News Type: Roundtable Weekly

Roundtable Members Featured in Commercial Observer’s “Power 100” List of 2024 Most Influential Leaders in CRE

Posted on by Abigail Grenadier
Commercial Observer's Power 100 list for 2024

This week, the publication Commercial Observer released their “Power 100” list of prominent industry influencers, which includes Real Estate Roundtable Chair-Elect Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone), Chairman Emeritus (2015-2018) William C. Rudin (Co-Executive Chairman, Rudin), Roundtable President and CEO Jeffrey DeBoer, and nearly 30 other Roundtable members. (Power 100 2024 – Commercial Observer)

CRE Industry Leadership

  • Commercial Observer notes that the industry has been through a great deal of turbulence this year. “For better or worse, the biggest cliché that seeped into the commercial real estate conversation over the last year was: ‘Survive until ’25.’ This year’s honorees have shown the pluck, the determination, and the fortitude to make their ways onto this list.” (Power 100 2024 – Commercial Observer)
  • The article also notes how The Roundtable effectively represents the industry while partnering with 18 national trade associations to educate Washington, D.C. policymakers on national issues impacting the industry.

The Roundtable’s Role

Commercial Observer's Top 100 Most Influential Leaders in CRE for 2024
  • DeBoer comments within his profile, “Helping federal regulators understand the whiplash of very quickly moving from the historically long period of artificially low interest rates to a much higher interest rate environment was critical to the flexibility they ultimately provided to banks to modify or extend a great deal of the roughly $1 trillion in maturing commercial real estate loans.”
  • He also notes that significant stress on CRE remains, especially the pressures of remote work. Yet, “a systemic crisis for the banking industry and real estate markets seems to have been averted,” DeBoer states. (See DeBoer’s listing)

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EPA Seeks Building Owners’ Input on Whole-Building Energy Data

Posted on by Abigail Grenadier

A new Environmental Protection Agency (EPA) campaign seeks to assist building owners in obtaining data from utilities on energy used by tenants in leased spaces. Stakeholders are encouraged to complete EPA’s brief Whole-Building Energy Data survey by Friday, June 7.

Access to Whole-Building Data is Critical

  • A challenge shared by owners and managers across the CRE industry is obtaining leased space energy data particularly where tenants operate under “triple-net” (NNN) leases and pay their electricity, gas, and other power bills directly to utilities.
  • Difficulties accessing whole-building energy data are acute in multifamily, offices, retail, logistics, life sciences, and any building type that leases spaces to numerous tenants.
  • Nonetheless, owners are expected to capture data on tenants’ energy use as a simple matter of proper building management, and for myriad policy and regulatory reasons such as:
  • Reports to investors and lenders, including disclosures to the US-SEC and state agencies;
  • Attaining voluntary certifications such as EPA’s ENERGY STAR and NextGen building “labels”; and
  • Qualifying for the 179D tax deduction for building retrofits enacted by the Inflation Reduction Act (IRA) of 2022. [Roundtable Weekly, Jan. 20, 2023 and  IRA fact sheet, July 31, 2023]

Roundtable Advocacy

  • The Roundtable supported a Jan. 18 open letter from leaders of the EPA, Department of Housing and Urban Development (HUD), and Department of Energy (DOE) to utilities and their regulatory commissions about the national importance of obtaining tenant-level consumption data.
  • The Roundtable also submitted comments to EPA on Jan. 20 that emphasized how utilities should be eligible for EPA grants to develop technologies that provide owners of multi-tenant assets with whole-building energy data.

EPA’s Campaign

  • EPA has posted online tools including a “Multitenant Buildings and Federal Incentives” fact sheet. This resource explains the importance of whole-building data to building owners (with a focus on federal funding opportunities requiring this data), as well as solutions available to utilities to provide the data.
  • More than 90% of utilities currently do not provide whole-building energy use data. (See EPA’s data access map.) The EPA campaign aims to:
  • Gather input from building owners and others on where they need this data most and why, via the survey.
  • Create resources that support building owners in engaging utilities nationwide, including a summary of the survey’s input.
  • Organize meetings between utilities and building owners in priority locations to facilitate discussion.
  • EPA will support utilities that are interested in providing the data in line with industry best practices.

EPA’s campaign will be among the topics discussed during The Roundtable’s Sustainability Policy Advisory Committee (SPAC) Meeting on June 21 in Washington, D.C., held in conjunction with the RER’s all-member Annual Meeting on June 20.

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House Committee Passes Roundtable-Supported Yes in My Backyard (YIMBY) Act

Posted on by Abigail Grenadier
House Financial Services Committee

Yesterday, the House Financial Services Committee passed the bipartisan Yes in My Backyard (YIMBY) Act, which would help eliminate discriminatory land use policies and remove barriers to production of affordable housing. The Roundtable and 17 other national organizations submitted a letter of strong support for the bill the day before the committee mark-up. (Coalition letter, May 15 | Committee news release and video of committee mark-up, May 16)

Affordable Housing

  • The YIMBY Act (H.R. 3507) requires recipients of certain federal grants to submit public reports about their implementation of certain land-use policies, such as policies for expanding high-density single-family and multifamily zoning. The reports must detail how federal grant recipients are removing discriminatory land use policies and other barriers to constructing affordable housing, while promoting inclusive and affordable housing.
  • Committee Chairman Patrick McHenry (R-NC) expressed his support for the legislation during the May 16 mark-up. Previously, the YIMBY Act passed the House without opposition in 2020 but stalled in the Senate (S. 1688).

Roundtable Support

  • The Real Estate Roundtable and 21 other national organizations also expressed their strong support for the bipartisan bill in February to the House Financial Services Committee (Coalition letter, Feb. 20, 2024)
  • The Roundtable joined another coalition of 285 housing, business, and municipal organizations last year in a letter of support when the YIMBY Act was reintroduced. (Roundtable Weekly, May 26, 2023 and coalition letter)
  • Separately, the Wall Street Journal (Feb. 20, 2024) reported that community opposition to new projects is not just restricted to housing developments. E-Commerce hubs are also “increasingly contending with a headache” of NIMBY sentiments, as developers of warehouse and logistics properties face the conundrum of siting projects that are necessary to deliver goods to residents and consumers. (“Don’t Build That E-Commerce Warehouse in My Backyard, More Communities Say”)   

Next week, a House Energy Subcommittee will hold a hearing on “Green Building Policies: Jeopardizing the American Dream of Homeownership.” The May 22 hearing will focus on excessive regulations that constrict housing supply, including a recent Biden administration “final determination” that all new single- and multifamily homes financed with federal mortgages must be built to stringent “model energy codes.”  (Roundtable Weekly, May 3)

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Roundtable and More Than 100 Business Organizations Support Legislation to Repeal the Corporate Transparency Act

Posted on by Abigail Grenadier
U.S. Capitol - viewing upward from left

The Real Estate Roundtable and more than 100 business organizations recently expressed strong support for bicameral legislation that would repeal the Corporate Transparency Act (CTA) and its onerous beneficial ownership burdens, which took effect on Jan. 1. The Roundtable has consistently opposed the CTA’s beneficial ownership rules. (Coalition letter, April 29)

CTA Overreach

  • The Repealing Big Brother Overreach Act, introduced on April 30 by Sen. Tommy Tuberville (R-AL) and Rep. Warren Davidson (R-OH), would provide relief for small business owners from the CTA’s burdensome reporting requirements and excessive penalties. (Rep. Davidson news release, April 30)
  • The coalition’s letter noted how the CTA was designed to help law enforcement prevent money laundering by requiring shell companies to report “beneficial owners information” (BOI) to the Department of the Treasury.
  • The law defines a shell company as any legal entity with 20 or fewer employees or $5 million or less in revenues—nearly every small business in the United States.
  • The broad concept of beneficial owner includes owners, senior management, members of the board, and any employee or outside consultant exerting significant control over the businesses’ operations.

Penalties

  • Under the CTA, covered entities must report and regularly update BOI to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) or face significant fines and jail time.
  • Last month, the District Court for the Northern District of Alabama ruled the CTA as unconstitutional. However, the resulting injunction applies only to the plaintiffs in the case—members of the National Small Business Association. (Roundtable Weekly, March 8)
  • A subsequent notice from FinCEN made clear that all other covered entities are still required to file their BOI reports by the end of the year. (FinCEN’s current requirements)
  • Initial filings under the CTA began more than two months ago in accordance with the new law, yet fewer than two percent of covered entities have submitted their required information to FinCEN. One reason for this low compliance rate is that most business owners are ignorant of the new law
  • The Roundtable also joined more than 120 other national business organizations in a March 22 letter that urged Senate Banking Committee leaders to support a one-year filing delay for the new CTA beneficial ownership regulation requirements. (Coalition letter, March 19)

The Roundtable’s Real Estate Capital Advisory Committee (RECPAC) will continue to monitor developments related to beneficial ownership requirements and legal outcomes.

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Bipartisan Senate Bill Would Set Limit on Federal Employees Telework

Posted on by Abigail Grenadier

This week, Sens. Mitt Romney (R-UT) and Joe Manchin (D-WV) introduced the Back to Work Act of 2024 (S. 4266), which would require federal employees to spend 60% of their work hours in the office, a slight increase from the 50% in-office policies at many agencies. The Roundtable supports various efforts by policymakers to enact workplace return policies for federal workers. (Romney-Manchin news release and The Register-Herald)

Senate Bills

  • The bipartisan Senate bill, in addition to the40% cap on remote work within a federal employee’s pay period, would also require agencies to report on the productivity and potential negative effects of their employees’ telework arrangements. (Government Executive, April 30)
  • A separate bipartisan Senate bill introduced on April 3 would increase oversight of federal telework policies after a recent report showed government agency headquarters in Washington, DC are using an average of 12% of their office space. (Senate Committee news release and Public Buildings Reform Board report).
  • The Telework Transparency Act (S. 4043) from Sens. Joni Ernst (R-IA) and Gary Peters (D-MI), chairman of the Homeland Security and Governmental Affairs Committee, would require agencies to gather information on how telework impacts agency performance and federal property decisions. (Government Executive, April 8 and Federal News Network, April 3)

House Efforts

House Oversight and Accountablity Committee Chairman James Comer (R-KY)
  • A Biden administration official testified last week before the House Oversight and Accountability Committee that federal agency workers should spend at least half of their working hours at their office sites. (Committee hearing, April 30)
  • “[For] office workers, the place where there is consistency across agencies, we’ve been clear that our expectation is for agencies to be achieving at least 50% [in-person work], while giving them flexibility for how best to deliver based on their diverse mission space. That’s consistent with where the private sector is, and we’ll continue to adjust as needed,” said Office of Management and Budget Deputy Director for Management Jason Miller. ( Government Executive, April 30 and Miller’s written testimony)
  • Committee Chairman James Comer (R-KY) responded, “At the onset of the COVID pandemic, massive federal employee telework was a justifiable necessity, but that necessity ended a long time ago.” (Committee hearing, April 30)

The Roundtable View

Jeffrey DeBoer testifying on April 30, 2024 before House Oversight Subcommittee
  • Roundtable President and CEO Jeffrey DeBoer, above, commended the efforts of Chairman Comer before a House subcommittee hearing last week, noting that the SHOW UP Act passed over a year ago and should be enacted into law. (Roundtable Weekly, Oct. 20 and Feb. 3, 2023)
  • DeBoer emphasized during the April 30 hearing that a return to in-person work is critical for the health of our cities, local economies, tax bases, and small businesses. “While private sector office occupancy is slowly picking up, the federal office workforce is behaving as if the pandemic still exists. This is despite President Biden’s call for agencies to return to pre-pandemic workplace practices,” DeBoer testified. (Roundtable Weekly, May 3)
  • The Real Estate Roundtable has also urged members of the Senate and President Biden to end the “active encouragement of remote working for federal employees” and for federal agencies to return to their pre-pandemic workplace practices. (RER letter to the Senate, April 12, 2023 and RER letter to President Biden, Dec. 12, 2022)

The Roundtable will discuss the evolving remote work issue during its all-member June 20-21 Annual Meeting in Washington, DC.

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Roundtable’s William C. Rudin Discusses Public Policies to Strengthen CRE and the Economy

Posted on by Abigail Grenadier
Real Estate Roundtable Chairman Emeritus (2015-2018) William C. Rudin (Co-Executive Chairman, Rudin)

Real Estate Roundtable Chairman Emeritus (2015-2018) William C. Rudin (Co-Executive Chairman, Rudin) discussed commercial real estate conditions on CNBC’s Squawk Box this morning, emphasizing how public policies could help the industry meet significant challenges as it faces a wave of looming maturities in a high-interest rate environment.

Federal Action Needed

  • Rudin noted that unless a property owner has a top-tier asset with a stable long-term lease, liquidity is a major issue. “The federal government and the Federal Reserve have to keep giving the banks flexibility to be able to restructure some of the loans.” (Watch Rudin’s comments)
  • Rudin added, “The federal government should support legislation to help incentivize owners to convert obsolete office buildings to residential—and the federal government should be getting their employees back into the office space.” (Entire Rudin interview)
  • Rudin referenced recent testimony by Roundtable President and CEO Jeffrey DeBoer that addressed these issues during a House subcommitteeon the “Health of the Commercial Real Estate Markets and Removing Regulatory Hurdles to Ensure Continued Strength.” (Roundtable Weekly, May 3 and video of DeBoer’s testimony)

Roundtable Recommendations

Roundtable President and CEO Jeffrey DeBoer
  • The Roundtable’s testimony last week addressed a wide swath of concerns for owners, lenders, and local communities. DeBoer discussed specific issues with House policymakers, including market liquidity, the state of the office sector, remote work, affordable housing, and property conversions. (DeBoer’s oral statement and written testimony)
  • DeBoer also emphasized the need for lawmakers to stimulate the production of affordable housing by converting obsolete buildings into housing, increasing the Low Income Housing Tax Credit volume caps, incentivizing local zoning and permitting reforms, increasing efficiency in the Section 8 housing voucher program, and more. (Roundtable Weekly, May 3)
  • Separately, The Roundtable and a broad real estate coalition submitted a set of specific policy recommendations last week to Congress detailing a host of pending legislative and regulatory actions that would help provide housing to more Americans. (Roundtable Weekly, May 3)

The Roundtable’s all-member Annual Meeting on June 20-21 in Washington, DC will include speakers and policy advisor committee meetings focused on many of these topics.

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Roundtable Testifies on Health of CRE Markets and Recommended Policies

Posted on by Abigail Grenadier
House Oversight Committe hearing included testimony from Roundtable President and CEO Jeffrey DeBoer
Click to watch a compilation of select testimony by Roundtable President and CEO Jeffrey DeBoer

Roundtable President and CEO Jeffrey DeBoer testified this week before a House subcommittee on the “Health of the Commercial Real Estate Markets and Removing Regulatory Hurdles to Ensure Continued Strength.” (Videos of DeBoer’s testimony | Entire hearing | Select clips from the subcommittee’s wrap-up)

CRE Issues

  • The April 30 hearing before the House Oversight and Accountability Subcommittee on Health Care and Financial Services included The Roundtable’s views on market liquidity, the state of the office sector, remote work, affordable housing, and property conversions. (DeBoer’s oral statement and written testimony)
  • DeBoer emphasized that all stakeholders in the regulatory and private sectors should work together to ensure real estate continues to be a leading driver of the economy—and a primary way cities grow, business needs are met, and housing challenges are solved. (Transcript of entire hearing)
  • DeBoer also clarified, “The commercial real estate industry is not seeking a bailout of any sort.” (MarketWatch, April 30)
  • Subcommittee members heard testimony on how liquidity in CRE markets, particularly office, is an overriding industry concern. As nearly half the value of the $4.7 trillion property debt market is scheduled to mature by 2027, base interest rates have risen nearly 500 basis points in 24 months while lenders are considering reductions in their CRE portfolios. (RER’s written testimony and Mortgage Bankers Association testimony)
Real Estate Roundtable President and CEO Jeffrey DeBoer testifies before House Oversight Subcommittee on April 30, 2024
  • DeBoer urged policymakers and regulators to acknowledge that not all CRE is the same. “In the office market, there are notable differences. Some individual owners are facing considerable pressure, potentially leading to increases in mortgage defaults, foreclosures and large losses of equity. Many top-tier modern office buildings with strong ownership and workspace amenities are currently weathering the storm. There needs to be a better distinction and not a monolithic treatment of commercial real estate.”

Policy Solutions

  • The Roundtable’s policy recommendations submitted to the subcommittee address a wide swath of concerns for owners, lenders, and local communities, including:
  • Ensure federal employees return to the workplace. DeBoer testified, “The federal government should lead by example by highlighting the value of in-office work” as it is critical for the health of cities, local economies, tax bases, and small businesses. (GlobeSt, May 2)

    He also commended efforts by House Oversight Committee Chairman James Comer (R-KY) to bring federal workers back as the lead sponsor of the Stopping Home Office Work’s Unproductive Problems (SHOW UP) Act (H.R. 139). “This bill passed the House over a year ago and should be enacted into law,” Deboer said. (Roundtable Weekly, Oct. 20 and Feb. 3, 2023)
House Oversight Subcommittee wide shot
  • Encourage banks and loan servicers to extend maturing loans and restructure maturing loans with new equity—effectively making “cash-in refinances”—by converting non-performing and criticized loans to new performing loans.
  • Encourage foreign capital investment in U.S. real estate by amending or repealing the outdated Foreign Investment in Real Property Tax Act (FIRPTA).
  • Reject pro-cyclical measures such as the Basel III Endgame and other regulatory measures that will restrict credit and capital formation.
  • Stimulate the production of affordable housing. The Roundtable and a broad real estate coalition submitted a set of specific policy recommendations this week to Congress detailing a host of pending legislative and regulatory actions that would help provide housing to more Americans.

  • DeBoer informed the subcommittee that these solutions include converting obsolete buildings into housing, increasing the Low Income Housing Tax Credit volume caps, incentivizing local zoning and permitting reforms, increasing efficiency in the Section 8 housing voucher program, and more. (see Affordable Housing story below)
Left to right: Real Estate Roundtable President and CEO Jeffrey DeBoer with House Oversight Subcommittee Ranking Member Katie Porter (D-CA) and Subcommittee Chairwoman Lisa McClain (R-MI)
House Oversight Subcommittee Chairwoman Lisa McClain (R-MI), right, and Ranking Member Katie Porter (D-CA), center, with Jeffrey DeBoer
  • He added, “Rent control and eviction moratoriums are on first blush appealing concepts, but they’ve proven time and again, that they’re counterproductive to addressing the housing shortfall.”
  • Congress should also enact a time-limited tax incentive to convert older, underutilized commercial buildings to housing that would help revitalize America’s cities, accelerate the economic recovery of office buildings, and create new supplies of housing in close proximity to jobs.

Property Conversions

  • Separately, The Roundtable provided a list of specific agency actions to accelerate property conversion projects in a recent letter to Jared Bernstein, Chair of the White House Council of Economic Advisers. (Roundtable Weekly, April 19)
Doug Turner, Sr. Fellow, Housing, Center for American Progress
  • Turner stated in his written testimony and oral comments, “I want to compliment The Real Estate Roundtable for a second. They sent a letter to the Council of Economic Advisers in April and offered some very specific suggestions on how to improve the conversion process. Many of these are sensible. And they could help direct what is an evolving policy. We haven’t seen an attempt to convert this much real estate in a short period of time.” (Video clip of Turner’s full comment, or click on photo above)

The Roundtable’s all-member Annual Meeting on June 20-21 in Washington, DC will include speakers and policy advisor committee meetings focused on many of the topics discussed during this week’s House hearing. 

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Biden Administration Determines Federally-Financed Housing Construction Must Comply with Costly “Model Energy Codes”

Posted on by Abigail Grenadier

The Biden administration recently issued a “final determination” that all new single- and multifamily homes financed with federal mortgages must be built to stringent “model energy codes.” The Department of Housing and Urban Development (HUD) estimates this federal mandate on residential construction will add at least $7,229 to the cost of building a new single-family home, effectively establishing a disincentive to increase the supply of affordable housing—a federal policy strongly opposed by The Roundtable. (Bloomberg, April 25 and National Association of Home Builders (NAHB), April 26)

Federal Compliance

  • The Roundtable believes this new federal regulation will reduce the supply of housing, increase home prices and rents, and make it more difficult for buyers to assemble a down payment.

  • The “final determination” from HUD and the Department of Agriculture (USDA) is, in effect, a new federal-level building energy code that could impact approximately 150,000 units per year.
  • Although the energy code update technically takes effect May 28, the dates for “compliance” are May 2025 for multifamily, Nov. 2025 for single-family homes, and May 2026 for homes in “persistent poverty rural areas.” (NAHB, April 26)
  • This action stands in stark contrast to a set of policy recommendations submitted this week by The Roundtable and a broad real estate coalition aimed at broadening housing supply and lowering costs. (Coalition letter to House policymakers, April 29 and Affordable Housing story, above)
  • Additionally, Roundtable President and CEO Jeffrey DeBoer testified on April 30 before a House Oversight Subcommittee on the need to “create more effective incentives and programs to stimulate the production of affordable housing.” (see Policy Landscape story, above)

Varying Energy Standards

  • The HUD-USDA notice may also conflict directly with local energy codes in jurisdictions throughout the country.
  • The federal action will require all HUD- and USDA-financed new single-family construction housing to be built to the 2021 International Energy Conservation Code (IECC). All HUD-financed multifamily housing must be built to 2021 IECC or ASHRAE 90.1-2019.

Zero Emissions Buildings (ZEB)

Apartment building with carbon neutral design
  • As Bloomberg reported, the Biden administration also issued this latest update as part of a larger effort to modernize building codes to reach its climate goals. Earlier this year, the Biden administration issued a draft of a federal definition for a Zero Emissions Buildings (ZEB). (Roundtable Weekly, Jan. 5)
  • RER and Nareit submitted comments on Feb. 2 to the U.S. Department of Energy (DOE) on the draft ZEB definition, which would impose no federal mandates. (Joint comments’ cover letter and addendum | Roundtable ZEB Fact Sheet, Jan. 18 | Roundtable Weekly, Jan. 5)

The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will discuss the repercussions of the HUD-USDA rule during its next meeting on June 21 in Washington, DC.

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Roundtable and Industry Coalition Urge Congress to Enact Affordable Housing Policies and Incentives

Posted on by Abigail Grenadier
Housing Coalition April 29, 2024 joint letter to Congress

This week, The Real Estate Roundtable and a broad real estate industry coalition encouraged lawmakers to pursue bipartisan solutions that would increase the supply of affordable and market-rate housing through specific policies and programs to help communities meet their housing challenges. (Coalition letter, April 29)

Legislation and Programs

  • The coalition letter to Congress and the Biden administration detailed policy solutions to help develop and preserve housing at all price points by enacting industry-supported bills in the House and Senate, encouraging incentive-based programs, streamlining regulatory burdens, and supporting public-private partnerships.
  • The specific proposals detailed in the letter will work best when paired with state and local government policies to meet the demand for rental homes.
  • Specific policies outlined in the letter would streamline and fast-track the entitlement and approval process; provide density bonuses and other incentives for developers to include workforce units in their properties; and enable “by-right” zoning and create more fully entitled parcels.
  • Other programs and bills defer taxes and other fees for a set period of time; lower construction costs by contributing underutilized buildings and raw land; create incentives to encourage higher density development near job and transportation hubs; and expand and strengthen the Low-Income Housing Tax Credit (LIHTC) program. Legislation would also encourage Yes In My Backyard (YIMBY) policies to remove discriminatory land use policies and other barriers that depress housing production.
  • Among the key bills strongly supported by the coalition are the Affordable Housing Credit Improvement Act (S.1557 & H.R.3238), Workforce Housing Tax Credit Act (S.3425 & H.R.6686), and Revitalizing Downtowns Act (S. 2511 & H.R.419). 
  • The coalition expects the Opportunity Zones program to spur the production of new multifamily housing, but to maximize its effectiveness, the industry groups recommend Congress revitalize and enhance Opportunity Zones to incentivize rehabilitation of housing units.

Biden Administration Proposals

The White House
  • The coalition described the Biden Administration’s Housing Supply Action Plan as a thoughtful proposal that rightly acknowledges that there is no single solution to the housing shortage. The letter also expressed support for several proposals included in the President’s FY25 federal budget proposal, including proposals to expand and enhance the LIHTC, the Neighborhood Homes Credit, and increased funding for the HOME Investment Partnerships Program.
  • However, the coalition also urged Congress to reject certain tax proposals included in the administration’s FY25 budget, such as increases in the capital gains rate. These policies would directly impact the operations of housing providers, as most are structured as “flow-through” entities where earnings are passed through to owners who pay taxes at the individual level. The tax increases under consideration would reduce real estate investment and inhibit the capital flows that are so critical to the development and preservation of critically needed housing. 

It is unlikely that new housing or tax-related legislation will be enacted before the November presidential election. Proposals now under consideration may have better opportunities for advancement in a post-election lame-duck session or during a new Congress in 2025.

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IRS Regulations Clarify Rules for Transferring Energy Tax Credits

Posted on by Abigail Grenadier
IRS building in Washington, DC

On Thursday, the IRS issued a package of final regulations on the transferability of tax credits for rooftop solar and other clean energy investments under the Inflation Reduction Act (IRA). (Final regulations and IRS news release, April 25)

Transferability

  • The final rules relate to the transferability of qualifying credits to third-party credit purchasers in the context of partnerships and pass-throughs, as well as potential credit recapture events and penalties for excessive credit transfers. (PoliticoPro, April 25 and Tax Notes, April 26)
  • The ability to transfer clean energy credits allows REITs to participate in the new IRA tax incentive regime. The final regulations address several concerns raised by The Roundtable in its July 2023 comment letter, particularly in the context of REIT investments. For example, the regulations clarify that as-yet-untransferred credits are disregarded for purposes of the REIT 75% asset test.
  • Unfortunately, the final regulations did not reverse the Biden administration’s prior guidance that generally limits the ability of mixed real estate partnerships (taxable and tax-exempt partners) to maximize their credit benefits through a combination of credit transfers and direct payments.  Mixed partnerships can still claim the new tax credits, but may lose some of the financial value due to the specific tax attributes of the individual partners. 
  • Treasury indicated additional guidance is likely to help taxpayers meet the cumbersome credit registration requirements and ensure taxpayers can qualify for the underlying incentives. The IRS also updated its FAQs on tax credit transfers on April 25.  

The Roundtable’s Energy Credit Transferability/Direct Pay Working Group is analyzing the regulations and assessing their impact on CRE.

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