News Type: Roundtable Weekly

House Republicans Urge Biden Administration to Preserve Like-Kind Exchanges

Posted on by Trey Jackson

A group of 88 House Republicans, led by Rep. Randy Feenstra (R-IA), above, sent a letter to President Joe Biden on Aug. 3 urging him “not to damage the livelihood of farmers everywhere by repealing or changing like-kind exchanges.” ( Coalition letter and Feenstra news release)

Agriculture Sector Impact 

  • Like-kind exchanges (LKEs) allow real estate, farming, and other businesses to defer capital gain when exchanging real property used in a trade or business for property of a like kind. Like-kind exchanges also help businesses to grow organically, with less debt, by reinvesting gains on a tax-deferred basis in new and productive assets.
  • President Biden has proposed restricting the use of LKEs by limiting deferred gain in any one year to no more than $500,000 for single taxpayers and $1 million for married taxpayers. (Treasury Department’s Summary of Revenue Proposals, “Green Book” budget documents, and Roundtable Weekly, April 30)
  • The coalition of House policymakers emphasized in their Aug. 3 letter how LKEs allow farmers and other small business owners to improve their operations and invest in better income-producing properties. The letter noted that four out of five individuals who utilize these tax deferments are qualified as small investors by the IRS.
  • The letter stated, “For the agricultural community, a cap on like-kind exchanges would limit farmers’ ability to improve their operations through combining acreage, purchasing more productive land, and mitigating environmental impacts. Further, capping like­kind exchanges could make it more difficult to restructure businesses so that young or beginning farmers can join operations. Retiring farmers could be prevented from using like-kind exchanges to exchange their farm or ranch for other real estate, allowing for the next generation to take over, without depleting their life savings.”
  • The 88 policymakers also commented how the negative impact of the administration’s LKE proposal would radiate outward from individual farm owners and agricultural investors into the larger agricultural sector and the national economy at large. 

Roundtable’s Strong Support for LKEs 

  • On May 27, a broad business coalition that included The Real Estate Roundtable held a virtual briefing for members of Congress and their staff on the longstanding economic importance of LKEs – and detailed the potential negative unintended consequences of limiting section 1031. (Roundtable Weekly, May 28)
  • The briefing, moderated by Roundtable President and CEO Jeffrey DeBoer, included expert speakers and featured recent research into the macro-economic impact of LKEs. (See “The Tax and Economic Impacts of Section 1031 Like-Kind Exchanges in Real Estate” by Professor Milena Petrova and Dr. David Ling)
  • On May 18, The Roundtable and others submitted detailed comments to the Senate Finance and House Ways and Means Committees on like-kind exchanges and other pending tax issues. (Roundtable Weekly, May 21).  Additionally, in March, The Roundtable and 30 national real estate, housing, environmental, farming, ranching, and forestry organizations wrote to key policymakers to underscore the vital importance of real estate like-kind exchanges. (Roundtable Weekly, March 19)

The coalition “1031 Builds America” provides an online method for stakeholders to share their experiences with LKEs with members of Congress, and urge them to preserve Section 1031. 

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Imminent Expiration of CDC Eviction Moratorium Prompts White House, FHFA Actions to Protect Tenants; Real Estate Groups Counter 11th Hour Attempts at Extension

Posted on by Trey Jackson

CDC signage Atlanta

The Biden Administration took steps this week to protect tenants at risk of eviction for non-payment of rent. (PoliticoPro, July 28). Announcements from the White House and the Federal Housing Finance Agency (FHFA) were prompted by the anticipated July 31 expiration of the national moratorium on residential tenant evictions – first enacted by Congress in March 2020, then extended by the Centers for Disease Control (CDC), and scheduled to sunset tomorrow. (Roundtable Weekly, June 25)

Congressional Action     

  • In response to the CDC moratorium’s expected lapse, Congressional Democrats today pursued an 11th hour attempt to resuscitate the eviction ban through legislation. The Hill reported late today that efforts to extend the federal moratorium “fell far short amid resistance from moderates and housing industry groups.” House Speaker Nancy Pelosi (D-CA) subsequently urged the CDC to unilaterally extend the current moratorium again. Politico reported earlier today that House Democrats were considering extending the moratorium to mid-October – and that there was not a plan yet to get the vote through Senate Republicans.

  • A coalition of 15 national real estate organizations – including The Real Estate Roundtable – sent a letter today to all members of Congress strongly opposing another moratorium extension. The joint letter called for policymakers to focus on disbursing the vast unspent sums of federal rental assistance appropriated in prior COVID-19 bills – instead of destabilizing rental markets with a new legislative eviction moratorium.
  • Roundtable President and CEO Jeffrey DeBoer commented, “In the first half of this year, Congress rightly appropriated more than $45 billion for rental assistance, but so far states have distributed less than 10 percent of that assistance. If the moratorium is extended, it needs to be more tightly targeted to people in distress due to the pandemic, including housing providers.”

Federal Actions Supporting Tenants 

FHFA logo

  • The FHFA announced on Wednesday that owners of all multifamily properties with a federally-backed mortgage must provide a 30-day written notice to a tenant before requiring removal for not paying rent. 
  • [Most states already have laws requiring some “wait period” or notice to tenants before eviction proceedings can commence, though typically not as long as 30 days according to this summary.]
  • The FHFA’s notice requirement had been limited to situations where a landlord received mortgage forbearance protections. Now, the FHFA requires the tenants’ notice regardless of whether the landlord benefits from delayed loan payments – where the debt is backed by Fannie Mae, Freddie Mac, or a federal agency. (See FHFA fact sheet).
  • The White House on June 24 released its fact sheet, “Initiatives to Promote Housing Stability by Supporting Vulnerable Tenants and Preventing Foreclosures.” The fact sheet also references “strict adherence” to tenant notice requirements and offers further measures such as:
    • Accelerating disbursement of Emergency Rental Assistance (ERA) to get the funds appropriated by Congress into the hands of landlords and tenants;
    • Providing a streamlined payment option so large landlords can receive “bundled” payments from multiple eligible tenants; and
        
    • Urging state and local courts to participate in “eviction diversion efforts” that encourage landlords and tenants to access ERA funds before litigation is pursued.   
  • The White House released another fact sheet on Wednesday summarizing how private sector companies, non-profits, and government agencies are notifying Americans about available emergency rental assistance – including a national “rental assistance finder” produced by the Consumer Financial Protection Bureau (CFPB) that helps tenants apply for ERA funds in their localities.

Rental Assistance Delays 

Treasury Dept building close

  • Severe delays in getting federal rental aid to those in need have added another layer of pressure on tenants at risk of eviction – as well as on housing providers who are unable to collect rent, yet remain responsible for taxes, maintenance and other property costs. (Wall Street Journal, July 22)
  • Only 6.5 percent of $46.5 billion allocated by Congress for rental aid has found its way to state and localities in the first half of 2021, according to a recent Treasury Department report.  (Washington Post, July 21 and Bloomberg and July 22)
     
  • Treasury’s report also notes some progress – more than $1.5 billion in rental assistance reached households in June, which is more than all of the money disbursed between January and May combined. 
     
  • The Roundtable is part of a broad real estate coalition that has consistently urged state, county and municipal officials to distribute the billions in allocated federal funds as soon as possible. (Coalition letter, April 15)
  • The National Multifamily Housing Council (NMHC) on July 26 urged the leadership of the Senate Banking and House Financial Services Committees to push for the swift distribution of rental assistance funds.  
  • Additionally, a recent NMHC survey of apartment owners and managers shows that 100 percent of multifamily firms surveyed worked with residents facing financial hardships since the onset of the COVID-19 crisis. 

Biden’s “Hands-Tied” by SCOTUS

The U.S. Supreme Court building

  • A U.S. Supreme Court majority indicated last month that the CDC overstepped its authority in issuing the federal-level eviction ban, with Justice Kavanaugh writing that “clear and specific” legislation from Congress would be necessary to extend the moratorium past July 31.  (New York Times, June 30)  The Biden Administration reportedly “found its hands to be tied” by the high Court’s decision. (PoliticoPro, July 29)
  • The White House issued a July 29 statement, noting, “President Biden would have strongly supported a decision by the CDC to further extend this eviction moratorium to protect renters at this moment of heightened vulnerability. Unfortunately, the Supreme Court has made clear that this option is no longer available.”
  • The statement also requested the U.S. Departments of Housing and Urban Development, Agriculture, and Veterans Affairs to extend their respective eviction moratoria through the end of September “to provide continued protection for households living in federally-insured, single-family properties.” 

Yesterday’s statement from the administration sparked today’s last-minute scramble in Congress. White House Press Secretary Jen Pskai said, “In light of the Supreme Court’s ruling, the President calls on Congress to extend the eviction moratorium to protect such vulnerable renters and their families without delay.” 

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Senate Advances Trillion Dollar Bipartisan “Physical” Infrastructure Deal as Democrats Push Separate $3.5 Trillion “Human” Infrastructure Package

Posted on by Trey Jackson

Capitol building sun and green

The Senate on July 28 voted to advance a $1 trillion infrastructure package that would allocate $550 billion in new spending toward transit, utilities and broadband. The plan, which has not been translated into final legislation yet, was the result of a breakthrough in month-long negotiations between a bipartisan group of senators and President Biden. (White House Fact Sheet, July 28 | E&E Daily, July 29 | Roundtable Weekly, June 25) 

Historic Step Forward 

  • The Senate vote of 67-32 included the support of 17 Republicans and all 50 Democrats – and kick-started the process of debating and amending the measure, which could draw enough support to pass the Senate next week. (BGov, July 29)
  • Real Estate Roundtable President and CEO Jeffrey DeBoer yesterday stated, “The Real Estate Roundtable strongly supports the bipartisan agreement on infrastructure reached by the White House and senators this week – and we applaud the continued hard work of policymakers to work across the aisle to create legislation that will revitalize our economy and keep us globally competitive. The trillion-dollar+ infrastructure package is a positive, historic step forward. We look forward to its enactment and the well-paying jobs it will create, the economic growth it will spur on, and how it will benefit our long-term national competitiveness and productivity.” (Read DeBoer’s full statement, July 29)
  • Roundtable Chair John Fish (Chairman & CEO, Suffolk) and 11 other Roundtable members joined more than 100 business leaders in a July 26 letter to Congress that urged policymakers to pass the bipartisan infrastructure package. (The Hill, July 28)
  • The letter noted, “New jobs generated by investment in the nation’s mass transit, roads, bridges, airports, broadband and other essential assets will create training and re-employment opportunities for millions of Americans who lost jobs during the pandemic. The public-private initiatives that are created will accelerate recovery from losses suffered due to COVID-19.” (Business leaders’ joint letter, July 26) 

Infrastructure Package & CRE 

Philly evening bridge

Pay-Fors & Timing 

Sen. Chuck Schumer Hudson Yards Subway station

  • Miller & Chevalier reported on July 28 that the bipartisan plan’s wide-ranging infrastructure investments would be paid from a variety of sources, including: 
    • certain unused COVID relief dollars;
    • certain states returning unused federal unemployment insurance aid; 
    • sales of future spectrum auctions;
    • extending fees on GSEs; economic growth resulting from a 33 percent return on investment in long-term infrastructure projects; and 
    • information reporting requirements related to cryptocurrency.
  • Senate Majority Leader Chuck Schumer (D-NY), above, would need 60 votes in the upper chamber to avoid a Republican filibuster and pass the Bipartisan Infrastructure Investment and Jobs Act. Those votes would likely come from all 50 members of his caucus and at least 10 Republicans. (PoliticoPro, July 29)
  • “My goal remains to pass both the bipartisan infrastructure bill and a budget resolution during this work period. Both,” he said. “It might take some long nights. It might eat into our weekends. But we are going to get the job done, and we are on track.” Although the Senate’s recess is scheduled to start Aug. 9, Schumer has said he could keep the chamber in session longer to pass the measures. (New York Times, July 29)  

“Human” Infrastructure Package 

DC monuments night

  • The Biden administration’s separate $3.5 trillion “human infrastructure” plan to invest in child care, paid leave, education and measures to curb climate change is traveling along a parallel budget “reconciliation” path – a process that would require the vote of every Senate Democrat to pass the bill without any Republican votes. (CNBC, July 29)
  • Senate Budget Committee Chairman Bernie Sanders (I-VT) on July 28 said he has the 50 votes to pass a broad budget resolution next week that would lead to consideration of the package, according to Bloomberg. Sanders added, “It is my absolute conviction that you’re not going to have a bipartisan bill unless you have a reconciliation bill of $3.5 trillion.”
  • However, Sen. Kyrsten Sinema (D-AZ) – the lead Democratic negotiator on the bipartisan infrastructure bill – this week told the Arizona Republic, “I have also made clear that while I will support beginning this process, I do not support a (reconciliation) bill that costs $3.5 trillion – and in the coming months, I will work in good faith to develop this legislation with my colleagues and the administration to strengthen Arizona’s economy and help Arizona’s everyday families get ahead.” (CNN, July 28) 

In the House of Representatives, Speaker Nancy Pelosi (D-CA) has insisted she will not consider either the infrastructure bill or budget measure until the Senate passes both. (CNBC, July 29) 

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House Financial Services Committee Approves Bill to Transition Away from LIBOR

Posted on by Trey Jackson

Rep. Brad Sherman table mic

Legislation advanced this week by the House Financial Services Committee would help smooth the transition away from the London Interbank Offered Rate (LIBOR) as a reference rate for financial contracts. (House Financial Services Committee markup documents and videos, July 28 | Rep. Brad Sherman (D-CA), above)

Why It Matters 

  • Libor is currently used in many outstanding financial contracts – including commercial real estate debt, mortgages, student loans and derivatives – worth an estimated $223 trillion. (Committee memo, page 6)
  • The use of LIBOR for new contracts is scheduled to terminate at the end of 2021. Additionally, all LIBOR maturities will stop in June 2023, although some will cease at the beginning of next year.
  • The Adjustable Interest Rate (LIBOR) Act of 2021 was sponsored by Rep. Brad Sherman (D-CA) – chair of the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets. The bill would authorize the Federal Reserve to issue rules to “establish a clear and uniform process on a nationwide basis for replacing LIBOR in existing contracts,” with replacement benchmark rates. An amendment to the legislation was also approved during the Financial Services Committee July 29 markup.
  • The bill would also provide a safe harbor for market participants switching existing LIBOR-referencing financial contracts over to a replacement benchmark for debt instruments. This would apply to instruments such as floating-rate bonds, which require all parties to agree to terms that cannot easily be changed.  The bill also includes a federal preemption.
  • Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell recently told the Financial Stability Oversight Council that Congress urgently needed to pass legislation to allow for a smooth transition away from LIBOR. (Bloomberg, June 11)
  • Additionally, the Fed’s Alternative Reference Rates Committee (ARRC) yesterday endorsed use of Secured Overnight Financing Rate (SOFR) Term Rates, a forward-looking version of the LIBOR alternative for financial instruments. (Bloomberg, July 29)
  • As Federal Reserve Vice Chair for Supervision Randal Quarles continues to encourage the termination of the use of LIBOR by year-end, the House bill and the ARRC endorsement of SOFR Term Rates are intended to provide market participants with the tools they need to transition away from LIBOR.  

Roundtable Support 

House Financial Services Committee

  • The Real Estate Roundtable and 17 national trade groups on July 27 submitted a letter to House Financial Services Committee policymakers in support of legislation to address “tough legacy” LIBOR contracts during the transition away from the benchmark.  (Joint Trades’ Letter on Libor)
  • The joint letter noted that currently, there is no realistic ability to modify legacy contracts that cannot be converted to a non-LIBOR rate or be amended with adequate fallback language before all LIBOR maturities are scheduled to stop in June 2023.
  • The coalition letter stated, “A state-by-state piecemeal approach does not provide the necessary comprehensive protections that is achievable at the federal level given importance of the issue and the very limited time remaining until LIBOR’s end in less than two years.” 

The letter also commended Rep. Sherman and the Committee for providing a meaningful legislative solution in support of the LIBOR transition by providing fair, equitable and consistent treatment for all tough legacy contracts. 

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Policymakers Claim Deal is Close on Bipartisan “Physical” Infrastructure Proposal; Roundtable Chair John Fisk Addresses Infrastructure Investment

Posted on by Trey Jackson

Members of a bipartisan group of senators working on a $579 billion “physical” infrastructure proposal said Thursday that final details may be announced as early as July 26, after a procedural vote in the Senate earlier this week failed to allow debate on the evolving measure. (Bloomberg, July 22)

Bipartisan Deal

  • The bipartisan group initially announced their tentative, broad infrastructure agreement with President Biden on June 24. Remaining issues to resolve are finalizing how to pay for the package including measures affecting funding for transit systems. (Roundtable Weekly, June 25 and BGov, July 22)
  • One of the 22 Senate negotiators, Sen. Joe Manchin (R-WV), said, “We had an agreement on 99% when we walked out yesterday afternoon. The pay-fors are pretty much lined up.” (Bloomberg, July 22)
  • Another negotiator, Sen. Mitt Romney (R-UT) added, “I think we’ll get it done over the weekend, and then I hope that we get another cloture vote next week, and that will succeed.” (PolitcoPro, July 22)
  • The bipartisan proposal, if eventually translated into legislation, would need at least 10 Republican votes in the 50-50 Senate to avoid a filibuster and start debate on the measure.

Reconciliation

  • If the deal fails, Democrats may consider paring the “hard” infrastructure proposal with a separate, $3.5 trillion “human” infrastructure plan that addresses climate change, child care and health care. A combined package could be pushed through Congress as part of a budget “reconciliation” process that would bypass the need for Republican votes. (CNBC, July 22)
  • Senate Majority Leader Chuck Schumer (D-NY) on July 21 said he may delay the chamber’s August recess to pass both infrastructure packages. (Roll Call, July 21)
  • House Speaker Nancy Pelosi (D-CA) yesterday reiterated that the House will not act on the Senate’s bipartisan infrastructure plan until the upper chamber also passes a reconciliation bill.  (Transcript of July 22 press conference)

Infrastructure Investment Analysis 

CRE & Infrastructure

  • Roundtable Chair John Fish (Chairman and CEO, Suffolk), above right, on July 21 discussed infrastructure issues, the impact of the pandemic on commercial real estate and the industry’s leadership role in national policy issues with Roundtable member Willy Walker (Chairman and CEO of Walker & Dunlop), left, on the Walker Webcast. (Bisnow and Connect, July 21)
  • Fish noted that economic opportunities resulting from investments in physical infrastructure are equally as important as investment in social infrastructure. Fish noted Boston’s “Big Dig” transportation infrastructure project as an example of a large-scale public investment that returns enormous benefits for the larger community.
  • “Boston made an almost $19 billion investment with the federal government in the Big Dig, and we have received probably $100 billion in returns today so far,” Fish said. “If we didn’t make those investments in the Big Dig back in the 1990s, early 2000s, the city of Boston would not be growing the way that it is right now.” (Walker Webcast and Bisnow)

Fish also commented on The Roundtable’s role in Washington and the importance of CRE industry leadership in the climate change debate. He emphasized that the vast majority of US buildings were constructed in the last century — and that with 40% of US energy use attributable to owners, tenants, and other occupants of residential and commercial structures, now is the opportune time for the industry to reimagine its positive role for future generations. (See 34:45 in the Walker Webcast) 

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Senate Finance Committee Chair Introduces Bill to Restrict 20% Pass-through Business Income Deduction

Posted on by Trey Jackson

Senate Finance Committee Chairman Ron Wyden (D-OR), above, unveiled new legislation this week that would phase out the 20-percent pass-through business income deduction for taxpayers earning more than $400 thousand a year. (CNBC, July 21 and Wyden news release, July 20) 

  • The current deduction for qualified business income (Section 199A) allows certain taxpayers, such as sole proprietors, partners in partnerships and shareholders of S-corporations, to deduct up to 20% of their net business income.
  • The deduction was enacted as part of the 2017 Tax Cuts and Jobs Act (TCJA), which  reduced the corporate tax rate by 40%. Since the vast majority of American businesses are taxed as pass-throughs, the deduction ensured that the benefits of TCJA were more evenly distributed.

Why It Matters

  • Section 199A is currently scheduled to expire at the end of 2025. Wyden’s proposed overhaul, if enacted, would start with the 2022 tax year. (CQ and BGov, July 20 | one-page summary  | text of the bill)
  • Wyden estimated that his Small Business Tax Fairness Act could raise $147 billion in revenue, based on a Joint Committee on Taxation analysis from 2018. The Senate Finance Committee Chairman also noted that he may add the bill to the Biden administration’s $3.5 billion “human” infrastructure proposal later this fall. (Tax Notes, July 21) 

Roundtable Response 

  • The Roundtable, as part of a broad business coalition, last month expressed strong opposition to any reductions or repeal of the Section 199A deduction – including phasing it out above a certain income threshold – to the leadership of the tax-writing Senate Finance and House Ways and Means Committees. (Coalition letter, June 22 and Roundtable Weekly, June 25) 
  • The coalition’s letter emphasized how nearly 40 percent of individually- and family-owned businesses closed their doors during the COVID pandemic – and that Section 199A provided critical tax relief during that time.
  • “There are nearly two million real estate partnerships with more than 8.6 million partners in the United States,” said Real Estate Roundtable President and CEO Jeffrey DeBoer, above, in response to the new legislation. “Among other benefits, the pass-through deduction allows these real estate businesses to focus on creating jobs, investing in underserved neighborhoods, and creating productive, sustainable properties that support the local tax base. Congress should permanently extend the pass-through deduction. The proposed restrictions are a step in the wrong direction.”   

President Biden proposed phasing out the Section 199A deduction for qualified business income above $400,000 during his presidential campaign. However, that proposal was not included in his Build Back Better agenda released earlier this year or his formal budget proposal. (Tax Notes, July 21) 

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Senate Hearing Focuses on Need for Federal Pandemic Risk Insurance Program

Posted on by Trey Jackson

Senate lawmakers heard testimony yesterday about the importance of establishing a federal pandemic risk / business continuity insurance program during a hearing entitled “Examining Frameworks to Address Future Pandemic Risk.” (See webcast and witness statements).

Public-Private Backstop

  • Senator Bob Menendez (D-NJ), above, chairman of the Senate Banking Subcommittee on Securities, Insurance, and Investment, stated in his opening remarks, “We must determine the extent to which businesses, private insurance providers, and the federal government are able to share the risk of losses due to a pandemic. Each presents different ideas on how much risk is borne by the private sector versus the federal government, and the approach to paying claims.”
  • Menendez also noted that of the eight million businesses with commercial insurance policies with business interruption coverage, 83 percent also carried a clause excluding claims from viral contamination, disease, or pandemic – and that 82 percent of claims have been closed without payment. (Menendez remarks)

Roundtable & Coalition Efforts

  • The Roundtable is part of the Business Continuity Coalition (BCC), which offered testimony during the hearing on how a public-private backstop program for pandemic risk insurance – similar to the Terrorism Risk Insurance Act (TRIA) program – is urgently needed. Charles Landgraf of Arnold & Porter, above, testified on behalf of the BCC. (See written testimony and video at 1:00:20)
  • The coalition includes 44 trade associations and major companies representing more than 70 million workers from healthcare and dining/hospitality to real estate, construction, finance, manufacturing, media and film, live entertainment, professional sports and professional services.
  • The BCC’s testimony emphasized how pandemic risk is possibly the largest unhedged risk exposure in the U.S. economy. The coalition’s statement also shows how a precedent for government involvement in insurance markets exists for a broad range of risks – including terrorism (TRIA), flood (NFIP), and crop risk (FCIC) – where private markets fail to provide the economy with the coverage it needs.
  • A detailed, section-by-section description of the BCC Recommended Proposal urges the design of any pandemic risk insurance program to address core principles, including: scope, availability and affordability; private insurer utilization; a pooling alternative for offerinf non-damage business interruption insurance (NDBI) coverage; stop-loss and quota-share protection; and utilization of reinsurance and capital markets.
  • A New Jersey small business owner, Adenah Bayoh, testified on behalf of the National Restaurant Association (NRA) in support of the BCC proposal, stated, “This country needs a Pandemic Risk Insurance Program to ensure that Main Street businesses and employees have certainty and continuity in the ability to navigate the impact of a future pandemic.”

Both Senate and House subcommittees played important role in the seven-year extension of the Terrorism Risk Insurance Program (TRIP) enacted in 2020. (Roundtable Weekly, Dec. 13 and Dec. 20, 2019)

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Senate Democrats Push Forward on Two Tracks to Advance President Biden’s Infrastructure Agenda

Posted on by Trey Jackson

HIghway Infrastructure Houston

Senate Democrats this week moved forward on their two-pronged approach to enact President Joe Biden’s policy agenda – a $579 billion bipartisan “physical” infrastructure package – and a separate $3.5 trillion package addressing “social” infrastructure. Both measures face steep hurdles in the narrowly divided Senate and House. (Wall Street Journal and BGov, July 15)

Two Tracks

  • Senate Budget Committee Democrats agreed in principle on Tuesday to a $3.5 trillion spending increase for Biden’s wide-ranging social agenda that includes education, childcare and climate. (Reuters, July 13 and Roundtable Weekly story below)
  • Separately, President Biden and a bipartisan group of senators on June 24 agreed on a framework to invest in “hard” infrastructure, including transit, roads, bridges and the electrical grid. (White House Fact Sheet and bipartisan Senate group framework, June 24)
  • Senate Majority Leader Chuck Schumer (D-NY) stated last week that he plans to hold votes on both measures before the Senate leaves for its August recess. (AP and CNBC, July 9)

Bipartisan Proposal Deadline

Capitol with evening sky

  • Schumer pushed his schedule forward by announcing the Senate will take a procedural vote next week to begin debate on the unfinished bipartisan proposal. The move forces a tight deadline on Senate negotiators to produce a detailed version of their bipartisan proposal, which has many unresolved issues, including funding sources. (Politico, July 15)
  • Sen. Shelley Moore Capito (R-WV) said Schumer’s decision is an attempt “to put pressure on the group to either put up or shut up,” according to Politico.
  • Sen. Lisa Murkowski (R-AK) said, “The good news-bad news is we’ve got a pretty tight time frame. There are details we have to resolve, and those details involve things like [paying for it].” (Washington Post, July 15)
  • The bipartisan proposal, if translated into legislation, would need any combination of 60 votes in the 50-50 Senate to avoid a filibuster and start debate on the measure.

Budget Blueprint Directive

  • Schumer also said he wants the Senate Budget Committee to agree by July 21 on the details of their separate 10-year budget blueprint, after they agreed this week to its overall $3.5 trillion spending level. (New York Times, July 15)
  • The committee must now build support for a budget resolution, which would give fiscal targets to other Senate committees responsible for producing an eventual, final bill – including how taxes would be raised to pay for it.
  • Senate Budget Committee Chairman Bernie Sanders (I-VT) commented this week, “What happens next is this is an enormously large and complicated piece of legislation and it’s going to take an enormous amount of work amongst 50 people to reach agreement.” (BGov, July 15)
  • Passage of a budget blueprint would also mark the beginning of the reconciliation process, which would allow Democrats to pass an expansive economic package without Republican votes. (Bloomberg, July 15)

SALT Inclusion

  • The Democratic budget outline may include a partial expansion of the state and local income tax deduction (SALT), according to Sen. Bob Menendez of (D-NJ), a member of the Senate Finance Committee.
  • “My understanding is there is a SALT provision in there that would provide relief,” Menendez told NJ Advance Media. (NJ.com, July 15)
  • Since the SALT deduction was capped at $10,000 in the Republican Tax Cuts and Jobs Act of 2017, Democratic lawmakers from high-tax states have urged the inclusion of a SALT expansion in longer-term fiscal packages.

Roundtable Perspective

Avison Young tax webinar

  • Roundtable Senior Vice President & Counsel Ryan McCormick, bottom left in photo, participated in the Avison Young July 14 webinar “Proposed Federal Tax Policy Changes.” Additional participants included Lisa Knee and Kenneth Weissenberg of Eisner Amper.
  • Roundtable Senior Vice President Chip Rodgers participated in the Association of Foreign Investors in Real Estate July 13 webinar “Mid-Year Policy Update.” Additional participants included Elizabeth Espín Stern, Partner at Mayer Brown and Hope Goldman, Senior Associate at The Cohen Group. (Watch video after entering the password “AFIRE!!”)

What’s Next

  • President Biden yesterday commented on the dual track approach in the Senate. “There may be some last-minute discussion as to what mechanism is used to pay for each of these items, both the infrastructure package and the human infrastructure package. But I believe we will get it done.” (White House transcript, July 15)

In the House, Speaker Nancy Pelosi has pledged that the chamber will not move forward until the Senate passes a budget setting up the $3.5 trillion social spending package. (The Mercury News, June 25 and Transcript of Pelosi Press Conference, June 24)

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Senate Committee Advances $100 Billion+ Energy Bill With Provisions Affecting Commercial Real Estate

Posted on by Trey Jackson

Senate Energy Committee

The Senate Energy Committee this week passed a bill to authorize more than $100 billion in spending on U.S. energy infrastructure with provisions affecting commercial real estate. The bill may be folded into a larger bipartisan infrastructure package emerging on Capitol Hill. (CQ and Reuters, July 14) 

A Bipartisan Influence 

  • The Energy Infrastructure Act, introduced by Committee Chairman Joe Manchin (D-WV), below, drew the support of all 10 Democrats and three Republicans on the panel. Manchin noted that the committee’s vote “is another critical step toward finalizing our bipartisan infrastructure package, and an important reminder that we can find sensible solutions to difficult problems when we put partisanship aside and work together.” (Manchin news release and committee meeting video, July 14) 

CRE Impact 

Sen. Joe Manchin (D-WV)

  • The bill includes provisions that would create an avenue for Congressional oversight to improve the Commercial Building Energy Consumption Survey (CBECS) – the key data set collected by the federal government on the basic characteristics of U.S. commercial buildings and how much energy they consume. 
    • Improving the quality and integrity of CBECS data has long been a priority of The Roundtable’s Sustainability Policy Advisory Committee (SPAC) chaired by Tony Malkin (Chairman, President, and CEO, Empire State Realty Trust) , and Vice-Chaired by Dan Egan (Vornado Realty Trust) and Ben Myers (Boston Properties). 
    • “Reliable data from the federal government is crucial to help building owners do their part to address climate change,” said Roundtable President and CEO, Jeffrey DeBoer. “We applaud Chairman Manchin’s efforts through the Energy Infrastructure Act to modernize CBECS data so it reflects the substantial resources our members commit to optimize energy efficiency and reduce greenhouse gas emissions from the built environment.” 
  • CBECS is managed by the U.S. Energy Information Administration (EIA). It provides the foundational data set used by the Environmental Protection Agency (EPA) to certify 1-100 ENERGY STAR scores that “label” top performing buildings for lower energy use and greenhouse gas emissions compared to typical buildings. 
    • According to EPA, 5.6 billion square feet of floor space are ENERGY STAR rated, and these certified assets command a premium up to 16% for sales prices and rental rates. 
  • Despite the critical importance of EIA’s CBECS data to EPA’s ENERGY STAR program, there is currently no requirement for the agencies to coordinate on how they use or verify data. Manchin’s bill would change this. 
    • It would require the agencies to submit to Congress an “information sharing agreement” that explains how EPA’s own vaster and more current set of building data (collected through its Portfolio Manager “energy benchmarking” tool) can be used to supplement CBECS data. 
  • Manchin’s bill would also require EIA to report to Congress on how it might publish CBECS data every three years – on a faster track than EIA’s current six-to-seven year survey cycle, which results in government and private sector reliance on outdated building information in rapidly evolving energy markets. 
    • The bill would also require the agencies to “cross-check” buildings’ energy consumption in different data sets to improve statistical reliability, and take steps to ensure that larger buildings (greater than 250,000 square feet) are fully represented in the federal CBECS set.   

Investments in the Electric Grid, Code Implementation 

Electric towers

  • Other provisions in the Energy Infrastructure Act would:
    • Provide federal grants to States and other entities to harden the electric grid and improve its resiliency to natural and cyber threats;
    • Provide States with money to establish revolving loan funds for building audits and retrofit projects;
    • Direct the Energy Department and the Federal Energy Regulatory Commission (FERC) to develop model guidance for combined heat and power (CHP) systems to provide “backup” or “standby” power to the electric grid;  
    • Create an Energy Department grant program for code agencies, building associations, and other entities to improve implementation and compliance with building energy codes; and
    • Trigger Davis-Bacon “prevailing wage” requirements for any projects or programs receiving federal dollars.  

 Language from the Senate Energy Committee’s bill might ultimately be incorporated into a larger infrastructure package expected to encompass transportation, electric vehicles, broadband, water, and sewer systems. [See Infrastructure story above]   

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2021 Annual Report – Meeting Today’s Challenges & Shaping Tomorrow’s Opportunities

Posted on by Trey Jackson

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