News Type: Roundtable Weekly

House Again Passes Cannabis Reform Legislation Providing a Safe Harbor to CRE Owners

Posted on by Trey Jackson

A Roundtable-supported bill that would allow federally regulated banks to provide mortgage and financial services to state-licensed, cannabis-related businesses (“CRBs”) without the threat of federal penalties passed the House April 19 on a strong bipartisan vote. 

The SAFE Banking Act

  • The Secure and Fair Enforcement (SAFE) Banking Act [H.R. 1996 (117)] would provide commercial property owners a safe harbor if they lease space to a CRB, whose mortgages would not be subjected to corrective action by a bank.
  • The SAFE Banking Act, which has been introduced in every Congress since 2013 by Rep. Ed Perlmutter (D-CO), passed the House multiple times in the last Congress – both as a stand-alone measure and as an addition to coronavirus relief legislation.
  • Rep. Perlmutter commented on the passage this week, “After years of bringing up this issue, I feel optimistic about the path forward for the SAFE Banking Act and, more broadly, reforms to our federal cannabis laws.” (Perlmutter news release, April 19)

Roundtable Support

  • The Real Estate Roundtable is a long-standing supporter of the SAFE Act. Roundtable President and CEO Jeffrey DeBoer noted in March 2019 letter to policymakers that the legislation, “… clarifies that banks could not take adverse action on a loan to a real estate owner solely because that owner leases property to a legitimate CRB.  The measure also protects sellers and lessors of real estate and other CRB ‘service providers’ by clarifying that proceeds from legitimate marijuana-related transactions do not derive from unlawful activity, and thus do not provide a predicate for federal criminal money laundering.”  (Perlmutter news release, March 18, 2021 and Roundtable letter, March 25, 2019)
  • The legislation is supported by a wide variety of other organizations, including the National Association of State Treasurers and Governors from 21 states and territories.  (Perlmutter news release, April 19)
  • The Roundtable also advocates that Congress should provide fuller protections to real estate business through legislation that clarifies state-compliant cannabis transactions are not illegal federal “trafficking” – and do not produce unlawful proceeds under money laundering statutes.

Cannabis and CRE

The estimated value of the U.S. cannabis industry is $17.7 billion, a substantial amount of which remains unbanked. As of January 2021, the legal cannabis industry supports 321,000 jobs across the country. (Perlmutter news release, April 19)

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Financial Regulators Call for Federal Legislation to Ease LIBOR Transition

Posted on by Trey Jackson

Rep-Brad-Sherman--Chair-x475w

Officials from the Fed and other top federal financial regulatory agencies testified on April 15 before a House Financial Services subcommittee that they support federal legislation to transition away from using the London Interbank Offered Rate (Libor) as an interest rate benchmark for US dollar contracts.  (Subcommittee hearing video and background memorandum)

Libor Deadlines

  • Libor is currently used in many outstanding financial contracts – including mortgages, student loans and derivatives – worth trillions of dollars.
  • Using LIBOR for new contracts is scheduled to end at the end of 2021. Additionally, all Libor maturities will stop in June 2023, although some will cease at the beginning of next year.
  • Rep. Brad Sherman (D-CA), photo above – who chairs the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets that held the hearing – has circulated draft legislation of a proposal entitled the Adjustable Interest Rate (LIBOR) Act of 2021 to smooth the transition away from Libor to the Secured Overnight Financing Rate (SOFR). (Pensions & Investments, April 16)
  • Lawmakers from both parties also voiced their support for federal Libor legislation during the hearing. Sherman stated that the need for federal action on Libor would test Congress to see if it can pass “necessary legislation that isn’t Democrat, isn’t Republican.” (CQ, April 15)

Roundtable Support

Libor transition to SOFR image

  • The Real Estate Roundtable and 17 national trade organizations on April 14 sent a letter of support for federal Libor legislation to leadership of the House Financial Services Committee.
  • The letter notes that the trillions of dollars of outstanding contracts, securities, and loans that use LIBOR for their interest rates do not have appropriate contractual language to address a permanent cessation of LIBOR. 
  • The coalition states in their letter that “Ineffective or ambiguous fallback provisions will result in uncertainty, litigation, and harm to consumers, businesses, and investors. Only federal legislation can uniformly address all 50 states, and only federal legislation can address issues such as the need for narrow relief from certain federal laws.”
  • On April 6, 2021, New York Governor Andrew Cuomo signed the first state-passed legislation (Senate Bill 297B/Assembly Bill 164B) intended to reduce risks associated with the transition away from LIBOR. Since New York law governs many of the financial products and agreements referencing LIBOR, the legislation will provide legal clarity for these contracts and will lessen the burden on New York courts. (Pensions & Investments, March 25) 

The American College of Real Estate Lawyers recently published a detailed overview of the Libor transition – “LIBOR’S Endgame: a Brief Pause, Not a Reprieve; a Safe Harbor, but a New Penalty” – by Joe Forte (Senior Legal Councel, AmTrust Title), who is a member of The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC). 

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Bipartisan Legislation to Build More Housing Near Transit Reintroduced

Posted on by Trey Jackson

San Diego

The bipartisan Build More Housing Near Transit Act of 2021 (H.R. 2483) – reintroduced on April 14 by Reps. Scott Peters (D-CA) and McMorris Rodgers (R-WA) – would encourage the construction of low and middle-income housing in transit-served, walkable locations. 

  • The United States is in the middle of a severe affordable housing shortage exacerbated by the economic toll of the COVID-19 pandemic. The National Low Income Housing Coalition estimates there is a shortage of 7 million affordable homes, and 10.4 million Americans spend more than half of their income on housing. 

Benefits of the Bill 

  • The Build More Housing Near Transit Act of 2021 would provide incentives for building housing developments that use less land, allow people to live closer to job opportunities and effectively reduce green house gas emissions by eliminating the need for cars.
  • The Roundtable-supported bill was initially introduced in the previous Congress, which passed the House as part of last year’s Moving Forward Act. (One-page summary, Up for Growth Action)
  • This year’s bill (H.R. 2483) would ensure the Federal Transit Administration (FTA) takes a holistic and quantitative approach to evaluating applicants seeking to build affordable housing projects near transit station areas. Specifically, the bill would make some minor, but essential, enhancements to the evaluation criteria for the FTA’s Fixed Guideway Capital Investment Grants Program, or Section 5309 grants, which fund projects like commuter rail, light rail, and bus rapid transit. 

Broad Support 

Housing Near Transit

  • The Real Estate Roundtable joined a broad coalition of housing, transportation and other organizations in an April 14 letter to the bill’s sponsors to express strong support for the legislation.
     
  • The coalition letter states, “ From encouraging more thoughtful planning, to supporting more inclusive housing policies, to enabling more efficient use of federal dollars, the Build More Housing Near Transit Act is a sound policy and the product of a collaborative process.”
  • One of the organizations includes Up for Growth Action, whose Executive Director Mike Kingsella said, “The Build More Housing Near Transit Act encourages localities to align land-use policies and affordable housing resources with federal transit investment, ensuring that transit-rich communities are accessible to more Americans.” (Rep. Peters news release, April 24) 

Original cosponsors of the legislation include Reps. Marilyn Strickland (D-WA), Derek Kilmer (D-WA), Lisa Blunt Rochester (D-DE), David Scott (D-GA), Ami Bera (D-CA), Alan Lowenthal (D-CA), and Tom Suozzi (D-NY). 

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Federal Reserve’s Robert Kaplan Discusses Economic Outlook with Roundtable; Real Estate Coalition Urges State and Local Officials to Distribute Federal Pandemic Relief Funds

Posted on by Trey Jackson

Kaplan Discussion

Federal Reserve Bank of Dallas President and CEO Robert S. Kaplan, top left in photo, on April 12 discussed a wide range of monetary and fiscal policy issues with Roundtable Chairman Emeritus Robert S. Taubman (Chairman & CEO, Taubman Centers, Inc.), top right, and Roundtable President and CEO Jeffrey DeBoer, center. (Watch the Kaplan video interview on The Roundtable’s YouTube Channel)

The Fed View

  • The remote discussion focused on the overall economy, inflation trends, affordable housing, commercial real estate, the banking industry and cryptocurrency. Among Mr. Kaplan’s key points:
    • The Dallas Fed forecast for the 2021 U.S. economy’s growth rate is 6.5 percent. 

    • The distribution of COVID-19 vaccines is outpacing the spread of the virus, positively affecting economic growth.  

    • A recovering economy follows improved health conditions, with expected increases in consumer mobility and spending.

    • A significant element driving the economic recovery is “Substantial fiscal policy, much more substantial as a percentage of GDP than we had during the Great Recession.” 
  • Kaplan acknowledged the challenge of balancing central bank monetary policies with fiscal policies enacted by lawmakers. “Anytime there’s fiscal actions or other changes, you have to keep recalibrating that balance. There’s no textbook for this because we haven’t been through a period where we were shut down and we’re now reopening … and there’s no precedent in recent years of fiscal policy that’s this size of GDP,” Kaplan said.  (Video of the discussion)
  • He commented about the yield on U.S. Treasuries, which rose to 1.77% last month. “As we recover, it wouldn’t surprise me for it to drift higher, the 10 year,” Kaplan said, adding, “There’s no shortage of capital” to buy Treasuries. (BGov, April 9)
  • Kaplan also addressed the economic trends monitored by the Dallas Fed, reopening progress and CRE debt exposure to banks.  

Pandemic Relief Funds & Distribution 

treasury-department-building_x475w

  • Significant fiscal policy enacted by Washington lawmakers last month authorized hundreds of billions in pandemic relief under the American Rescue Plan Act of 2021 to households, small businesses, and the hospitality industry suffering from the economic impact of COVID-19. (Roundtable Weekly, March 12, 2021)
     
  • The Wall Street Journal reported on April 13 that state and local authorities are overwhelmed with “how to allocate $25 billion in federal rental relief, leaving many tenants and landlords waiting weeks or months for their share.”
     
  • The Roundtable is part of a broad real estate coalition that wrote on April 15 to state, county and municipal officials, urging them to distribute the allocated federal funds as soon as possible. (Coalition letter)
     
  • The coalition letter emphasized the need for elected state and local leaders “to quickly and fully allocate available American Rescue Plan federal funds to provide assistance to renters, consumer-facing small businesses, and impacted industries such as retail, tourism, travel, and hospitality that are having trouble paying rents, mortgages or remaining viable enterprises due to the COVID-19 pandemic.”
     
  • The letter adds, “Such assistance would make a big difference in the lives of thousands upon thousands of COVID-19 affected renters and businesses in their cities, counties, and states – and would also provide stability to the buildings and communities in which they live.” 

The Treasury Department continues to implement pandemic recovery programs, including the State and Local Fiscal Recovery Fund, State Small Business Credit Initiative, and renter and homeowner assistance. Treasury Secretary Yellen  and White House Rescue Plan Coordinator Gene Sperling met yesterday with members of the National Governor’s Association Executive Committee to determine the most efficient and effective way to get federal resources to states. (Treasury Dept readout, April 15) 

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President Biden Signals Flexibility on Infrastructure Plan as GOP Senators Craft Alternative Approach; SALT Repeal May Influence Negotiations

Posted on by Trey Jackson

Biden White House Meeting

President Joe Biden this week met with a bipartisan group of policymakers about the details of his multitrillion infrastructure proposal as a bloc of moderate GOP senators stated they are developing a far less expensive counterproposal that would pare back the definition of what comprises “infrastructure” and fund it with unspecified user fees. (Washington Post, April 14)

  • Sen. Mitt Romney (R-UT), who is involved in talks about an alternative infrastructure plan, said, “The pay-for ought to come from the people who are using it,” suggesting that a transportation mileage charge could be applied to electric vehicle drivers. “Clearly by bringing in additional revenue from actual miles driven is going to create some additional revenue,” Romney said.  (Politico Pro, April 14)
  • Rep. Donald  Payne, Jr., chairman of the House Transportation Subcommittee on Railroads, attended the White House meeting where President Biden said he was “prepared to negotiate” on his new infrastructure-focused economic plan – and expressed support for the Gateway project, a major rail tunnel project between New York and New Jersey. (BGov, April 12)

SALT Caucus

SALT Caucus

  • An effort by members of Congress to repeal the cap on state and local tax deductions (SALT) is adding to the complexity of negotiations over the White House infrastructure proposal. Yesterday, a bipartisan congressional “SALT caucus” was launched to push for the full repeal of the $10,000 limit on state and local deductions, which was enacted as part of the 2017 Republican tax overhaul. (Bloomberg, April 15)
  • It is unclear how many members of the bipartisan caucus would link their support for Biden’s infrastructure proposal, and its increased corporate taxes, to action on the SALT cap.  Reps. Josh Gottheimer (D-NJ) and Tom Suozzi (D-NY), who co-chair the SALT caucus, said they “will not accept any changes to the tax code that do not restore the SALT deduction.” (CNBC, April 15)
  • Additionally, several New York Democrats sent a letter to House leadership on April 13 urging for a full repeal. “We will not hesitate to oppose any tax legislation that does not fully restore the SALT deduction,” according to the letter. (BGov and Wall Street Journal, April 13)

Energy-Efficient Buildings

  • The White House’s infrastructure plan and the importance of energy efficient buildings was noted in a recent New York Times interview with White House National Economic Council Director Brian Deese.
  • Deese stated during the April 9 Ezra Klein Show (podcast), “… it’s been true for multiple years that energy efficiency upgrades in commercial buildings should just happen, and they’re not.  The built environment and industry get less attention but are extraordinary opportunities. And this [infrastructure] plan has a very significant investment in upgrading buildings and making them more energy efficient.”
  • He added, “The jobs doing that happen all around the country. They’re construction jobs, building trades. A lot of it is actually high-value investment, where providing an incentive could actually unlock a bunch of private capital to invest, particularly in the commercial building space.”
  • Deese is scheduled to participate in next week’s Roundtable Spring Meeting, along with U.S. Department of Transportation Secretary Pete Buttigieg. The remote discussions will be available on The Roundtable’s YouTube channel by April 21.

The Roundtable is part of the Build by the 4th coalition, led by the U.S. Chamber of Commerce, which encourages the Biden Administration and Congress to pass a comprehensive infrastructure deal by Independence Day 2021.

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Administration Outlines FY 2022 Budget, Plans Executive Order on Climate-Related Risks for Public and Private Financial Assets

Posted on by Trey Jackson

Biden Budget April_9_2021

The Biden administration today released its $1.52 trillion discretionary spending request for the coming fiscal year, which starts Oct. 1, 2022. This initial budget request outlines President Biden’s priorities and agenda for the coming year, but does not include any plans for raising revenue or tax policy changes. (Full budget text and news release summary)

Tax Details in Spring

  • Today’s “skinny” budget will be followed in late spring by a formal budget with more detailed requests for mandatory spending and tax policy proposals.  (CQ, April 7)
  • The budget proposal would boost current funding levels for nondefense spending by 16 percent and limit increases in defense spending to 1.7 percent. (CQ, April 9)
  • Among the specific agencies affected, the Environmental Protection Agency budget would increase $2 billion, and the Housing and Urban Development Department would receive a $9 billion boost. (New York Times and USA Today, April 9 )

Budget & Climate

San Francisco landscape wildfire smoke

  • The administration’s is also expected to address risks to financial stability posed by climate change in its long-term budget planning. Bloomberg reported this week that Biden will soon issue an Executive Order to develop a plan on climate-related risks for public and private financial assets.
  • The Executive Order would come as policymakers and the private sector debate how the financial industry should prepare for environmental threats – and the information companies should provide to investors about those risks.
  • The strategy would be developed within 120 days of the Order by National Economic Council Director Brian Deese and National Climate Advisor Gina McCarthy, in coordination with Treasury Secretary Janet Yellen. (Bloomberg, April 8)

Secretary Yellen is currently working on a separate report on government-wide efforts to address climate-related financial risks with the Financial Stability Oversight Council, which includes the Federal Reserve and the Securities and Exchange Commission. (Politico, March 31)

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Roundtable Comments on “Model” Local Ordinance Proposing Efficiency and Emissions Requirements on Buildings

Posted on by Trey Jackson

Honolulu

The Real Estate Roundtable submitted comments on April 6 regarding a “model” law developed for cities, counties, and states considering building “performance standards” for energy consumption and GHG emissions. 

Building Performance Standards (BPS): 

  • The model ordinance has been developed by the Institute for Market Transformation (IMT) – a D.C.-based policy organization that coordinates with state and local bodies on energy- and climate-related regulations. (IMT’s model ordinance, BPS resources, and blog post, Creating Real-Estate Friendly Building Performance Standards, Jan 21, 2021)
  • A task force of The Roundtable’s Sustainability Policy Advisory Committee (SPAC) convened to respond to IMT’s proposed law. According to the letter, a “whole-of-economy approach must drive businesses to take bolder actions within their control to minimize their carbon footprints while operating profitably, meeting investors’ demands, and equitably creating jobs in their communities.”
  • “Real estate developers, owners, managers, and financiers – along with building tenants, occupants, public buildings, and … the power supply, transportation, and manufacturing sectors – all have shared obligations to address climate change,” The Roundtable writes.

Roundtable Comments — Talking Points:

Bloomberg Center Cornell Tech campus

  1. BPS laws must rely on consistent standards, methods, and data that reflect the best available government and industry practices. Uniformity is critical to avoid a divergent “patchwork” of state and local laws that would unduly complicate building owners’ compliance and regulators’ enforcement.
  2. No BPS law should mandate building owners to reduce emissions from sources beyond their control.  Owners should not be saddled with responsibilities to “clean-up” the electric grid, district thermal systems, and other community-wide power infrastructure that they do not manage or control.
  3. Any BPS law should include financial assistance to help all regulated owners defray the significant capital expenses needed to bring buildings into compliance.
  4. BPS laws should encourage investments in existing buildings and allocate compliance burdens based on tenants’ and occupants’ energy usage.

  5. The least efficient buildings and communities are frequently the most distressed buildings and communities. Added regulatory costs from BPS mandates could disproportionately affect housing affordability and economically distressed neighborhoods on the “frontlines” of climate change.

Why It Matters: 

Leadership - RER's SPAC

  • “RER members must engage vigorously on climate and energy issues,” said SPAC Chair Anthony E. Malkin, above left, (Chairman, President and CEO, Empire State Realty Trust). “We have the facts, the practice, and the experience to inform the thinking of cities, states, federal officials, and NGOs as they develop goals to reduce greenhouse gas emissions and stride toward a clean energy economy. The field on which the game is played, and the rules themselves, are in constant flux. RER member engagement has never been more important to offer policy recommendations that create green jobs while modernizing U.S. buildings and power infrastructure.” 
  • “It is critical for Roundtable members to have a seat at the table as cities and states consider laws that set efficiency and emissions standards on buildings,” said SPAC Vice Chair, Daniel Egan, above right, (Senior Vice President, Vornado Realty Trust). “Policy makers must design climate programs that encourage owners to invest in their buildings to improve performance, while incentivizing our industry with market-based solutions that can help increase the nation’s supply of clean, renewable energy.”  

State and local jurisdictions have been marching forward with regulatory mandates on buildings to address energy and GHG emissions, which prompted The Roundtable to comment on IMT’s model ordinance. While Democrats in the House of Representatives have offered omnibus climate legislation with provisions that would affect U.S. real estate (see the CLEAN Future Act, H.R. 1512), it faces an uphill battle in the Senate. (Roundtable Weekly, March 5)   

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Biden Administration Details Tax Proposals to Fund Infrastructure Package

Posted on by Trey Jackson

The White House - roses

The Biden administration this week released additional details on its proposals to raise corporate taxes to pay for its massive $2.3 trillion economic growth and infrastructure proposal.

Infrastructure & Taxes

  • President Biden, anticipating Congress’ return next week to begin deliberations on his proposal, stated, “Debate is welcome. Compromise is inevitable. Changes are certain. Inaction simply is not an option.” (White House remarks, April 7)
  • The administration aims to raise $2.5 trillion to pay for its sprawling “American Jobs Plan” by increasing the corporate tax rate to 28 percent from 21 percent, imposing a strict new minimum tax on global profits, and eliminating incentives to shift profits overseas. (New York Times, April 7)
  • The proposed taxes to fund the infrastructure investments were detailed this week in a Wall Street Journal op-ed by Treasury Secretary Janet Yellen – “A Better Corporate Tax for America” – and in Treasury’s report, “The Made in American Tax Plan.”
  • According to an April 8 Wall Street Journal report, the infrastructure proposal includes at least $5 billion for an affordable-housing grant program that would encourage local jurisdictions to relax zoning rules and restrictions on new construction.  The new competitive grants for cities and localities would seek to eliminate exclusionary zoning policies such as minimum lot sizes, mandatory parking requirements and density restrictions.
  • The Journal article quotes a recent Urban Institute brief: “There are so many decisions made at the local level that can impede the development of affordable housing that federal policy makers should push communities to reorganize their approach to development from the ground up.”
  • The Roundtable has long encouraged federal agencies to leverage economic development and infrastructure funds to discourage exclusionary zoning tactics. Bills such as the Yes in My Backyard Act  and the Build More Housing Near Mass Transit Act would require state and local governments to plan for and encourage high-density and multifamily development when they seek grants from US-HUD and US-DOT. (Roundtable Weekly, March 6, 2020 and February 28, 2020)

What’s Next:

U.S. Capitol with flag

  • Democrats are weighing whether to advance the Biden infrastructure plan under the same “reconciliation” budget process that was used to pass the March $1.9 trillion pandemic relief package by a simple majority vote – thereby bypassing the 60-vote requirement typically needed to advance most legislation in the 50-50 Senate.
  • Senate Parliamentarian Elizabeth MacDonough this week issued an opinion that may allow Democrats to pass additional, large-scale bills with no Republican support before the midterm elections. The sparse April 5 ruling, according to a Democratic spokesperson, has “some parameters [that] still need to be worked out.” The ruling does not specify the types of reconciliation bills that could be considered or how many times the maneuver would be allowed. (Politico, April 7 and CQ News, April 8)
  • House Speaker Nancy Pelosi (D-CA) yesterday said, “If [Democrats] have to go to reconciliation, that’s a lever, but I hope it’s not something that we need to do.” (Roll Call, April 8)
  • Pelosi added that the House could pass the infrastructure package by the July 4 recess, followed by the Senate before the August recess. (Bloomberg, April 8)

Pelosi also said she expects the White House in the coming months to introduce a separate, multi-trillion “American Families Plan” focused on expanded family support benefits, including child care and health measures. That plan could be pared with significant changes to individual taxes, including capital gains.

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Congressional Progressives Propose Legislation to Tax Unrealized Gains at Death as Republican Bill Seeks Permanent Repeal of Federal Estate Tax

Posted on by Trey Jackson

Sen. Chris Van Hollen (D-MD)

Several progressive members of Congress, led by Senator Chris Van Hollen (D-MD), above, on March 29 proposed legislation that would tax appreciated and unrealized capital gains when property is transferred at death or by gift. Meanwhile, Senate Republicans on March 9 reintroduced legislation to repeal permanently the federal estate and gift tax, commonly known as the “death tax.” (Wall Street Journal, March 29 and Fox Business, March 11).

Stepped-Up Basis

Why It Matters

Philadelphia, PA skyline

  • Repealing stepped-up basis and treating death as a taxable event would be particularly burdensome for real estate owners because of the illiquid and indivisible nature of real assets relative to a holdings like a portfolio of publicly traded stock. 
  • The legislation could force owners to sell properties if no cash income is available to pay the tax.  The bill would also pull capital out of real estate markets at a time when it will be needed to help repurpose existing properties in the post-pandemic era. 

Estate Tax Repeal 

  • Senate Republicans on March 9 unveiled the Death Tax Repeal Act of 2021 (S. 617) to permanently repeal the federal estate tax. The legislation, introduced by Sens. John Thune (R-SD.) and John Kennedy (R-LA) would eliminate the federal tax levied on estates worth more than $11.7 million after the death of the owner. (Sen. Kennedy news release)
  • Reps Jason Smith (R-MO) and Sanford Bishop (D-GA) on March 10 introduced companion legislation in the House. (Rep. Smith news release)
  • The Real Estate Roundtable, as part of the Family Business Estate Tax Coalition (FBETC), this week wrote to Sen. Thune and the House co-sponsors in support of S. 617 and the permanent repeal of the estate tax. (Coalition letter, April 2) 
  • The letter states that the FBETC “… supported the temporary estate tax relief in the Tax Cuts and Jobs Act (TCJA), which doubled the exemption to approximately $11.7 million for tax year 2021 and indexed future increases for inflation through 2025. However, without further congressional action, the temporary increase in the exemption amount will expire… repeal is the best solution to protect all family-owned businesses from the estate tax.” 

Proposals to raise the tax burden on appreciated property at death could be considered in the next wave of domestic economic legislation.  President Biden is expected to roll out more tax proposals aimed at upper-income taxpayers over the next few weeks. 

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Bipartisan House Bill Encourages Equipment Upgrades in Commercial and Multifamily Buildings

Posted on by Trey Jackson

Capitol Dome Stormy weather

Roundtable-supported legislation that would accelerate depreciation for high performance upgrades in commercial and multifamily buildings – creating jobs and reducing the built environment’s carbon footprint – was reintroduced this week by House Ways and Means Committee members Brad Schneider (D-IL) and Tom Rice (R-SC).

The E-QUIP Approach

  • The bipartisan Energy Efficient Qualified Improvement Property (E-QUIP) Act (H.R. 2346), originally introduced last December by Reps. Schneider and Rice, encourages energy efficiency building retrofits to replace aging and obsolete HVAC, lighting, windows, roofs, and windows with state-of-the-art systems.
    • The Real Estate Roundtable has rallied a unique coalition of environmental, manufacturing, and business groups to support the bill. The coalition sent an April 1 letter to members of the House Ways and Means Committee, and the Energy and Commerce Committee, to enact the E-QUIP Act and include it in any infrastructure package.
    • Roundtable President and CEO Jeffrey DeBoer stated, “The E-QUIP Act checks all of the boxes for smart energy, climate, and economic policy. Installation of high performance HVAC, lights, windows, and other building components will modernize aging buildings, save businesses billions of dollars on their energy bills, create tens of thousands of jobs, and avoid carbon emissions equal to taking 22 million cars off the road for a year.”
    • DeBoer added, “The E-QUIP Act can also encourage state-of-the-art retrofits that enhance outdoor air ventilation rates — a key practice to improve a building’s health and indoor air quality, according to the best available science.”

    Support for an Energy Efficient Economy

    American Council for an Energy-Efficient Economy E-Quip

    • The American Council for an Energy-Efficient Economy (ACEEE) has  prepared a fact sheet and analysis that estimates the climate, energy, and jobs benefits of E-QUIP Act retrofit projects: 
      • 130,000 net additional job-years.
      • $15 billion energy bill savings.
      • 100 million tons of carbon dioxide emissions avoided – or the equivalent emissions from 560,000 rail cars full of coal or taking 22 million cars off the road for one year.
    • Key elements of the E-QUIP Act are:
        
      • Elective 10-year, straight-line cost recovery period for a new category of depreciable property that meets the E-QUIP Act’s high-performance standards.
      • Available to replace or retrofit systems and components in buildings that are at least 10 years old.
      • Certification requirement that E-QUIP is designed, installed, operated, and maintained by credentialed professionals.
      • Five-year duration of incentive.
    • A uniform 10-year depreciation period for components that meet E-QUIP standards would simplify the current cost recovery “patchwork” in the federal tax code for building investments.

    The E-QUIP Act and advocacy efforts to include it as part of infrastructure legislation will be a focus of discussion during The Roundtable’s April 20 (Remote) Spring Meeting.

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