Roundtable Weekly Newsletter by The Real Estate Roundtable

This week’s newsletter by The Real Estate Roundtable contains the following articles we thought would be of interest to you:

  • BUDGET & TAX POLICY
    Congress Racing Against Clock to Avert Mid-December Government Shutdown, Expiration of Payroll Tax Cut, Dozens of Business and Individual Tax Provisions (Including Two Affecting Commercial Real Estate)
  • INTERNET SALES TAX
    Real Estate Groups Welcome Senate Legislation Authorizing Online Sales Tax Collection by States; Online Retailer Amazon Now a Supporter, Too
  • PUBLIC-PRIVATE INVESTMENTS IN ENERGY EFFICIENCY
    Real Estate Roundtable Members Among Private-Sector Leaders Pledging Energy Retrofit Investments — as Part of Obama’s “Better Buildings Commitment”

 BUDGET & TAX POLICY

Congress Racing Against Clock to Avert Mid-December Government Shutdown, Expiration of Payroll Tax Cut, Dozens of Business and Individual Tax Provisions (Including Two Affecting Commercial Real Estate)  

In the wake of the super committee’s failure last week to agree on a deficit-cutting plan, Fitch Ratings on Monday downgraded its outlook on the U.S. credit rating from “stable” to “negative,” giving the United States until 2013 to come up with a “credible plan” for reducing its skyrocketing deficit (The Wall Street Journal, Nov. 28). Meanwhile, on Capitol Hill, the focus has switched from the deficit-reduction committee to “must-pass” appropriations legislation, the so-called “Doc fix” (preventing a cut in payments to doctors participating with Medicare), and dueling Democratic and GOP versions of a payroll tax extension. 

Capitol Twiliight

 With stopgap funding for the federal government due to expire on Dec. 16, lawmakers have been focusing on a massive $1 trillion “omnibus” funding bill.

The Democrats’ payroll tax proposal (S. 1917) would expand the tax cut for both employers and employees and impose a 3.25% surtax on millionaires; it failed in the Senate last night on a vote of 51-49 (falling short of the 60 votes needed).

The GOP alternative — which would freeze federal workers’ pay and cut some 200,000 federal jobs to pay for an extension of the current payroll tax cut — also failed in last night’s voting, by a margin of 78 to 20.

As The New York Times reported today, “The maneuvering suggests that the parties will agree to some continued relief before the current payroll tax cut expires on Dec. 31. But how much of a cut and how — or if — it will be paid for remain to be settled, with some in both parties saying that the tax break would further weaken the Social Security system’s financing.”

House Republicans reportedly also have a payroll tax cut extension in the works that would be tied to an extension of expiring unemployment benefits. The measure — whose projected cost is expected to be “offset” or paid for so that it doesn’t increase the U.S. deficit — could be on the House floor as early as next week.

Meanwhile, with stopgap funding for the federal government due to expire on Dec. 16, lawmakers have been focusing on a massive $1 trillion “omnibus” funding bill that would lump together nine unfinished appropriations bills and avert a pre-Christmas government shutdown.

2011_11_09_image Coalition Tax Extenders letter 

Joint letter to all members of Congress urging enactment of tax extenders legislation before Dec. 31. 

The omnibus bill could also be a potential vehicle for tax legislation such as a package of business and individual tax “extenders.” The Real Estate Roundtable continues to urge that any such extenders package include provisions to maintain 15-year leasehold improvement depreciation and immediate expensing for brownfields cleanup costs.

The Roundtable and its partners in the “Broad Tax Extenders Group” — including over 1,500 businesses, associations, community development and non-profit organizations — recently wrote a joint letter to all members of Congress urging enactment of tax extenders legislation before Dec. 31. Failure to extend the dozens of provisions expiring at year-end would exacerbate market instability and economic uncertainty, and “further weaken confidence in the employment marketplace,” the coalition warned (BNA Daily Report for Executives, Nov 9).

The massive stop-gap funding bill being considered to avert a government shutdown could also be the “last train leaving the station” for politically popular legislation such as the Doc fix and an Alternative Minimum Tax (AMT) “patch” that would prevent the AMT from hitting millions of middle-income Americans.  

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INTERNET SALES TAX

Real Estate Groups Welcome Senate Legislation Authorizing Online Sales Tax Collection by States; Online Retailer Amazon Now a Supporter, Too  

A coalition of real estate industry organizations (including The Real Estate Roundtable) on Nov. 23 sent a letter of support to Senators Enzi (R-WY), Durbin (D-IL) and Alexander (R-TX) for their recent introduction of legislation authorizing states and local governments to collect sales tax revenue from online retailers — a step that would level the competitive playing field between Internet-based and brick-and-mortar retailers.

2011_11_23_image_Internet Sales Tax NREO support letter

Nov. 23 letter of support to Senators Enzi (R-WY), Durbin (D-IL) and Alexander (R-TX) on their recent introduction of legislation authorizing states and local governments to collect sales tax revenue from online retailers. 

The “Marketplace Fairness Act” (S. 1832), introduced Nov. 9, would also “gives the states the power to collect revenue they are owed and help offset current budget shortfalls — all without costing the federal government a dime,” said the real estate industry letter. An editorial in USA Today on Nov. 27 said state and local governments lose over $11 billion annually due to untaxed online retail sales.

The International Council of Shopping Centers, which is spearheading efforts to enact such legislation, ran an ad in Tuesday’s Washington Post urging support for S. 1832 and H.R. 3179, the “Marketplace Equity Act,” introduced in the House on Oct. 13.  (Politico, Oct. 13).

“For too long, Internet-only retailers have enjoyed a tax loophole that allows them to undersell their brick-and-mortar competitors by as much as 10%, simply because they don’t have to collect state and local sales taxes,” the Nov. 28 ICSC ad asserted. “This unfair advantage is pushing mom-and-pop retailers out of business and hurting our local communities that rely on sales tax revenue to fund vital services like schools and infrastructure.”

Online sales tax collection was among the issues raised by Roundtable members — in particular ICSC Chairman David Henry (Kimco Realty Corp.) — in an exchange with White House Chief of Staff William M. Daley during the Fall 2011 Roundtable Meeting in October. (Roundtable Weekly, Oct. 14).

With online retailer Amazon now on board as a supporter of legislation allowing the collection of online sales taxes (Bloomberg, Nov. 29), policy advocates are hoping the issue will gain traction in Congress (despite opposition from online marketplace eBay and the Electronic Retailing Association).

Regarding the competitive disadvantage facing stores with a physical presence (vis-à-vis online-only stores), Retail Industry Leaders Association official Katherine Lugar told Bloomberg, “We have a system where everyone doesn’t play by the same set of rules.” As for Amazon’s decision to come out in support of online sales tax collection, she said, “We now have one of the largest online retailers saying this needs to happy federally. It’s the patchwork of state laws that is really driving them to want and support a federal solution.” 

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PUBLIC-PRIVATE INVESTMENTS IN ENERGY EFFICIENCY

Real Estate Roundtable Members Among Private-Sector Leaders Pledging Energy Retrofit Investments — as Part of Obama’s “Better Buildings Commitment”  

As President Obama and former President Clinton announced at the White House today, 60 private-sector leaders — including members of The Real Estate Roundtable — have pledged nearly $2 billion for energy retrofits over next two years covering 1.6 billion square feet of space (including offices, warehouses, municipal buildings, hospitals, universities and schools). The CEOs, mayors, university presidents, and labor leaders participating in today’s announcement pledged to upgrade energy performance in their buildings by at least 20 percent by the year 2020. (See written remarks by President Obama and former President Clinton at the Transwestern Building in Washington, DC).  (Watch video of comments here).

Transwestern Tour_CROP_ Better Buidlings Challenge 

Roundtable member Transwestern hosted a tour of their energy efficient building in Washington, DC for President Obama and former President Clinton as part of the Better Buildings Challenge event today

Today’s announcement builds on a commitment made by 14 partners at the Clinton Global Initiative America meeting in June — including several Roundtable members — to make energy upgrades across 300 million square feet, and to invest $500 million in private sector financing for energy efficiency projects (Roundtable Weekly, July 8 and White House press release, June 30).

Roundtable members who have entered into Better Buildings Challenge agreements with the Obama Administration include those associated with CBRE, Citi, Forest City Enterprises, GE, HEI Hotels & Resorts, IHG, Jones Lang LaSalle, The PNC Financial Services Group, Prologis, Shorenstein Properties, LLC, TIAA-CREF, Transwestern, USAA Real Estate Company, and Lend Lease.

“Roundtable members continue to be at the vanguard of innovation in making our built environment more energy efficient,” said Roundtable President and CEO Jeffrey D. DeBoer. “As our economy and the real estate sector struggle to recover, the Obama Administration is taking the right steps to encourage building retrofits that will get Americans back to work, modernize our infrastructure to keep pace with the global marketplace, and secure long-term energy benefits for the country.”

Also as part of today’s ceremony, the Administration committed $2 billion for energy upgrades of federal buildings over the next two years — but using long-term energy savings to pay for the up-front costs, rather than a direct outlay of taxpayer dollars. This will be done by encouraging maximum use of “performance-based contracting” — whereby third parties guarantee that the expenses of an energy efficiency retrofit project will be compensated from its resulting lower energy costs.

According to a White House fact sheet, the $4 billion in combined federal and public-sector investment will save billions in energy costs, promote energy independence, and create tens of thousands of jobs in the hard-hit construction sector.

A jobs analysis released by The Roundtable, U.S. Green Building Council (USGBC) and Natural Resources Defense Council (NRDC) in June estimated the number of “green jobs” that could be created with federal incentives. With the $4 billion committed in today’s announcement, 50,000 green jobs could be created to get Americans back to work by modernizing buildings throughout the nation’s cities and suburbs.  

Image_PERI_cover_crop  

A jobs analysis released by The Roundtable, U.S. Green Building Council (USGBC) and Natural Resources Defense Council (NRDC) in June estimated the number of “green jobs” that could be created with federal incentives. 

While welcoming today’s announcement and congratulating Roundtable members who have signed up for the Better Buildings Challenge, DeBoer added that more needs to be done by U.S. policymakers to encourage private-sector investment in energy retrofits — particularly large scale, comprehensive retrofits (e.g., involving heating and A/C systems, “smart windows,” and the entire building “envelope”).

“Leading private sector owners are committing resources and doing their best to increase energy efficiency in buildings,” DeBoer said. “But to make deeper and more significant energy reductions nationwide, policymakers must recognize the cost and financing hurdles that confront the broader range of building owners. Meaningful tax incentives and credit guarantee support are essential to spur transformation in the retrofit market — which will help to create tens of thousands of more jobs in the process.”  

Along these lines, the Administration today said that the U.S. Treasury Department is working to improve an underperforming tax incentive (Section 179D), and will issue revised guidance in this area in coming weeks to modify existing targets for claiming the partial deduction.

In addition, Treasury, in consultation with the U.S. Energy Department, will continue to work on streamlining the requirements for claiming a deduction under Section 179D, including a simplified approach for modeling common energy upgrade measures which would reduce modeling requirement costs for building owners.

The Better Buildings Challenge is part of the Better Buildings Initiative launched in February by President Obama. It is being spearheaded by former President Clinton and the President’s Council on Jobs and Competitiveness to support job creation by catalyzing private-sector investment in commercial and industrial building energy upgrades to make America’s buildings 20 percent more efficient over the next decade, reducing energy costs for American businesses by nearly $40 billion.   

Source:  The Real Estate Roundtable

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