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 on  Budget & Tax Policy as well as Wetlands and Land Use Policy:

BUDGET & TAX POLICY
House Likely to Formally Disapprove of Obama’s Latest Debt Ceiling Increase; Partnership “Carried Interest” Resurfaces on the Presidential Campaign Trail

WETLANDS AND LAND USE POLICY
Supreme Court Hears Oral Arguments in Highly Watched Wetlands Case With Broad Implications for Property Owners, Land Use, Scope of EPA’s Authority Under Clean Water Act


BUDGET & TAX POLICY

House Likely to Formally Disapprove of Obama’s Latest Debt Ceiling Increase; Partnership “Carried Interest” Resurfaces on the Presidential Campaign Trail  

After last week’s controversial recess appointments by the White House, budget and tax issues were back in focus in Washington this week as President Obama formally requested congressional approval for the third of three debt ceiling increases authorized under last summer’s budget compromise (The Hill, Jan. 12), and as Obama tapped former White House budget director Jacob (“Jack”) Lew to succeed outgoing chief of staff Bill Daley. 

SOTU_2011_cropped200 

Upcoming budget, tax and job proposals will likely be debuted as part of the president’s Jan. 24 State of the Union address. 

As The Wall Street Journal reported Jan. 11, Lew will work closely with Vice President Biden’s chief of staff, Bruce Reed, and National Economic Council Director Gene Sperling to shape upcoming budget, tax and job proposals — which will likely be debuted as part of the president’s Jan. 24 State of the Union address and fleshed out more fully in the FY2013 budget to be released in early February.

The U.S. House reconvenes on Tuesday, and a day later is expected to pass a joint resolution disapproving the president’s $1.2 trillion debt ceiling increase. Although the increase is a formality only — and the House resolution has little chance of clearing the Democrat-controlled Senate — the matter gives Republicans a fresh opportunity to “paint Obama as a spendthrift during an election year in which taxes and spending are key issues,” Reuters reported today. 

As GOP presidential front-runner Mitt Romney this week fended off attacks about his tenure at private equity firm Bain Capital, The New York Times highlighted the private equity industry’s efforts to preserve “favorable tax treatment for profits on private equity deals” — an allusion to legislation proposing dramatically higher taxes on partnership “carried interest” (NYT, Jan. 10

Wide_shot_SOI 

A t The Roundtable’s 2012 State of the Industry Meeting on Jan. 31, U.S. policymakers and panelists will focus on conditions in commercial real estate capital markets and upcoming congressional policy debates affecting CRE

Similarly, a guest article in The Christian Science Monitor this week concluded that the “battle over how to tax the compensation of private equity managers may be on again,” thanks to the controversy over Bain as well as the Carlyle Group’s release of rarely seen executive compensation information. 

“Combined with the Bain flap, [Carlyle’s disclosure this week] will surely reopen the five-year old debate over the special tax treatment these partnerships receive through a mechanism known as carried interest or, in short, ‘the carry,’” wrote Howard Gleckman of the Urban-Brookings Tax Policy Center. 

Despite claims that carried interest legislation would predominantly affect private equity and hedge fund managers, such legislation would disproportionately affect real estate partnerships, which account for nearly half of all U.S. partnerships. Such proposals would also, for the first time, affect millions of Americans in family partnerships (including real estate partnerships) that in reality have no carried interest but would be taxed as if they did due to the sweeping nature of the proposals.

Thus, The Real Estate Roundtable and its real estate trade association partners continue to educate policymakers about the harm such proposals would cause — not just for the struggling commercial real estate sector, but for job creation, entrepreneurship, and the economy as a whole.

2011_10_18_image_CI Supercommittee Letter  

Oct. 18, 2011 industry coalition letter on carried interest

In an Oct. 18 letter to the bipartisan deficit super committee, a coalition of 18 national real estate organizations urged the panel to reject a carried interest tax hike, noting that carried interest is a decades-old investment model that helps ensure alignment of interests among the general and limited partners in a partnership.    

With major tax debates looming this year — over the expiring Bush tax cuts, the appropriate treatment of investment capital vs. wages, what constitutes a “middle class” or “wealthy” taxpayer, etc. — The Roundtable continues to insist that any discussion about changing partnership carried interest taxation take place in the context of fundamental tax code reform.

Budget deficits, taxes, the jobs and economic outlook, and the 2012 elections will be key issues at The Roundtable’s 2012 State of the Industry Meeting on Jan. 31, where an array of U.S. policymakers and panelists are expected to focus on conditions in commercial real estate capital markets, upcoming congressional debates on deficit-reduction and tax policy, as well as opportunities to create “green” jobs through energy retrofits and transportation infrastructure investment.  

# # #

Return to Top


WETLANDS AND LAND USE POLICY

Supreme Court Hears Oral Arguments in Highly Watched Wetlands Case With Broad Implications for Property Owners, Land Use, Scope of EPA’s Authority Under Clean Water Act  

The U.S. Supreme Court on Monday heard oral arguments in a pivotal case (Sackett v. EPA, U.S., No. 10-1062) that centers on whether a property owner may seek federal judicial review of an administrative compliance order issued by the Environmental Protection Agency (EPA) before the agency files a lawsuit to enforce its administrative action. And, if landowners are not allowed such pre-enforcement review, does this violate their due process rights under the U.S. Constitution? 

Supreme Court fountain 

The  U.S. Supreme Court on Monday heard oral arguments in Sackett v. EPA, U.S., No. 10-1062 

Petitioner Mike Sackett (who had planned to build a home on a residential plot near Priest Lake, ID with his wife Chantell) reportedly said that land to the north of his property “appears clearly to be wetlands,” but that “he had no reason to believe that his lot contained ‘waters of the United States’ subject to the Clean Water Act.” As he was quoted in The Washington Post on Jan. 2, “How can you call it a wetland when it’s a lot in an existing subdivision that has a sewer hookup?”

Although a final decision on Sackett v. EPA may not come until June, when the Court goes into recess until October, many of the justices reportedly appeared sympathetic to the property owners in Monday’s proceedings, while expressing skepticism of the government’s position.

This included Justice Breyer, widely regarded as an expert on administrative law. At oral argument, he said the EPA’s compliance order to the Sacketts “looks like about as final a thing as I have ever seen” — signaling his inclination that the property owners can litigate on the offensive and not wait to be a defendant in an EPA-initiated lawsuit.  (See transcript of Jan. 9, 2012 Supreme Court oral argument)

Indicating his belief that EPA’s order had real-life consequences for the Sacketts that did not allow room for negotiation, Chief Justice Roberts directly asked the deputy solicitor arguing the case on the government’s behalf, “What would you do, Mr. Stewart, if you received this compliance order?” Justice Alito appeared most frustrated with the EPA’s position, pointedly inquiring of the government’s attorney, “If you related the facts of this case . . . to an ordinary homeowner, don’t you think most ordinary homeowners would say this kind of thing can’t happen in the United States?” 

 Transcript Image - Sackett v. EPA oral arguments 

Transcript of Jan. 9, 2012 Supreme Court oral argument in Sackett v. EPA. (pdf)

Underscoring the significance of the case 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, The Washington Post on Jan. 2 stated that a decision favoring the Sacketts “could curtail the EPA’s authority and mean a fundamental change in the way the agency enforces the Clean Water Act.”

Similarly, the American College of Environmental Lawyers predicted, “Whatever the outcome, the Court’s ruling will likely be an important environmental and administrative law precedent.”

The Real Estate Roundtable, National Association of Home Builders (NAHB) and National Apartment Association (NAA) on Sept. 30 filed an amicus brief with the high court supporting the petitioners in Sackett v. EPA. The Roundtable and a diverse coalition of organizations also filed a separate amicus brief in September in the case of PPL v. Montana, asking the Court to clarify the meaning of “navigable waters” under the CWA and similar statutes. [Roundtable Weekly, Sept. 30]

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. 

# # #

Source:  The Real Estate Roundtable

Advertisements

Comments are closed.