Infrastructure and Tax Policy

Democrats Struggle to Reach Agreement on “Social Infrastructure” Package as Roundtable’s DeBoer Addresses Real Estate Tax Issues in Play

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Democrats this week struggled to reach agreement on cutting the cost of President Biden’s multitrillion “social infrastructure” proposal as Senator Kyrsten Sinema (D-AZ) opposed any increase in marginal rates for businesses, high-income individuals or capital gains to pay for the package. Democrats aim to pass both the “human” and “physical’ infrastructure packages under a budget reconciliation process that requires approval of all 50 Democrats in the evenly divided Senate. (Wall Street Journal, Oct. 20) 

CRE Impact 

Jeffrey DeBoer, Real Estate Roundtable President and CEP
  • Real Estate Roundtable President and CEO Jeffrey DeBoer (above) yesterday addressed the fluid nature of the reconciliation bill negotiations during a Marcus and Millichap tax policy webinar. The webcast is available here, but you must be registered to access the discussion.

  • DeBoer noted that the narrow voting margins in both the Senate and House have created an environment where it is difficult for various factions in Congress to reach consensus. “What we have here is a clash between expectations and reality,” DeBoer said.

  • He added that the current policy disputes among lawmakers adds uncertainty to the potential outcome. “Could negative tax provisions affecting real estate be put back on the table? Absolutely. What also worries me is that other proposals that we don’t know about yet may suddenly be considered.” (Registration required to view the Marcus & Millichap webcast)

  • The House Ways and Means Committee voted in September to advance legislation that would finance Biden’s social infrastructure initiatives with a $2.1 trillion tax increase focused on high-income individuals and corporations. The House legislation excluded several tax proposals put forward by the Biden administration and Senate lawmakers that would increase the tax burden on real estate. (Roundtable Weekly, Sept. 17)

  • The Washington Post today reported that a new “Billionaire Income Tax” proposal from Senate Finance Chair Ron Wyden (D-OR) would “aim to raise hundreds of billions of dollars from the fortunes of America’s roughly 700 billionaires” by applying a tax to those individuals earning over $100 million in income three years in a row. Taxes would be imposed on the increased value of assets such as stocks on an annual basis, regardless of whether those assets are sold. Billionaires would also be able to take deductions for the annual loss in value of those assets. (Washington Post, Oct 22)

  • Additional tax issues affecting CRE are profiled in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation.   

Tax Uncertainty 

Kyrsten Sinema

  • The Senate has not acted on any revenue-raising proposals to support President Biden’s original $3.5 trillion infrastructure package. Policymakers are now aiming to pare down the overall reconciliation bill cost to approximately $2 trillion before finalizing measures to pay for the package.

  • Sen. Sinema (above) yesterday spoke with House Ways and Means Committee Chairman Richard Neal (D-MA) in an effort to break the impasse on how to fund certain infrastructure spending priorities in a scaled-down package. Neal said he is optimistic a deal will be reached. "I did point out that it's the ninth inning. I mean, when are you going to vet these issues?" Neal said. (The Hill, Oct. 21)

  • The current reconciliation bill in the House would raise the top marginal income tax rate on many pass-through business owners from 29.6% today to 46.4% (a 57% increase). The Roundtable believes this level of increase on pass-through businesses was unintended by Members of Congress and could undercut the bill’s own objectives. 

As negotiations continue among policymakers on a reduced topline number for the social infrastructure package – and the specific programs it would support within a multi-trillion reconciliation bill – The Roundtable continues to urge lawmakers to ensure that any tax changes within a final agreement treats pass-through businesses fairly and equitably. (Roundtable Weekly, Oct. 1 and Oct. 15

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Infrastructure and Clean Energy

Policymakers Exploring Alternative Climate Policies for Reconciliation Package

Capitol at night reflective

The White House and congressional Democrats scrambled this week to find alternatives to address climate change within the multitrillion reconciliation framework after Sen. Joe Manchin (D-WV) rejected the proposed Clean Electricity Performance Program (CEPP). The CEPP has been a centerpiece proposal pushed by the Biden Administration to increase U.S. renewable power supplies by de-carbonizing the electricity grid. (Politico and E&E News, Oct. 20)

Clean Energy and CEPP

Sen.  Joe Manchin (D-WV)

  • The CEPP would offer federal Energy Department incentive payments to utilities that meet an annual target of increasing “clean electricity” by four percent per year through 2030. It is intended to reach the Biden Administration’s goal of powering 80% of the electric grid from renewable sources by 2030. (The Hill, Oct. 18)

  • Sen. Manchin (above), chair of the Senate Energy and Natural Resources Committee, stated he opposes the CEPP because the electricity sectors’ transition to clean power sources is already underway. Manchin’s opposition has prompted some Democrats to consider a last-ditch effort to expand the program to include coal and gas power plants that capture carbon emissions, in an effort to attract the key West Virginia Senator’s support. (E&E News, Oct .19 and Politico, Oct. 14)

  • Policymakers are also exploring whether the CEPP could be restructured as a grant program to reward states that increase clean energy output. (Bloomberg, Oct. 20)

  • U.S. Department of Energy Deputy Secretary David Turk addressed alternative approaches to the CEPP during an Oct. 19 Bloomberg Live event.  He said, “There are a variety of discussions right now about how to have different authorities, different funding streams” that support partnerships among states, localities, utilities and the private sector toward the goal of grid de-carbonization. (BGov, Oct 20)

Climate Provisions and CRE

Solar Panels on building
  • Proposals like the CEPP – which aim to boost electricity from solar, wind, and other non-carbon sources – have become a key energy policy priority for CRE. This is particularly the case in local jurisdictions considering “performance standards” that set regulatory limits on “direct” and “indirect” GHG emissions from buildings. (Roundtable Weekly, April 9)

  • An evolving, cleaner grid can also help enable real estate assets to reduce and disclose their so-called “Scope 2” emissions that derive from purchased electricity. The Securities and Exchange Commission (SEC) has indicated it will propose regulations that require public companies (and other entities in its jurisdiction) to report on “material” information regarding GHG emissions to the investor community.  (Roundtable Weekly, Oct. 1 and June 11)

  • If a CEPP-type policy is included in a final reconciliation package, it will be critical for federal data to stay up-to-date and forecast how such a program is driving the grid to become cleaner and less reliant on fossil fuels.

  • The Roundtable’s Sustainability Policy Advisory Committee (SPAC) has thus convened a task force to examine the primary federal data set – known as the Emissions Generation Resource Integrated Database (eGRID) – that reports on the carbon impact of virtually all electric power generated in the U.S.

  • Roundtable members rely on eGRID to inventory their portfolio-wide carbon emissions. eGRID also provides the data that EPA’s Portfolio Manager benchmarking tool uses to determine a specific building’s indirect Scope 2 emissions that derive from electricity consumption.

While the fate of climate policies – and indeed, the entire reconciliation framework – remains unclear, re-vamped provisions of the federal tax code to incentivize clean energy projects appear to have garnered uniform Democratic support. Particulars vary in Senate and House tax proposals, but credits and deductions to incentivize solar installations, energy storage, EV charging stations, and building retrofit projects are on the table in reconciliation discussions. (See The Roundtable’s latest Policy Issues Toolkit, “Clean Energy Tax Incentives,” p. 25)

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