Tag: Policy Landscape

Major Tax and Fiscal Package Gains Momentum as House Passes Budget Resolution

Posted on by Abigail Grenadier

House Republicans’ effort to pass a massive tax and fiscal package received a jolt of momentum this week after a cliffhanger vote on the House floor Tuesday night. Passed by a narrow vote of 217-215, the House resolution would authorize $4.5 trillion in tax cuts, provided congressional committees can identify $2 trillion in spending reductions. 

House Budget Proposal

  • Under the deal negotiated with fiscal conservatives in the House, if congressional committees cannot agree on $2 trillion in savings, the size of the authorized tax cut will automatically adjust downwards.  If they can agree on more than $2 trillion in savings, the size of the authorized tax cuts would adjust higher. (House Committee Report, Feb. 18)
  • The House resolution also includes a controversial $4 trillion increase in the national borrowing limit, along with allocations of up to $200 billion for border security and $100 billion for defense funding. (Roll Call, Feb. 25; AP, Feb. 25))
  • Shortly before the vote, The Roundtable joined a broad business coalition urging Congress to pass the House budget resolution to prevent a looming tax hike on pass-through businesses.  (Letter, Feb. 24)

Next Steps

  • Both the House and Senate chambers must now align on a budget resolution before moving forward with a reconciliation bill detailing the spending cuts, tax reductions, and other measures.
  • Senate Republicans have expressed reservations about the House’s approach, particularly concerning the scale of spending cuts and the structure of tax extensions.
  • Senate leaders have already signaled they will push for changes to ensure the 2017 tax cuts become permanent, as the House plan may lack the fiscal room to do so while also accommodating President Trump’s proposed new tax breaks.
  • Senate Majority Leader John Thune emphasized the complexity of the task, stating, “It’s complicated. It’s hard. Nothing about this is going to be easy.” (The Hill, Feb. 27)

View from The White House

  • For weeks, the president has endorsed the House plan as the best way to achieve his top legislative priorities in one move, yet he has also signaled openness to the Senate’s alternative or a compromise blending both approaches.
  • “So the House has a bill and the Senate has a bill, and I’m looking at them both, and I’ll make decisions,” President Trump said at the White House on Tuesday. “I know the Senate’s doing very well, and the House is doing very well, but each one of them has things that I like, so we’ll see if we can come together.”

Revenue Offsets and Business SALT

  • Some lawmakers have raised “Business SALT” and potential restrictions on the deductibility of state and local property taxes as a possible revenue offset for the tax bill. 
  • Eliminating the business deduction for property taxes would be the equivalent of raising property tax bills on commercial real estate by roughly 40 percent. 
  • “Business taxes are fundamentally different from state and local individual income taxes.  State and local business taxes are an unavoidable expense, an inescapable cost of doing business,” observed Real Estate Roundtable President and CEO Jeffrey DeBoer last week.  (Roundtable Weekly, Feb. 21)
  • “Employers would owe federal tax on money that they do not have.  It would lead to insolvencies and foreclosures. It would cause self-inflicted injury to the U.S. economy, including unnecessary job losses, higher rents for families and individuals, and other inflationary pressures.  It is a recipe for a recession,” said DeBoer.
  • It remains an open question whether the House and Senate will use a “current policy” budget baseline that would not count the extension of the 2017 tax cuts as a revenue loss.  A current policy baseline could significantly reduce the pressure to identify spending reductions and revenue offsets. (PoliticoPro, Feb. 28)

Averting Government Shutdown

  • In addition to the tax and fiscal package, congressional leaders are under pressure to reach an agreement on current-year federal spending before a government shutdown on March 14.  A short-term stopgap bill will likely be necessary. (Axios, Feb. 27, CBS, Feb. 27)

Looking Ahead

The House budget resolution directs House committees to report their spending reductions and tax changes to the House Budget Committee no later than March 27, 2025.

Senate Advances Narrow Budget Resolution as President Trump Endorses House “One Bill” Strategy

Posted on by Cole Kline

After an all-night session of voting on amendments, the Senate passed a narrow budget resolution focused on border security, defense spending, and expanded energy production. 

Senate Passes Budget Resolution

  • The Senate vote, 52-48, came two days after President Trump expressed his preference for the House strategy of moving forward with “one big beautiful bill” that would include all of his agenda, including an extension of the 2017 tax cuts. (Reuters, Feb. 21)

  • After its passage, Senate Budget Committee Chairman Lindsey Graham (R-SC) said the Senate resolution would allow the Judiciary and Homeland Security Committees to spend up to $175 billion to implement the President’s border security agenda, increase defense spending by $150 billion, and facilitate energy independence through new on and offshore lease sales and ending the methane emissions fee. (Politico, Feb. 20)

Amendments Defeated

  • Although the Senate budget resolution does not include an extension of the 2017 tax cuts, Senate Democrats used the open amendment process to challenge Republicans on tax policy, offering several amendments calling on Senators to reject tax cuts for millionaires and billionaires. These amendments were defeated on party-line votes. (AP, Feb. 21)

  • Senator Mark Warner (D-VA) offered an amendment to create a point of order against any final budget reconciliation bill that does not decrease the cost of housing for American families. It was also defeated on a party-line vote. (WSJ, Feb. 21)

  • Senators Tammy Baldwin (D-WI) and Sheldon Whitehouse (D-RI) filed, but did not offer, an amendment aimed at putting Senators on the record in favor or against recharacterizing carried interest as ordinary income.

House and Senate’s Competing Plans

  • The House and Senate appear to be on a collision course.  Last week, the Senate Budget Committee passed, on a party-line vote, a much more ambitious budget resolution that includes $4.5 trillion in tax cuts and up to $2 trillion in spending reductions. (Reuters, Feb. 21)

  • The House approach received a major lift on Wednesday when President Trump posted that the House resolution “implements my FULL American First Agenda … not just parts of it,” and that “[w]e need both Chambers to pass the House Budget to ‘kickstart’ the Reconciliation process.” (Barrons, Feb. 19)

  • The House budget could be on the House floor as early as next week. Passage would allow the two chambers to resolve their differences in a conference committee, vote on the compromise budget, and then move to the next stage—committee action on actual legislation. (AP, Feb. 21)

Looking Ahead

RER will pay close attention to budget discussions coming from both chambers and their implications on crucial real estate policy issues. We will continue to advocate for pro-growth budget considerations in areas such as State and Local Tax (SALT) and carried interest. 

House GOP Unveils Fiscal Blueprint Calling for Trillions in Cuts to Taxes and Spending

Posted on by Abigail Grenadier

After weeks of discussions, the House GOP and Speaker Mike Johnson unveiled their long-term budget blueprint, which would allow congressional committees to move forward with trillions into tax cuts and spending reductions. However, negotiations to fund the government ahead of the March 14 deadline have stalled.

Committee Advances Budget Plan

  • The House Budget Committee voted late Thursday night 21-16 to advance their budget resolution, which authorizes up to $4.5 trillion in tax cuts and $2 trillion in spending cuts over the next decade. The fiscal blueprint also calls for $300 billion in new border and defense spending and a two-year extension of the debt ceiling. (Politico, Feb. 12)
  • While Speaker Mike Johnson hopes to bring the resolution to the floor later this month, there are a number of details to hammer out that could hinder its passage. Overcoming the GOP’s extremely narrow majority in the House (218-215) will be a challenge.
  • House Budget Republicans secured passage of their resolution along party lines after striking a deal with the Freedom Caucus to win over fiscal hardliners Reps. Ralph Norman (R-SC) and Chip Roy (R-TX). (Roll Call, Feb. 13)

  • An amendment from Vice Chair Lloyd Smucker (R-PA) cemented the agreement by linking the size of a future tax-cut package to spending reductions. Under the modified resolution, the amount of the tax cuts would be reduced if the legislation does not include the full $2 trillion in spending reductions.

Tax Negotiations

  • House Ways and Means Chair Jason Smith (R-MO) also faces a difficult road to extend key provisions in the 2017 Tax Cuts and Jobs Act (TCJA). The $4.5 trillion figure for tax cuts is not enough to permanently extend the TCJA and include President Trump’s other tax priorities. (Politico, Feb. 12)

  • How to come up with the spending cuts to fund a permanent TCJA extension and other priorities remains a fundamental question. The budget package is expected to include significant reductions in Medicaid, which provides health benefits to low-income families and individuals.  President Trump has expressed concern with those health care cuts. (Politico, Feb. 13)
  • Some estimates place the cost of the President’s additional tax priorities as high as $2 trillion. These include exempting tips, overtime pay, and Social Security benefits from tax. Tax-writers must also find a way to pay for any adjustments to the SALT limitation, which are widely understood as needed to secure Blue State Republican votes in the House. 
  • Tax-writers are expected to look for other tax offsets, raising concerns that they could target issues such as the deductibility of state and local property taxes paid by businesses.
  • Limits on the deductibility of property taxes would upend the federal income tax by denying a deduction for a basic cost of doing business. It would severely hurt property values, real estate markets, and the millions of Americans employed directly and indirectly by the real estate industry.
  • “Capping or eliminating the federal deduction for business property taxes would be a major policy misstep,” said Roundtable President and CEO Jeffrey DeBoer. “Property taxes are not optional—they are a fundamental cost of doing business.”
  • “This change would force businesses to pay federal tax on money they never actually receive, placing a heavy burden on real estate investment and development. The impact would be severe for property owners repositioning assets—such as converting office buildings into housing—where property taxes remain due even when rental income is disrupted. Losing this deduction would drive up operating costs, which would ultimately be passed to consumers through higher rents, and hindering economic growth at a time when we should be encouraging investment and revitalization,” said DeBoer.
  • House Republicans are also considering shorter extensions of the expiring tax cuts in a bid to fit them into the budget plan’s constraints.
  • However, in a letter released Thursday, Senate Republican leaders, including Majority Leader John Thune (R-SD), Finance Chair Mike Crapo (R-ID) and seven others, said they would not support a tax package that only provides temporary relief from tax hikes. They said that any extension of the provisions due to lapse at the end of this year “must” be permanent. (Politico, Feb. 13)
  • Meanwhile, congressional Democrats have attacked Republican’s tax and spending cuts as a “betrayal of the middle class,” though they have minimal power to stop the GOP’s budget plan if Republicans are able to align on a strategy. (Politico, Feb. 13)

Reconciliation

  • To avoid the Senate filibuster, the tax and spending cuts will require the House and Senate to pass identical budget resolutions as part of the reconciliation process—and the Senate is pursuing its own budget proposal. (Politico, Feb. 12)

  • On Wednesday, the Senate Budget Committee approved its own budget blueprint, which includes up to $345 billion in funding for border security, immigration enforcement and defense. However, the resolution punts on any sweeping tax and spending cuts. (Washington Times, Feb. 12)

  • Preferring a two-step strategy over the House Republican’s plan, Senate Budget Chair Lindsey Graham (R-SC) said, “To my colleagues in the House, I hope you can pass one, big beautiful bill.” “But we’ve got to move on this issue.” (Politico, Feb. 12)

  • The March 14 deadline to fund the government is fast approaching. House Appropriations Chair Tom Cole (R-OK) indicated that negotiations are ongoing, but with much activity and attention focused on budget resolutions, little progress has been made.
  • If congressional leaders are unable to extend government funding before the deadline, key programs like the National Flood Insurance Program (NFIP) could lapse. (Politico, Feb. 12)

Looking Ahead

While the Senate will be in session next week after President’s Day, the House is out of session until February 24. The Roundtable will continue to follow developments on tax and budget negotiations closely.

Tax Policy This Week in Washington: Carried Interest and Budget Talks

Posted on by Abigail Grenadier

As budget negotiations continued this week in the House and Senate, President Donald Trump met with Republican lawmakers on Thursday to discuss his tax priorities.

Tax Talks

  • White House Press Secretary Karoline Leavitt told reporters that during a Thursday meeting with Republican lawmakers, President Trump outlined his tax priorities, including closing the “carried interest tax deduction loophole,” along with other provisions he wants included in a sweeping tax bill this year. (Bloomberg, Feb. 6 | Axios, Feb.7)
  • President Trump also reiterated ideas he promoted on the campaign trail, including ending taxes on tips, overtime and Social Security payouts, as well as adjusting deductions for state and local taxes.
  • Appearing on Fox Business this week, Treasury Secretary Scott Bessent rejected the idea of a short-term extension of President Trump’s tax cuts, emphasizing they should be made permanent. (Fox Business, Feb. 5)

The Roundtable’s Position

  • Since carried interest and its tax treatment first emerged as a controversial political issue in 2007, The Roundtable has consistently opposed legislative proposals to tax all carried interest at ordinary income rates.
  • “The proposals would penalize entrepreneurs, slow housing production, and reduce economic mobility,” said Roundtable President and CEO Jeffrey DeBoer.  “The tax code has never, and should never, limit the reward for risk-taking only to deep-pocketed investors who have cash to deploy.” 
  • “Real estate partnerships of all sizes across the country, small and large, use carried interest.  It is not compensation for services, and it is not comparable to wages. Carried interest is granted for the value a general partner adds beyond routine services, and it is a recognition of the risks a general partner takes, such as funding predevelopment costs, guaranteeing construction budgets and financing, and exposure to potential litigation,” said DeBoer. 
  • Reversing well-established tax law and ending carried interest would raise little revenue. It would, however, reduce construction activity, especially higher-risk and much-needed projects like affordable housing, commercial developments in long-neglected neighborhoods, and the cleanup of contaminated land. 
  • “Today, construction costs are higher than ever and financing remains challenging.  Now is not the time to raise taxes on U.S. real estate,” said DeBoer. 

Senate Proposal

  • Senate Budget Chair Lindsey Graham (R-SC) announced today that his committee will convene Wednesday and Thursday to debate and vote on his budget resolution, setting the stage for a future vote on a bill focused solely on border security, defense, and energy. (Politico, Feb. 7)
  • Their decision comes ahead of a meeting with President Trump at Mar-a-Lago today, where they also plan to discuss budget reconciliation. (Politico, Feb. 5)
  • “This budget resolution jumpstarts a process that will give President Trump’s team the money they need to secure the border and deport criminals, and make America strong and more energy independent,” Graham said in a statement.
  • With a 53-seat majority, Senate Republicans have a bit more flexibility than the House, but still need to unite their party, as some members demand significant spending cuts.
  • Senate GOP leaders plan to revisit the extension of the TCJA 2017 tax cuts later this year through a second reconciliation package.

House Proposal

  • Several House Republicans met with President Trump on Thursday to resolve intraparty spending disputes. House Majority Leader Steve Scalise (R-LA) said the meeting was designed so House Republicans could “get in a place” where they could advance their stalled budget blueprint “next week.” (Politico, Feb. 7)
  • Speaker Mike Johnson had aimed to release a framework today but now says Republicans will be working all weekend to finalize it.

GOP leaders have warned members that full details won’t be available until Monday, and a topline spending agreement remains elusive.

This Week on Capitol Hill: Confirmation Hearings and Tax Policy Debates

Posted on by Abigail Grenadier

This week, the Senate conducted confirmation hearings for several of President-elect Donald Trump’s Cabinet nominees, providing critical insights into the nominees’ perspectives and potential policy directions on real estate, housing, the economy, and tax policy under the incoming administration.

Senate Confirmation Hearings

  • Scott Bessent – Nominee for Secretary of the Treasury: Treasury nominee Scott Bessent faced bipartisan scrutiny during his Senate Finance Committee confirmation hearing over tax policy, tariffs, and China on Thursday. (Axios, Jan 17)
  • He emphasized the importance of extending the 2017 Tax Cuts and Jobs Act, stating, “This is the single most important economic issue of the day.” (Roll Call, Jan. 16 | PoliticoPro, Jan. 16)
  • “We must make permanent the 2017 Tax Cuts and Jobs Act and implement new pro-growth policies to reduce the tax burden on American manufacturers service workers and seniors,” Bessent said in his testimony. He also praised the Opportunity Zones program as a “resounding success,” highlighting its potential to address housing challenges, promote inner-city redevelopment, and support rural growth. (Politico, Jan, 16)
  • He also called for spending cuts and shifts in existing taxes to offset the costs that extending the tax cuts would add to the federal deficit. (AP News, Jan. 16)
  • Lee Zeldin, nominee for EPA Administrator, Chris Wright, nominee for Energy Secretary, and Doug Burgum, nominee for Housing and Urban Development Secretary, also testified this week and are expected to be confirmed. (see Energy story below)
  • Sean Duffy – Nominee for Secretary of the Department of Transportation: Appearing before the Senate Commerce Committee, Duffy emphasized his commitment to safety and pledged to streamline regulatory processes that delay infrastructure projects. Promising to uphold the 2021 infrastructure law, he stated, “I commit to implementing the law,” and vowed to expedite funding distribution, addressing delays to ensure critical projects move forward efficiently. (Politico, Jan. 17)

Federal Housing Finance Agency (FHFA) Nominee

  • On Thursday, Trump announced he would nominate Bill Pulte for Director of the Federal Housing Finance Agency (FHFA). (HousingWire | Reuters Jan. 16)
  • If confirmed, Pulte would oversee Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) standing behind roughly half of the U.S. residential mortgage market.
  • The Trump administration is expected to pursue a plan to release Fannie and Freddie from government control. (GlobeSt., Jan. 17)
  • GOP lawmakers have raised the idea of including language to mandate Fannie and Freddie’s release in this year’s reconciliation package as a way to offset the cost of extending expiring tax cuts. (Politico, Jan. 16)

House Ways and Means Committee Hearing – TCJA

  • The tax debate kicked off Tuesday with the House Committee on Ways and Means’ first hearing on extending key provisions of the TCJA led by Chairman Jason Smith (R-MO). (Fox News, Jan. 14)
  • At the hearing, lawmakers discussed expiring provisions of the TCJA including the SALT deduction, Section 199-A, opportunity zones, and child tax credits.
  • Congress faces the dual challenge of addressing expiring tax provisions while managing fiscal pressures. While bipartisan cooperation is possible on certain issues like affordable housing, divisions over business tax rates, SALT deductions, and the debt ceiling could stall progress.

What’s Next: RER President & CEO Jeffrey DeBoer will be on Marcus & Millichap’s 2025 Economic & CRE Outlook webinar next Thursday, January 23. He will be joined by Mark Zandi and a panel of industry leaders discussing the macro environment and the potential policies of the new administration and key trends on jobs, the FED outlook, tax policy expectations and more. (Register)

Tax Policy 2025: Competing Strategies and CRE Priorities

Posted on by Abigail Grenadier

The Real Estate Roundtable (RER) is focused on advancing a tax code that encourages investment, supports economic growth, and ensures fair treatment for commercial real estate. With significant provisions of the 2017 Tax Cuts and Jobs Act (TCJA) set to expire, tax policy is already dominating early Congressional discussions.

Congressional Dynamics

  • The tax debate is set to kick off on Tuesday, Jan. 14, with the House Committee on Ways and Means’ first hearing on extending key provisions of the TCJA led by Chairman Jason Smith (R-MO).
  • Congress faces the dual challenge of addressing expiring tax provisions while managing fiscal pressures. While bipartisan cooperation is possible on certain issues like affordable housing, divisions over business tax rates, SALT deductions, and the debt ceiling could stall progress.
  • House Speaker Mike Johnson and top House leaders doubled down on their plan to bundle border, tax, and energy policies into a single bill. Meanwhile, Senate leaders are continuing with their two-bill approach, aiming for faster legislative wins for the new administration. (The Hill, Jan. 10)
  • The two chambers are effectively competing to see which strategy can deliver results more quickly.
  • Trump indicated he can live with either approach. “I like one, big, beautiful bill,” Trump said at a press conference on Tuesday. On Wednesday after meeting with Senate Republicans, he told reporters “Whether it’s one bill or two bills, it’s going to get done one way or the other. The end result is the same.” (Axios, Jan. 8 | The Hill, Jan. 8)
  • Speaker Johnson and Republicans are determined to pass their budget blueprint by the end of February. Johnson told reporters Thursday that he’s still working with the Senate to properly “sequence” the massive effort. (PoliticoPro, Jan. 9)
  • On Thursday, Senate Majority Leader John Thune refused to commit to the House’s preferred approach and called it an ongoing conversation. “Obviously we want to give the House as much space as possible,” he told reporters. “They believe they can move and execute on getting a bill across the finish line fairly quickly. But we are prepared to move here, as well.” (PoliticoPro, Jan. 9)
  • “We’re going to be having conversations with each chairman to make sure that the targets they’re given are achievable within their committee, and then ultimately get pulled back into budget reconciliation to give us the ability to do all the things you want to do,” House Majority Leader Steve Scalise told Punchbowl News. (Punchbowl News, Jan. 10)

Senate Bipartisan Outreach

  • Eleven moderate Senate Democrats, led by Sens. Catherine Cortez Masto (D-NV) and Mark Warner (D-VA) wrote to Republican leaders, offering to work with them on extending expiring tax cuts and raising the debt ceiling, proposing bipartisan reforms to balance tax policy and fiscal responsibility. (PoliticoPro, Jan. 10)
  • The letter stated the group was willing to cut spending, protect family-oriented tax policies, maintain competitive business tax rates, — and indicated that they could provide enough votes to allow Republicans to overcome a filibuster in the Senate without having to go through the reconciliation process.
  • While the GOP is unlikely to accept the offer amid internal divisions, the proposal highlights potential avenues for compromise on tax reform and debates ahead.

Roundtable Tax Priorities for 2025

RER encourages lawmakers to ensure that any major tax legislation in 2025 retain or include:

  • The reduced tax rate on capital gains. 
  • Tax fairness for partnerships and pass-through entities.
  • Safeguard like-kind exchanges.
  • Extend, improve, and enact smart tax policies to address the severe housing shortage.
  • Tax rules that encourage, rather than deter, foreign investment in U.S. real estate.

As negotiations and debates continue, RER remains committed to working with lawmakers to ensure the U.S. maintains a competitive tax code that encourages capital formation, rewards entrepreneurial risk-taking, and supports policy objectives, including accessible and affordable housing and safe and healthy communities.

Congress Faces Shutdown Threat Amid Funding Battles

Posted on by Abigail Grenadier

House Speaker Mike Johnson (R-LA) announced this afternoon that the House will vote tonight on a revised version of the bill that was defeated on Thursday, excluding the debt ceiling provision advocated by President-elect Trump. (Politico, Live updates)

Latest Funding Plan

  • On Thursday, Democrats and a group of Republicans rejected a second Continuing Resolution (CR) proposal in a decisive 174-235 vote, which fell short of the two-thirds majority needed under expedited rules.  (Axios, Dec. 20)
  • Elon Musk and President-elect Trump amplified tensions in Congress, urging Johnson to abandon the bipartisan agreement he reached with top Democrats in favor of a Republican-preferred measure earlier in the week. (AP, Dec. 20)
  • By rejecting the Trump-endorsed proposal, Democrats signaled they would not support legislation unless they were included in negotiations.

Roundtable Urges National Flood Insurance Program (NFIP) Extension

  • The Roundtable and 11 other organizations wrote to Congressional leadership urging swift action to extend the National Flood Insurance Program (NFIP) before its December 20 expiration. (NFIP Letter, Dec. 20)
  • The letter emphasized the urgency of passing the “NFIP Extension Act of 2024” in the event of a government funding lapse. This legislation, already introduced in both the House and Senate, would extend the NFIP through September 30, 2025, ensuring continuity and aligning the program with the end of the fiscal year.

Debt Ceiling

  • House Republican leaders unveiled a plan this afternoon to raise the debt ceiling by $1.5 trillion in early 2025, paired with $2.5 trillion in cuts to mandatory spending. (Politico, Dec. 20)
  • GOP leaders aim to use the reconciliation process next year to pass these measures with a simple majority vote in the Senate, bypassing the filibuster. The proposal directly challenges President-elect Donald Trump’s demands for immediate bipartisan action to raise the debt ceiling.
  • GOP leaders hope to leverage this budget tool to achieve major policy goals, such as increased border security and expiring tax cuts, but face challenges in rallying the slim majorities they will have in both chambers when the new Congress is sworn in. (Politico, Dec. 20)

What’s next: The GOP plan sets the stage for a contentious fiscal battle in 2025, as the party grapples with how to balance its policy priorities against the looming threat of economic fallout.

Outlook for 2025 Budget, Reconciliation, and Tax Legislation

Posted on by Abigail Grenadier

Senate Republicans are mapping out an ambitious two-step reconciliation strategy for 2025, planning to first address defense, energy, and border security before tackling a tax package later in the year. The initial focus is to secure an early win that could help build momentum for the more complex task of extending the expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA). (Tax Notes, Dec. 4)

Why It Matters

  • This approach marks a notable shift from House Republicans’ earlier plan to address tax issues within the first 100 days of President-elect Trump’s term. (Washington Post, Dec. 4)
  • Instead, Senate Republicans want to divide the legislative work to make each package more manageable, leveraging early victories to build momentum for harder battles. (PoliticoPro, Dec. 4)

Reconciliation Plan

  • GOP senators, including Thom Tillis (R-NC) and Shelley Moore Capito (R-WV), emphasized the importance of consensus and coordination within the party, acknowledging that a slim House majority could complicate passage. (Tax Notes, Dec. 4)
  • Sen. Capito noted that a smaller, earlier reconciliation package—focused on defense, energy, and border security—could help set the stage for tackling the more politically challenging tax bill.
  • The initial bill could include measures that all Republican factions can support, such as limited deficit reduction and targeted energy policy reforms.
  • Failure to act on tax reform by the end of 2025 will lead to the expiration of many provisions from the 2017 tax law, resulting in tax increases for most individuals and some businesses. (Bloomberg, Dec. 3)
  • Rep. Jason Smith (R-MO), chairman of the House’s Ways and Means committee, voiced his opposition to delaying tax reform under Sen. Thune’s plan, noting the difficulty of advancing two budget reconciliation packages, which are immune to filibusters in the Senate. (The Hill. Dec. 5 | CNBC, Dec. 4)
  • “The important thing is getting all the policies done as quickly as possible, and what we ultimately all agree on [is] we’re all going to have to be in unison on that, but no final decision has been made,” said House Majority Leader Steve Scalise (R-LA) regarding the reconciliation timeline. (PoliticoPro, Dec. 4)

View from Senate

  • Sen. Chuck Grassley (R-IA) pointed to the complexity of the tax package as the reason for its placement as the second bill.
  • “We want to help lower energy costs, we want to help the military. We want to hit the ground running,” said Sen. Lindsey Graham (R-SC). (The Hill, Dec. 4)
  • Sen. Rand Paul (R-KY) cautioned against using reconciliation to increase spending, emphasizing the need to reduce overall expenditures.

What’s Next

  • Senate Republicans, led by incoming Senate Majority Leader John Thune (R-SD), will work closely with House Speaker Mike Johnson (R-LA) and the White House to finalize the contents and timing of both reconciliation bills.
  • Passage of a budget resolution, which is the first key step in the reconciliation process, will be crucial to move forward—a challenge in itself given the slim GOP majority in the House.

The two-bill reconciliation strategy reflects Senate Republicans’ cautious approach to the legislative calendar. By securing an earlier, more straightforward win, the GOP hopes to gain the momentum needed to navigate a complex tax debate later in 2025.

Congress Extends Government Funding Until March, House Ways & Means Approves Tax Package with LIHTC and Business Provisions

Posted on by Abigail Grenadier

President Biden signed legislation today that averts a partial federal government shutdown by extending federal funding to March 1 and 8. The stopgap, passed by Congress yesterday, gives policymakers limited time to negotiate 12 additional bills at an agreed-upon $1.59 trillion limit to fund the government through the end of its fiscal year on Sept. 30. (Associated Press, Jan. 19 | (Politico and The Hill, Jan. 18)

Stopgap Funding

  • Today’s stopgap is the third “continuing resolution” Congress has cleared since the start of the current fiscal year on Oct. 1. Intense opposition from members of the conservative House Freedom Caucus led Speaker Mike Johnson (R-LA) to reach an agreement with Democrats to support the measure. (Wall Street Journal, Jan. 18)
  • A similar short-term spending bill last October led to the ouster of former Speaker Kevin McCarthy (R-CA) by House conservatives. (Wall Street Journal, Jan. 8)

Bipartisan Tax Package Advances

House Ways and Means Committee
  • Provisions in the tax bill affecting real estate include:

    • Low-Income Housing Tax Credit
      A Roundtable-supported three-year extension (2023–2025) of the 12.5 percent increase in LIHTC allocations to states. Even more importantly, the agreement reforms LIHTC’s tax-exempt bond financing requirement, which will allow more affordable housing projects to receive LIHTC allocations outside of the state cap, and without requiring projects be financed with 50% tax-exempt bonds.
       
    • Business Interest Deductibility
      A retroactive, four-year extension (2022–2025) of the taxpayer-favorable EBITDA standard for measuring the amount of business interest deductible under section 163(j). The changes do not alter the exception to the interest limitation that applies to interest attributable to a real estate business.

    • Bonus Depreciation 
      Extension of 100 percent bonus depreciation through the end of 2025. As under current law, leasehold and other qualifying interior improvements are eligible for bonus depreciation. In 2026, bonus depreciation would fall to 20 percent and expire altogether after 2026.  

  • Other provisions in the agreement include reforms to the child tax credit, the expensing of R&D costs, disaster tax relief, a double-taxation tax agreement with Taiwan, and a large pay-for that creates significant new penalties for abuse of the employee retention tax credit (ERTC) rules and accelerates the expiration of the ERTC.

Sen. Wyden and senior congressional staff will discuss tax legislation with Roundtable members during The Roundtable’s all-member 2024 State of the Industry Meeting in Washington next week.

#  #  #

Congress Struggles to Assemble Stopgap Funding Measure as Policymakers Negotiate Elements of Potential Tax Package

Posted on by Abigail Grenadier

House and Senate lawmakers are discussing a short-term stopgap measure aimed at avoiding government shutdown deadlines on Jan. 19 and Feb. 2, which would also buy time to negotiate additional funding through the end of the fiscal year on Sept. 30. Meanwhile, with tax filing season slated to begin Jan. 29, congressional tax writers reported making progress this week on a potential tax package that includes measures on business interest deductibility, bonus depreciation, and the child tax credit. (CQ | PoliticoPro | TaxNotes, Jan. 11)

Funding Challenge

  • Sen. John Thune (R-SD), the second-ranking Republican in the Senate, said on Tuesday that a stopgap bill with funding until March might be necessary. “What that looks like next week, and where it originates, House or Senate, remains to be seen.” Thune said. (Roll Call, Jan. 9 and PunchBowl News, Jan. 10)
  • Sen. Majority Leader Chuck Schumer (D-NY) announced yesterday that the Senate will consider a “continuing resolution” to keep the government open. “A shutdown is looming over us, starting on Jan. 19, about a week away. Unfortunately, it has become crystal clear that it will take more than a week to finish the appropriations process.” (CBS News and CQ, Jan. 11)
  • In the House, Speaker Mike Johnson (R-LA) is struggling to obtain the approval of conservative Republicans on a spending agreement announced on Sunday for a $1.66 trillion spending plan for the federal government. (The Hill, Jan. 11 and AP, Jan. 8))
  • Republicans currently hold a 220-seat majority in the House while Democrats control 213, which means Johnson can afford to lose only three votes in his caucus for the GOP to pass legislation in the lower chamber by party-line vote. (AP, Jan 11 | CNN, Jan. 9 | AlterNet, Jan. 2)

Tax Package Negotiations

  • On Wednesday, Senate Finance Committee Chairman Ron Wyden (D-OR) and House Ways and Means Committee Chairman Jason Smith (R-MO), above, presented their members with an outline of a potential, three-year $70 billion tax package. 
  • Disagreements continue over the scope of a potential child tax credit and low-income housing tax credit in exchange for partial restorations of business tax credits such as business interest deductibility and bonus depreciation. (MarketWatch and PunchBowl, Jan. 11 | PoliticoPro and Wall Street Journal, Jan. 10)
  • Issues that remain under consideration include a Roundtable-supported expansion of the low-income housing tax credit and the deductibility of state and local taxes (SALT). Sen. Wyden and senior congressional staff will discuss tax legislation with Roundtable members during The Roundtable’s all-member 2024 State of the Industry Meeting on Jan. 23-24.

Preview of Coming Tax Battles

PWC 2024 Tax Policy Outlook figure 8
  • Current discussions among congressional tax negotiators are a precursor for a much larger challenge next year, when 23 different provisions in the 2017 Tax Cuts and Jobs Act (TCJA) will change or expire at the end of 2025, including the deduction for pass-through business income and the cap on the SALT deduction. (Roundtable Weekly, May 26)
  • PWC emphasized the stakes in next year’s tax negotiations in its “2024 Tax Policy Outlook” released yesterday. PwC’s National Tax Services Co-Leader Rohit Kumar told PoliticoPro that the current tax package under consideration would amount to only a “rounding error” when compared to the value of all the TCJA provisions. Today’s Wall Street Journal estimated there are $6 trillion in taxes at stake in this year’s elections.
  • Policymakers’ efforts to pass government funding and negotiate a tax package come as office vacancies hit a record high in the fourth quarter of last year, according to a Moody’s Analytics released Jan. 8.

The Moody’s report shows the national office vacancy rate rose 40 bps to a record-breaking 19.6 percent. The new record shatters the previous rate of 19.3% set twice previously—and reflects changing trends in business needs and the recent shift towards in remote work arrangements. (Wall Street Journal and ConnectCRE, Jan. 8)

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