- Republicans Seek Intra-Party Consensus on Coronavirus Aid as Unemployment Benefits Expire and Democrats Wait to Begin Negotiations
- Real Estate Coalition Seeks Expansion of Main Street Lending Program for CRE Borrowers; Hotel Industry Seeks COVID-19 Relief
- Biden Proposes Taxes on Real Estate Investments and 1031 Like-Kind Exchanges to Pay for Caregiving Plan
Republicans Seek Intra-Party Consensus on Coronavirus Aid as Unemployment Benefits Expire and Democrats Wait to Begin Negotiations
The White House and Senate Republicans have reached an “agreement in principle” on GOP priorities for another COVID-19 relief package but legislative text is still in the drafting phase, as negotiations in earnest with Democrats have yet to commence. (The Hill, NPR, and Law 360, July 23)
- Sen. Rob Portman (R-OH) outlined GOP priorities during a July 22 floor speech on the next COVID-19 bill. (News release and transcript of Portman’s comments and YouTube video.) Republicans are reportedly in broad agreement on issues such as a liability shield for businesses from frivolous COVID-related lawsuits, a new targeted round of forgivable Paycheck Protection Program (PPP) loans for small business, and funds to help schools re-open, but “[w]e’re still developing the bill,” said Senate Finance Committee Chairman Chuck Grassley (R-IA). (B-Gov, July 23)
- The GOP proposal is also expected to include additional unemployment benefits that expire this month, but less than the $600 per week boost Congress approved in March as part of the CARES Act. (Roundtable Weekly, March 27 and July 17). Republicans’ next plan is expected to fall within the $1 to $1.5 trillion dollar range.
- The Democratic starting point for negotiations is the $3.4 trillion HEROES Act (H.R. 6800) passed by the House of Representatives in May (See one-pager; section-by-section; state and local relief summary and Roundtable Weekly, May 22). Speaker Nancy Pelosi (D-CA) expressed her conference’s perspective that the GOP’s relief proposal “falls very short of the challenge that we face in order to defeat the virus and to open our schools and to open our economy." (July 23 news conference video, The Hill)
Healthy Workplaces Tax Credit
Bipartisan support is growing for a “re-opening tax credit” in the next COVID-19 response package, which could offer businesses assistance in helping defray extra costs associated with workplace cleaning, disinfecting, personal protective equipment, and virus testing. (The Hill, July 16 and Roundtable Weekly, July 17)
- Legislation includes the Clean Start: Back to Work Tax Credit Act (H.R. 7079) – introduced by Reps. Darin LaHood (R-IL) and Stephanie Murphy (D-FL). The bill proposes a credit maximum of $250,000 per business entity, up to $25,000 per location. (LaHood news release, May 29)
- LaHood discussed his tax credit proposal and other pandemic relief measures yesterday in a video discussion with Roundtable President and CEO, Jeffrey D. DeBoer. Watch the July 23 LaHood discussion on The Roundtable’s Youtube channel.
- Additionally, Sen. Rob Portman (R-OH) this week introduced the Healthy Workplaces Tax Credit Act, which proposes a refundable payroll tax credit with a phased amount based on the number of a business’s employees that would cover 50% of costs associated with PPE, cleaning, disinfecting, testing, and reconfiguring workspaces (Portman news release , July 20). Rep. Tom Rice introduced companion legislation in the House.
- A broad business coalition, including The Real Estate Roundtable, urged Congress on July 16 to include a “healthy workplaces” tax credit in the next coronavirus relief bill. (Coalition letter, July 16 and Roundtable Weekly, July 17)
Liability Protections and Minority Credit Legislation
Governors from 21 states urged Congress this week to provide “common sense” civil liability protections to health care workers, businesses, and schools in the next COVID-19 response package. (Governors’ Letter, July 21)
- Republican Senators have indicated liability protections remain a leading priority for inclusion in the next relief package. A draft outline of the Senate’s new COVID-19-related liability protections for businesses proposes a five-year shield from coronavirus lawsuits. (The Hill, Fox Business, CBS News, and Roundtable Weekly, July 17)
- The Senate summary reflects principals supported by The Roundtable that were part of a multi-sector coalition letter sent to Hill leadership on May 27. (Roundtable Weekly, May 29)
- Separately, Senate Minority Leader Charles Schumer (D-NY) and Senators Mark Warner (D-VA), Cory Booker (D-NJ), and Kamala Harris (D-CA) introduced legislation on July 21 to invest $17.9 billion in low-income and minority communities especially hard-hit by the COVID-19 crisis. Representative Gregory Meeks (D-NY) introduced companion legislation in the House.
- The Jobs and Neighborhood Investment Act would provide eligible community development financial institutions (CDFIs) and Minority Depository Institutions (MDIs) with capital, liquidity, and operational capacity to expand the flow of credit into underserved, minority, and historically disadvantaged communities.
- The sponsors aim to include the measure in upcoming COVID-19 relief legislation to help small businesses remain solvent and expand operations, while providing affordable access to credit for lower income borrowers.
Congress faces a tight deadline to address a multitude of economic and health policy issues related to COVID-19 in an omnibus bill before breaking for its August recess. (The Hill, July 20)
Real Estate Coalition Seeks Expansion of Main Street Lending Program for CRE Borrowers; Hotel Industry Seeks COVID-19 Relief
A coalition of nine real estate industry groups, including The Real Estate Roundtable, on July 21 submitted a set of recommendations to the Senate Banking Committee aimed at improving the Fed’s Main Street Lending Program (MSLP) for commercial real estate owners and tenants. The committee is currently reviewing the effectiveness of the MSLP and other Fed credit lending facilities launched to counter the economic repercussions of the COVID-19 crisis. (Real estate coalition letter, July 21)
- The coalition letter states, “The impact of COVID-19 has been especially devastating to commercial real estate tenants, borrowers and lenders. As our members attempt to navigate the fall-out from this crisis, there is a deficiency of reasonably priced capital sources to address temporary liquidity deficits. Should impacted assets go into foreclosure, a downward spiral follows, affecting jobs, property values, investors at all levels (including pension funds), and state and local tax revenues. The repercussions on communities will be profound and take years from which to recover.”
- The coalition letter makes a number of recommendations for adapting the MSLP to support real estate.
AHLA Comment Letter Requests Additional Liquidity Assistance
The American Hotel & Lodging Association (AHLA) sent a letter to the congressional leadership this week requesting additional relief as the leisure and hospitality sector faces the loss of 4.8 million jobs since February. AHLA is urging Congress to:
- Provide additional liquidity for severely impacted businesses through a targeted extension of the Paycheck Protection Program (PPP).
- Establish a Commercial Mortgage Backed Securities (CMBS) market relief fund, with a specific focus on the hotel industry, as part of the Federal Reserve’s lending options.
- Make structural changes to the Main Street Lending Facility (MSLP) established under the CARES Act to ensure hotel companies can access the program.
- Include limited liability language to provide a limited safe harbor from exposure liability for hotels that reopen and follow proper public health guidance.
- Include targeted tax provisions that will benefit severely injured businesses and their employees, including tax credits for capital expenditures or expenses to meet the industry’s Safe Stay initiative.
Moody’s Report Raises Concerns About CMBS Delinquencies for Hotel and Retail
Moody’s reported yesterday that special servicing and late payment volumes have both continued to spike as ongoing COVID-19-related cash flow disruptions severely hinder retail and hotel properties backing commercial mortgage-backed securities (CMBS) loans.
- The report shows that significant drops in revenue per available room (RevPAR) and low rent collections among nonessential business have resulted in hotel and retail loans making up more than 91% of special servicing transfers since 1 March. The remaining 9% was primarily office and mixed-use. Mixed-use property types typically included a retail or hotel component. (Moody’s report, July 23)
Federal Reserve officials are scheduled to meet on July 28 and 29 to discuss how and whether to provide more economic stimulus. They are expected to address interest rates and the status of several credit lending programs, but will likely not release any proposal until the fall. (Wall Street Journal, July 22)
# # #
Biden Proposes Taxes on Real Estate Investments and 1031 Like-Kind Exchanges to Pay for Caregiving Plan
Presumptive Democratic nominee Joe Biden on July 21 released a policy proposal to fund universal childcare and in-home elder care by taxing real estate investors and targeting the taxation of like-kind exchanges. (The Real Deal July 21)
- The proposal states that $775 billion would be raised over 10 years to pay for the plan “… by rolling back unproductive and unequal tax breaks for real estate investors with incomes over $400,000 and taking steps to increase tax compliance for high-income earners.”
- A senior Biden campaign official added the plan would prevent investors from using real estate losses to lower their income tax bills and would take aim at the taxation of like-kind exchanges, according to a Bloomberg report.
- Real Estate Roundtable President and CEO Jeffrey DeBoer responded by noting the many ways in which like-kind exchanges contribute to economic growth and create greater opportunity for entrepreneurs from under-represented demographic groups.
- "The long-standing like-kind exchange tax law has encouraged investment in affordable housing and other properties, generated state and local tax revenue, and spurred new jobs through labor-intensive property improvement. Exchanges reduce the need for outside financing, leading to less leverage and debt on U.S. real estate. As a result, exchanges allow cash-strapped minority, women, and veteran-owned businesses to grow their business by temporarily deferring tax on the reinvested proceeds,” DeBoer said.
- He added, “Like-kind exchanges are particularly important during economic downturns when access to capital is less certain. In short, like-kind exchanges create a more dynamic real estate marketplace, ensuring properties do not languish, permanently underutilized and under-invested. Congressional review of like-kind exchanges is reasonable and appropriate, and we will support sensible reforms, as The Roundtable has in the past, that preserve and maintain the provision’s broad-based economic benefits." (National Real Estate Investor, July 21)
- “The Biden Plan for Mobilizing American Talent and Heart to Create a 21st Century Caregiving and Education Workforce” does not contain details on the specific changes to like-kind exchange (LKE) taxation. (CNBC, July 21)
A 2015 economic study commissioned by The Real Estate Roundtable and other national real estate organizations on the US commercial real estate market highlights the critical role that 1031 exchanges play in stabilizing rents, safeguarding property values and strengthening the economy. (“The Economic Impact of Repealing or Limiting Section 1031 Like-Kind Exchanges in Real Estate” by Professors David C. Ling and Milena Petrova)
# # #