Category: News

Real Estate Roundtable Commits Cooperation on Productive Policy Agenda with President-Elect Trump and New Congress

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(WASHINGTON, D.C.) — Real Estate Roundtable CEO and President Jeffrey D. DeBoer today committed to
working on a positive policy agenda with President-Elect Trump and the 115th Congress on compelling issues

affecting the nation’s economy, job creation and the health of commercial real estate markets.

“We look forward to working with President-Elect Trump and the 115th Congress to positively boost job creation, expand the economy, and address the many important national policy issues relating to real estate and the national economy.

Strong real estate markets provide millions of American jobs, improve the well being of our local communities, support the interests of national security and defense, and help sustain the nation’s critical infrastructure in our towns, cities, and states. 

The strength of real estate, and the benefits the industry provides to all Americans, depends on fair, consistent, and forward-looking policy at all levels of government. Real estate public policies are non partisan. They should be based on objective economic principles, responsive to changing economic cycles and sensitive to societal demands. 

Tax and financial regulatory reform; infrastructure investment; immigration issues; energy policy; and, physical and cyber security each will present opportunities to advance the economy job creation and the stability of U.S. real estate markets. 

We are excited to offer our support, expertise and assistance to President-Elect Trump and to the new Congress. We are honored to contribute meaningfully to the strength and prosperity of our nation,” said DeBoer.

About The Real Estate Roundtable

The Real Estate Roundtable brings together leaders of the nation’s publicly-held and privately owned real
estate ownership, development, lending and management firms with the leaders of national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. Collectively, Roundtable members’ portfolios contain over 12 billion square feet of office, retail and industrial properties valued at more than $1 trillion; over 1.5 million apartment units; and in excess of 2.5 million hotel rooms. Participating trade associations represent more than 1.5 million people involved in virtually every aspect of the real estate business.

Vice President Pence Promotes Opportunity Zones Program; Wall Street Investors Focus on Opportunity Funds

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Vice President Mike Pence and Sen. Tim Scott (R-SC) promoted the new Opportunity Zones (OZ) program in South Carolina yesterday as an example of how economically distressed areas can be redeveloped to benefit lower-income communities.  (WCBD video, Feb. 21)

Vice President Mike Pence and Sen. Tim Scott (R-SC), above, promoted the new Opportunity Zones (OZ) program in South Carolina yesterday as an example of how economically distressed areas can be redeveloped to benefit lower-income communities.  (WCBD video, Feb. 21). 
  • “The truth is, Opportunity Zones help address unique needs by forming partnerships between the federal government with regard to tax benefits, state and local leaders, and local investors to create that incentive that makes it even more possible for people to invest at the point of the need,” Pence said.  (Pence Remarks, Feb. 21)
  • Vice President Pence added, “As President Trump said just a few months ago, when he established what came to be known as the White House Opportunity and Revitalization Council – which is going to be coordinating efforts and identifying Opportunity Zones all across the country – as the President said, and I quote, ‘No citizen will be forgotten, no community will be ignored…no American will be left on the sidelines.’ “
  • Sen. Scott – who led the effort in Congress for enactment of the Opportunity Zones program – discussed OZ goals and incentives on Jan. 29 in a discussion with Roundtable member Geordy Johnson (CEO, Johnson Development Associates, Inc.) during The Roundtable’s State of the Industry Meeting (Roundtable Weekly, Feb. 15)
  • Wall Street’s interest in OZs was profiled this week in the New York Times, which reported more than 80 opportunity funds have been established since January 2018 – and that the program “has unleashed a flurry of investment activity by wealthy families, some of Wall Street’s biggest investors and other investors.”  (New York Times, Feb. 20)
  • The article also notes that “The National Council of State Housing Agencies, which is tracking opportunity-zone funds, found that money managers and nonprofits had so far sought to raise over $18 billion.” 

A recent IRS hearing focused on how OZ regulatory guidance may affect long-term investments in certain low-income communities. The Treasury Department is expected to release its second set of OZ regulations in the coming weeks.  Another public hearing will follow before rules for the program are finalized.  (Roundtable Weekly, Feb. 15)

IRS Holds Hearing on Opportunity Zones; Roundtable Working Group Meets With Treasury Officials on OZ Regulations

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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.).
  • 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.

 

TAX POLICY

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PARTIAL GOVERNMENT SHUTDOWN

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President Trump, Congress Agree to 3-Week Shutdown Reprieve As Negotiations Proceed Over Border Security

Industry, Investors Await Opportunity Zones’ Clarifying Guidance Amid Shutdown Delay

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The government shutdown is slowing progress on tax guidance important to real estate, including Opportunity Zone incentives.  The IRS cancelled a Jan. 10 administrative hearing on the October proposed regulations.  However, under a special two-year IRS appropriation for tax reform implementation, and the agency’s own contingency plan, background work continues on Opportunity Zone rules and other  critical regulatory guidance.”

The  Wall Street Journal reported on Jan. 15 that “there has been a surge in site acquisitions in the zones last year as developers planned for a surge of investments. There were 58% more deals [in] the zones in the third quarter of 2018, compared with the same quarter in 2017.”  (WSJ, Jan. 15 and Real Capital Analytics.)

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  • The Wall Street Journal reported on Jan. 15 that “there has been a surge in site acquisitions in the zones last year as developers planned for a surge of investments. There were 58% more deals [in] the zones in the third quarter of 2018, compared with the same quarter in 2017.”  (WSJ, Jan. 15 and Real Capital Analytics.)
  • John Lettieri, chief executive of the Economic Innovation Group, a public policy organization that advocated for the inclusion of opportunity zones in last year’s tax overhaul, told The Journal, “The sooner you get regulatory clarity, the more benefit is available to investors and the sooner they can stand up a marketplace.” (WSJ, Jan. 15)
  • The Real Estate Roundtable on Dec. 19 provided formal commentsthat encourages Treasury and the IRS to clarify a number of tax issues that would remove uncertainty for potential opportunity zone investors and opportunity fund managers.  The letter was the second round of Roundtable comments on opportunity zones following Treasury’s publication of proposed regulations last October. (Roundtable Weekly, Oct. 21, 2018 and Dec. 19, 2018)
  • Roundtable Senior Vice President & Counsel Ryan McCormick participated this week in a CBRE conference call presentation on qualified opportunity zones.  Joining McCormick was Steven Kennedy (Director, PwC), a member of The Roundtable’s Tax Policy Advisory Committee Working Group on Opportunity Zones, and experts from CBRE’s capital markets and research team. The Jan. 16 CBRE PowerPoint presentation can be downloaded here.
  • Also this week, Jared Bernstein, a former chief economist to former Vice President Joe Biden, authored an op-ed in the Washington Postin support of the opportunity zone program.  Bernstein and Kevin Hassett, current chairman of the White House Council of Economic Advisers, wrote the original paper that put forward the opportunity zone concept.  In the Jan. 14 op-ed, Bernstein states, “[M]ost OZ communities have faced disinvestment and depopulation for so long, they have both the need and capacity to absorb new investment, development and people without displacing local residents … I suggest we give OZs a chance, while scrutinizing their progress.”

The future of the OZ program will be discussed by Sen. Tim Scott (R-SC) – who led the effort in Congress for enactment of the opportunity zone program – and Roundtable member Geordy Johnson (CEO, Johnson Development Associates, Inc.) on Jan. 29 during The Roundtable’s State of the Industry Meeting in Washington, DC.  Opportunity Zones will also be a focus of The Roundtable’s TPAC meeting on Jan. 30.

116th CONGRESSIONAL COMMITTEES

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Roundtable Comment Letter Recommends Additional Guidance from Treasury and IRS to Accelerate Capital Investment in Opportunity Zones

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This week the Real Estate Roundtable provided formal comments regarding opportunity zones to the Treasury Department and the IRS.  The letter encourages Treasury to clarify a number of tax issues that would remove uncertainty for potential investors and opportunity fund managers.  This is the second Roundtable comment letter on opportunity zones, following Treasury’s publication of proposed regulations in October. ( Roundtable Weekly, Oct. 19)

This week the Real Estate Roundtable provided  formal comments  regarding opportunity zones to the Treasury Department and the IRS.

  • The October proposed rules provided a strong foundation for opportunity fund formation and investment.  Building on the rules, the Roundtable letter prioritizes five areas where additional guidance from Treasury would accelerate the pooling of capital and job creation in opportunity zones.  The letter recommends that Treasury:
    1. Remove barriers to the formation of multi-asset opportunity funds through flexible exit rules;
    2. Clarify the circumstances in which land and previously vacant buildings constitute qualified opportunity zone business property;
    3. Allow appropriate refinancing of opportunity fund assets and avoid overly restrictive debt-distribution rules;
    4. Encourage continued investment in opportunity zones with flexible gain reinvestment, roll-over, and holding period rules at the investor, fund, and business level; and
    5. Provide additional protections in the working capital safe harbor and the substantial improvement rules for taxpayers making a good faith effort to comply with opportunity zone requirements.
  • “Real estate development and redevelopment is a key component of any region’s economic strength and growth, wrote Roundtable President and CEO Jeffrey D. DeBoer. “The Roundtable foresees opportunity fund investors and fund managers actively partnering with local leaders and entrepreneurs on projects that both drive economic activity and respond to the needs of communities. Additional guidance along the lines described above will help ensure that the opportunity zone incentives fulfill their ambitious objectives.”
  • The Treasury Department could issue a second set of proposed regulations on opportunity zones as soon as January, according to Treasury Assistant Secretary David Kautter (Roundtable Weekly, Dec. 14).
  • The underlying legislation directs Treasury to report to Congress on opportunity zones’ effectiveness.  The  Roundtable letter encourages Treasury to consider, as part of its reporting, the aggregate impact of opportunity zone investments on the overall health and wellbeing of targeted communities, including the impact on the local tax base, surrounding infrastructure, and their ability to attract and retain employers.

The Roundtable comments are the product of an active Tax Policy Advisory Committee (TPAC) Opportunity Zone Working Group that includes leading real estate developers, owners, investors, lenders, industry organizations, and outside advisors. The TPAC working group will continue to work closely with government officials to help ensure the program fulfills its ambitious objective of stimulating economic development and job creation in low-income communities.

White House Executive Order Aims to Stimulate Opportunity Zone Investment by Channeling Federal Resources; Additional OZ Regulations Expected in January

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President Trump on Dec. 12 signed an Executive Order that seeks to facilitate long-term equity investment in new Opportunity Zones and other low-income communities.  The order formally established the White House Opportunity and Revitalization Council.  (White House statement and PBS Video, Dec. 12)

President Trump on Dec. 12 signed an Executive Order that seeks to facilitate long-term equity investment in new Opportunity Zones and other low-income communities.   (White House statement and PBS Video)

  • Congress created Opportunity Zones in the 2017 Tax Cuts and Jobs Act to encourage long-term, capital investment in economically struggling, low-income communities.  Opportunity Funds that invest in tangible business property, such as real estate, located in a qualifying zone are eligible for tax benefits that are tied to the investment holding period.  The capital gain on an Opportunity Fund investment is excluded from tax altogether if the asset is held for 10 years or more. 
  • In June 2018, the Treasury Department designated 8,761 communities in all 50 States, the District of Columbia, and five Territories as Opportunity Zones.  (IRS Notice 2018-48 and Roundtable Weekly, June 22) 
  • The new Council will lead joint efforts across executive departments and agencies to implement reforms that streamline existing regulations, optimize the use of federal resources, and align the requirements for public and private investment programs in economically distressed communities. The Council will also present the President with a number of reports identifying and recommending ways to encourage investment in these areas.   (White House statement, Dec. 12).  The White House signing was live streamed and included comments from Sen. Tim Scott (R-SC), the original author and sponsor of Opportunity Zone legislation.  (New York Times, Jan. 29, 2018)
  • The Council-chaired by Secretary of Housing and Urban Development Ben Carson-will be comprised of officials from 13 Federal agencies and include Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross.

Second Round of Opportunity Zone Regulations Expected in January

  • The Treasury Department released its first round of Proposed Regulations governing the Opportunity Zone program in October.   An Oct. 26 GlobeSt.com interview with Real Estate Roundtable President & CEO Jeffrey DeBoer and Roundtable SVP and Counsel Ryan McCormick focused on the initial regulatory guidance and its implications for the real estate industry.

    The next round of Opportunity Zone regulations may be released in January, according to Treasury Assistant Secretary for Tax Policy David Kautter, above.  (Tax Notes, Dec. 14). 
  • The next round of Opportunity Zone regulations may be released in January, according to Treasury Assistant Secretary for Tax Policy David Kautter.  (Tax Notes, Dec. 14)
  • The day after the White House Executive Order signing, Kautter told reporters that it would be “about January before we come out with additional guidance.”  Kauter noted, “The first set of regulations was designed to provide rules for getting funds up and operating, and the second set of rules is more about the operational aspects of the funds themselves.”
  • According to the New York Times, an anonymous administration official said Tuesday that the coming regulations would include reporting requirements for investments in Opportunity Zones to evaluate the program‘s impact.  (New York Times, Dec. 12)

The Roundtable’s Tax Policy Advisory Committee (TPAC) recently convened a panel on Opportunity Zones that included the tax counsel for Senator Tim Scott (R-SC).  TPAC’s Opportunity Zone Working Group is developing additional comments on how the industry can help the program fulfill its ambitious objective of stimulating economic development and job creation in low-income communities. (Roundtable Comment Letter, June 28 and Roundtable Weekly, July 20) 

ECONOMIC GROWTH – TRAVEL & TOURISM

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