Author: abigail_grenadier

Fed Beige Book Highlights Mixed CRE Conditions and Continued Financing Pressures

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The Federal Reserve’s October Beige Book, released Oct. 14, found that economic activity grew slightly or modestly across most districts, while commercial real estate conditions varied by region. Higher borrowing costs, tighter credit conditions, and rising construction expenses continued to weigh on investment and development. (Beige Book, Oct. 14 | GlobeSt., Oct. 16)

Regional CRE Trends

  • New York: Commercial property sales slowed as rising interest rates reduced demand, despite strong Manhattan office leasing and industrial demand driven by data centers. Banks reported slightly tighter credit standards for commercial mortgages, with concerns over interest rate exposure and refinancing costs. (New York Fed)
  • Chicago: Construction and real estate activity declined slightly, although commercial real estate activity remained unchanged overall. Financial conditions tightened modestly, while major development projects competed for construction capacity and electrical equipment needed for data centers. (Chicago Fed)
  • National Outlook: Nine of the 12 Federal Reserve districts reported slight to moderate economic growth, while three reported little change. Businesses continued to face higher costs from energy, tariffs, and insurance, along with shortages of specialized technical and skilled-trade workers. (Federal Reserve)

Why It Matters

  • Nationally, businesses continued to report higher input costs, including pressure from tariffs, insurance, and energy prices. Several districts also noted continued shortages of specialized technical and skilled-trade workers, which could affect construction costs and development timelines. (Federal Reserve, Oct. 14)
  • Financing pressures and rising development costs remain key challenges for CRE investment. Higher borrowing costs and tighter lending standards can complicate refinancing and property transactions, while labor shortages and competition for construction materials and infrastructure capacity can delay new projects. 

Roundtable on the Road

  • This week, RER President and CEO Jeffrey DeBoer joined Kristen Silverberg, Business Roundtable’s President and COO and incoming President and CEO, for a policy and business panel at Marriott International’s North America (MINA) Conference. The discussion focused on policy issues affecting the economy, job creation and investment.
  • The panel also addressed the upcoming elections and next year’s legislative outlook. DeBoer and Silverberg encouraged business leaders to engage with state and local officials, noting that nearly 50 members of Congress previously served as mayors or governors.

RER will release its Q4 2026 Sentiment Index Report in the coming weeks, providing an updated assessment of commercial real estate executives’ views on market conditions, capital availability, and the outlook for the industry.

Energy Policy Update: Permitting Reform, Data Center Growth and Tax Proposals

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A bipartisan group of former senior administration officials is urging Congress to advance permitting reform legislation, citing growing energy demand, infrastructure delays, and threats to U.S. economic competitiveness. The push comes as new research highlights the economic impact of data center development and Senate Democrats introduce proposals to reshape federal energy and data center tax incentives. (The Hill | Axios, Oct. 21)

Permitting Reform

  • Nineteen former economic and national security officials from five presidential administrations urged congressional leaders to pass bipartisan permitting reform legislation, warning that lengthy approval processes are hindering infrastructure development, economic growth, and national security. (The Hill, Oct. 21)
  • Signatories included former Treasury Secretaries Janet Yellen, Steven Mnuchin, Timothy Geithner, Henry Paulson Jr. and Robert Rubin, along with former Secretary of State Mike Pompeo and seven former chairs of the Council of Economic Advisers.
  • The officials endorsed the bipartisan American Affordability and Jobs Act, introduced Sept. 30 by Sens. Shelley Moore Capito (R-WV), Mike Lee (R-UT), Martin Heinrich (D-NM) and Sheldon Whitehouse (D-RI), which would reform federal environmental review and permitting processes. (Roundtable Weekly, Oct. 2)
  • The officials warned that permitting delays are particularly concerning as artificial intelligence and data center development drive electricity demand. Faster infrastructure approvals could expand electricity supply, reduce reliance on costly on-site generation and help lower consumer energy costs.

RER Advocacy

  • The Real Estate Roundtable (RER) has consistently supported bipartisan permitting reform to strengthen grid reliability, lower energy costs, and accelerate infrastructure investment.
  • In a December 2025 letter to congressional leadership, RER urged passage of the bipartisan SPEED Act (H.R. 4776), emphasizing that duplicative federal reviews delay the delivery of affordable, reliable electricity to homes and commercial buildings. (RER Letter, Dec. 8 | Roundtable Weekly, Dec. 12)

Data Center Economic Impact

  • A new U.S. Chamber of Commerce study found that data centers generate substantial economic activity, employment, and local tax revenue, underscoring their role in supporting communities and infrastructure investment. (U.S. Chamber of Commerce, Oct. 15)
  • By the Numbers: According to the Chamber’s analysis, economic impacts generated by a typical 50-megawatt data center include:
  • 5,200 jobs annually supported statewide during a two-year construction phase, generating approximately $680 million in economic activity.
  • $114 million in local tax revenue projected over five years in Prince William County, Virginia, with similar benefits estimated for communities in Texas, Georgia, and Ohio.
  • The findings come as lawmakers debate how to accommodate growing data center electricity demand while protecting consumers from higher infrastructure costs.
  • RER has also urged the North American Electric Reliability Corporation (NERC) to develop clear, workable grid reliability standards that reflect the distinct responsibilities of data center owners, operators, and tenants. (Roundtable Weekly, Sept. 18)
  • Meanwhile, congressional Democrats plan to ramp up oversight of the Trump Administration’s efforts to avoid federal environmental standards for data centers if they take control of the House and/or Senate after the midterms. (PoliticoPro, Oct. 22)

Data Center Tax Proposals

Sen. Ron Wyden (D-OR)
  • Senate Finance Committee Ranking Member Ron Wyden (D-OR) released draft legislation Friday that would impose an excise tax on data center operators and eliminate several federal tax incentives for data center investment, including bonus depreciation, Opportunity Zone benefits and research and development tax credits. (Press Release | Senate Finance Committee Summary | Draft Legislation, Oct. 23)
  • The proposal builds on Wyden’s August white paper, which also called for restrictions on certain data center investments through real estate investment trusts (REITs). (Roundtable Weekly, Aug. 7)
  • The proposed changes would create tax penalties specifically targeting data centers by excluding them from longstanding incentives available to other capital investments. (Roundtable Weekly, Aug. 7)

Clean Energy Tax Incentives

  • Sen. Wyden (D-OR) also outlined plans to restore wind and solar tax credits and expand the Inflation Reduction Act’s Direct Pay Program if Democrats regain control of the Senate. (Politico, Oct. 22)
  • A new Senate Finance Committee Democratic staff report found that nearly $2.5 billion in direct payments went to tax-exempt entities during the program’s first two years, supporting renewable energy and other clean energy investments. (Sen. Wyden Press Release, Oct. 22)

The November elections will shape prospects for permitting reform, data center regulation and federal energy tax policy, with several proposals potentially returning to the agenda during the lame-duck session or the next Congress.

Treasury Proposes Single-Family Investment Rules as Administration Pursues Housing Affordability Measures

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President Donald Trump signed an executive order on Thursday, aimed at reducing mortgage costs and supporting manufactured housing development. Separately, Treasury proposed rules implementing restrictions on institutional purchases of single-family homes, while HUD expanded financing eligibility for build-to-rent communities. (The Hill | White House, Oct. 22)

Executive Order

  • The Oct. 22 executive order directs the Federal Housing Finance Agency (FHFA) to establish a mortgage insurance cancellation pilot through Fannie Mae and Freddie Mac, subject to safety and soundness and other requirements. The pilot would proactively identify eligible borrowers and apply to mortgages originated after the program begins. (White House EO | Politico, Oct. 22)
  • To reduce refinancing costs, the order directs FHFA to expand alternatives to lender’s title insurance for eligible refinances, with savings passed through to borrowers.
  • The order also establishes a federal task force on manufactured housing to recommend ways to streamline approvals, reduce duplicative requirements and expand manufactured and factory-built housing production. Recommendations are due within 180 days. (Reuters, Oct. 22)

Treasury’s Proposed Housing Rules

  • Beginning Jan. 7, 2027, large institutional investors generally may not purchase—or enter into contracts to purchase—single-family homes unless the transactions qualify for a statutory exception. The law’s definition includes entities engaged in the single-family housing business with direct or indirect investment control over at least 350 homes. (Treasury Press Release, Oct. 22)
  • The proposal outlines how exceptions would apply to build-to-rent, renovate-to-rent and homeownership programs, including standards for substantial rehabilitation, and financial assistance to help renters purchase homes. (PoliticoPro, Oct. 22)
  • Treasury also proposes clarifications addressing passive investment, ownership and property-control arrangements, certain debt-related transactions, and transfers between large institutional investors.
  • Treasury said its approach seeks to accommodate different investment, construction and property-management structures while avoiding unnecessary disruption to housing supply, homebuilding, rehabilitation and capital formation.
  • Rep. Maxine Waters (D-CA), Ranking Member on the House Financial Services Committee, welcomed Treasury’s proposal but urged the department to ensure the rules protect homeownership opportunities for families and prevent investors from circumventing the restrictions. (Rep. Waters Press Release, Oct. 22)
  • The Real Estate Roundtable (RER) welcomes member input as it prepares comments on Treasury’s proposed investor rules and their implications for housing supply and private investment. Comments are due 30 days after publication in the Federal Register.

Build-to-Rent Financing

  • HUD announced Oct. 14 that build-to-rent communities—including single-family homes, duplexes and triplexes—are now eligible for FHA-insured financing under the same general terms as traditional multifamily rental developments.
  • Effective immediately, the policy expands financing options for new construction and the acquisition or refinancing of recently developed rental communities. (HUD Press Release, Oct. 14)

Government Sponsored Enterprises (GSEs)

  • Treasury Secretary Scott Bessent said Tuesday that the administration expects to pursue an overhaul of Fannie Mae and Freddie Mac over the next two years, setting a new timeline for addressing their government conservatorship, which began during the 2008 financial crisis.  (Politico Pro, Oct. 20)

Sec. Bessent said the administration’s priority is ensuring that any changes do not increase mortgage rates relative to Treasury bonds. (Politico Pro, Oct. 20)

Tax Policy Roundup: Lame-Duck Outlook, Opportunity Zones and Data Center Proposals

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The November elections will shape the prospects for year-end tax legislation, with a crowded lame-duck agenda leaving limited room for a bipartisan package. Treasury and the IRS are also advancing guidance affecting real estate investment, while lawmakers continue to pursue new limits on data center tax incentives.

Lame-Duck Outlook

  • Lawmakers will return to Washington with just 24 legislative days to address government funding beyond Dec. 11, the annual defense policy bill and other expiring programs. Those negotiations could provide a vehicle for a limited tax package. (Politico, Oct. 13)
  • Potential provisions could include renewing the Work Opportunity Tax Credit, improving IRS administration, and making targeted corrections to the 2025 tax law. A narrow bipartisan agreement appears more achievable than a broader tax bargain, with cost and competing party priorities remaining obstacles. (WilmerHale, Oct. 14)
  • Control of the next Congress will influence whether lawmakers negotiate a year-end agreement or defer major decisions until 2027. Another Republican reconciliation bill remains uncertain, with Senate Majority Leader John Thune (R-SD) acknowledging the difficulty of securing sufficient votes. (Politico, Oct. 13 | Thomson Reuters, Oct. 15)
  • Senate Minority Leader Chuck Schumer (DNY) stated in a recent interview, “The lame duck will be quite different if we win the Senate,” he said. “Same thing if they win the House, and same thing if we win both or neither.” (Politico, Oct. 13)

Opportunity Zones and Tax Guidance

  • OZ deadlines: State nominations for new OZ maps have been extended and are now due Oct. 28, while comments on proposed reporting rules and broader program implementation are due Oct. 26 and Nov. 23, respectively. (Roundtable Weekly, Sept. 25 | Federal Register, Sept. 28 | IRS, Sept. 22)
  • RER advocacy: RER’s Opportunity Zone Working Group met with Treasury and IRS officials in August and has urged clear transition rules that allow existing projects to continue under the permanent program. (Roundtable Weekly, Sept. 25)
  • Treasury and the IRS recently released their 2026–2027 Priority Guidance Plan, outlining 121 tax guidance projects, including rules on Opportunity Zones, business interest deductibility, bonus depreciation and the Section 199A pass-through deduction. (Treasury–IRS Priority Guidance Plan, Sept. 29)
  • These administrative decisions will help determine how provisions of the 2025 tax law operate regardless of congressional action.

Data Center Tax Proposals

  • Sen. Peter Welch (D-VT) urged the IRS to examine whether major technology companies are improperly claiming research and experimentation tax credits for AI data center development. His Oct. 7 letter requests information on claims, enforcement, and potential guidance changes. (Sen. Welch Press Release, Oct. 8)
  • Sen. Welch’s inquiry follows proposals from Senate Finance Committee Ranking Member Ron Wyden (D-OR), Sen. Josh Hawley (R-MO) and House Democrats targeting data center tax treatment. (PoliticoPro, Oct. 14)
  • The proposals include restrictions on OZ eligibility and bonus depreciation; Wyden’s framework also targets certain REIT rents and proposes an operator excise tax. (Roundtable Weekly, Aug. 7 | Roundtable Weekly, Sept. 25 | Axios, Oct. 8)
  • A separate report led by Sen. Elizabeth Warren (D-MA) criticized data center companies’ energy-cost commitments and pursuit of state and local tax incentives. (Sen. Warren Press Release, Oct. 9)

Roundtable on the Road

  • In his prepared remarks, DeBoer highlighted that “[r]eal estate development is not just about buildings; it is a macro-economic engine that provides funding for local and national budgets, creates millions of jobs and structurally supports the long-term retirement goals of everyday Americans through pension funds and institutional portfolios.”

DeBoer also called for policies that reward capital investment, lower housing production costs, accelerate commercial-to-residential conversions, remove regulatory barriers, and expand private investment in housing and community redevelopment.

RER Calls for Coordinated Community Reinvestment Act (CRA) Rules; HUD Outlines Manufactured Housing Plan

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This week, The Real Estate Roundtable (RER) urged all three federal banking agencies to adopt clear, harmonized Community Reinvestment Act (CRA) rules to reduce compliance costs and support capital investment in affordable housing and underserved communities. (Letter, Oct. 13)

CRA Rulemaking

  • In the Oct. 13 letter, RER called for the Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and Federal Reserve to adopt clear, harmonized CRA rules. The OCC and FDIC have jointly proposed changes without parallel Federal Reserve action. (Letter, Oct. 13)
  • Enacted in 1977 to combat redlining, the CRA encourages banks to meet the credit needs of their entire communities, including low- and moderate-income neighborhoods.
  • RER supports continued efforts to modernize CRA rules but cautioned that finalizing changes without parallel Federal Reserve action could replace the historically uniform interagency framework with materially different regulatory regimes. (Letter, Oct. 13)

Why It Matters

  • Affordable housing and community development projects frequently rely on multiple banks providing construction loans, permanent financing, tax credit investments, and other forms of capital.
  • A divided CRA regime could make identical loans receive different treatment, weaken investment incentives for some lenders, complicate mergers and syndicated transactions, and make the flow of capital into underserved markets less predictable.
  • RER also raised concerns about a potential 1.25% of Tier 1 capital benchmark for wholesale and limited-purpose banks, which would need to be met within their assessment areas before qualifying activities elsewhere could receive CRA consideration. (Letter, Oct. 13)
  • The benchmark could concentrate investment in heavily banked markets while disadvantaging strong projects in smaller metropolitan and rural communities.
  • RER recommended uniform rules, coordinated implementation and consistent treatment of multibank transactions. (Letter, Oct. 13)

RER Advocacy

  • RER urged the agencies to coordinate transition schedules, examinations and interpretive guidance, and apply consistent standards to multibank housing and community development transactions. (Letter, Oct. 13)
  • Existing requirements should remain in place until all three agencies jointly propose and finalize a harmonized framework.

Manufactured Housing

  • The plan calls for updated energy efficiency standards, design and installation rules for chassis-free homes, and a performance-based code for larger factory-built residential structures. HUD will also develop guidance and resources addressing zoning, appraisal, lending, and insurance. (HUD, Oct. 7)
  • The ROAD Act eliminates the requirement that manufactured homes be built and remain on a permanent steel transport frame—a relic of the mobile home era. The change could reduce construction costs by $5,000–$10,000 per home, by some estimates, allow more flexible designs, and reduce local zoning barriers. (RER’s Housing Fact Sheet, July 2026)

RER will continue working with banking agencies and stakeholders to advance rules that support community investment and provide certainty for real estate financing.

Opportunity Zone Rules and Maps Take Shape as Congress Weighs Data Center Limits

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As states finalize the next Opportunity Zone maps, Treasury and the IRS are seeking input on program rules while lawmakers weigh whether data centers should qualify for OZ tax benefits.

Treasury Seeks Input on OZ Rules

  • In a Sept. 22 notice, Treasury and the IRS requested comments on how to implement the permanent OZ program, specifically regarding housing investment, working capital rules, operating businesses and the tax treatment of long-held investments. Comments are due Nov. 23. (Tax Notes, Sept. 22 | Bloomberg Law, Sept. 23)
  • The request follows proposed regulations issued Sept. 11 on reporting requirements for Qualified Opportunity Funds (QOFs) and OZ businesses, as well as fund certification and decertification. Comments on that separate proposal are due Oct. 16. (PoliticoPro, Sept. 10)

RER Advocacy

  • RER’s Opportunity Zone Working Group has urged Treasury and the IRS to adopt clear, workable rules that allow existing projects to continue through the transition to the permanent program.  The Group also recently met with Treasury and IRS staff in August to discuss guidance for projects spanning the original and permanent OZ programs.
  • The new maps and forthcoming rules will shape where and how OZ capital can support housing, redevelopment and other projects in low-income communities.

New Opportunity Zones Maps

  • Governors are finalizing nominations for the next generation of OZs ahead of a Sept. 28 deadline, with a 30-day extension available upon request. Treasury will certify the new designations, which take effect Jan. 1, 2027 and remain in place for 10 years.
  • The tighter eligibility rules are expected to significantly reduce the number of designated OZs. Roughly, 6,500 zones could be selected nationwide, nearly 26% fewer than the 8,764 designated under the original program. (Bisnow, Sept. 15)
  • The designation process will help determine where new OZ-supported investment can occur beginning in 2027. While the original program attracted significant multifamily investment, developers are now pursuing designations for a broader range of real estate projects, including mall redevelopments and data centers. (Bisnow, Sept. 15)

Data Center OZ Legislation

RER will continue working with Congress, Treasury, and the IRS to secure and improve  OZ rules to ensure the incentives support economic development and job growth, new sources of local tax revenue,  and expanded housing supply.

RER Urges Bridge Financing Status Quo in EB-5 Program

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The Real Estate Roundtable (RER) submitted comments on Aug. 19 to the U.S. Citizenship and Immigration Services (USCIS) recommending changes to proposed regulations implementing the EB-5 Reform and Integrity Act of 2022 (RIA). RER urged revisions to three provisions in USCIS’s proposal that could limit EB-5’s effectiveness as a source of capital for job-creating real estate and economic development projects.  (Letter, Aug. 19)

The Proposal

  • Published July 2, Ensuring the Integrity of the EB-5 Program (Docket No. USCIS-2026-0100) is USCIS’s first proposed rule implementing the 2022 law. (Federal Register) 

  • The proposed rule would change the program’s treatment of bridge financing, expand “source of funds” reviews to non-EB-5 capital, and establish a new $1.4 million investment tier for projects in “high employment areas.” (Letter, Aug. 19)

RER Recommendations

RER urged USCIS to:

  • Maintain the longstanding treatment of bridge financing. Bridge financing addresses the timing mismatch between when a project requires immediate capital and when longer-term capital becomes available. RER urged USCIS not to cap, eliminate or time-limit the amount of repaid bridge financing that can support qualifying EB-5 job creation. (Letter, Aug. 19)
  • Apply “source of funds” requirements only to EB-5 capital. The RIA does not support applying these requirements to every component of a project’s financing. It would be impractical for an EB-5 investor to document the ultimate source of funds supporting institutional bank loans, pension fund investments and other capital the investor neither owns nor controls. (Letter, Aug. 19)
  • Congress delegated responsibilities to other agencies— not USCIS—to monitor avenues of illicit overseas finance regarding non-EB-5 capital.
  • Reject the proposed $1.4 million investment tier for “high employment areas.” RER warned that the new category would place urban and suburban projects at a competitive disadvantage and could impede affordable and low-income housing development, working against the goals Congress set in the 21st Century ROAD to Housing Act enacted in July. (Letter, Aug. 19)

Why It Matters

  • Real estate and infrastructure projects typically depend on multiple, interrelated sources of capital with different risk profiles, financing terms, and deployment timelines.
  • Denying job-creation credit solely because temporary bridge financing preceded an EB-5 investment would elevate form over substance.
  • EB-5 policy should focus on whether the capital supports a qualifying project that creates U.S. jobs, not the sequence in which each component of the project’s capital stack was deployed.

What’s Next

USCIS will review public comments before issuing a final rule. RER will continue advocating for an EB-5 framework that maintains program integrity while supporting capital formation, housing production, economic development and U.S. job creation.

Industry Urges Congress to Include Retail Crime Bill in Final NDAA

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The Real Estate Roundtable (RER) and a coalition of national real estate organizations urged congressional leaders to include the bipartisan Combating Organized Retail Crime Act (CORCA) in the final Fiscal Year 2027 National Defense Authorization Act (NDAA). (Letter, Sept. 17)

State of Play

  • CORCA (H.R. 2853/S. 1404) would strengthen coordination among federal, state, and local law enforcement and provide additional tools to investigate and prosecute organized criminal networks operating across jurisdictions.
  • The House passed H.R. 2853 on May 12 by a bipartisan vote of 348–60. Senate supporters later filed CORCA as part of a bipartisan amendment package to the FY 2027 NDAA, but the chamber has not advanced the broader defense bill. (Legis1, May 14)
  • RER joined the Commercial Real Estate Development Association, ICSC, Nareit, and the National Association of REALTORS® in sending the letter to House and Senate leaders.

Why It Matters

  • Organized retail crime affects more than retailers. These criminal networks threaten employees and customers, disrupt shopping centers and supply chains, contribute to store closures and higher prices, and discourage investment in communities. (Letter, Sept. 17)
  • Retailers are projected to lose $49.8 billion to retail theft in 2026, with losses potentially exceeding $59 billion by 2029 without federal intervention.
  • A nationwide FTI Consulting survey found that 81% of Americans believe organized retail crime contributes to higher consumer prices, while 74% support federal legislation to address it.

What’s Next

  • With the House not expected to return until after the midterm elections, lawmakers will face a compressed year-end window to complete the NDAA.

RER and its coalition partners are urging congressional leaders to preserve CORCA in the final package and enact the bipartisan measure before the end of the 119th Congress.

Fed Raises Rates for the First Time Since 2023

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The Federal Reserve raised its benchmark interest rate by a quarter point on Wednesday to a target range of 3.75-4 percent, its first increase since 2023. The Federal Open Market Committee (FOMC) voted unanimously, a sharp turn from July when three officials dissented in favor of a hike. (Cushman & Wakefield, Sept. 17)

Fed’s Decision

  • The FOMC voted 12-0 to raise the target range by 25 basis points, citing economic activity expanding at a solid pace, resilient domestic spending, strong productivity growth, robust capital investment, and job gains keeping pace with the workforce. (Federal Reserve | Implementation Note, Sept. 16)
  • Chair Warsh said this summer’s readings do not show underlying inflation trends meaningfully improving, putting 12-month total PCE inflation at roughly 3.6 percent in August, with too many categories still running above 3 percent. (Opening Statement, Sept. 16)
  • Repeating a point from Jackson Hole, Warsh said he would be “hard-pressed to describe broad financial conditions as restrictive,” a view he said the Committee widely shared. (Opening Statement, Sept. 16)
  • The Summary of Economic Projections put median real GDP growth at 2.3 percent this year, total PCE inflation at 3.7 percent falling to 2.3 percent next year, and unemployment steady near 4.1 percent. (Projections | Opening Statement, Sept. 16)

Housing and CRE Outlook

  • The 10-year Treasury breached 5 percent on Sept. 15, and the 30-year topped 5.4 percent, both the highest since 2007. Most permanent commercial mortgages price off Treasury benchmarks rather than the federal funds rate. (Scotsman Guide, Sept. 16)
  • Lenders report that higher debt service costs are reducing loan proceeds and widening the gap between buyers and sellers, requiring sponsors to contribute more equity. Deal structures are adapting, with more cash-in refinancings, recapitalizations, and loan sales as lenders grow less willing to extend. (Commercial Observer, Sept. 16)

What to Watch

  • The FOMC next meets Oct. 27-28, followed by Dec. 8-9. With the median projection pointing to one more increase this year, attention will remain on both meetings for signs of when the Fed could make its next move. (Federal Reserve Calendar)
  • Nearly $983 billion of U.S. commercial real estate mortgages are estimated to mature in 2027. Sustained higher long-term yields would increase refinancing costs as those loans come due. (RER Policy Priorities, Capital & Credit)

RER will continue to advocate for policies that strengthen capital markets, preserve access to credit, and support the capital formation needed to drive long-term economic growth.

Tax Policy Roundup: Foreign Investment, Demolition Expenses, Data Centers, and Partnership Taxes

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FIRPTA

The Real Estate Roundtable (RER) submitted recommendations this week aimed at removing barriers to foreign investment in US real estate and reforming the tax treatment of demolition costs, as lawmakers introduced data center tax legislation and a federal appeals court ruled on the self-employment tax treatment of limited partners.

FIRPTA: RER Requests Repeal of IRS Notice

  • This week, RER submitted a letter to Treasury Secretary Scott Bessent requesting revocation of IRS Notice 2007-55, citing its negative impact on foreign investment in U.S. commercial real estate. (Letter, Sept. 15)
  • The IRS Notice took the position that REIT distributions are not exempt from tax under the tax exemption for foreign governments (section 892). It also treats REIT liquidating distributions as sales of real property subject to tax under the Foreign Investment in Real Property Tax Act (FIRPTA).
  • The letter notes that nearly 20 years have passed without regulations implementing the Notice. Since that time, statutory changes to FIRPTA have eliminated much of its original rationale, and foreign capital’s importance to U.S. real estate investment and jobs has only increased. (Letter, Sept. 15)
  • RER contends that the Notice creates unnecessary transaction costs, limits investment flexibility, and discourages otherwise productive transactions. (Letter, Sept. 15)
  • “[S]ound legal reasoning, good governance, and favorable economic policy strongly support an administrative action to revoke Notice 2007-55,” wrote RER President and CEO Jeffrey DeBoer. “Repeal of the Notice would align squarely with the Administration’s stated priority of ‘unleashing prosperity through deregulation.’”

Property Redevelopment and Demolition Costs: Coalition Seeks Tax Reforms

  • On Wednesday, RER and 13 other national real estate organizations sent Congress a letter encouraging changes to the tax treatment of demolished buildings and demolition expenses.  (Letter, Sept. 15)
  • Current treatment: Section 280B generally requires both demolition expenses and a demolished building’s remaining tax basis to be added to the basis of nondepreciable land. Owners typically cannot recover those amounts for tax purposes until the land is sold, potentially years or decades later.
  • “This treatment can delay or deter redevelopment projects that would otherwise support increased housing supply and commercial activity, particularly in high-cost areas and downtown corridors facing elevated vacancy rates,” the 14 organizations wrote. (Letter, Sept. 15)
  • Proposed changes: The coalition recommends allowing taxpayers to deduct as a loss any remaining tax basis of a demolished building and allowing taxpayers to deduct the actual demolition expenses. The reforms should be paired with reasonable guardrails to protect historic buildings and ensure timely redevelopment of the property.

  • The issue was recently highlighted in an op-ed written by RER Tax Policy Advisory Committee Chairman Joshua Parker and published in The Hill. (The Hill, Aug. 30 | Roundtable Weekly, Sept. 11)
  • Future legislation in this area could also restore the deductibility of environmental remediation expenses.
  • The recently enacted, bipartisan ROAD to Housing Act removed many barriers to creating new housing. The organizations’ proposal would continue building on these efforts by promoting productive real estate investment.

Data Centers: House Democrats Propose Tax Restrictions

  • Reps. Kristen McDonald Rivet (D-MI) and Don Davis (D-NC) introduced the Reverse Big Ugly Tax Breaks for Data Centers Act on Sept. 16, seeking to exclude covered data centers from investment incentives expanded in the 2025 tax law. (Politico |  Rep. Rivet Press Release, Sept. 16)
  • The bill would deny 100% bonus depreciation and Opportunity Zone eligibility to covered data-center property. Its definition covers facilities exceeding 50 megawatts of maximum rated power capacity or total peak power load, including property dedicated to their operation. (Bill text)
  • The legislation follows an August white paper from Senate Finance Committee Ranking Member Ron Wyden (D-OR) addressing bonus depreciation, Opportunity Zones and REIT treatment for data centers, along with a proposed excise tax on operators. (Senate Finance proposal, Aug. 6 | Roundtable Weekly, Aug. 7)

Partnership Taxes: Second Circuit Rules in Soroban

  • The U.S. Court of Appeals for the Second Circuit on Sept. 17 affirmed the Tax Court’s decision in Soroban Capital Partners LP v. Commissioner, holding that three principals did not qualify for the limited partner exception from self-employment tax because they exercised managerial control over the firm. (Opinion, Sept. 17)
  • The court focused on the partners’ actual responsibilities, including managing investments, serving on governing committees, and directing personnel decisions. It clarified that partners may provide some services and still qualify for the exception if those activities do not involve controlling, managing or running the business. (Bloomberg Law, Sept. 17)
  • The opinion appears to align, at least in significant part, with the Fifth Circuit’s revised approach in K Alain, formerly Sirius Solutions. (Court Opinion | JD Supra, Aug. 12)
  • RER filed an amicus brief supporting the taxpayer in Soroban as part of its broader challenge to the IRS’s restrictive interpretation of the limited partner exception from self-employment tax. RER also filed briefs supporting taxpayers in Sirius Solutions in the Fifth Circuit and Denham Capital in the First Circuit. (Roundtable Weekly, Jan. 30 | Feb. 13 | Sept. 11)

RER will continue working with Congress, Treasury and the IRS to advance tax policies that expand access to capital, encourage redevelopment and support long-term economic growth.