Tax Policy – Page 6 – The Real Estate Roundtable

Congress Faces Short-Term Funding Measure to Prevent Government Shutdown by Sept. 30

Posted on September 8, 2023October 27, 2023 by Trey Jackson

Funding for the government will expire Sept. 30 if Congress cannot muster a short-term stopgap patch to keep federal agencies open and avoid a partial government shutdown. House Speaker Kevin McCarthy (R-CA) faces strong opposition from members of the conservative House Freedom Caucus to strike a deal with the Biden administration, which has submitted an additional $44 billion request for disaster relief, border security, and Ukraine. (CQ, Sept. 5 and AP, Aug. 21)

Flood Response Funding

An uncertain funding landscape dominates the prospects for legislative developments for the remainder of the year. If policymakers manage to pass a short-term “continuing resolution,” it could require a follow-on “omnibus” budget package for 2024 that may serve as the only must-pass vehicle to move other policy changes through Congress.

As the hurricane season picks up momentum, one government program affecting commercial real estate that is subject to the Sept. 30 funding deadline is The National Flood Insurance Program (NFIP). Congress has enacted 25 short-term NFIP reauthorizations since 2017.

A new flood rating methodology (Risk Rating 2.0) in 2021 established by the Federal Emergency Management Agency (FEMA) has attracted additional disagreement among policymakers after it was reported that resulting rate hikes could cause the loss of coverage for hundreds of thousands of policyholders. (Associated Press, July 22)

The Roundtable is a long-standing supporter of a long-term reauthorization of the NFIP with appropriate reforms that create long-term stability for policyholders, improved accuracy of flood maps, mitigation reforms, enhanced affordability, and the acceptance of non-NFIP policies for commercial properties. (Roundtable Weekly, June 30)

Tax and Other Policy

House Republican leaders hope to break an impasse in the GOP caucus over a tax relief package passed by the Ways and Means Committee that includes measures affecting commercial real estate. Committee Chairman Jason Smith (R-MO), above, spoke about his efforts to advance the tax measure during The Roundtable’s recent Annual Meeting. (Roundtable Weekly, June 16 and June 9)

The committee bill has not reached the House floor for a vote due to opposition by members from high-tax states who want the package to include relief from the $10,000 cap on state and local tax deductions (SALT), enacted in the GOP’s 2017 tax law. (Washington Post, July 24 and Roll Call).

The tax package would extend expired business interest deductibility rules and 100% immediate expensing (bonus depreciation) for qualifying capital investments. Bonus depreciation is 80% in 2023 and gradually phasing down.

Two other tax issues with bipartisan support that may be folded into a negotiated end-of-year tax package are the expansion of The Roundtable-supported low-income housing tax credit and technical corrections to SECURE 2.0, a package of retirement provisions. (Tax Notes, Sept. 5)

Hearings & Climate Disclosure Rule

Securities and Exchange Commission (SEC) Chair Gary Gensler will testify before the Senate Banking Committee on Sept. 12, followed by an expected appearance before the House Financial Services Committee on Sept. 27. (PoliticoPro, Aug. 28)

Committee members are likely to question Gensler about a highly anticipated climate disclosure rule and SEC proposals impacting advisory client assets and cybersecurity risk management. (Thomson Reuters, Aug. 22, “SEC Plans to Finalize 30 Proposed Rules in Near Term”)

See The Roundtable’s resources on “Reporting on Climate Risks,” including a Fact Sheet, recent issues of Roundtable Weekly, and policy comment letters.

In other news this week, the Wall Street Journal featured a story on how owners of buildings in cities across the U.S. are facing significant new taxes on their carbon emissions. Ben Myers, Senior Vice President of Sustainability at BXP and Vice Chair of The Roundtable’s Sustainability Policy Advisory Committee (SPAC), is quoted in the article, stating, “We have made energy efficiency a priority”

The policy issues above and many more will be the focus of discussions during The Roundtable’s Fall Meeting (Roundtable-level members only) on Oct. 16-17 in Washington.

New Federal Rules Issued Regarding Real Estate Construction, Clean Energy Projects

Posted on August 11, 2023October 27, 2023 by Trey Jackson

The Biden administration issued two new rules this week impacting real estate construction and investments in clean energy projects.

Davis-Bacon: The U.S. Labor Department on Tuesday issued a final rule to overhaul Davis-Bacon standards that determine prevailing wages for workers on construction projects covered by a federal contract or financially assisted by federal grants, loans, guarantees or insurance.
- Construction association AGC issued a statement expressing “preliminary” concerns that “this rulemaking critically missed an opportunity” to inject “more accurate data” in processes to establish prevailing wage rates in local markets across the nation.
- Laborers and mechanics constructing transportation, energy, water, toxic site clean-ups, and other infrastructure financially supported by the bipartisan Infrastructure Investment and Jobs Act (IIJA) must meet the new Davis-Bacon requirements. (IIJA project map)
- Inflation Reduction Act (IRA) projects receiving clean energy tax incentives are not required to meet Davis-Bacon rules, but they can qualify for increased credits and deductions if workers are paid prevailing wages. (RER’s IRA fact sheets)
“Bonus” Tax Credits: The Treasury Department and IRS on Thursday released final rules explaining how IRA “bonus credits” can be awarded to solar, wind, and associated storage projects in low-income communities. (The Hill, August 10)
- Qualifying projects in census tracts eligible for new market tax credits (NMTCs) can receive a 10% solar credit boost, while those supported by low-income housing tax credits or Section 8 rental assistance can receive a 20% solar credit increase. (RER’s IRA “bonus rate” chart)
- The “bonus” incentives – over “base” rate tax credit amounts – are competitive. Bonuses will be awarded through an application process run by the U.S. Department of Energy scheduled to open this fall.

The Roundtable submitted comments in June when the IRS proposed the “bonus credit” program. (Roundtable Weekly, June 30). It will update its summary of IRA-related agency guidance following analysis of the newly issued rule.

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House Ways and Means Members Call on Treasury to Withdraw FIRPTA Regulatory Proposal

Posted on August 5, 2023April 24, 2024 by Trey Jackson

House Ways and Means Committee Members Darin LaHood (R-IL) and Carol Miller (R-WV) recently called on Treasury Secretary Janet Yellen to withdraw a proposed IRS rule that would expand the reach of the Foreign Investment in Real Property Tax Act (FIRPTA) of 1980. The policymakers’ request followed a letter by The Real Estate Roundtable and 14 other real estate trade organizations that urged congressional tax-writing committees to oppose the FIRPTA proposal. (Letter to Yellen, July 28 and Industry coalition letter, March 1)

Retroactive Rewrite for REITs

Under current law, shareholders of domestically controlled REITs are not subject to FIRPTA, a statutory regime that subjects foreign investors to capital gains tax on their U.S. property investments.
The proposed IRS Look-Through Rule would no longer treat a taxpaying U.S. C corporation that has ownership shares in a REIT as a U.S. person—if more than 25% of the owners of the C corporation are foreign. If enacted, the new rule would trigger FIRPTA capital gains, retroactively, on REITS and investment structures used for decades when planning real estate and infrastructure investments.

Congressional CRE Concerns

Reps. LaHood and Miller asked Treasury and the IRS to reverse course and withdraw the proposed regulation, stating in their letter, “The proposed regulation’s retroactivity is severely burdensome and is already having a chilling effect on foreign investment, which has been a vital contributor to the economic health of the U.S. commercial real estate market. If Treasury decides to move forward with this proposal, it is imperative that the retroactivity provisions are removed.”
The letter also noted the proposed change would limit access to capital at a time when the CRE market is showing signs of destabilization. The House taxwriters added, “We fear this proposal could worsen the commercial real estate outlook and harm the many Americans who rely on these crucial investments in their communities.”

Industry Response

In March, The Roundtable and other industry trade organizations wrote to congressional tax policymakers, urging them to contact regulators about withdrawing the rule. (Roundtable Weekly, March 3)

Additionally, The Roundtable, Nareit, American Investment Council, Managed Funds Association, and ICSC submitted comments to Treasury in February in opposition to the proposed look-through rule. The organizations wrote that the regulation would “reverse decades of well-settled tax law, severely misconstrue the statute, and contradict Congressional intent.” (Letter to Treasury, Feb. 27)

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Monetizing Energy Credits: Roundtable Submits Recommendations to Treasury

Posted on July 28, 2023November 16, 2023 by Trey Jackson

The Real Estate Roundtable submitted comments today on proposed and temporary tax regulations regarding the transferability and direct payment of clean energy credits under the Inflation Reduction Act (IRA) of 2022. (Roundtable comments, July 28)

IRA Incentives

Congress passed the IRA last August. The law significantly increases the size of existing tax incentives for energy-saving improvements to commercial real estate. Perhaps even more importantly, the legislation contained key reforms related to the transferability and direct payment of energy tax credits.
The reforms have made the incentives relevant to a large and previously untapped segment of real estate owners, including REITs, pension funds, and private foundations. The incentives include:
- Tax-exempt real estate owners that invest in solar panels and other improvements can elect to receive direct payments from the Treasury in lieu of the expanded investment tax credit.
- Taxable real estate owners, including REITs, can sell the credits to third parties for cash.
- The credit amount can range from 6% to 60% of the qualifying investment, depending on factors such as the size, location, domestic content, and wages paid to equipment contractors.

Roundtable comments submitted last year included recommendations on the IRA’s transferability provisions. On June 14, the Treasury Department and IRS issued proposed regulations to implement the provisions, as well as temporary regulations establishing a pre-filing registration process.
The IRS rules adopted certain Roundtable recommendations, such as the ability to divide and sell the credits from a single project to multiple transferees. Other recommendations, which would have maximized the value of the credits in mixed real estate partnerships involving taxable and tax-exempt partners, were rejected as contrary to the statute and difficult to administer.

Energy Credits Monetization

Today’s letter from Real Estate Roundtable President and CEO Jeffrey DeBoer commends Treasury for providing greater clarity on its credit monetization mechanism and for laying out a rational process and timeline for property owners to claim and transfer credits or receive payments.
The Roundtable’s July 28 letter—developed by a joint working group of the Roundtable’s Tax and Sustainability Policy Advisory Committees (TPAC and SPAC)—also encourages Treasury to revisit the issue of mixed partnerships and asks for clarification that the credits are not “bad assets” for purposes of the 75% REIT asset test.
The credit monetization tools enacted in the IRA offer valuable new opportunities to access and raise capital for energy-saving improvements to commercial real estate. The deadline for comments to Treasury and the IRS is August 14, and final Treasury regulations are expected this year.

The Roundtable’s Energy Credit Transferability Working Group will remain engaged with policymakers as the rules are finalized and implementation continues.

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Senate Finance Chairman Seeks Expanded Taxation of Sovereign Wealth Funds’ Real Estate, Other Investments

Posted on July 28, 2023October 27, 2023 by Trey Jackson

Legislation introduced this week by Senate Finance Chairman Ron Wyden, above, would repeal tax rules applicable to foreign governments and their investment arms (“sovereign wealth funds”) if that government has more than $100 billion invested globally and does not qualify for an exception. (Wyden’s news release and one-page summary, July 26)

Section 892

Citing specific concerns related to the recent merger between the Professional Golf Association (PGA) Tour and the Saudi Public Investment Fund, Chairman Wyden’s expansive bill—the Ending Tax Breaks for Massive Sovereign Wealth Funds Act—would deny application of the tax code’s long-standing section 892, which exempts certain passive income earned by foreign governments from U.S. income taxation.
Countries that have a free trade agreement or tax treaty with the United States could continue to qualify for section 892, provided they are not listed as a “foreign country of concern”by the U.S. State Department. According to Chairman Wyden, the legislation would apply to China, Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, and Russia. (PoliticoPro, July 26)

Foreign Investment & CRE

Some of the listed countries are large investors in U.S. commercial real estate and represent a key source of capital for job-creating U.S. real estate investment.
“Section 892 is nearly as old as the tax code itself, and the tax principle it represents—sovereign immunity for foreign governments—is older than the tax code. Disrupting and rewriting these rules on a whim because of a single transaction is risky and unwarranted. The consequences for U.S. real estate, jobs, and the economy could be severe,” said Real Estate Roundtable President and CEO Jeffrey DeBoer, above.
“The United States is able to attract foreign capital for jobs and productive real estate investment because foreign investors have confidence in our rule of law. They believe the USA is a safe place to invest,” continued DeBoer. “When leading lawmakers threaten to overturn 100-year-old tax policies because of a single, unpopular transaction, it raises legitimate concerns. Congress should tread carefully in this area and fully understand the potential implications of its action.”
CBRE’s Global Head of Capital Markets Christopher Ludeman stated, “Sovereign wealth funds are among the largest and most important investors in global real estate, especially in the U.S. where, by conservative estimates, they have invested over $25 billion since 2021. At a time when capital flows into real estate are scarce, transaction volume is down by 53% in the first half of 2023 compared to the first half of 2022. In this environment, SWFs are an important source of capital, investing close to $9.7 billion this year alone. This is the wrong time to put any new restrictions on capital flows into real estate, which this bill would do.”

Established Law

The section 892 tax exemption for foreign governments does not extend to commercial activities or active ownership of U.S. real estate. Income from an interest in a U.S. real property-holding corporation that a foreign sovereign does not control is generally exempt from U.S. tax as income from an investment in a U.S. security—consistent with the general rule that section 892 is limited to passive investments.
Over the years, Treasury guidance and IRS rulings have further defined the scope of the provision and its interaction with other tax provisions, such as section 897 and the Foreign Investment in Real Property Tax Act (FIRPTA).
The original version of section 892 was enacted in 1917 and is based on Supreme Court case law that dates to 1812. Similar foreign government tax exemption regimes apply in other countries, such as the United Kingdom, Canada, Australia, and Japan. See JCT, Economic and U.S. Income Tax Issues Raised by Sovereign Wealth Fund Investment in the United States (2008).

The Wyden bill includes grandfathering rules that would apply to certain investments through 2025. The rules would cover capital deployed or committed prior to enactment and investments in publicly traded companies, provided the investment is less than 10 percent. Any grandfathering benefits would expire beginning in 2026. (Wyden’s one-page summary of the bill, July 26)

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2023 Annual Report – Sustained Strength, Sustained Solutions

Posted on July 18, 2023October 27, 2023 by Trey Jackson

View Full Report – 2023 Annual Report – Sustained Strength, Sustained Solutions

Intro

Policy Outreach

Commercial Real Estate by the Numbers

Tax Policy

Capital & Credit

Infrastructure, Affordable Housing & GSE Reform

Energy & Climate

Homeland Security

Roundtable Initiatives

Membership

Senate Democrats Propose Tax Penalties on Institutional Owners of Single-Family Rental Homes

Posted on July 14, 2023February 14, 2024 by Trey Jackson

A group of eight Democratic Senators introduced legislation on July 11 that would prohibit for-profit owners of 50 or more single-family rental homes from taking depreciation or business interest expense deductions on their properties.

“Short-Sighted Proposal”

Senate Banking Committee Chairman Senator Sherrod Brown (D-OH), one of the bill’s sponsors, said, “big investors funded by Wall Street buy up homes that could have gone to first-time homebuyers, then jack up rent, neglect repairs, and threaten families with eviction.” Similar concerns were expressed by several cosponsors: Senator Ron Wyden (D-OR), chair of the Senate Finance Committee, along with Sens. Elizabeth Warren (D-MA), Tina Smith (D-MN), Jeff Merkley (D-OR), Jack Reed (D-RI), John Fetterman (D-PA), and Tammy Baldwin (D-WI). (Senate Banking press release, July 11)
Real Estate Roundtable President and CEO Jeffrey DeBoer, below, said, “Improving and expanding housing affordability is a goal we all share, and any illegal or unjust actions by landlords should not be tolerated. However, this legislation is a short-sighted proposal that will drive up housing costs for working Americans, reduce property values for existing homeowners, and further discourage new home construction.”

“The bill deflects attention from the real, underlying causes contributing to high housing costs: inflation, labor shortages, and supply chain challenges; rising interest rates and tight credit conditions; NIMBY’ism, discriminatory zoning rules, and restrictive land-use policies; and insufficient investment in the low-income housing credit, to name just a few. Many of these factors are deep, structural challenges. Institutional investors are a convenient scapegoat and a distraction from the real work that must be done to address housing affordability,” DeBoer added.
By denying basic business expense deductions, the Stop Predatory Investing Act would distort housing markets and create additional, restrictive policies that exacerbate the current supply/demand imbalance.
Depreciation ensures that the cost of a capital investment is reflected in the measurement of income and recovered, for tax purposes, over the economic life of the investment. Depreciation deductions compensate property owners for the normal wear and tear that reduces the value of a structure over time. Interest expense deductions ensure that taxable income properly takes into account the cost of borrowing to invest in a trade or business.
Depreciation and interest expense deductions are not “tax breaks” as suggested by the bill’s sponsors. (Senate Banking one-page summary)

House Tax Legislation

Tax legislation advanced by the House Ways and Means Committee in June is unlikely to receive a vote before Congress starts its August recess.
House Majority Leader Steve Scalise (R-LA), above, noted this week that the appropriations bills and reauthorization of the National Defense Authorization Act (NDAA), passed today in the House, are the chamber’s current priorities. “Getting the NDAA done and getting the appropriations bills are what are front and center right now. Then, we’ll really look forward to getting that economic agenda moving forward,” Scalise said. (Bloomberg Law, July 12)
Republican Ways and Means Committee members last month approved their proposed tax legislative package along party lines, including measures on business interest deductibility, bonus depreciation, and opportunity zones. (Tax Notes, June 14 | Ways and Means Committee, June 13 and Roundtable Weekly, June 9)

Scalise added that Ways and Means Committee Chairman Jason Smith (R-MO) is still “working with other members on remaining issues with that bill.” (Bloomberg Law, July 12)

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Roundtable Comments on Clean Energy Tax Credits for Low-Income Communities, Housing

Posted on June 30, 2023October 27, 2023 by Trey Jackson

The Real Estate Roundtable submitted comments today on a proposed rule from the IRS and Treasury Department regarding “bonus” tax credits for renewable energy investments in low-income communities, passed by Congress as part of the Inflation Reduction Act (IRA). (Roundtable Comment Letter, June 30)

Solar, Wind Bonus Credits

IRA Section 48(e) establishes a Low-Income Communities Bonus Credit Program to address climate, affordable housing, and environmental justice challenges. (Treasury news release, Feb. 13, 2023)
Taxpayers must apply to the IRS through a competitive process to receive any bonus credits under the Program.
The bonus can provide extra tax credits to help cover the costs of solar, wind, and storage facilities. See The Roundtable’s chart, “Base” and “Bonus Rate” Amounts Relevant to Commercial and Multifamily Buildings (May 25, 2023).
Taxpayers who qualify can layer an extra 10% bonus—above “base rate” credit amounts—for renewable projects in low-income communities defined in the IRA as census tracts that qualify for new markets tax credits.
The bonus can increase to an extra 20% for clean energy investments that are part of low-income rental housing—such as housing supported by LIHTCs or Section 8 “housing choice” vouchers.

Roundtable Comments

Treasury and IRS proposed a rule on June 1 to implement the low-income bonus program. Today’s comments from The Roundtable seek greater clarity and certainty for building owners that may access the bonus credits, raising the following points:
- The bonuses are available only for solar or wind projects that generate under 5 megawatts of electrical output. The Roundtable requested a more straightforward rule for what constitutes a “single project” for purposes of this output threshold.
- The IRA’s text requires that multifamily building owners must share “financial benefits” of renewable energy produced on-site with tenants. The Roundtable’s comments stressed that any such benefits should not depend on utility bill savings that accrue directly to tenants—because owners cannot measure, track or control energy consumption in sub-metered leased units.
- Low-income housing supported by non-federal programs through state- and local-level housing finance agencies or public housing authorities should also be eligible for the IRA’s low-income bonuses.
- The proposed rule would offer a preference, not based in the statute, for non-profit owners to receive bonus credit allocations. The Roundtable’s comments urge there should be no bias against business taxpayers to receive the bonus to further the Biden administration’s climate policy goals for rapid deployment of renewable energy investments in low-income communities.

Future Roundtable comments on IRA topics are in the works. Feedback on a proposed rule to buy-and-sell certain clean energy credits is due August 14. In addition, proposed rules to implement the 179D tax deduction for energy efficient retrofits of commercial buildings are expected this summer.

Prior comments, information and summaries on The Roundtable’s advocacy efforts regarding clean energy tax incentives are available on our Inflation Reduction Act resources page and in Roundtable Weekly (Dec. 2, 2022 and Nov. 4, 2022).

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Bipartisan Bill Would Correct Condo Construction Tax Accounting Rules and Facilitate Construction Financing

Posted on June 23, 2023October 27, 2023 by Trey Jackson

House Ways and Means Committee members Bill Pascrell Jr. (D-NJ) and Vern Buchanan (R-FL) this week reintroduced the Fair Accounting for Condominium Construction Act (H.R. 4280) to correct current condominium tax accounting rules that hamper construction financing.

Discriminatory Tax

Current condo tax accounting rules require multifamily developers of condominium buildings to recognize income and pay tax on their expected profit as construction is ongoing. This “percentage-of-completion method” requires payment on pre-sale transactions well before a buyer closes and pays for a transaction.
Homebuilders of single-family homes, townhouses and row houses are not subject to this tax accounting rule restriction, which unfairly accelerates federal income tax liability for new condominium construction.
The Buchanan-Pascrell legislation would correct the discriminatory tax by providing condominium developers an exclusion from the percentage-of-completion tax method.

Roundtable Support for Change

Real Estate Roundtable President and CEO Jeffrey DeBoer said, “Developers seeking construction loans face severe headwinds in today’s economy. Our tax accounting rules should not create additional barriers to the financing of new housing construction. Unfortunately, a quirk in the way that federal tax law works accelerates income from the pre-sale of condominium units and prevents developers from using their own revenue to finance condo construction.”
“This tax aberration is unique to vertical condo development and does not apply to the construction of townhouses, row houses, or buildings with four or fewer units,” DeBoer continued. “The Buchanan-Pascrell bill would fix this issue and allow taxpayers to put their own capital to work expanding the supply and availability of housing.”
The Roundtable is a long-standing advocate to correct this discriminatory rule as developers have struggled to access their own income (condo pre-sales) to self-finance new construction.
On August 21, 2019 The Roundtable wrote to former Treasury Secretary Steven Mnuchin requesting regulatory relief from existing tax accounting rules that unfairly accelerate federal income tax liability for new condominium construction. (Roundtable letter)
The Roundtable’s letter detailed how the completed contract method of accounting— rather than the percentage- of-completion method—would more accurately fit the economics of condominium construction. (Tax Notes, August 23, 2019)
In 2008, the IRS and Treasury released proposed regulations (REG-120844-07) under section 460 that would treat individual condo units as townhouses or row houses.

The Roundtable’s Tax Policy Advisory Committee (TPAC) continues to advocate for the passage of corrective legislation that would level the playing field for accounting rules impacting condominium construction.

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House Republicans Advance Tax Package, Biden Administration Proposes Rules for Energy Tax Credits

Posted on June 16, 2023October 27, 2023 by Trey Jackson

Republican members of the House Ways and Means Committee approved their proposed tax legislative package along party lines this week, including measures on business interest deductibility, bonus depreciation, and opportunity zones. (Tax Notes, June 14 | Ways and Means Committee, June 13 and Roundtable Weekly, June 9)

Tax Measures and CRE

On Wednesday, Ways and Means Committee Chairman Jason Smith (R-MO), Committee Member Brad Schneider (D-IL), and Ways and Means staff spoke with Roundtable Members about the tax measures and other issues at The Roundtable’s all-member Annual Meeting in Washington, DC during the Tax Policy Advisory Committee (TPAC) session. [Photo left to right: Roundtable Chair John Fish (Chairman and CEO, SUFFOLK), Roundtable President and CEO Jeffrey DeBoer, and Committee Chairman Jason Smith]
The three tax bills sent to the House floor for a potential vote next week contain $237 billion in business and individual tax cuts, financed by the repeal or modification of several energy tax incentives enacted in last year’s Inflation Reduction Act (IRA). However, differences in the GOP caucus and requests from some Republicans to include a boost in the $10,000 deduction cap on state and local taxes (SALT) could push a vote until after the congressional July 4 recess. Any Republican tax package passing the House would face significant opposition in the Democrat-controlled Senate and the White House. (Tax Notes, June 16)

The committee’s proposals relevant to real estate include:

Business interest deduction. The Build It in America Act would provide a 4-year extension (through 2025) of certain, taxpayer-favorable business interest deductibility rules that applied from 2018-2021. The proposal would allow more real estate businesses to operate under the general rules of section 163(j) and its preferable cost recovery schedules. (H.R. 3938 and summary)
Bonus depreciation. H.R. 3938 also includes a 3-year extension (through 2025) of 100% bonus depreciation for qualifying capital investments, including equipment, machinery, and interior improvements to nonresidential property (“qualified improvement property”). Bonus depreciation is 80% in 2023 and gradually phasing down.
Opportunity Zones. The Small Business Jobs Act would establish special, favorable rules for investments in rural opportunity zones. It would also create a new and detailed information-reporting regime for all opportunity funds. (H.R. 3937 and summary)

Energy Tax Credits Transferability

The Biden administration this week proposed rules on transferring clean-energy tax credits under the IRA. Treasury’s proposed guidance released on June 14 seeks to clarify numerous issues, including which entities would be eligible for each credit monetization mechanism, laying out the process and timeline to claim and receive an elective payment, and transferring a credit. (Tax Notes, June 15 |The Wall Street Journal, June 14 | IRS news release)
Secretary of the Treasury Janet Yellen stated, “The Inflation Reduction Act’s new tools to access clean energy tax credits are a catalyst for meeting President Biden’s historic economic and climate goals. They will act as a force multiplier, bringing governments and nonprofits to the table.” (CNBC and Treasury news release, June 14)
The Roundtable’s Tax Policy Advisory Committee (TPAC) and Sustainability Tax Policy Committee (SPAC) will analyze the impact of the transferability rules on commercial real estate for potential comments on the proposed rulemaking. SPAC’s meeting on Wednesday during The Roundtable’s Annual Meeting included a presentation about an online marketplace for exchanging such tax credits.

Climate Disclosure Regs

Separately, the Securities and Exchange Commission (SEC) expects to issue new climate disclosure rules by October, a year later than the original target date. The new date was included in a SEC rule-making agenda and schedule released on Tuesday.
Legislation to constrain future SEC disclosure requirements was reintroduced this week by Sen. Mike Rounds (R-SD) and nine of his Senate colleagues. The bill includes language stating that an “issuer is only required to disclose information in response to disclosure obligation adopted by the Commission to the extent the issuer has determined that such information is important with respect to a voting or investment decision regarding such issuer.” Rep. Bill Huizenga (R-MI) is sponsoring a version of the bill in the House. (Sen. Rounds news release and Politico Pro, June 15)

The Roundtable’s SPAC will continue to track any developments related to the SEC’s forthcoming rule on climate reporting, including its proposal for sweeping disclosures on Scope 3 GHG emissions affecting CRE. (Roundtable Weekly, March 10)

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