This week’s newsletter by The Real Estate Roundtable contains the following articles we thought would be of interest to you:
- BUDGET & TAX POLICY – As “Super Committee” Stays Mum on Deliberations, Speculation Abounds on Prospects of Bipartisan Deal by Nov. 23; Business Leaders Urge Deeper Deficit Reductions, Corporate Tax and Entitlement Reforms
- ENVIRONMENT AND LAND USE – Roundtable Weighs in on Two Supreme Court Cases With Significant Implications for Federal Regulation of Wetlands, Property Use
BUDGET & TAX POLICY
As “Super Committee” Stays Mum on Deliberations, Speculation Abounds on Prospects of Bipartisan Deal by Nov. 23; Business Leaders Urge Deeper Deficit Reductions, Corporate Tax and Entitlement Reforms
The deficit “super committee” charged with finding $1.2 trillion–$1.5 trillion in federal budget savings continued its deliberations this week — deliberations that could potentially include corporate tax reform and proposals affecting pass-through entities or carried interest — although none of this week’s meetings were open to the public. Not surprisingly, the secrecy surrounding the panel has only fueled speculation — in particular about what industries might be on the chopping block (Financial Post, Sept. 30) and the odds of the committee reaching bipartisan agreement by the Nov. 23 deadline (imposed by this summer’s debt reduction deal).
More than 150 business organizations wrote to the Joint Select Committee on Deficit Reduction urging it to “go big” by going beyond the $1.5 trillion deficit-reduction target called for by law.
In a presentation released today, J.P. Morgan analyst Thomas Lee said companies and industries that rely heavily on government spending have significant exposure to the panel’s decisions. Looking at sales to U.S. government agencies as a percentage of total sales, Lee identified education services, electronic equipment and instrumentation and the aerospace and defense sectors as having the largest exposures by industry sector.
A Huffington Post analysis on Wednesday pointed out that the “automatic,” across-the-board budget cuts that would be triggered if the panel failed to reach agreement by Nov. 23 wouldn’t actually begin taking effect until 2013 (and would then continue over the coming decade). Speaking with MSNBC political commentator Lawrence O’Donnell, HP’s Washington bureau chief suggested the negotiations wouldn’t begin in earnest until after the 2012 presidential elections, when the lame-duck Congress would have two months to address the looming “automatic” budget cuts and expiration of the 2001-2003 (Bush) tax cuts (MSNBC’s “The Last Word,” Sept. 28).
Yesterday, more than 150 business organizations wrote to the Joint Select Committee on Deficit Reduction urging it to “go big” by going beyond the $1.5 trillion deficit-reduction target called for by law, and to address corporate tax and entitlement reform. The signatories, which included the U.S. Chamber of Commerce, Business Roundtable and National Association of Manufacturers, said deeper deficit cuts are “essential for long-term economic growth in our nation.”
They added that it is “crucial to act expeditiously to rein in spending, reform the tax code, reduce the deficit and stabilize and ultimately lower America’s level of debt. Economic growth is critical to our nation’s fiscal health, and we believe that these steps will remove the threat of fiscal instability, improve certainty, and create a sustainable foundation for economic and job growth in the years ahead” (National Journal, Sept. 29).
Roundtable President and CEO Jeff DeBoer testified in March about the impact of potential federal building sales on commercial real estate markets before the Senate Environment and Public Works Committee .
Although virtually no information has been available about the panel’s roughly 6½ hour-meeting in the Capitol this week, several of its members have previously expressed their intention of focusing on “waste, fraud, and abuse” in the federal budget. As part of a long list of potential items that could help reduce the deficit, the panel this week was expected to discuss proposals to dispose of excess and underutilized federal buildings.
Roundtable President and CEO Jeff DeBoer testified on this issue before the Senate Environment and Public Works Committee back in March [Roundtable Weekly, April 1], identifying opportunities but also signaling cautionary concerns regarding the impact of federal building sales on the recovering commercial real estate market.
Given the pressure lawmakers are under to cut deficits and find revenue offsets — and the potential for economic dislocation from tax restructuring — The Roundtable is monitoring the work of the super committee closely to ensure that real estate is not inadvertently hurt as part of deficit reduction or broad tax reform. In addition to potentially imposing new taxes on pass-through entities — a widely used ownership structure in commercial real estate — lawmakers could once again resurrect carried interest as a potential “loophole closer” and revenue raiser.
Roundtable members will have an opportunity to discuss economic and tax policy — including the work of the super committee, the 2012 elections and the 2013 expiration of the Bush tax cuts — with former White House economist/former Fed Vice Chairman Alan Blinder at the Fall Roundtable Meeting next month. The program also includes U.S. Public Buildings Commissioner Robert Peck, who will discuss infrastructure and energy efficiency investment in the public building stock.
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Roundtable Weighs in on Two Supreme Court Cases With Significant Implications for Federal Regulation of Wetlands, Property Use
Along with two major real estate trade groups, The Real Estate Roundtable today filed an amicus brief with the U.S. Supreme Court supporting the petitioners in Sackett v. EPA — a case that considers whether property owners may bring their own affirmative court challenge against administrative compliance orders issued by the Environmental Protection Agency (EPA), or whether they must wait for EPA to initiate suit and thereby force such owners to litigate in a defensive posture. In a related amicus filing earlier this month (PPL v. Montana), The Roundtable and a diverse coalition of organizations asked the Court to clarify the meaning of “navigable waters” under the Clean Water Act (CWA) and similar statutes.
The Roundtable, NAHB and NAA today filed an amicus brief with the U.S. Supreme Court supporting the petitioners in Sackett v. EPA
Both cases have significant implications for property owners seeking development permits under the CWA, and more broadly, for the scope of federal regulatory jurisdiction over marginal wetlands, ditches, and storm drains.
At issue in today’s (Sept. 30) brief and the underlying Sackett case is whether a landowner may seek federal judicial review of an administrative compliance order issued by the EPA before the agency files a lawsuit to enforce its administrative action. And, if landowners are not allowed federal court review over agency compliance orders, does this violate their due process rights under the U.S. Constitution?
As case law currently stands, a landowner targeted by an EPA order must comply with its terms, restore the property as the agency demands, and then litigate the legality of the original EPA order after the fact — even if the agency wrongly issued the order in the first place. The only alternative — for those willing to take the risk — is to defy an order that may have been illegally issued and wait to be sued by EPA, as fines and penalties mount. The Supreme Court will decide whether landowners have the right to challenge the legality of the agency order in federal court upon issuance — thereby avoiding the “comply or defy” dilemma.
In the Sept. 7 (PPL v. Montana) filing, The Roundtable and its coalition partners urged the high court to clarify that “legal standards for ‘navigable waters’ are different depending on the statute at issue and the purpose of the determination.” According to the coalition’s brief, the EPA and the Army Corps are poised to finalize proposed new CWA guidance relying on “aberrant case law” to support a new, broader definition of “traditional navigable waters” as long as any federal court has deemed the water navigable ‘for any purpose’ or if the water can float a kayak or canoe.”
As the coalition stated, a lower court “held, incorrectly, that current recreational use of one segment of a river is sufficient to determine that the entire river is navigable for title purposes.” By reversing this inappropriate ruling, the Supreme Court would help ensure that its words may “not be subject to misuse” by federal agencies seeking to advance a “renegade interpretation of ‘traditional navigable waters’ under the CWA.”
Given expansive interpretations of this term by EPA and the Army Corps — so as to encompass wetlands, ditches and storm drains — such determinations can have a significant impact on land development activities.
Roundtable member firms frequently obtain CWA permit coverage when developing or building their projects, under both Section 402 (for discharges of stormwater) and Section 404 (discharges of fill material). Thus, the fundamental issue in both Sackett and PPL of whether a parcel contains “waters of the United States” to trigger CWA jurisdiction and associated permitting requirements —and whether and how a property owner can challenge that determination in court – is of utmost importance to Roundtable members and the real estate community generally.
The high court, whose 2011-2012 term begins this Monday and runs till next October, is expected to reach a decision on these cases during the first half of 2012.
Source: The Real Estate Roundtable