utilization percentages range from a low of 7% to 49% with most agencies using less than 30%. (Agency list | Sen. Ernst news release | DailyMail, Dec. 6)

Federal Employees’ Return to Office

  • The GAO statistics released by Sen. Ernst, the Ranking Member of the Senate Small Business & Entrepreneurship Committee, covers 24 agencies for one week between January and March 2023. Sen. Ernst told Federal News Network this week that she is pushing the federal government to get workers back to their offices or sell their unused space.
  • In August, Ernst demanded investigations into federal departments and agencies to determine the impact of telework on the delivery and response times of government services. That same month, White House Chief of Staff Jeff Zients directed cabinet officials to increase the return of federal employees to their offices. (Federal News Network, Nov. 30 | (Government Executive, Aug. 7 | Roundtable Weekly, Aug. 11)
  • Since the pandemic, Congress has held multiple hearings and introduced legislation in both the House and Senate about the government’s remote work policies. (Roundtable Weekly, Dec. 1)
  • The General Services Administration’s (GSA) Robin Carnahan recently told the House Committee on Oversight and Accountability that her agency sees an opportunity to reduce the government’s real-estate footprint by up to 30% in the coming years. (Federal News Network, Nov. 14)

Roundtable Response

  • RER Chair John Fish (Chairman & CEO, Suffolk), above, expressed the industry’s concern about government employees’ reluctant return to their offices in last week’s Wall Street Journal. “Other parts of the country with large federal workforces are also struggling to bring back workers. Whether you’re talking about downtown Boston, or Denver or Northern Virginia, occupancy is down substantially,” said Fish. (WSJ, Nov. 28)

Roundtable President and CEO Jeffrey DeBoer has consistently emphasized that federal policies promoting remote work undermine the health of cities, local tax bases, and small businesses. The Real Estate Roundtable has urged President Biden and national policymakers to end government policies that encourage remote working arrangements for federal employees. (RER letter to President Biden, Dec. 2022; RER letter to Senate, April 2023)

#  #  #

U.S. Joins Global Push to Slash Building Emissions

Posted on by Abigail Grenadier

The United States joined China, the UK, and the larger European Union this week in an international initiative to accelerate the buildings sector’s ability to reach “near zero” emissions by 2030. (United Nations press release, Dec. 6)

  • The initiative is a pledge by countries to cut emissions from building operations and construction materials down or close to zero. A Buildings and Climate Global Forum scheduled for March in Paris will flesh-out details.
  • The Biden-Harris administration’s imminent release of a proposed zero emissions building (“ZEB”) definition aligns with this international effort. The ZEB definition will be the first federal government guideline providing voluntary criteria for buildings that aspire to zero emissions status. (Roundtable Weekly, Sept. 29)

SBTi

  • SBTi’s latest guidance includes important revisions urged by The Roundtable and Nareit in joint comments submitted last summer. (Roundtable Weekly, July 14).
  • Notably, SBTi changed course from its original proposal and will allow companies to set science-based emissions targets based on “market-based” solutions such as purchases of renewable energy certificates (RECs).
  • Real estate companies can apply to participate in SBTi’s pilot program through December 10. (SBTi Call for Applicants)

CFTC Guidelines and EPA’s Portfolio Manager

  • The Environmental Protection Agency (EPA) is holding a workshop session for Real Estate Roundtable members on improvements to its ENERGY STAR Portfolio Manager benchmarking tool. The workshop will take place on January 24, 2024 as part of The Roundtable’s State of the Industry meeting in Washington, DC. (Contact RER Meetings about registration)

EPA’s improvements to its free online Portfolio Manager tool, used by nearly 25% of U.S. building space to measure energy use and GHG emissions, is widely supported by the CRE industry. (Coalition letter to EPA, Sept. 14 and Roundtable Weekly, Sept. 15)

#  #  #

The Roundtable’s Jeffrey DeBoer Recognized as a “Top Lobbyist” for 2023

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

Real Estate Roundtable President and CEO Jeffrey DeBoer, above, is one of the “Top Lobbyists” in Washington, DC for 2023, according to the widely-read Capitol Hill publication, The Hill.  This is the sixth consecutive year that DeBoer has earned the recognition. (The Hill, Dec. 6)

  • The Top Lobbyists 2023 list includes “impactful advocates (who) stand out for the results they’ve delivered for their clients, companies, trade associations and advocacy groups in the nation’s capital.”
  • The Hill also noted that after pandemic restrictions were lifted, “these top lobbyists had to navigate a divided Congress—and not just the traditional Republican and Democratic divisions” as a flood of regulatory activity flowed from the Biden administration.

DeBoer commented, “I am honored to lead The Real Estate Roundtable’s policy advocacy efforts and very humbled to be included on The Hill’s top lobbyist list. This personal recognition by The Hill reflects the collective efforts of the Roundtable membership, leadership, and staff. Together we work very hard to deliver non-partisan, data-based policy positions, guided by what is good for communities, job creation, and the economy. This has always been the foundation of our organization’s effectiveness, and it has proven to be even more critical given today’s increasingly challenging policy environment.”

# # #

The Administration and Congress Continue to Urge Federal Agencies to Return to the Office

Posted on by Abigail Grenadier

Although the Biden administration and Congress continue to urge federal agencies to end pandemic-era telework policies, officials acknowledge they have yet to reach their return-to-office objectives, with only about half of cabinet agencies having achieved the goal of workplace return by January. (Axios, Nov. 30)

Congressional and Administration Efforts

  • On Wednesday, a subcommittee of the House Committee on Oversight and Accountability held a hearing titled, “Oversight of Federal Agencies’ Post-Pandemic Telework Policies,” to discuss the current status of telework policies within various federal agencies.
  • White House Chief of Staff Jeff Zients has been privately urging cabinet secretaries to address the significant number of federal workers who continue to work remotely, encouraging a shift away from persistent work-from-home practices. (Axios, Nov. 30)
  • RER Chair John Fish (SUFFOLK) (above) was quoted in the Wall Street Journal, voicing the industry’s concern for stalled return to the workplace. “Other parts of the country with large federal workforces are also struggling to bring back workers. “Whether you’re talking about downtown Boston, or Denver or Northern Virginia, occupancy is down substantially,” said Fish. (WSJ, Nov. 28)
  • Unions representing federal workers strongly support work from home and have pushed back against the Biden administration’s workplace return goals. (BGov, Sept. 14; Federal Times, Aug. 7)
  • Since the pandemic, Congress has held multiple hearings and introduced legislation in both the House and Senate aimed at solidifying official government definitions of remote work and enhancing the accountability and transparency of federal telework policies. (Roundtable Weekly, Oct. 20)

Roundtable Advocacy

  • The Real Estate Roundtable has urged President Biden and national policymakers for months to end government policies that encourage remote working arrangements for federal employees. (RER letter to President Biden, Dec. 2022; RER letter to Senate, April 2023)
  • In August, the White House ordered cabinet officials to increase the return of federal employees to their offices. (Roundtable Weekly,Aug. 11)

Roundtable President and CEO Jeffrey DeBoer has repeatedly emphasized that remote working by federal employees is undermining the health of cities, local tax bases, and small businesses.

#  #  #

White House Holds Property Conversions Briefing for Roundtable Members

Posted on by Abigail Grenadier

Last week, the White House hosted a virtual briefing for Roundtable members to discuss federal loan and guarantee programs at the federal departments of Energy, Housing, Transportation and the General Services Administration that may assist with financing commercial-to-residential conversion projects.

Property Conversions Briefing

  • In October, the administration announced a suite of federal resources—including low-interest loans—across various agencies to assist conversion projects aimed at increasing the housing supply, revitalizing urban downtowns, and cutting climate pollution. (Roundtable Weekly, Oct. 27; White House Commercial to Residential Conversions Guidebook)
  • The briefing last week provided members with a high-level overview of the administration’s conversion work and focused on the Transportation Department’s Transportation Infrastructure Finance and Innovation (TIFIA) and Railroad Rehabilitation and Improvement (RRIF) financing programs. (See FAQs)
  • White House staff also announced upcoming workshops with the Department of Transportation’s Build America Bureau to learn more about how TIFIA and RRIF financing can be used for transit-oriented development (“TOD”) that takes the form of adaptive reuse.

Upcoming Workshops – Federal Resources to Support Commercial-to-Residential Conversions

IRA Tax Incentives – 179D

  • White House staff on the property conversions briefing mentioned that green tax incentives enacted by the Inflation Reduction Act (IRA) may be layered with other federal loan, guarantee, and grant programs to support a project.  (See RER fact sheet, “Clean Energy Tax Incentives Relevant to U.S Real Estate)
  • Roundtable Senior Vice President & Counsel Duane Desiderio was quoted this week in Tax Notes on the deduction in section 179D for energy-efficient commercial buildings.
  • “The IRA’s changes to section 179D are good policy, but more changes need to be made for the deduction to reach its full potential,” said Desiderio.” (Tax Notes, Nov. 28). He explained that Congress should make 179D “transferable” by REITs and other private sector owners.

The Roundtable’s Property Conversions Working Group will continue to serve as a conduit between our members and the administration to help design impactful policies that can assist with office-to-residential conversions. Please contact Roundtable SVPs Duane Desiderio (ddesiderio@rer.org) or Ryan McCormick (rmccormick@rer.org) for more information.

#  #  #

New Analysis Highlights Importance of Like-Kind Exchanges in Current Market Environment

Posted on by Abigail Grenadier

A new analysis by Marcus & Millichap demonstrates how like-kind exchanges are fundamental to the health and financing of the commercial real estate industry, particularly during market corrections and liquidity shortages. (Marcus & Millichap – The Importance of Like-Kind Exchanges During Periods of Reduced Commercial Real Estate Market Liquidity, 2023).

Key Findings

  • Commercial real estate transaction volume is down, but like-kind exchanges are up.  Despite a general decline in commercial real estate transactions, the number of 1031 exchanges initiated has increased nearly 15% from 17,467 in the first half of 2019 to 20,070 in the first half of 2023.
  • The analysis attributes the general decline in commercial real estate transactions in the first half of 2023 to the rise in interest rates, stricter lender underwriting, a diminished economic outlook, and a broad spectrum of geopolitical challenges.
  • “The 15% rise in the number of exchanges initiated, when commercial real estate transaction count fell by 22.1%, underscores the importance of like-kind exchanges in periods of reduced commercial real estate market activity.” (Marcus & Millichap)
  • The liquidity generated through LKEs serves as a deterrent against commercial property defaults, consequently reducing risks in the banking and financial systems that could otherwise pose a threat to the broader economy.
  • The Marcus & Millichap analysis draws on data collected by the largest like-kind exchange qualified intermediaries in the country and aggregated by the Federation of Exchange Accommodators, a member of The Real Estate Roundtable’s President’s Council.

The Roundtable’s Tax Policy Advisory Committee (TPAC) will continue working to raise awareness of the role that like-kind exchanges play in supporting the health of the US economy and the stability of real estate markets.

#  #  #

Lawmakers Extend Government Funding Into Early 2024; Outlook Uncertain for Tax Policy and Other Priorities

Posted on by Abigail Grenadier
Capitol Hill at dusk

The latest threat of a government shutdown eased this week after President Biden signed two continuing resolutions, funding some agencies until Jan. 19 and others until Feb. 2, giving Congress a chance to pass full-year appropriations bills in early 2024, and leaving the Biden administration’s $106 billion supplemental foreign aid request unresolved. (AP, Nov. 17 |Wall Street Journal | Washington Post | NBC News, Nov. 15)

Window Narrowing for Other Policy Priorities

  • Congress’ focus on the funding measures leave policymakers looking for a potential legislative vehicle that could support a separate, expensive tax package. Conversations among tax policy writers are ongoing, according to Ways and Means Ranking Member Richard Neal (D-MA). (BGov, Nov. 16)
  • Senate Finance Committee Chair Ron Wyden (D-OR) and House Ways and Means Committee Chairman Jason Smith (R-MO) are discussing a package in the $90-100 billion range that would include measures on business interest deductibility and bonus depreciation, as well as an increase in the child tax credit for low-income families. (Roundtable Weekly, June 16)

IRA Tax Incentives

Tax Notes publication
  • On the regulatory front, Roundtable Senior Vice President Ryan McCormick was quoted this week in Tax Notes on the Inflation Reduction Act’s (IRA) rules affecting clean energy credits—and the need to ensure incentives extend equitably to “mixed partnerships” that include both taxable and tax-exempt investors.
  • “Tax-exempt investors in mixed real estate partnerships include pension funds, educational endowments, private foundations, and public charities,” said McCormick, noting that these entities have invested over $900 billion in commercial real estate.
  • The Tax Notes article also addressed problems posed by IRA prevailing wage and apprenticeship rules that were the focus of an Oct. 30 Roundtable comment letter. The letter quantified the large compliance costs and recommended allowing contractors to self-certify their compliance with the wage and apprenticeship requirements. (Roundtable Weekly, Nov. 3)

The Roundtable’s Tax and Sustainability Policy Advisory Committees will remain engaged with policymakers as the IRA rules affecting CRE are finalized and implemented. These issues will be discussed during The Roundtable’s State of the Industry Meeting on January 23-24, 2024 in Washington.

 #  #  #