On Thursday, The Real Estate Roundtable (RER) wrote to  U.S. Treasury Secretary Scott Bessent encouraging the Treasury Department to withdraw regulations issued last year under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). (Letter)

Why It Matters

• FIRPTA imposes capital gains tax on foreign investors that invest in U.S. real estate.  The discriminatory tax does not apply to any other asset class. 

• For several years, RER and other stakeholders have worked with policymakers to reform FIRPTA and remove tax barriers that deter capital formation and investment in U.S. real estate and infrastructure.  In 2015, those efforts led Congress to enact a new exemption from FIRPTA for foreign pension funds and other helpful FIRPTA reforms.

• In April 2024, however, Treasury issued final regulations that expanded the reach of FIRPTA to common investment structures by redefining what constitutes a domestically controlled entity.

• The 2024 regulations invented a new look-through rule to determine whether an entity is a domestically controlled REIT exempt from tax under FIRPTA.  The practical effect of the regulations is to subject more foreign investors to U.S. taxation and impede capital formation for job-creating U.S. real estate and infrastructure projects (Roundtable Weekly, July 2024)

Roundtable Advocacy

• In a cover letter accompanying a more detailed legal and economic analysis, RER President and CEO Jeffrey DeBoer wrote this week that in issuing the new look-through rule, “Treasury reached well beyond its regulatory authority and invented a rule that contradicts the statute and is damaging the U.S. real estate market.”  (Real Estate Group Seeks Withdrawal of Look-Through Rule, Tax Notes March 20)

• “[T]he Look-Through Rule reversed decades of well-settled tax law, severely misconstrued the statute, and contradicted Congressional intent,” wrote DeBoer. 

• The letter described the economic benefits of inbound real estate investment.  “When invested in U.S. real estate, foreign capital puts contractors, tradesmen, and others to work constructing, upgrading, and improving properties. Pooled with U.S. partners and their expertise, foreign investment helps create productive assets, such as shopping centers and apartment buildings, which revitalize communities and increase the supply of affordable housing.”

• This week’s letter follows repeated efforts by RER and others to stop the regulations from moving forward during the Biden Administration.  House Ways and Means Committee Members Darin LaHood (R-IL) and Carol Miller (R-WV) urged former Treasury Secretary Janet Yellen to drop the regulations when they were in proposed form.  (Roundtable Weekly, Aug. 2023) 

• The legal case against the FIRPTA regulations is even stronger today, in the wake of the Supreme Court’s Loper Bright decision in which the Court significantly narrowed the deference to which regulatory agencies are entitled when rulemaking.  

• RER’s submission included a detailed legal and economic analysis prepared by RER’s Tax Policy Advisory Committee FIRPTA Working Group and principally drafted by TPAC Members David Polster and Nickolas Gianou of Skadden, Arps, Slate, Meagher & Flom LLP.  (Analysis)

In addition to seeking formal withdrawal of the April 2024 regulations, the letter urges the Treasury Secretary to issue sub-regulatory guidance immediately that would allow taxpayers to rely on the forthcoming withdrawal before it is finalized.  The Trump Administration has prioritized removing regulations that unnecessarily impede economic activity.

The Federal Reserve announced Wednesday that it will maintain its benchmark federal funds rate at the current 4.25-4.50 percent range, citing heightened economic uncertainty linked primarily to recent tariff policies.

Fed’s Decision

• The decision reflects cautiousness by Fed policymakers amid rising inflation expectations and slower projected economic growth. (AP, March 19)

• Fed Chair Jerome Powell highlighted ongoing economic uncertainty, citing the Trump administration's potential "significant policy changes" on trade, immigration, fiscal policy, and regulation. (Opening Statement, March 19)

• "It's the net effect of these policy changes that will matter for the economy and for the path of monetary policy," Powell said. "Uncertainty around the changes and their effects on the economic outlook is high."

• Fed Chair Jerome Powell also emphasized that uncertainty is "unusually elevated," largely due to the Trump administration's extensive import tariffs.

• "Clearly, a good part of [inflation] is coming from tariffs," Powell stated, adding that while tariffs may temporarily delay inflation reduction, he believes the effect will ultimately prove transitory.

Looking Ahead

• Powell stated that the Fed will take a patient, data-driven approach to future rate decisions.

• "We’re not going to be in any hurry to move," Powell said. "Our current policy stance is well-positioned to deal with the risks and uncertainties we face."

• According to the Fed's quarterly projections, officials expect GDP to grow 1.7 percent this year, a drop from their 2.1 percent estimate in December.

• While Fed policymakers still anticipate two quarter-percentage-point rate cuts by year-end, consistent with their December forecast, this expectation primarily reflects concerns over slowing economic growth counterbalancing rising inflation and what Powell described as uncertainty-driven "inertia" given the unclear outlook. (Reuters, March 19)

Pressure From The White House

• President Trump criticized the Fed’s cautious approach via Truth Social, advocating for rate cuts, stating, "The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy. Do the right thing." (ABC News, March 20)

• Earlier this week, President Trump nominated Federal Reserve governor Michelle Bowman as vice chair for supervision, the central bank's top regulatory position. (Bloomberg, March 17)

• Senate Banking Committee Chair Tim Scott (R-SC) applauded the nomination and called Bowman an important voice in “pushing back on burdensome rules.”

Implications for CRE

• The decision to maintain current interest rates carries significant implications for commercial real estate. Stable and lower interest rates can provide a more predictable environment for financing and investment decisions.

• The Fed’s decision reinforces findings from our Q1 2025 Sentiment Index that the CRE industry remains in a transitional period. Released in February, the Index showed signs of market stability—but also lingering uncertainty over tariffs, expiring tax cuts and regulatory reforms that could slow investment and economic growth. (Roundtable Weekly, Feb. 21)

• Heightened economic uncertainty, particularly from tariff policies, could dampen investment activity and make it challenging to attract foreign capital—both critical elements needed to drive economic growth.

• Reduced investment activity also risks hindering development projects, including the creation of affordable housing, and could slow ongoing efforts to revitalize communities and cities still recovering from pandemic disruptions. (CBRE, March 19)

RER will continue to track coverage on interest rates and tariffs, and the implications for commercial real estate.

Tax and fiscal policy are now at the top of the GOP’s agenda after a stopgap spending bill passed last Friday, preventing a potential government shutdown. House and Senate GOP members have just a few weeks of session before the long Easter and Passover recess to make significant progress on a budget resolution.

Government Shutdown Averted

• Congress avoided a shutdown last Friday after ten Senate Democrats, including Minority Leader Chuck Schumer (D-NY), voted to advance the GOP’s stopgap spending bill. The six-month continuing resolution funds the federal government through September. (NBC News, March 14)
  
  
• Schumer rallied enough Democrats in the Senate to approve the measure in a key procedural vote. Responding to outspoken disagreement within his party about voting for the GOP’s spending bill, Schumer said, “I knew it was a difficult choice, and I knew I'd get a lot of criticism for my choice, but I felt as a leader I had to do it.” (ABC News, March 18)

Tax Policy Update

• With the risk of a shutdown now in the rearview mirror, House and Senate GOP leaders are focusing their attention on a reconciliation package that would advance their tax priorities, including extending key provisions of the 2017 Tax Cuts and Jobs Act (TCJA). (NYT, March 21)
  
  
• The House passed its version of the budget resolution last month, but the bill has seen little movement in the Senate due to divisions within the GOP over budget constraints and offsets.
  
• Congressional Republicans want to make the TCJA tax cuts permanent, which will be challenging under the House budget resolution’s current $4.5 trillion tax cut ceiling.
  
  
• President Trump, Senate GOP leadership and House Speaker Mike Johnson (R-LA) support using a “current policy baseline” approach, a budget scoring method that would allow Congress to extend the TCJA tax cuts without adding to the deficit on paper and give them more room to include the administration’s other tax priorities. (Politico, March 13)
  
  
• Senate Budget Committee Republicans are planning to hold meetings with the Senate parliamentarian’s office to determine if this approach complies with reconciliation rules. GOP lawmakers need guidance by early April to move forward with large parts of the budget resolution. (Punchbowl News, March 18)
  
  
• The challenge of balancing tax relief with deficit concerns has fueled high-level discussions between Speaker Mike Johnson (R-LA) and Senate Majority Leader John Thune (R-SD). Thune acknowledged the difficulty of the process, saying, “Both of us understand we’ve got to get this done. And we’re trying to figure out the best way to do that.” (Punchbowl News, March 19)

Key Tax Provisions At Stake

• While GOP leaders seek guidance on the “current policy baseline” approach, House Ways and Means Committee and Senate Finance Republicans are continuing to debate key tax provisions of the bill.
  
  
• Senate Finance Chair Mike Crapo (R-ID) mentioned during an appearance at the U.S. Chamber of Commerce that there are over 200 proposals under consideration—including reducing the estate tax, expanding the Opportunity Zone program and enhancing the Low-Income Housing Tax Credit (LIHTC). (PoliticoPro, March 12)
  
  
• Expanding Opportunity Zones and the LIHTC would help expand the supply of affordable housing and address the U.S. housing crisis. (Roundtable Weekly, March 17)

• To offset the cost of the large number of tax proposals under consideration, Republicans are considering the repeal of Inflation Reduction Act (IRA) energy tax credits. IRA programs have come under increasing scrutiny by the Trump administration as it looks to roll back Biden-era energy policies.
  
  
• However, a new report warns that eliminating these credits could result in nearly 790,000 job losses and increase consumer energy costs by $6 billion annually by 2030. In light of these concerns, 21 House Republicans have advocated for preserving the energy tax credits—pointing out that they are critical to help the U.S. meet Trump’s goal of becoming “energy dominant.” (PoliticoPro, March 20; Politico, March 10)
  
  
• Other lawmakers have raised potential restrictions on the deductibility of state and local business property taxes, also known as “business SALT,” as a revenue offset for the tax bill. This tax change would have devastating consequences on the commercial real estate industry and the broader economy. (Letter, March 7 | Roundtable Weekly, March 17 | (BisNow, March 14)
  
  
• RER has urged members to contact their representatives to oppose restrictions on business SALT that would discourage new investment and undermine housing affordability nationwide.
  

GSA’s Plans for Federal Leases

• In other news this week, the General Services Administration (GSA)—under directions from the Elon Musk-led Department of Government Efficiency (DOGE)—will begin to vacate nearly 800 offices across the country this summer. (AP, March 14)
  
  
• The news has generated great uncertainty for federal agencies using these offices and building owners who lease to the government. The Associated Press released a full list of office locations it found would be affected by the planned lease terminations. (AP, March 14)

Looking Ahead

• With Congress racing to cut through key process hurdles before the April 13 recess, GOP leaders are hoping the concurrent budget resolution will start to finally take shape—though tough decisions remain ahead.

RER will continue to engage policymakers on important tax priorities for the real estate industry and analyze the implications of the GSA’s federal lease plans on commercial real estate across the country.