House Ways & Means Committee Signals Upcoming Tax Legislation; Roundtable Weighs in Regarding Carried Interest, FIRPTA Repeal
The House Ways and Means Committee this week signaled its upcoming tax policy priorities after holding a hearing on the 2017 Tax Cuts and Jobs Act (“TCJA”) entitled “The 2017 Tax Law and Who It Left Behind.” The March 27th hearing was the first one focused on the TCJA since Democrats took control of the House, with policymakers examining which provisions they plan to reverse or refine.
House Ways and Means Committee Chairman Richard Neal (D-MA) signaled the committee's upcoming tax policy priorities .
- Ways and Means Chairman Richard Neal (D-MA) on Wednesday also announced the committee will hold its first legislative mark-up next week on bills to encourage retirement savings (H.R. 1007) and bipartisan IRS reform. “Our plan here is to move legislation and we’re going to start doing that next week,” Neal said. He indicated that bills addressing other tax issues, including a tax extender package, must first be negotiated with Senate Finance Chairman Charles Grassley (R-IA). (BGov and CQ, March 27)
- A future Ways and Means mark-up may also address “technical corrections” to the TCJA. On March 26, House Ways and Means Committee members Jimmy Panetta (D-CA) and Jackie Walorski (R-IN) introduced the Restoring Investment in Improvements Act.
The House bill (H.R. 1869) would correct a TCJA mistake that inadvertently lengthened the cost recovery period for qualified improvement property (QIP). A companion bill in the Senate (S. 803) was introduced earlier this month by Sens. Pat Toomey (R-PA) and Doug Jones (D-AL). (Roundtable Weekly, March 15). The Roundtable strongly supports the legislation.
Comment Letters – Carried Interest and FIRPTA Repeal
The Roundtable and 13 other national real estate organizations sent a letter this week to members of the House Ways and Means Committee about the adverse impact that recently introduced carried interest legislation (H.R. 1735) would have on U.S. real estate and entrepreneurial risk taking.
- The letter notes how the bill would result in a huge tax increase on Americans who use partnerships in businesses of all types and sizes – and would be particularly harmful to the nearly 8 million partners in U.S. real estate partnerships.
The Roundtable and 13 other national real estate organizations submitted comments about recently introduced carried interest legislation (H.R. 1735).
- The March 26 letter states, “The false narrative surrounding the carried interest issue is that it targets only a handful of hedge fund billionaires and Wall Street executives. The carried interest legislation is far broader and would apply to real estate partnerships of all sizes—from two friends owning and leasing a townhome to a large private real estate fund with institutional investors.”
- Additionally, The Roundtable and 19 national trade organizations – representing every aspect of constructing, developing, financing, owning, and managing real estate and infrastructure in the United States – wrote to Ways and Means Committee Members and other key House lawmakers on March 28, urging them to support the Invest in America Act.
- The legislation would repeal the arcane and punitive Foreign Investment in Real Property Tax Act (FIRPTA) of 1980. FIRPTA imposes a discriminatory layer of capital gains tax on foreign investment—a tax burden that does not apply to any other asset class. Private investors cite FIRPTA as a principal obstacle to attracting greater foreign capital for infrastructure projects. (Roundtable FIRPTA Letter, March 28)
- Reps. John Larson (D-CT) and Kenny Marchant (R-TX) are expected to introduce the bipartisan legislation soon.
Repealing FIRPTA is a key policy action Congress could take to help spur infrastructure improvements and contribute to economic growth, according to recommendations submitted March 20 by The Real Estate Roundtable to the House Ways and Means Committee. (Roundtable Statement for the Record)
Senate Banking Committee and President Trump Launch Efforts to Address Housing Finance Reform, Including GSEs
Senate Banking Committee Chairman Mike Crapo (R-ID) and President Trump this week launched separate efforts aimed at reforming the multi-trillion-dollar financial market for single-family and multifamily mortgages, including the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac.
Senate Banking Committee Chairman Mike Crapo (R-ID) held hearing this week on reforming the multi-trillion-dollar housing finance markets.
- Two days of hearings before the Senate Banking Committee concluded Wednesday, with twelve witnesses testifying about Chairman Crapo's recent housing reform outline – a proposal that would return the GSEs to private control. (Roundtable Weekly, Feb. 8)
- Crapo stated during the hearing, “This outline sets out a blueprint for a permanent, sustainable new housing finance system that: protects taxpayers by reducing the systemic, too-big-to-fail risk posed by the current duopoly of mortgage guarantors;
preserves existing infrastructure in the housing finance system that works well, while significantly increasing the role of private risk-bearing capital; establishes several new layers of protection between mortgage credit risk and taxpayers;
ensures a level playing field for originators of all sizes and types, while also locking in uniform, responsible underwriting standards; and promotes broad accessibility to mortgage credit, including in under-served markets.” (Senate Banking Committee,
Day One Testimony and Day Two Testimony)
The Real Estate Roundtable and 27 industry organizations on March 1 submitted principles for reforming the (GSEs).
- Following the hearings, President Trump released a presidential memodirecting “the Secretary of the Treasury and the Secretary of Housing and Urban Development to craft administrative and legislative options for housing finance reform.” (Wall Street Journal, March 27)
- President Trump aims to end the GSEs' conservatorship, “promote competition in the housing finance market ... create a system that encourages sustainable homeownership and protects taxpayers against bailouts.” The memo also calls for the preservation of the 30-year fixed-rate mortgage. (White House announcement, March 27)
- The GSE’s received $191 billion in government support during the financial crisis, but since entering conservatorship, they have paid the Treasury $292 billion in dividends, according to research from Keefe, Bruyette & Woods (Reuters, March 27)
The Real Estate Roundtable and 27 industry organizations on March 1 submitted principles for reforming the (GSEs). The coalition’s letter was sent to Acting Federal Housing Finance Agency (FHFA) Director Joseph Otting and Washington policymakers days after the Senate Banking Committee advanced the nomination of Mark Calabria as FHFA Director. (Roundtable Weekly, March 1)
Calabria is awaiting full Senate confirmation, which is expected soon.
House Committee Approves Bill Allowing Banks to Serve Legal Cannabis Businesses; Roundtable Urges Enactment
The House Financial Services Committee on March 27 approved the Secure and Fair Enforcement (SAFE) Banking Act of 20119 (H.R. 1595), which would allow financial institutions to legally work with state-authorized cannabis-related businesses.
The Roundtable earlier in the week sent a letter urging swift enactment of the legislation to the leadership of the House Financial Services and Judiciary Committees.
- The bipartisan bill, approved by a 45-15 vote, was co-sponsored Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH) and Warren Davidson (R-OH).
- The Real Estate Roundtable earlier in the week sent a letter urging swift enactment of the legislation to the leadership of the House Financial Services and Judiciary Committees.
- Roundtable President and CEO Jeffrey DeBoer notes in the letter, “The SAFE Banking Act provides much-needed clarity for the banking, real estate, and business sectors to function within the contours of state laws that have legalized marijuana.”
- The Roundtable letter emphasizes that federal and state law differences on cannabis policy leaves banks and real estate providers trapped between their mission to serve lawful businesses in local communities – and the threat of federal enforcement action. If H.R. 1595 is enacted, federally regulated banks would no longer face the threat of sanction simply by providing financial services to a legitimate cannabis-related businesses (CRB).
- “Without a bank account, dispensaries and other legal CRBs must operate on a cash basis,” DeBoer notes. “Risks of crime thus increase and tax revenues to pay for infrastructure and other government services are potentially lost. H.R. 1595 can significantly address these problems by providing protections for banks, real estate firms and their employees from punishment simply because they aim to serve businesses within the 46 states that have legalized marijuana to varying degrees,” DeBoer stated. (Roundtable SAFE Act letter, March 25)
Rep. Perlmutter noted the broad support for the legislation from the business community, including The Roundtable, in a March 28 news release. Perlmutter added, “With 152 cosponsors at the time of the committee vote – over a third of the entire House – the bill will next move to the floor of the House. A Senate companion bill is also expected to be introduced in the coming weeks.”