Roundtable Weekly - November 9, 2018

Policy Landscape

Midterm Elections Produce Divided Congress; Lame Duck Session Faces Government Funding Deadline

Lawmakers return to Washington next week for a Lame Duck session after midterm elections that secured Democratic control of the House in January.  Policymakers will immediately face a Dec. 7 deadline to fund parts of the government that may collide with President Trump’s goal to fund a border wall on the Mexican border – a possible impasse that could threaten a partial government shutdown.

Lawmakers return to Washington next week for a Lame Duck session after midterm elections that secured Democratic control of the House in January.

  • Senate Majority Leader Mitch McConnell (R-KY) this week cautioned against a possible shutdown.  "75 percent of the government got funded before the end of September and we all know we need to work together here at the end to finish that up.  So we're going to do the best we can to achieve the president's priorities. And hopefully we won't be headed down that path," McConnell said. (Politico, Nov. 7) 
  • Several immigration programs (including the EB-5 investment program) are scheduled to expire on Dec. 7 unless Congress pursues its typical course and extends them as part of the next government funding measure.  However, Congress also faces a Nov. 30 funding expiration for the National Flood Insurance Program. 
  • Other major legislation is not expected to pass during the Lame Duck, although President Trump and Democrats have recently expressed interest in working together on an infrastructure package (CNBC, Nov. 7).   Congress may also consider a tax bill with technical corrections and an extension for expiring tax breaks that could carry over to the new year.
  • Beyond the Lame Duck, it is expected that both parties in the 116th Congress will introduce legislation to maneuver for public favor affecting the 2020 presidential campaign.  (AP, Nov. 7)  

    Roundtable President and CEO Jeffrey DeBoer said, "We believe we will continue to be successful in Washington – regardless of which party controls the power levers – by maintaining our focus on smart research; strong political relationships; and our long-standing positive bipartisan approach to advocacy that emphasizes commercial real estate's contributions to job creation, communities, retirement savings and overall economic strength."

  • A new Congress will also bring Democratic control of House committees and a substantial new policy dynamic.  Extensive hearings on last year's tax overhaul are expected from the new chair of the House Ways and Means Committee Richard Neal (D-MA), the long-standing leader of the House Real Estate Caucus. 
  • Nancy Pelosi (D-CA), who served as Speaker of the House from 2006-2011 and is favored to re-assume that role, stated her caucus plans to revive a "Select Committee on Energy Independence and Global Warming" that will lend heightened focus on risks and impacts from climate change and extreme weather events. (The Hill, Nov. 8.) 
  • It is also possible that GSE reform and a focus on housing issues could gain traction in next year's House Financial Services Committee, which will be led by incoming Chair Maxine Waters (D-CA).  Her committee will also consider reauthorization of the federal terrorism insurance program. 
  • GlobeSt reported this week there "is one piece of must-pass legislation for the CRE industry that will require bipartisan support – the Terrorism Risk Insurance Act, which is set to expire at the end of 2020.  This law impacts most business properties and is a key to transactions and refinancing. Without a doubt it has to be extended."  (What A Divided Government Means For CRE, Nov. 7) 

The new dynamic of a divided Congress will refocus the commercial real estate industry on its policy agenda. Roundtable President and CEO Jeffrey DeBoer said, "The Real Estate Roundtable will maintain its steady course. We believe we will continue to be successful in Washington – regardless of which party controls the power levers – by maintaining our focus on smart research; strong political relationships; and our long-standing positive bipartisan approach to advocacy that emphasizes commercial real estate's contributions to job creation, communities, retirement savings and overall economic strength."

The Roundtable will hold its State of the Industry Meeting on January 29, 2019 in Washington, DC.

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Internet Sales Tax - Tax Policy

Virginia Plans to Advance Internet Sales Tax Legislation as Opponents Aim to Roll Back Supreme Court's Wayfair Decision

The Supreme Court's recent South Dakota v. Wayfair decision allowing States to collect tax owed on remote internet sales purchases could generate an estimated $250 million in annual revenue for the state of Virginia, which is aiming to start its online sales tax program this summer. 

The Real Estate Roundtable and seven other national trade organizations wrote to congressional leaders on Sept. 17, 2018 opposing any legislation that reverses or limits the Supreme Court's June 22 decision in South Dakota v. Wayfair, which allows States to collect tax owed on remote internet sales purchases.

  • Many states are seeking to expand their tax authority over online sales in the wake of the Supreme Court's June 21 South Dakota v. Wayfair decision.  The 5-4 Wayfair ruling strongly suggests that South Dakota's law requiring remote sellers to collect sales tax on more than $100,000 of in-state sales or 200 transactions complies with constitutional law.  
  • Virginia Finance Secretary Aubrey L. Layne Jr. recently told Bloomberg Tax that a state bill in next year's Virginia legislative session would align with principles supported in the high court's Wayfair decision.  Layne said details of the bill may be unveiled in December and added, "My guess is it probably won't be effective until July."  (BNA, Oct. 30) 
  • Despite the Wayfair ruling, a bipartisan quartet of House members led by Rep. Jim Sensenbrenner (R-WI) introduced legislation on Sept. 13 that would  prohibit states from requiring remote sellers with less than $10 million in national annual sales from collecting and remitting sales and use taxes - pending a compact approved by Congress.  In addition to Sensenbrenner's Online Sales Simplicity and Small Business Relief Act of 2018 (H.R. 6824), other bills in Congress would go even further in reversing the Wayfair decision.   (Tax Notes, Nov. 7)
  • Opponents of the decision are asking Congress to include restrictions on States in an end-of-year bill.  (Bloomberg, Oct. 24).  However, legislation to roll back Wayfair is unlikely.  Any major legislation must be negotiated by leaders of both parties, who have limited time during a Lame Duck session.  Congressional negotiators are expected instead to focus on a handful of "must pass" bills. 
  • The Real Estate Roundtable and seven other national trade organizations wrote to congressional leaders on Sept. 17 opposing legislation that reverses or limits Wayfair.  (Wayfair Comment Letter, Sept. 17) 

The business coalition letter explains that for more than a decade, industry groups "have undertaken significant efforts to establish economic parity between online and brick-and-mortar sellers that would better reflect the changing dynamics of today's omnichannel marketplace. For Congress to insert themselves post-ruling only creates additional uncertainty and further complicates the implementation process, while undermining the level playing field created by the Wayfair decision."  (Roundtable Weekly, Sept. 21) 

The eight organizations conclude the letter by offering to work with Congress on any problems that may arise from state implementation of remote internet sales tax collection allowed by Wayfair.  (Roundtable Weekly, June 22)

 

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