Tag: Infrastructure

Biden Administration Issues Funding Guide for the Bipartisan Infrastructure Law

Posted on by Trey Jackson

Infrastructure Guidebook

The White House on Jan. 31 released its guidebook to funding for the Infrastructure Investment and Jobs Act, the $1.2 trillion bipartisan measure signed into law last year. (The Hill, Jan. 31 and (Roundtable Weekly, Jan. 21) 

Roadmap to Infrastructure Funding 

  • The Bipartisan Infrastructure Law Guidebook is a key tool for states and local governments to apply for federal grants, loans, and public-private partnership resources under more than 375 infrastructure investment programs.
  • Mitch Landrieu, White House Senior Advisor and Infrastructure Implementation Coordinator, stated, “Our primary goal is to empower people across the country with information, so they know what to apply for, who to contact, and how to get ready to rebuild.” (White House news release, Jan. 31)
  • The White House last week also outlined steps for cities and mayors to prepare for funding applications. Landrieu on Jan. 4 sent a request to all of the nation’s governors, urging them to appoint their own infrastructure implementation coordinators to work on the smooth disbursement of funds over the next several years. 

Support for Infrastructure Important to CRE 

Atlanta, Georgia

The Guidebook consolidates information on the funding available from myriad federal agencies to build and repair infrastructure assets that are positive for local communities and commercial real estate, including: 

  • Bridges

    A total of $40 billion is dedicated for bridges, including $12.5 billion for a new DOT grant program to replace or rehabilitate some of the nation’s most economically significant bridges. (Roads, Bridges and Major Projects section.)

  • Transit-Oriented Development

    The infrastructure law invests $91.2 billion to repair and modernize mass transit. (Public Transportation section). The public-private TIFIA loan program receives $1.25 billion in funding with expanded authorities to assist airport and transit-oriented development projects. (Major Projects section).

  • Passenger Rail

    $36 billion is available for federal-state partnership grants to repair existing rail routes or establish new intercity service. Amtrak’s Northeast Corridor benefits from a $6 billion grant program.  (Passenger Rail section)

  • EV Charging

    $7.5 billion in grants is available to help build out a national network of 500,000 electric vehicle chargers – particularly along highway corridors to facilitate long-distance travel and within disadvantaged communities. (Electric Vehicles section)

  • Clean Energy

    The infrastructure law will deploy more than $20 billion in federal financing tools to deliver clean power. The U.S. Department of Energy in January launched the “Building a Better Grid” Initiative to catalyze construction of electric transmission lines that can deliver solar, wind, and other renewable energy over long distances. (Clean Energy and Power section and DOE website)

  • Superfund Clean-up Program

    The law provides $3.5 billion for the Environmental Protection Agency’s Superfund program to clean up some of the nation’s most contaminated sites. (EPA news release, Dec. 20, 2021)

  • Underserved Communities
    A set of funding sources aim to make transformative investments in disadvantaged and low-income communities. (Supporting Underserved Communities section) For example, $1 billion is devoted to a “Reconnecting Communities” competitive grant program that can remove or retrofit highways built decades ago that isolated low-income neighborhoods. 

Future versions of the guidebook will update key timelines for program implementation, best practices, case studies, and links to resources developed by the White House. 

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White House Details Initial Implementation of $1.2 Trillion Federal Infrastructure Spending Package

Posted on by Trey Jackson

The disbursement of $1.2 trillion in federal infrastructure investment approved by Washington policymakers two months ago is moving forward – in careful coordination with federal agencies, state and local partners – according to recent announcements by President Biden and White House Infrastructure Implementation Coordinator Mitch Landrieu, above. (News conference transcript and video, Jan. 18) 

Improving Infrastructure Assets 

  • The bipartisan infrastructure law enacted in November includes measures to improve infrastructure assets via public-private partnership efforts, streamline the federal permitting process, and improve key federal energy data that supports Environmental Protection Agency building labels. (Roundtable Weekly, Nov. 12, 2021 and White House Executive Order on Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, Dec. 8, 2021)
  • Real Estate Roundtable Chair John Fish (Chairman and CEO, Suffolk) commended the bipartisan effort and called the legislative package “an historic opportunity to position our nation for sustainable growth and greater economic prosperity.” (Roundtable Statement, Nov. 8, 2021)
  • Former New Orleans Mayor Mitch Landrieu now leads a task force of federal agency officials charged with implementing the infrastructure law through a combination of direct federal grants and competitive bidding. (White House Infrastructure Implementation Fact Sheet, Jan. 14)
  • Landrieu on Jan. 4 sent a request to all the nation’s governors, urging them to appoint their own infrastructure implementation coordinators to work on the smooth disbursement of funds over the next several years, in coordination with both federal agencies and state and local leaders.
  • Landrieu noted during his Jan. 18 White House news conference that the $1.2 trillion disbursement involves 14 federal agencies. He also said federal talks are also underway with Amtrak and that “the Northeastern Corridor … needs immediate attention.” (News conference transcript and video)

Specific Programs Impacting CRE

airport construction infrastructure terminal in background

President Biden on Jan. 14 discussed a variety of recently announced infrastructure projects and funding commitments with Infrastructure “Czar” Landrieu. (White House Remarks and Infrastructure Implementation Fact Sheet, Jan. 14 and Competitive Infrastructure Funding Opportunities for Local Governments Fact Sheet, Jan. 21).

  1. The U.S. Department of Energy (DOE) launched the “Building a Better Grid” Initiative, which will catalyze the nationwide development of new and upgraded high-capacity electric transmission lines by deploying more than $20 billion in federal financing tools. (DOE news release, Jan. 12)
  2. The U.S. Department of Transportation (DOT) and Federal Highway Administration announced $27 billion in funding to replace, repair, and rehabilitate thousands of bridges across the country. (Wall Street Journal and ABC News, Jan. 14)
  3. DOT Secretary Pete Buttigieg and DOE Secretary Jennifer Granholm formed a Joint Office of Energy & Transportation focused on building a national network of 500,000 electric vehicle chargers. (Department of Energy news release, Dec. 14, 2021 and White House EV Charging Action Plan, Dec. 13, 2021)
  4. The Federal Aviation Administration (FAA) announced $3 billion for 3,075 airports across the country to upgrade critical infrastructure.
  5. The Environmental Protection Agency (EPA) announced a $1 billion investment to initiate cleanup and clear the backlog of 49 previously unfunded Superfund sites and accelerate cleanup at dozens of other sites across the country. (EPA news release, Dec. 20, 2021)
  • Additionally, Labor Secretary Marty Walsh discussed in an interview today with The Hill  how he is focused on implementing the infrastructure law and launching a new program called the Good Jobs Initiative. Walsh emphasized the need for “workers at all different levels of construction” and stated, “I think we’re going to need additional housing in our country in the next five to 10 years, we’re going to have lots more development going on in our country.” (The Hill, Jan. 21)

The various infrastructure improvement programs and their impact on the economy, commercial real estate and local communities will be a focus of discussion during The Roundtable’s Jan. 25-26 Virtual State of the Industry Meeting and its policy advisory committee meetings.

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House Passes Build Back Better Act, Roundtable Urges Improvements to Green Energy Tax Provisions

Posted on by Trey Jackson

Capitol reflective glass morning

House Democrats passed their “sweeping” reconciliation package of tax, health care, education, and climate initiatives Friday morning, a step that advances a “centerpiece” of President Biden’s domestic agenda and represents “the most significant restructuring of the [social] safety net in decades.” (Politico, Nov. 19)

President Biden lauded the House’s action in a statement released by the White House this morning.

Partisan Bill Advances to the Senate

  • All Democrats (except one) supported the $1.7 trillion Build Back Better Act (H.R. 5376), after months of negotiations between Progressives and Moderates debating the breadth of the measure and scaling back its original price tag north of $3.5 trillion. (Roundtable Weekly, Nov. 5) No House Republican voted for the bill.
  • Today’s party-line vote took place after the Congressional Budget Office submitted a cost analysis that satisfied the requirements of a crucial group of Democratic Moderates needed to approve the legislative package. (CBO, Nov. 18 and text of the budget reconciliation bill.)
  • The legislation now moves to the Senate where it will face additional scrutiny and could be reduced further in scope. If the Senate ultimately passes the BBB Act in a manner that changes the House-approved version, the bill would need to go back to the House for another vote before it reaches President Biden’s desk.
  • Passage of the BBB Act follows on the heels of the enactment of the bipartisan bill to upgrade the nation’s transportation, water, grid, broadband, and other “physical” infrastructure. President Biden signed the $1.2 trillion Infrastructure Investment and Jobs Act into law on Monday. (Washington Post, Nov. 15). The Roundtable has strongly supported bipartisan investments to modernize the nation’s physical infrastructure. (Roundtable Weekly, Nov. 12).

Progress on CRE Tax Issues

San Francisco buildings

  • Relative to President Biden’s budget and the initial bill passed by the Ways and Means Committee, the House-passed BBB Act reflects continued progress on a number of tax issues important to real estate and prioritized by The Real Estate Roundtable. (Roundtable Weekly, Oct. 29) Critically, the current bill does not:     
     
    • Limit like-kind exchanges (sec. 1031),
    • Increase the capital gains tax rate,
    • Restrict the 20% pass-through business income deduction (sec. 199A),
    • Tax unrealized gains at death or repeal of the step-up in basis of assets,
    • Change the tax treatment of carried interest, and
    • Restrict estate tax valuation discounts.

Roundtable Recommends Changes to Clean Energy Tax Provisions

Alternative Energy source CRE

  • The BBB Act’s suite of clean energy tax credits and incentives comprise the legislation’s biggest measures to fight climate change. (Roundtable Weekly, Oct. 29)
  • The Roundtable sent a letter to Congressional tax writers on Tuesday detailing five recommendations that aim to improve green energy tax provisions affecting real estate. The Roundtable’s letter urged changes to the BBB Act that would further the objectives to slash GHG emissions and make rapid progress toward a “net zero” economy by mid-century. (Roundtable letter, Nov. 16)
  • The letter’s recommendations, listed below, would increase and scale deployment of low- and zero-carbon technology in the nation’s commercial and multifamily building infrastructure.
  1. Clarify that “thermal energy storage systems” are eligible for incentives under the Section 48 Investment Tax Credit.
  2. Further revise the 30C tax credit to support EV chargers in the non-public, but widely used, parking lots and garages that serve America’s residential and business tenants who seek to conveniently “charge-up” while at home or at work.
  3. Better align the BBB Act with the Biden Administration’s long-term climate strategy – by providing accelerated depreciation and other incentives for heat pumps and other components that “electrify” commercial and multifamily buildings.
  4. Induce more “retrofits” of aging buildings by allowing taxpayers to claim the 179D deduction in the year high-efficiency equipment is placed in service.
  5. The inclusion of Davis-Bacon and apprenticeship hiring will seriously undermine climate goals – because the high costs to comply with these labor standards will more than offset the BBB Act’s “bonus rates” for clean energy projects. Congress should not hinge the “bonus rates” on unrelated labor issues that fail to accelerate achievement of GHG reduction strategies.

Next: The Senate in December

U.S. Capitol evening

  • The Senate will take up the House BBB bill in December. Democrats will need the support of moderate Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) to pass BBB legislation in the evenly divided upper chamber using budget reconciliation rules. However, Manchin recently stated he may withhold his support of the bill until next year due to rising inflation rates. (Newsweek, Nov. 16 and Axios, Nov. 10)
  • Additionally, House lawmakers included six pages of technical changes in their BBB bill that could help it pass the scrutiny of the Senate Parliamentarian, who can remove certain House provisions if she determines they are incompatible with Senate rules.

Congress is scheduled to return from the Thanksgiving break on Dec. 3. Treasury Secretary Janet Yellen this week warned that if lawmakers do not take action to lift the legal debt ceiling by Dec. 15, they will risk a government default on its debt obligations. (Wall Street Journal, Nov. 16) 

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Roundtable Applauds Passage of Bipartisan Infrastructure Bill; House Democrats Aim to Vote on Social and Climate Package Next Week

Posted on by Trey Jackson

The Real Estate Roundtable on Nov. 8 congratulated congressional policymakers and the Biden administration for their bipartisan efforts in passing the trillion-dollar infrastructure bill late last week. President Joe Biden plans to sign the legislation on Monday, Nov. 15 as Congress returns from recess to consider a separate $1.85 trillion social and climate package. (JD Supra and White House Statement, Nov. 10) 

Roundtable Reaction 

Cleveland Cityscape and Infrastructure visual

  • Real Estate Roundtable Chair John Fish (Chairman and CEO, Suffolk) said, “The real estate industry has long been committed to an ambitious vision for infrastructure. The passage of the bipartisan infrastructure bill by Congress is an historic opportunity to position our nation for sustainable growth and greater economic prosperity. Thank you to Members of Congress for coming together and supporting this critical legislation. I urge President Biden to sign the legislation as soon as possible so we can get shovels in the ground and start building a brighter future.” (Roundtable Statement, Nov. 8)
  • The infrastructure legislation is a positive catalyst that should dramatically improve the nation’s infrastructure, spur economic growth and advance national efforts to combat the climate crisis. The bill includes measures to expand the use of public-private partnerships to reach infrastructure goals, streamline the federal permitting process and improve key federal energy data that support EPA building labels.
  • The bipartisan bill also includes $30 billion for improvements along Amtrak’s Northeast Corridor, including the long-delayed “Gateway” tunnel project between New York and New Jersey, according to a Nov. 10 Bloomberg interview with Amtrak CEO Bill Flynn. (Bloomberg article)
  • Roundtable President and CEO Jeffrey DeBoer said, “This infrastructure bill will repair and upgrade the nation’s roads, bridges, mass transit, high-speed rail, broadband, power grid, water pipes, electric vehicle charging stations, and other critical infrastructure. We applaud this investment in our nation’s future and look forward to the jobs, communities and progress it will support.” (MultiHousing News, Nov. 10) 

Build Back Better Act & CRE 

Roundtable Tax Priorities Nov-12-2021 image

  • House Speaker Nancy Pelosi (D-CA) this week said during the U.N. climate change conference that next on her agenda is passage of the Build Back Better Act (H.R. 5376). “That is our plan, to pass the [Build Back Better] bill the week of Nov. 15, as is indicated in our statements that were made at the time of passing the infrastructure bill.” (Pelosi Remarks)
  • President Biden in late Oct. scaled back his sprawling social and climate package from $3.5 trillion to $1.85 trillion to resolve intraparty differences in the Democratic congressional caucus. Further changes made last week to the tax and spending measure would increase the cap on the deductibility of state and local taxes (SALT) from $10,000 to $80,000.  Another set of changes would expand and modify the low income housing tax credit (LIHTC) to promote greater construction and rehabilitation of affordable housing.  (Roundtable Weekly, Nov. 5 and House Rules Committee section-by-section summary of the bill.)
  • The revised legislation reflects continued progress on a number of tax and climate issues of importance to The Real Estate Roundtable. (Summaries in Roundtable Weekly, Oct. 29)
  • The Roundtable has produced a comparison of the real estate-related tax provisions (image above) in the most recent version of the legislation – compared to the bill passed by the House Ways and Means Committee in September, and the Biden Budget .
  • Additionally, an Oct. 21 Marcus & Millichap webcast on tax policy featured The Roundtable’s Jeffrey DeBoer. (Registration required before streaming the webcast)
  • The revised bill will be considered under budget reconciliation rules, which require a majority vote for approval in the narrowly divided House and the 50-50 Senate. 

Challenges Ahead 

House Passes Infra Dems Applaud

  • Five moderate House Democrats have raised concerns regarding the deficit impact of the Build Back Better Act (BBB), threatening its passage even before it goes to the Senate.  They have also urged that the bill be “pre-conferenced” with the Senate. (Letter to Speaker Pelosi Nov. 2; Politico, Nov. 8) 
  • The House moderates committed to vote for the BBB no later than the week of Nov. 15 –  if Congressional Budget Office (CBO) cost estimates are in line with the Administration’s estimates (CNBC, Nov. 5)
  • CBO stated on Nov. 9 that it plans to unveil estimates for parts of the BBB as the agency completes its reviews. A CBO score is not a technical requirement for a House vote – but Senate rules do require the agency’s cost estimate. (CBO statement and Politico, Nov. 11)
  • If the BBB package passes the House, substantive changes are possible in the Senate. (Wall Street Journal, Nov. 9)
  • Axios reported on Nov. 10 that Sen. Joe Manchin (D-WV) may withhold his support of the costly BBB legislation until next year due to worries about rising inflation rates.

  • Roundtable President and CEO Jeffrey DeBoer commented on the evolving infrastructure legislative developments in an interview with American City Business Journals. “We’re continuing to monitor developments and ensure that nothing comes up without proper vetting or full understanding of how it would impact CRE,” DeBoer said. 

Policymakers return to Washington on Monday for one week before the Thanksgiving break. On Dec. 3, funding for the government will run out unless an appropriations bill or “Continuing Resolution” is passed to avoid a partial shutdown. Additionally, the Bipartisan Policy Center estimates the current debt ceiling will be breached sometime between mid-December and mid-February. 

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House Democrats Stall Efforts to Pass “Physical” and “Human” Infrastructure Bills

Posted on by Trey Jackson

Capitol evening blue

An intense push by Democratic leaders this week to approve a $1 trillion “physical” infrastructure bill and a $1.85 trillion “human” infrastructure plan (H.R. 5376) met resistance today from House progressives and moderates, who rejected ongoing efforts to vote on the bills until their concerns are addressed. 

Intraparty Disagreement 

  • The bipartisan physical infrastructure bill passed the Senate in August. House progressives have tied consideration of that bill to a separate social infrastructure package – which has been mired in weeks of ongoing negotiations and revisions over its scope and cost. Additionally, House moderates insist on a full cost estimate from the Congressional Budget Office before a final vote on the larger package. (BGov and CQ, Nov. 5)
  • President Biden announced a scaled-down version for the larger bill on Oct. 28, reducing its total outlay to $1.85 trillion versus the earlier estimated cost of $3.5 trillion. (Roundtable Weekly, Aug. 13 and Oct. 29)
  • The new Build Back Better plan framework includes $1.75 trillion of social and climate provisions, along with $100 billion targeting immigration needs contingent on approval by the Senate parliamentarian. (Investopedia, Nov. 5)
  • President Biden today said, “I’m asking every House member … to vote ‘yes’ on both these bills right now. Send the [physical] infrastructure bill to my desk, send the Build Back Better bill to the Senate.” (Bloomberg, Nov. 5)
  • House Speaker Nancy Pelosi worked to bridge the divides in her caucus, considering a possible vote on the physical infrastructure bill alone, while postponing a vote on the social spending package. (The Hill, Nov. 5)
  • Rep. Pramila Jayapal (D-WA), leader of the Congressional Progressive Caucus, responded, “As we’ve consistently said, there are dozens of our members who want to vote both bills — the Build Back Better Act and the Infrastructure Investment and Jobs Act — out of the House together.” (The Hill, Nov. 5) 

SALT and LIHTC 

DC monuments dawn

  • Changes were made this week to the sweeping tax and spending measure, including a new provision affecting the deductibility of state and local taxes (SALT) and an expansion of the low income housing tax credit (LIHTC).
  • The new SALT provision would raise the deduction cap from $10,000 to $80,000 through 2030, then return to the $10,000 cap in 2031. A previous version of the bill would have set the cap at $72,500 through 2031.
  • The revised LIHTC measure would increase state allocations, temporarily allowing the credit to cover a project without affecting state caps if at least 25% of the building and land are financed by tax-exempt bonds – instead of 50%.  Additionally, projects intended to serve extremely low-income communities could receive a 50% increase in the applicable credit amount. (BGov, Nov. 5)
  • The new reconciliation bill reflects continued progress on a number of tax and climate issues of importance to real estate and prioritized by The Real Estate Roundtable. Summaries of the revised bill are in the Oct. 29 edition of Roundtable Weekly. 

Congress faces a crucial agenda and a tight timeframe. Policymakers return from recess Nov. 15 for one week before the Thanksgiving break. On Dec. 3, funding for the government will expire – within the same time frame when the current debt ceiling must also be addressed. Lawmakers may pass either an appropriations bill covering FY23, or opt for another “continuing resolution” to fund the government at existing levels for a specified period of time. 

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Biden Administration Proposal Includes $555 Billion Mix of Senate and House Clean Energy Proposals

Posted on by Trey Jackson

Capitol-Dome-night-flag

The White House’s scaled back $1.75 trillion “framework” infrastructure reconciliation bill includes a $555 billion mix of Senate and House clean energy provisions. (Axios, Oct. 29) 

Why It Matters 

  • Revamped clean energy tax incentives “form the biggest measures to fight climate change in the budget reconciliation bill.” (PoliticoPro and B-Gov, Oct. 28)
  • House Ways and Means Chair Richard Neal (D-MA) and Senate Finance Chairman Ron Wyden (R-OR) said yesterday they had reached agreement on the climate provisions. (PoliticoPro, Oct. 28)
  • The incentives largely reflect the suite of credits and deductions passed Ways and Means last month with Democratic-only support (Roundtable Weekly, Sept. 17). Senate Finance provisions favorable to CRE advanced in May (Roundtable Weekly, May 28) have also been included in the latest House package. 

Clean Energy Tax Provisions 

Solar-panel-installation-3-men

  • Based on the text and a section-by-section summary of the Build Back Better reconciliation bill, clean energy tax provisions of interest to the U.S. real estate sector include:
    • Extension of the Section 48 Investment Tax Credit to offset some of the expenses of solar properties, combined heat and power systems, and fuel cells – with expansions to cover energy storage, dynamic glass, and “linear” generators;   
    • A revised tax credit for installations of EV charging stations;

    • An elective “direct pay” option allowing entities with little or no tax liability to obtain a payment equal to the value of the credits they would have received if they paid taxes; and

    • Reform of the 179D tax deduction geared toward incentivizing energy efficiency “retrofits” of existing commercial and multifamily buildings.
  • The green energy incentives, however, are subject to new labor rules that will affect taxpayers’ decisions to utilize the benefits. The Build Back Better Act does not require businesses seeking these credits or deductions to pay Davis-Bacon wages or hire registered apprentices on clean energy projects. However, the amount of the incentives can be five times greater for qualifying projects meeting these labor costs compared to those that do not.
  • The Roundtable’s latest Policy Issues Toolkit (“Clean Energy Tax Incentives” fact sheet, p. 25) provides more details on particular incentives and the wage/apprenticeship issues at play in reconciliation talks.
  • A separate climate priority of Progressive Democrats known as the Clean Electricity Performance Program (CEPP) – that would have offered incentives to power companies switching to renewable energy and fining those that “moved slowly from fossil fuels” – was dropped from the reconciliation bill at the urging of Senator Joe Manchin (D-WV). (Roll Call, Oct. 28.) 

CRE’s Role 

John Fish 2021 Suffolk

  • Roundtable Chair John Fish (Chairman and CEO, Suffolk), above, commented on the importance of clean energy measures affecting commercial real estate in an interview published this week with American City Business Journals.
  • Fish emphasized the impact that the built environment has on clean energy. He noted buildings produce 40 percent of all carbon emissions and 36 percent of all energy use. He also commented on the role of older building stock, since 75 percent of all buildings in America average 35 years old or older.

“The building world – the asset class of the buildings themselves – contributes a great deal of influence to the health of our environment. We all support energy efficiency, we all support lowering the carbon footprint. We really feel that the real estate industry, of all industries, has probably one of the biggest impacts on that conversation than anybody else. We welcome the opportunity to be at the table and to have those constructive dialogues,” Fish said. (Business Journals, Oct. 27)

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Democrats’ Revised Tax Plan Includes Changes and Improvements Important to Real Estate and Other Pass-through Businesses

Posted on by Trey Jackson

DC landscape

This week’s frenzy of infrastructure negotiations in Washington was capped off by the White House’s release yesterday of a pared down, $1.75 trillion framework agreement on “human” infrastructure legislation, which trimmed back potential tax increases on commercial real estate and other pass-through businesses. (CQ, Oct. 30 and Tax Notes, Oct. 29) 

Dynamic Negotiations 

  • By introducing revised legislation – the Build Back Better Act (H.R. 5376) – Democratic leaders hoped to create momentum for a vote on the separate, bipartisan “physical” infrastructure bill. Their effort was unable to secure the necessary support for an immediate vote from House progressives. (Section-by-section bill summary and Washington Post, Oct. 29)
  • Policymakers did pass a short-term extension of surface transportation programs until Dec. 3 – the same day that funding for the government will run out and within the time frame for addressing the current debt ceiling. (Punchbowl News, and BGov, Oct. 30)
  • Roundtable President and CEO Jeffrey DeBoer commented on the evolving infrastructure legislative developments in an interview this week with American City Business Journals. DeBoer noted that as the bill’s cost has come down, policymakers have eliminated many proposed tax increases.
  • “We very much want to see the physical bipartisan infrastructure bill pass. It has been tied in the House to the larger human infrastructure bill, and that legislation is slowly winding its way to the finish line. As the larger bill was put forward, we were concerned about some provisions that we felt might target real estate activities and real estate investment. We tracked all of these various proposals such as mark-to-market and wealth taxes. We’re continuing to monitor developments and ensure that nothing comes up without proper vetting or full understanding of how it would impact CRE,” DeBoer said. 

What It Means for CRE 

Marcus and Millichap Oct 21 2021 tax webinar

  • The revised reconciliation bill reflects continued progress on a number of tax issues important to real estate and prioritized by The Real Estate Roundtable. Critically, the current bill includes:     
     
    • No limitations on like-kind exchanges (sec. 1031),
    • No increase in the capital gains tax rate,
    • No restrictions on the 20% pass-through business income deduction (sec. 199A),
    • No taxation of unrealized gains at death or repeal of the step-up in basis of assets,
    • No changes in the tax treatment of carried interest, and
    • No restrictions on estate tax valuation discounts. 
  • Additionally, the revised legislation excludes a complex mark-to-market regime to tax the unrealized gains of billionaires, new tax burdens on grantor trusts, and a provision that would have prohibited IRA investment in many non-listed REITS. 

Key Tax Revenue Provisions 

Tax issues grid choice image

  • In addition to provisions aimed at corporate and international business activities, tax provisions in the framework agreement include:
     
    • Expansion of the 3.8% net investment income tax to cover a much broader range of income – such as capital gains and rents – earned by both active business owners (such as real estate professionals), S corp. shareholders, and limited partners.

    • A new proposal to impose a 5% surtax on a taxpayer’s modified adjusted gross income (AGI) over $10M and an additional 3% surtax tax on modified AGI over $25 million.

    • Restrictions on taxpayers’ ability to deduct more than $250K (individual) or $500K (married couple) of losses incurred in an active trade or business from their portfolio income or wages.

    • Modifications to the portfolio interest exception that exempts interest earned on certain U.S. debt obligations from a withholding tax on outbound interest payments. The exception is sometimes used by foreign institutions when investing in US real estate.

    • Clarification that limitation on interest deductibility (sec. 163(j)) applies at the partner or shareholder level, not the entity level.

    • Clean Energy tax provisions affecting real estate are covered in the Roundtable Weekly story below. 

Dropped Tax Incentives 

  • As the cost of the bill came down, certain tax incentives were eliminated from the package: expansion of the low-income housing tax credit and the credit for rehabilitating historic structures, creation of a new tax credit for home construction in low-income communities for low-income buyers, and new infrastructure tax credit bonds and related infrastructure financing provisions. 

Legislative changes to the bill could occur next week on crucial issues such as the SALT deduction, but the timing of action on a final agreement remains uncertain. (Bloomberg, Oct. 29) 

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Democrats Struggle to Reach Agreement on “Social Infrastructure” Package as Roundtable’s DeBoer Addresses Real Estate Tax Issues in Play

Posted on by Trey Jackson

image - U.S. Capitol blue sky

Democrats this week struggled to reach agreement on cutting the cost of President Biden’s multitrillion “social infrastructure” proposal as Senator Kyrsten Sinema (D-AZ) opposed any increase in marginal rates for businesses, high-income individuals or capital gains to pay for the package. Democrats aim to pass both the “human” and “physical’ infrastructure packages under a budget reconciliation process that requires approval of all 50 Democrats in the evenly divided Senate. (Wall Street Journal, Oct. 20) 

CRE Impact 

Jeffrey DeBoer, Real Estate Roundtable President and CEP

  • Real Estate Roundtable President and CEO Jeffrey DeBoer (above) yesterday addressed the fluid nature of the reconciliation bill negotiations during a Marcus and Millichap tax policy webinar. The webcast is available here, but you must be registered to access the discussion.
  • DeBoer noted that the narrow voting margins in both the Senate and House have created an environment where it is difficult for various factions in Congress to reach consensus. “What we have here is a clash between expectations and reality,” DeBoer said.
  • He added that the current policy disputes among lawmakers adds uncertainty to the potential outcome. “Could negative tax provisions affecting real estate be put back on the table? Absolutely. What also worries me is that other proposals that we don’t know about yet may suddenly be considered.” (Registration required to view the Marcus & Millichap webcast)
  • The House Ways and Means Committee voted in September to advance legislation that would finance Biden’s social infrastructure initiatives with a $2.1 trillion tax increase focused on high-income individuals and corporations. The House legislation excluded several tax proposals put forward by the Biden administration and Senate lawmakers that would increase the tax burden on real estate. (Roundtable Weekly, Sept. 17)
  • The Washington Post today reported that a new “Billionaire Income Tax” proposal from Senate Finance Chair Ron Wyden (D-OR) would “aim to raise hundreds of billions of dollars from the fortunes of America’s roughly 700 billionaires” by applying a tax to those individuals earning over $100 million in income three years in a row. Taxes would be imposed on the increased value of assets such as stocks on an annual basis, regardless of whether those assets are sold. Billionaires would also be able to take deductions for the annual loss in value of those assets. (Washington Post, Oct 22)
  • Additional tax issues affecting CRE are profiled in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation.   

Tax Uncertainty 

Kyrsten Sinema

  • The Senate has not acted on any revenue-raising proposals to support President Biden’s original $3.5 trillion infrastructure package. Policymakers are now aiming to pare down the overall reconciliation bill cost to approximately $2 trillion before finalizing measures to pay for the package.
  • Sen. Sinema (above) yesterday spoke with House Ways and Means Committee Chairman Richard Neal (D-MA) in an effort to break the impasse on how to fund certain infrastructure spending priorities in a scaled-down package. Neal said he is optimistic a deal will be reached. “I did point out that it’s the ninth inning. I mean, when are you going to vet these issues?” Neal said. (The Hill, Oct. 21)
  • The current reconciliation bill in the House would raise the top marginal income tax rate on many pass-through business owners from 29.6% today to 46.4% (a 57% increase). The Roundtable believes this level of increase on pass-through businesses was unintended by Members of Congress and could undercut the bill’s own objectives. 

As negotiations continue among policymakers on a reduced topline number for the social infrastructure package – and the specific programs it would support within a multi-trillion reconciliation bill – The Roundtable continues to urge lawmakers to ensure that any tax changes within a final agreement treats pass-through businesses fairly and equitably. (Roundtable Weekly, Oct. 1 and Oct. 15) 

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Debt Ceiling Increase Enacted as House Democrats Consider Cuts to $3.5 Trillion Reconciliation Bill

Posted on by Trey Jackson

Capitol with flag close

President Joe Biden yesterday signed a $480 billion increase in the federal government’s debt limit to $28.9 trillion, narrowly avoiding an Oct. 18 national default deadline. The debt increase – passed by the Senate last week and the House on Tuesday – sets the stage for another fiscal cliff negotiation in less than two months, when both the debt limit and funding for the government run out on Dec. 3. (Associated Press, Oct. 14 and Reuters, Oct. 13) 

Infrastructure Funding 

  • Democrats this week continued to struggle on how to cut the scope and cost of the $3.5 trillion “human” infrastructure bill, after an intraparty split between moderates and progressives postponed a vote on a scaled-down bill in the House. (Wall Street Journal, Oct. 1)
  • House Speaker Nancy Pelosi (D-CA) set an Oct. 31 target date to pass revised legislation under the budget reconciliation process, which requires a simple majority in the 50-50 Senate to bypass Republican opposition. (Bloomberg, Oct. 2) 

Cuts and Scale 

Schumer and Pelosi

  • Pelosi sent an Oct. 11 letter to her caucus members as they work to cut Biden’s reconciliation proposal from $3.5 trillion to approximately $2 trillion. “Overwhelmingly, the guidance I am receiving from Members is to do fewer things well,” Pelosi wrote. (PoliticoPro, Oct 13)
  • On Oct. 12, Pelosi also commented on possible cuts to the length of certain spending programs, stating, “What would be the first to go? … the timing would be reduced in many cases to make the cost lower.” (News conference transcript)
  • In the Senate, Majority Leader Chuck Schumer (D-NY) yesterday sent a letter to his fellow Democrats urging unity as they consider a scaled-back infrastructure bill. “To pass meaningful legislation, we must put aside our differences and find the common ground within our party. As with any bill of such historic proportions, not every member will get everything he or she wants,” Schumer wrote. (Associated Press, Oct. 14) 

Roundtable Concerns 

Marcus and Millichap Oct 21 2021 tax webinar

  • Real Estate Roundtable President and CEO Jeffrey DeBoer will participate in an Oct. 21 Marcus & Millichap webinar on the state of play in infrastructure proposals, the industry’s tax policy concerns and the possible impact on commercial real estate. (Register here)
  • The tax bill passed by the House Ways and Means Committee does not include restrictions on like-kind exchanges, taxation of gains at death, ordinary income treatment for carried interest, and tax parity between capital gains and ordinary income.  The Roundtable argued that these Biden administration tax proposals could harm job growth, local tax revenue, and the economic recovery. 
  • As negotiations continue on a multi-trillion reconciliation proposal, The Roundtable is urging lawmakers to ensure that any final agreement on tax changes to fund a bill would treat pass-through businesses fairly and equitably. The current reconciliation bill in the House would raise the top marginal income tax rate on many pass-through business owners from 29.6% today to 46.4% (a 57% increase). 
  • The Roundtable believes this level of increase on pass-through businesses was unintended by Members of Congress and could undercut the bill’s own objectives of stimulating job growth, improving housing availability, and promoting investment in economically struggling communities, among other priorities.

Additional tax issues affecting CRE are summarized in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation.  

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Senate Passes Short-Term Debt Limit Increase as Democrats Aim to Reduce Cost of Human Infrastructure Package

Posted on by Trey Jackson

Capitol building bright

The Senate last night passed legislation (S.1301) on a 50-48 vote that would increase the debt limit by $480 billion and avoid an Oct. 18 national default. (Axios and Wall Street Journal, Oct. 7)

New Fiscal Cliff 

  • The bill would also effectively set Dec. 3 as the new fiscal cliff – when the new debt limit and the current short-term government-spending authorization both expire. (Roundtable Weekly, Oct. 1 and CQ, Oct. 7)
  • The agreement struck by Senate Majority Leader Charles Schumer (D-NY) and Minority Leader Mitch McConnell (R-KY) this week raises the current national debt to approximately $28.8 trillion to cover spending previously authorized by the federal government. (NPR and CNBC, Oct. 7) 
  • House Speaker Nancy Pelosi (D-CA) wrote to members of her caucus last night that she would call the House back from recess early to vote if necessary. President Biden said this week said he also would support an increase in the debt ceiling. (Wall Street Journal, Oct. 7 and White House remarks, Oct. 6)

Infrastructure Reset 

DC landscape sunset

  • Meanwhile, disagreements among moderate and progressive Democrats on the scope and cost of a $3.5 trillion “human” infrastructure package delayed a vote last week in the House, prompting Speaker Nancy Pelosi (D-CA) to reset the deadline for lawmakers to reach agreement to Oct. 31. (Forbes, Oct 2) 
  • Congressional leaders and President Biden continued negotiations this week with centrist Senate Democrats Joe Manchin (WV) and Kyrsten Sinema (AZ) aimed at reaching a deal that would allow a human infrastructure bill to pass the Senate with 50 votes. Manchin this week added that he is open to a reduction in the reconciliation bill’s cost to between $1.9 trillion and $2.2 trillion. (CNN, Oct 5)
  • Democrats are now engaged in an intense debate about how to cut the total cost of their human infrastructure bill. Legislation that would raise an estimated $2.1 trillion in taxes from corporations and the wealthy was approved by the House Ways and Means Committee on Sept. 15 to help finance the original $3.5 trillion reconciliation package. (Roundtable Weekly, Sept. 17) 
  • Real Estate Roundtable President Jeffrey DeBoer commented Sept. 17 on the bill’s advancement. “We encourage Congress to review the suggested tax hikes, particularly those on pass-through businesses, and work to ensure that unnecessary and unintended damage is not done to the economy. Substantial commercial real estate activities are conducted by pass-through entities and these activities create jobs, support retirement savings, and boost tax revenue for critical public services provided by local governments.”  DeBoer added, “The Roundtable is encouraged, yet cautious, at this still relatively early stage of the legislative process.” (Roundtable Weekly, Sept. 17 | Sept. 24 | Oct. 1)
  • Roundtable members and others are encouraged to reach out to their Representatives and contact their Senators to urge them to preserve the 20% deduction for pass-through business income (section 199A), which is directly tied to hiring workers and investing in capital equipment and property. Modest adjustments in the legislation would ensure that pass-through businesses could continue contributing to economic growth, innovation, and job creation. Background information and talking points on the pass-through issue can be found here. 
  • Tax issues affecting CRE are summarized in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation. 
  • DeBoer will participate in an Oct. 21 Marcus & Millichap webinar on the latest tax policy developments in Washington and what they mean for CRE. (Register here) 

Legislation on human and physical infrastructure, the debt ceiling, government funding and many other policy issues affecting CRE were the focus of discussions between Roundtable members and national policymakers during The Roundtable’s Oct. 5 Fall Business Meeting. (See story above).  

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