News Type: Roundtable Weekly

Bipartisan Bill to Extend and Reform National Flood Insurance Program Introduced in Senate, House

Posted on by Trey Jackson

National Flood Insurance Program (NFIP) logo

Bipartisan legislation recently introduced in the Senate and House would reauthorize and extend the National Flood Insurance Program (NFIP) for five years, providing greater stability for real estate markets, homeowners, and small business owners as the nation continues to struggle with inflationary pressures and increased threats of extreme weather. The National Flood Insurance Program Reauthorization (NFIP-RE) Act of 2023 would also implement a series of sweeping reforms to reduce program costs, make generational investments in communities to reduce flood risk, and establish a fairer claims process for policyholders. (Legislative text and PoliticoPro, June 22)

Risk Mitigation

  • A new flood rating methodology (Risk Rating 2.0) established by the Federal Emergency Management Agency (FEMA) attracted the attention of policymakers from coastal and flood-prone areas after it was reported that resulting rate hikes may result in the loss of coverage for hundreds of thousands of policyholders. (Associated Press, July 22)
  • Sens. Bob Menendez (D-NJ) and Bill Cassidy (R-LA), alongside Reps. Frank Pallone (D-NJ) and Clay Higgins (R-LA), introduced the NFIP-RE Act (S. 2142 and H.R. 4349) to put the program on solid fiscal ground. The Senate Banking Committee is leading this bicameral and bipartisan reform effort. (One-page summary of the bill)
  • The Roundtable is a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms that create long-term stability for policyholders, improved accuracy of flood maps, mitigation reforms, enhanced affordability, and the acceptance of non-NFIP policies for commercial properties. (Roundtable Weekly, May 27, 2022)

Proposed Changes

Person building sandbag barrier

  • Congress has enacted 25 short-term NFIP reauthorizations since 2017. The NFIP-RE Act of 2023 would:
    • Extend the program for five years and cap annual rate increases at 9%.

    • Provide a comprehensive means-tested voucher for millions of low- and middle-income homeowners and renters if their flood insurance premium becomes prohibitively expensive.

    • Increase the maximum limit for Increased Cost of Compliance (ICC) coverage to reflect more accurately the costs of rebuilding and implementing mitigation projects.

    • Boost funding for mitigation grants and modernize mapping to identify and reduce flood risks.

    • Create new oversight measures for insurance companies and vendors.

    • Reform the claims process based on lessons learned from Superstorm Sandy and other disasters, to level the playing field for policyholders during appeal or litigation, hold FEMA accountable to strict deadlines so that homeowners get quick and fair payments, and ban aggressive legal tactics preventing homeowners from filing legitimate claims.

Sen. Menendez said, “With disastrous flooding events becoming all the more common, we must work to create a more sustainable, resilient, and affordable flood insurance program that invests in prevention and mitigation efforts, and all while ensure hard-working Americans can have peace of mind in the event of a disaster.” (Menendez news release, June 22)

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Roundtable Comments on Clean Energy Tax Credits for Low-Income Communities, Housing

Posted on by Trey Jackson
Low-income housing development in New Jersey

The Real Estate Roundtable submitted comments today on a proposed rule from the IRS and Treasury Department regarding “bonus” tax credits for renewable energy investments in low-income communities, passed by Congress as part of the Inflation Reduction Act (IRA). (Roundtable Comment Letter, June 30) 

Solar, Wind Bonus Credits 

  • IRA Section 48(e) establishes a Low-Income Communities Bonus Credit Program to address climate, affordable housing, and environmental justice challenges. (Treasury news release, Feb. 13, 2023)

  • Taxpayers must apply to the IRS through a competitive process to receive any bonus credits under the Program.

  • The bonus can provide extra tax credits to help cover the costs of solar, wind, and storage facilities. See The Roundtable’s chart, “Base” and “Bonus Rate” Amounts Relevant to Commercial and Multifamily Buildings (May 25, 2023).

  • Taxpayers who qualify can layer an extra 10% bonus—above “base rate” credit amounts—for renewable projects in low-income communities defined in the IRA as census tracts that qualify for new markets tax credits.

  • The bonus can increase to an extra 20% for clean energy investments that are part of low-income rental housing—such as housing supported by LIHTCs or Section 8 “housing choice” vouchers. 

Roundtable Comments 

RER chart on Section 48(e)
  • Treasury and IRS proposed a rule on June 1 to implement the low-income bonus program. Today’s comments from The Roundtable seek greater clarity and certainty for building owners that may access the bonus credits, raising the following points:

    • The bonuses are available only for solar or wind projects that generate under 5 megawatts of electrical output. The Roundtable requested a more straightforward rule for what constitutes a “single project” for purposes of this output threshold.

    • The IRA’s text requires that multifamily building owners must share “financial benefits” of renewable energy produced on-site with tenants. The Roundtable’s comments stressed that any such benefits should not depend on utility bill savings that accrue directly to tenants—because owners cannot measure, track or control energy consumption in sub-metered leased units.

    • Low-income housing supported by non-federal programs through state- and local-level housing finance agencies or public housing authorities should also be eligible for the IRA’s low-income bonuses.

    • The proposed rule would offer a preference, not based in the statute, for non-profit owners to receive bonus credit allocations. The Roundtable’s comments urge there should be no bias against business taxpayers to receive the bonus to further the Biden administration’s climate policy goals for rapid deployment of renewable energy investments in low-income communities.  

  • Future Roundtable comments on IRA topics are in the works. Feedback on a proposed rule to buy-and-sell certain clean energy credits is due August 14. In addition, proposed rules to implement the 179D tax deduction for energy efficient retrofits of commercial buildings are expected this summer. 

Prior comments, information and summaries on The Roundtable’s advocacy efforts regarding clean energy tax incentives are available on our Inflation Reduction Act resources page and in Roundtable Weekly (Dec. 2, 2022 and Nov. 4, 2022).  

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Public Data in Roundtable’s “Commercial Real Estate By The Numbers: 2023” Shows CRE as Driving Economic Force

Posted on by Trey Jackson

RER report - Commercial Real Estate By The Numbers: 2023

A new Real Estate Roundtable report—Commercial Real Estate By The Numbers: 2023— illustrates CRE’s significant contributions to the economy, statistics on climate and the industry, and the important role of tax policy in CRE investment. (18-page report) 

Statistical CRE Reference 

  • Roundtable President and CEO Jeffrey DeBoer said, “Our compilation of publicly available data shows the vital role commercial real estate plays as a driving force in the American economy. Whether it is real estate’s positive contributions to GDP, the workforce, local tax bases, or Americans’ retirement savings, this report serves as a valuable resource in understanding the important role of CRE in our society.”
  • DeBoer added, “Our report also presents data on CRE’s climate footprint, information on the economic impact of real estate tax proposals, facts on the affordable housing shortage, and statistics on the physical footprint of U.S. commercial real estate. We intend for this reference to be a ‘living document’ that can be updated when new government and private sector statistics become available.” 

Public Data 

GHG Emissions CRE graphic

  • The report’s findings, footnoted throughout the publication, include:
  • The total value of America’s commercial real estate is estimated between $18- $22 trillion.  The value of America’s commercial real estate is nearly 39%-47% of the market capitalization of all U.S. publicly traded companies. The U.S. multifamily housing sector alone is worth $3.8 trillion—worth more than the value of Microsoft, Google, and Amazon combined.
  • The combined economic contributions of new commercial building development and the operations of existing commercial buildings contributed an estimated $2.3T to GDP in 2022.
  • If U.S. commercial real estate was a country it would have the eighth-largest economy in the world as measured by GDP.
  • The commercial real estate industry supports 15.1 million jobs in the U.S.
  • CRE pays $559B in property taxes to local governments annually—comprising 72% of all local tax revenue. Commercial real estate owners pay property taxes that are 1.7X more, on average, than the tax rates paid by homeowners.
  • Pension funds, educational endowments, and charitable foundations have invested $900B in real estate. 87% and 73% of public and private sector pension funds, respectively, contain real estate investments.

  • The commercial and residential sectors represent 13% of total U.S. greenhouse gas emissions. This figure does not include “Scope 3” supply chain emissions beyond the direct control of CRE owners and developers—such as from tenant operations in leased spaces, and carbon embodied in the manufacturing process of cement, steel and other construction materials. (See March 17 Roundtable Weekly, “Reports Confirm Challenges in Scope 3 Reporting”) 

Download the 18-page pdf of The Roundtable’s Commercial Real Estate By The Numbers: 2023. 

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Bipartisan Bill Would Correct Condo Construction Tax Accounting Rules and Facilitate Construction Financing

Posted on by Trey Jackson

Construction of condo building in Denver

House Ways and Means Committee members Bill Pascrell Jr. (D-NJ) and Vern Buchanan (R-FL) this week reintroduced the Fair Accounting for Condominium Construction Act (H.R. 4280) to correct current condominium tax accounting rules that hamper construction financing.

 Discriminatory Tax 

  • Current condo tax accounting rules require multifamily developers of condominium buildings to recognize income and pay tax on their expected profit as construction is ongoing. This “percentage-of-completion method” requires payment on pre-sale transactions well before a buyer closes and pays for a transaction.
  • Homebuilders of single-family homes, townhouses and row houses are not subject to this tax accounting rule restriction, which unfairly accelerates federal income tax liability for new condominium construction.
  • The Buchanan-Pascrell legislation would correct the discriminatory tax by providing condominium developers an exclusion from the percentage-of-completion tax method. 

Roundtable Support for Change 

Real Estate Roundtable President and CEO Jeffrey DeBoer

  • Real Estate Roundtable President and CEO Jeffrey DeBoer said, “Developers seeking construction loans face severe headwinds in today’s economy. Our tax accounting rules should not create additional barriers to the financing of new housing construction. Unfortunately, a quirk in the way that federal tax law works accelerates income from the pre-sale of condominium units and prevents developers from using their own revenue to finance condo construction.”
  • “This tax aberration is unique to vertical condo development and does not apply to the construction of townhouses, row houses, or buildings with four or fewer units,” DeBoer continued. “The Buchanan-Pascrell bill would fix this issue and allow taxpayers to put their own capital to work expanding the supply and availability of housing.”
  • The Roundtable is a long-standing advocate to correct this discriminatory rule as developers have struggled to access their own income (condo pre-sales) to self-finance new construction.
  • On August 21, 2019 The Roundtable wrote to former Treasury Secretary Steven Mnuchin requesting regulatory relief from existing tax accounting rules that unfairly accelerate federal income tax liability for new condominium construction. (Roundtable letter)
  • The Roundtable’s letter detailed how the completed contract method of accounting— rather than the percentage- of-completion method—would more accurately fit the economics of condominium construction. (Tax Notes, August 23, 2019)
  • In 2008, the IRS and Treasury released proposed regulations (REG-120844-07) under section 460 that would treat individual condo units as townhouses or row houses. 

The Roundtable’s Tax Policy Advisory Committee (TPAC) continues to advocate for the passage of corrective legislation that would level the playing field for accounting rules impacting condominium construction. 

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Fed Chairman Addresses CRE as Leading Economic Concern During Congressional Hearings

Posted on by Trey Jackson

Federal Reserve Chairman Jerome Powell

Federal Reserve Chairman Jerome Powell testified this week before congressional committees on the state of the economy, identifying commercial real estate as an area the central bank is “very focused on” as the office sector faces significant pressures from declining demand and remote work issues. 

Banks & CRE 

  • During Powell’s appearances before the House Financial Services Committee on Wednesday and the Senate Banking, Housing, and Urban Affairs Committee on Thursday, policymakers noted in their Q&A that an estimated $1.5 trillion of CRE loans will mature in the next three years. Powell responded that the Fed is applying a “supervisory toolkit” to banks it has identified with high concentrations of commercial real estate loans.

Sen. Bob Menendez (D-NJ)

  • During the Senate hearing, committee member Bob Menendez (D-NJ) said he was concerned CRE mortgages could be “a ticking time bomb” for many banks as office property values decline and interest rates increase. Powell noted, “We’re being pretty proactive about reaching out to these institutions and trying to help them get through these significant issues.” Click on video clip above to watch the Menendez-Powell exchange or scroll to :31:33 in the full Senate hearing.
  • In his opening remarks, House Financial Services Committee Chairman Patrick McHenry (R-NC) stated, “Now we are told these (bank) runs represent a systemic threat to the stability of our financial system. Add in the commercial real estate exposure facing financial institutions and it becomes very easy to understand the mounting anxiety of consumers and job creators. I share in that anxiety.” (Scroll to 1:44 in the House hearing)

House Financial Services Committee Chairman Patrick McHenry (R-NC)

  • McHenry, above, also warned, “… a massive increase in capital standards for medium and large institutions… would limit banks’ ability to lend money, exacerbating the looming credit crunch, and starving families and small businesses of the capital they need.”  (The Roundtable wrote to federal regulators on March 17 about the importance of not engaging in pro-cyclical policies such as requiring financial institutions to increase capital.)
  • Rep. Young Kim (R-CA) asked Powell during the House hearing if the Fed is thinking about policies that could provide time for refinancing commercial real estate loans—a position strongly advocated by The Real Estate Roundtable. Powell answered, “There’s a playbook for working your way out of these loans. And it’s particularly in the office sector where work from home is still a material factor in some areas.” (Scroll to 1:26:04 in the House hearing for Kim-Powell exchange)
  • On June 16, a statement from the Financial Stability Oversight Council—which includes the heads of the Federal Reserve, the Treasury Department, and the Securities and Exchange Commission—addressed the results of their recent meeting where potential risks in the CRE market were on the agenda. The group commented, “Regulators are taking steps to emphasize risk management and examine exposures to CRE loans at their regulated institutions.”  

Roundtable Response 

Real Estate Roundtable Board Members Scott Rechler on CNBC's Last Call

  • On June 21, CNBC’s Last Call interviewed Roundtable Board Member Scott Rechler, above right, (Chief Executive Officer and Chairman, RXR) on how a rise in office vacancies could have sweeping implications for the economy. Roundtable Board Member Barry Sternlicht (Chairman and CEO, Starwood Capital Group) joined CNBC’s Squawk Box on June 22 for a discussion about the Fed’s inflation fight and commercial real estate.
  • The dropping value of various investments, including offices that provide crucial property taxes to fund municipalities, were the focus of a June 20 Wall Street Journal report “Wall Street Sours on America’s Downtowns.” 
  • Real Estate Roundtable President and CEO Jeffrey DeBoer recently remarked on The Roundtable’s Q2 Sentiment Index findings and the role federal regulators can play as CRE faces these significant market developments. “Federal financial institution regulators must act quickly to provide greater supervisory flexibility—as they did in 2009, 2020, and 2022—to allow lenders and borrowers to responsibly restructure the large amount of maturing commercial real estate loans,” DeBoer said. (Roundtable Weekly, June 9)

“Businesses and individuals need more time to transition their space needs to the post-pandemic economy. Greater certainty in demand will allow commercial real estate markets, particularly the office sector, to stabilize and revert to its dominant position as the source for local budget revenue. In addition to regulatory flexibility, positive public and private action to encourage in-person, return-to-work policies is needed, where appropriate. As some buildings will need to be reimagined entirely, policy reforms are needed to encourage those buildings to convert to other uses such as housing,” DeBoer added.

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Economic Pressures on CRE a Top Concern of Federal Regulators

Posted on by Trey Jackson

Fed Chair Powell on CRE

Federal Reserve Chairman Jerome Powell, above, commented on Wednesday about the economic pressures on banks that hold a significant concentration of commercial real estate loans. Powell said, “We of course, we’re watching that situation very carefully. There’s a substantial amount of commercial real estate in the banking system. A large part of it is in smaller banks.” He added, “those banks will experience larger losses” but since the loans are “well distributed,” the issue is not likely to “suddenly hit and work its way into systemic risk” to the overall economy. (Fed news conference transcript, page 24 and Fortune, June 14)

Market Conditions

  • The Fed Chairman spoke after the Federal Open Market Committee declined to raise interest rates this week for the first time in 15 months, after the Fed funds rate jumped from zero to more than 5% in less than a year and a half—the sharpest spike in rate increases in nearly 40 years. (Axios, June 15)
  • Real Estate Roundtable President and CEO Jeffrey DeBoer stated during an April 7 Walker Webcast, “I don’t think anybody assumed a 12-year period of basically zero interest rates, followed by a steep 500bps increase in financing costs, immediately following a once-every-hundred-years pandemic that shut everything down and changed a lot of the ways the built environment would be used. I think all of this has to be allowed to settle through.” (Walker Webcast video and Connect CRE, April 5)
  • The Real Estate Roundtable continues to emphasize the need for federal regulators to allow more flexibility for lenders and borrowers to restructure commercial real estate loans facing potential default—as the Federal Reserve reported recently that CRE poses a potential risk to financial stability. (Fed’s Financial Stability Report, May 2023)
  • Today, Treasury Secretary Janet Yellen presided over a meeting of the multi-agency Financial Stability Oversight Council, which will address financial stability vulnerabilities, developments in the commercial real estate market, and receive an update on the banking sector.

Maturing CRE Loans

Willy Walker on CNBC

The Roundtable’s joint RECPAC and Research Committee meeting this week included a real estate capital market panel with CRE leaders and a presentation by CBRE industry experts on the economy and CRE conditions. The session also included a discussion with Sen. Bill Hagerty (R-TN), a member of the Senate Banking Committee.

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House Republicans Advance Tax Package, Biden Administration Proposes Rules for Energy Tax Credits

Posted on by Trey Jackson

Republican members of the House Ways and Means Committee approved their proposed tax legislative package along party lines this week, including measures on business interest deductibility, bonus depreciation, and opportunity zones. (Tax Notes, June 14 | Ways and Means Committee, June 13 and Roundtable Weekly, June 9)

Tax Measures and CRE

Roundtable Chair John Fish with Jeffrey DeBoer and House Ways and Means Committee Chairman Jason Smith (R-MO)

  • On Wednesday, Ways and Means Committee Chairman Jason Smith (R-MO), Committee Member Brad Schneider (D-IL), and Ways and Means staff spoke with Roundtable Members about the tax measures and other issues at The Roundtable’s all-member Annual Meeting in Washington, DC during the Tax Policy Advisory Committee (TPAC) session. [Photo left to right: Roundtable Chair John Fish (Chairman and CEO, SUFFOLK), Roundtable President and CEO Jeffrey DeBoer, and Committee Chairman Jason Smith]
  • The three tax bills sent to the House floor for a potential vote next week contain $237 billion in business and individual tax cuts, financed by the repeal or modification of several energy tax incentives enacted in last year’s Inflation Reduction Act (IRA). However, differences in the GOP caucus and requests from some Republicans to include a boost in the $10,000 deduction cap on state and local taxes (SALT) could push a vote until after the congressional July 4 recess. Any Republican tax package passing the House would face significant opposition in the Democrat-controlled Senate and the White House. (Tax Notes, June 16)
  • The committee’s proposals relevant to real estate include:

House Ways and Means Committee

    • Business interest deduction. The Build It in America Act would provide a 4-year extension (through 2025) of certain, taxpayer-favorable business interest deductibility rules that applied from 2018-2021. The proposal would allow more real estate businesses to operate under the general rules of section 163(j) and its preferable cost recovery schedules. (H.R. 3938 and summary)
    • Bonus depreciation.  H.R. 3938 also includes a 3-year extension (through 2025) of 100% bonus depreciation for qualifying capital investments, including equipment, machinery, and interior improvements to nonresidential property (“qualified improvement property”).  Bonus depreciation is 80% in 2023 and gradually phasing down. 
    • Opportunity Zones. The Small Business Jobs Act would establish special, favorable rules for investments in rural opportunity zones. It would also create a new and detailed information-reporting regime for all opportunity funds. (H.R. 3937 and summary)

Energy Tax Credits Transferability

Chicago evening

  • The Biden administration this week proposed rules on transferring clean-energy tax credits under the IRA. Treasury’s proposed guidance released on June 14 seeks to clarify numerous issues, including which entities would be eligible for each credit monetization mechanism, laying out the process and timeline to claim and receive an elective payment, and transferring a credit. (Tax Notes, June 15 |The Wall Street Journal, June 14 | IRS news release)
  • Secretary of the Treasury Janet Yellen stated, “The Inflation Reduction Act’s new tools to access clean energy tax credits are a catalyst for meeting President Biden’s historic economic and climate goals. They will act as a force multiplier, bringing governments and nonprofits to the table.” (CNBC and Treasury news release, June 14)
  • The Roundtable’s Tax Policy Advisory Committee (TPAC) and Sustainability Tax Policy Committee (SPAC) will analyze the impact of the transferability rules on commercial real estate for potential comments on the proposed rulemaking. SPAC’s meeting on Wednesday during The Roundtable’s Annual Meeting included a presentation about an online marketplace for exchanging such tax credits.

Climate Disclosure RegsSEC logo - image

  • Separately, the Securities and Exchange Commission (SEC) expects to issue new climate disclosure rules by October, a year later than the original target date. The new date was included in a SEC rule-making agenda and schedule released on Tuesday.
  • Legislation to constrain future SEC disclosure requirements was reintroduced this week by Sen. Mike Rounds (R-SD) and nine of his Senate colleagues. The bill includes language stating that an “issuer is only required to disclose information in response to disclosure obligation adopted by the Commission to the extent the issuer has determined that such information is important with respect to a voting or investment decision regarding such issuer.” Rep. Bill Huizenga (R-MI) is sponsoring a version of the bill in the House. (Sen. Rounds news release and Politico Pro, June 15)

The Roundtable’s SPAC will continue to track any developments related to the SEC’s forthcoming rule on climate reporting, including its proposal for sweeping disclosures on Scope 3 GHG emissions affecting CRE. (Roundtable Weekly, March 10) 

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CRE Market Conditions, Tax Proposals, and Energy Policy Focus of Roundtable Annual Meeting

Posted on by Trey Jackson

The Real Estate Roundtable’s 2023 Annual Meeting this week included policy discussions with national lawmakers on issues affecting commercial real estate, including market conditions and pressures on the office sector, tax policy, sustainability issues, and evolving security threats. Additionally, a special industry tax panel focused on incentives for property repurposing, community revitalization, and housing.

Speakers & Policy Issues 

Roundtable Chairman John Fish, left, with Roundtable President and CEO Jeffrey DeBoer

Roundtable Chair John Fish (Chairman and CEO, SUFFOLK), left, and Roundtable President and CEO Jeffrey DeBoer, right, launched the meeting, which included the following speakers:

Sen. Kyrsten Sinema (I-AZ)

Sen. Kyrsten Sinema (I-AZ)
Member, Senate Committee on Banking, Housing and Urban Affairs

Sen. Bill Hagerty (R-TN) and Geordy Johnson, CEO, The Johnson Group

Sen. Bill Hagerty (R-TN), left 
Member, Senate Committee on Banking, Housing and Urban Affairs
and Roundtable Board Member Geordy Johnson (CEO, The Johnson Group)

House Ways and Means Committee Chairman Jason Smith (R-MO)

Jason Smith (R-MO), Chairman
House Ways and Means Committee

House Ways and Means Committee Member Brad Schneider (D-IL)

 Brad Schneider (D-IL), Member
House Ways and Means Committee

Rep. Andrew Gabarino (R-NY)

Rep. Andrew Garbarino (R-NY), Chairman
House Homeland Security Subcommittee on Cybersecurity and Infrastructure Protection
 

David Crane and Tony Malkin

David Crane, left, Department of Energy Under Secretary for Infrastructure, and 
Roundtable Board Member Tony Malkin (Chairman, President and Chief Executive Officer, Empire State Realty Trust, Inc.)

Alejandra Nunez

Alejandra Nunez
Environmental Protection Agency (EPA)
Deputy Assistant Administrator, Office of Air and Radiation

Thomas Barthold

Thomas Barthold
 Chief of Staff, Joint Committee on Tax

Moody's Analytics Chief Economist Mark Zandi

Mark Zandi, Chief Economist, Moody’s Analytics  

Roundtable Policy Advisory Committees 

Real Estate Roundtable 2023 Annual Meeting wide shot

The Roundtable’s policy advisory committees also met on June 13-14 to analyze policy issues
with industry experts, policymakers, and their staff, including:

  • Joint RECPAC-Research Committee Meeting 

RECPAC Research panel Annual 2023

The Roundtable’s joint RECPAC and Research Committee meeting included a real estate capital market panel with CRE leaders. [Left to right in photo: panel moderator Mike Lowe (Co-CEO, Lowe); Sarah Hawkins (CEO, East Region, Hines); Christoph Donner (Chief Executive Officer, America, PIMCO Prime Real Estate LLC); David Mei (Vice President, InterContinental Hotels & Resorts); Gregg Gerken (Head of Commercial Real Estate, TD Bank); and Kathy Farrell (Head of Commercial Real Estate, Truist).

A separate presentation on the economy and CRE conditions was given by CBRE’s Christopher R. Ludeman, Global President, Capital Markets and Spencer Levy, Global Client Strategist & Senior Economic Advisor.

  • Tax Policy Advisory Committee (TPAC) 

TPAC panel with Downey speaking

Speakers at the TPAC meeting included key House tax policy leaders (see photos in previous story section) and a panel on “Debt Workouts / Tax Incentives for Property Repurposing, Community Revitalization, and Housing.” [Left to right in photo above: Adam Feuerstein (Real Estate Tax Technical Leader, PwC); David Downey (President & CEO, International Downtown Association); Victoria Honard (Legislative Director, Rep. Suzan DelBene (D-WA); and Phuc Tran (Vice President, Asset Management, Jair Lynch Real Estate Partners)]

An additional panel on the “Tax Legislative Outlook and Agenda with Senior Republican Tax Staff” featured a discussion with Payson Peabody (Tax Counsel, House Ways and Means Committee Majority Staff) and Michael Gould (IRS Detailee, Senate Finance Committee) that was moderated by Russ Sullivan (Brownstein Hyatt Farber Schreck).

  • Sustainability Policy Advisory Committee (SPAC) 

SPAC meeting at 2023 Annual

SPAC members heard from featured speakers David Crane and Alejandra Nunez (see photos in previous section above), along with updates from EPA senior staff on agency projects affecting CRE assets, and a presentation of an online marketplace for Inflation Reduction Act energy tax credits. (SPAC meeting agenda)

  • Homeland Security Task Force (HSTF) 

Roundtable's Homeland Security Task Force

A joint session of The Roundtable’s HSTF and Risk Management Working Group met with Rep. Andrew Garbarino (R-NY) and were briefed by officials from the Department of Homeland Security on efforts to enhance information sharing with the CRE industry. 

Next on The Roundtable’s FY2023 meeting calendar is the Fall Meeting on October 16-17 in Washington, DC. This meeting is restricted to Roundtable-level members only. 

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Policymakers and Industry Leaders to Discuss Economic Pressures on CRE

Posted on by Trey Jackson

All-member Roundtable Meeting wide shot

Real Estate Roundtable members will meet next week to discuss policy issues, market conditions, and the significant economic pressures facing the office sector. In an interview with CNBC’s Squawk Box, Treasury Secretary Janet Yellen acknowledged the increasing stress on the office market this week, including the potential for further problems with banks with exposure to weakening CRE valuations.

Stress on Office Sector

  • On June 7, Treasury Secretary Yellen said, “Well, I do think that there will be issues with respect to commercial real estate. Certainly, the demand for office space since we’ve seen such a big change in attitudes and behavior toward remote work has changed and especially in an environment of higher interest rates.” She added that banking supervisors continue to closely monitor “a range of banks to make sure that they are adequately prepared to deal with it.” (CNBC’s Squawk Box and MarketWatch, June 7)
  • Roundtable Member David O’Reilly (CEO, Howard Hughes Corporation) was interviewed by CNBC’s Power Lunch on June 7 about the distress facing sectors of CRE, noting how capital markets are constraining borrowers from financing real estate projects.
  • The Roundtable continues to emphasize the need for federal regulators to allow more flexibility for lenders and borrowers to restructure a wave of $1.5 trillion in CRE loans maturing in the next three years. Real Estate Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) summarized the industry’s views in a May 9 MarketWatch article.

Policymakers at Next Week’s Roundtable Meeting

TPAC at SOI

  • These compelling industry issues, among others, will be the focus of The Roundtable’s Annual Meeting on June 13-14 in Washington, DC.

The Roundtable will conclude its 2023 fiscal year this month and will release its annual report to the membership in early July.

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House Republicans Unveil Tax Package; Ways and Means Chairman to Address Real Estate Roundtable Next Week

Posted on by Trey Jackson

House Ways and Means Committee Chairman Jason Smith

The House Ways and Means Committee unveiled a tax package today that includes measures impacting commercial real estate, and announced a legislative mark-up on June 13. (Politico and Tax Notes, June 9)

Committee Chairman Jason Smith (R-MO), above, Ways and Means Member Brad Schneider (D-IL), and committee staff will speak on June 14 during The Roundtable’s all-member Annual Meeting in Washington, DC at the Tax Policy Advisory Committee (TPAC) meeting.

GOP Proposal & CRE

  • Chairman Smith released a statement today about the package, which includes the following bills scheduled for markup next week:
  • The proposals relevant to real estate include:
    • Business interest deduction. The Build It in America Act (H.R. 3938) would provide a 4-year extension (through 2025) of certain, taxpayer-favorable business interest deductibility rules that applied from 2018-2021. The proposal would allow more real estate businesses to operate under the general rules of section 163(j) and its preferable cost recovery schedules.
    • Bonus depreciation.  H.R. 3938 also includes a 3-year extension (through 2025) of 100% bonus depreciation for qualifying capital investments, including equipment, machinery, and interior improvements to nonresidential property (“qualified improvement property”).  Bonus depreciation is 80% in 2023 and gradually phasing down. 
    • Opportunity Zones. The Small Business Jobs Act (H.R. 3937) would establish special, favorable rules for investments in rural opportunity zones. It would also create a new and detailed information-reporting regime for all opportunity funds.
  • The GOP package (H.R. 3938) also contains proposals that would repeal some clean energy provisions from the Inflation Reduction Act (H.R. 5376), including electric vehicle tax credits, clean energy production, and investment tax credits.

Prospects for Passage

House Ways and Means Committee hearing

  • The Ways and Means proposal may pass through committee—and possibly pass the Republican-majority House—but such a package faces steep obstacles in the Democrat-controlled Senate and with the White House.   

The proposals are a good indication of the priorities that House Republicans will bring to any bipartisan economic policy negotiations as the year unfolds. 

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