Policymakers Agree on Government Funding Through Sept. 30; Second Partial Government Shutdown Avoided
A $333 billion spending package passed by Congress yesterday and signed by President Trump today funds the government through Sept. 30 (end of FY2019), avoiding a second government shutdown. (Senate Appropriations Committee summary, Feb. 15)
President Trump today declared a national emergency over illegal immigration at the border. White House officials said executive powers will be used to reprogram $6.6 billion in Pentagon and Treasury funds to build a border wall.
- The legislative measure signed today includes funding for the Department of Homeland Security (DHS) and six other government agencies. The debate over DHS funding for a wall along the southwestern border with Mexico led to a five-week partial government shutdown. During the shutdown, the EB-5 Immigrant Investor Regional Center Program and federal cleanups at Superfund sites around the nation were suspended. With today's funding package, EB-5 has received another extension through Sept. 30. (Roundtable Weekly, Jan. 25).
- Policymakers this week agreed to appropriate $1.38 billion for 55 new miles of barriers along the Mexican border. President Trump originally requested $5.7 billion to construct 234 miles of barriers. (Wall Street Journal, Feb. 15).
- President Trump today also declared a national emergency over illegal immigration at the border. White House officials said executive powers will be used to reprogram $6.6 billion in Pentagon and Treasury funds to build a border wall. (The Hill, and New York Times, Feb. 15)
- House Speaker Nancy Pelosi (D-CA) and Senate Minority Leader Charles Schumer (D-NY) responded they would use “every available remedy” to overturn the emergency declaration. (Pelosi-Schumer joint statement, Feb. 15)
- House Democrats plan to introduce legislation to block the president’s effort to reprogram funding for wall construction. Legal challenges, which are also expected, could end up in the Supreme Court. (USA Today, Feb. 14 and AP, Feb. 15)
President Trump said he expected a legal battle over the emergency proclamation. “I expect to be sued. I shouldn’t be sued,” he said today. “We will possibly get a bad ruling. And then we’ll get another bad ruling. And then we’ll end up in the Supreme Court, and hopefully we’ll get a fair shake,” he added. (Wall Street Journal, Feb. 15)
IRS Holds Hearing on Opportunity Zones; Roundtable Working Group Meets With Treasury Officials on OZ Regulations
An IRS hearing this week focused on how Opportunity Zone regulatory guidance may affect long-term investments in certain low-income communities. The hearing, originally scheduled for Jan. 10, was rescheduled due to the government shutdown in December.
An IRS hearing this week focused on how Opportunity Zone regulatory guidance may affect long-term investments in certain low-income communities.
- Earlier in the week, a delegation from The Real Estate Roundtable’s Opportunity Zone Working Group met with Treasury officials to discuss proposed and forthcoming tax regulations. The meeting addressed key areas where additional guidance could help ensure the Opportunity Zone tax incentives succeed in stimulating productive, job-creating real estate investment in the designated low-income communities. Among the issues discussed:
- Determining what constitutes the original use of property for Opportunity Zone purposes, and in particular, whether a Qualified Opportunity Fund can purchase a newly constructed building before it is placed in service;
- Clarifying how land is treated for purposes of the Opportunity Zone asset test, and how to account for leased property;
- Facilitating contributions of real property to Opportunity Funds by current property owners
- Ensuring that capital gain in multi-asset Opportunity Funds can qualify for the tax incentives;
- Clarifying the tax consequences of refinancing and debt distribution transactions, particularly those that involve appreciated Opportunity Zone assets;
- Encouraging capital formation and growth in Opportunity Zones through favorable gain reinvestment, roll-over, and holding period rules at the investor, fund and business level; and
- Enhancing the 31-month working capital safe harbor through additional safeguards and relief for fund investors making a good faith effort to deploy their capital.
Sen. Tim Scott (R-SC) led the effort in Congress for enactment of the Opportunity Zones program.
Similar issues were raised by 23 witnesses at the five-hour IRS hearing on Thursday. (Bisnow, Feb. 14).
- A letter on Feb. 5 from Senators Chris Coons (D-DE) and Michael Bennet (D-CO) to Treasury Secretary Steven Mnuchin raised additional issues and expressed concerns regarding the potential for waste and abuse, including in the context of real estate investment. (Delaware Business Now, Feb. 6).
- The Opportunity Zone program's goals and incentives were the focus of a Jan. 29 discussion during The Roundtable’s State of the Industry Meeting, which featured Sen. Tim Scott (R-SC) – who led the effort in Congress for enactment of the program – and Roundtable member Geordy Johnson (CEO, Johnson Development Associates, Inc.).
- Sen. Scott and the original co-sponsors of the Investing in Opportunity Act sent a bipartisan letter to Treasury Secretary Mnuchin on Jan. 24, urging Treasury to clarify its initial set of regulations, particularly as it relates to operating businesses. (Congressional Letter to Treasury, Jan. 24).
- The Real Estate Roundtable provided formal comments on Dec. 19, 2018 that encouraged Treasury and the IRS to clarify certain tax issues for potential Opportunity Zone (OZ) investors and Qualified Opportunity Zone managers. The letter was the second round of Roundtable comments following Treasury’s initial set of proposed OZ regulations issued last October. (Roundtable Weekly, Oct. 21, 2018 and Dec. 19, 2018)
The highly-anticipated, second set of Treasury OZ regulations are expected in the coming weeks. Another public hearing will follow before rules for the program are finalized.