News Type: Roundtable Weekly

First Circuit Hears Denham Oral Argument as SECA Limited Partner Fight Continues

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The legal dispute over the tax code’s limited partner exception from self-employment (SECA) taxes remains very much alive, with the issue now in various stages of litigation before three federal appellate courts. The IRS is asserting that a limited partner must be a passive investor.

Denham Oral Arguments

  • On Feb. 5, the First Circuit heard oral argument in Denham Capital Management LP, et al. v. Commissioner (No. 25-1349), while a related appeal in Soroban Capital Partners LP v. Commissioner is pending in the Second Circuit. The Fifth Circuit also recently issued a significant decision in Sirius Solutions, L.L.L.P. v. Commissioner (No. 24-60240). (Roundtable Weekly, Jan. 30)
  • The First Circuit heard oral arguments in Denham before Chief Judge David Barron, Judge Kermit Lipez, and Judge Lara Montecalvo Rikelman. Most of the argument focused on jurisdictional issues, which could allow the court to resolve the case without reaching the merits.
  • On the merits, the panel posed tough questions to Denham and the IRS. The discussion focused on the meaning of a limited partner in 1977 when the exception was enacted, prior case law, relevant dictionary definitions, the Revised Uniform Limited Partnership Act, and the provision’s legislative history.
  • In the course of the argument, Denham emphasized state law developments leading up to the 1977 amendments and, notably, cited The Real Estate Roundtable’s (RER) amicus brief in support of its position. (RER Amicus Brief, Aug. 15; Roundtable Weekly, Sept. 12, 2025)

Why It Matters

  • Income-producing real estate is predominantly owned and operated through partnerships, and the IRS’s litigation campaign creates risk for long-standing structures relied on by real estate and other pass-through businesses.
  • A circuit split among the First, Second, and Fifth Circuits could accelerate Supreme Court review of the issue.

RER Advocacy

  • RER is actively engaged across the circuits to oppose the IRS’s restrictive “passive investor” approach:
  • First Circuit (Denham): RER filed an amicus brief in August 2025 supporting the taxpayer’s challenge to the Tax Court’s judge-made “passive investor” test and explaining the long-standing reliance of real estate partnerships on state-law limited partner status.
  • Second Circuit (Soroban): RER filed an amicus brief in December 2025 urging reversal of the Tax Court’s Soroban approach and warning that a new federal “passivity” overlay would inject uncertainty and increase tax burdens for partnership-based businesses. (Roundtable Weekly, Dec. 19, 2025)
  • Fifth Circuit (Sirius): RER filed an amicus brief in 2024, and the Fifth Circuit’s Jan. 16, 2026 decision rejected the Tax Court’s passivity-focused framework in favor of a status-based analysis tied to limited liability.  (Roundtable Weekly, Jan. 30)

What’s Next

  • The First Circuit’s decision in Denham could turn on jurisdictional challenges, but the merits questions at argument underscored that the government’s “passive investor” theory remains contested and unstable across the courts.

RER will continue pressing its position through amicus advocacy to protect the flexibility inherent in partnership tax rules and preserve the long-standing tax exemption for limited partners.

Roundtable Urges Treasury to Modify Proposed Regulations on Sovereign Investment in U.S. Real Estate

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The Real Estate Roundtable (RER) submitted a comment letter to Treasury Secretary Scott Bessent on Treasury’s recently issued Section 892 regulations and related proposed rules that could materially affect sovereign investment in U.S. real estate. (Letter, Feb. 12)

Why It Matters

  • Foreign investment, including investment by sovereign wealth funds, foreign pension funds, and other government entities, is a critical source of financing for capital-intensive U.S. real estate projects.
  • Since 2011, foreign governmental investors have invested over $100 billion in U.S. commercial real estate.
  • “This patient and long-duration foreign capital drives ambitious and transformative investments that create new housing supply, lower housing costs, and spur job growth and economic opportunity in American cities,” wrote Roundtable President and CEO Jeffrey DeBoer.
  • Section 892 generally exempts from U.S. tax certain dividend and interest income—and gains on sales of securities—earned by foreign governments, unless the income is treated as commercial activity income or income from a controlled commercial entity. The provision traces back to 1917.
  • On Dec. 15, Treasury released final Section 892 regulations and issued new proposed regulations addressing two key questions: (1) when a foreign government has effective control of an entity engaged in commercial activities, and (2) when an acquisition of debt is considered commercial activity.
  • These issues have important consequences for existing and future sovereign investment in U.S. real estate.

RER Recommendations

  • The RER letter commends Treasury for its general approach and for clarifying specific issues. At the same time, RER expressed concerns regarding aspects of the proposed regulations that could disrupt inbound real estate investment and raise the cost of capital for U.S. real estate projects.
  • For example, the proposed rules can be read to restrict foreign governmental investors’ ability to secure certain investor protections, such as veto rights over major investment and financing decisions. Such restrictions could deter and discourage foreign governments from investing in the United States.
  • The letter highlights these concerns while offering specific solutions that Treasury could incorporate in its final rulemaking. These include:
  • Clarifying that customary minority investor veto rights do not create effective control;
  • Grandfathering existing investments;
  • Confirming U.S. withholding agents can rely on self-certifications from foreign governments;
  • Clarifying that certain modifications of distressed debt are not commercial activity; and
  • Establishing debt-related safe harbors for specific situations.
  • In short, RER’s recommendations would ensure U.S. real estate owners and developers can continue to mobilize capital from foreign government sources while preserving Section 892’s fundamental distinction between tax-exempt investment activities and taxable commercial activities.

RER’s Tax Policy Advisory Committee (TPAC) Advocacy

  • The letter was developed by TPAC’s Section 892 Working Group, which includes representatives from a diverse group of foreign investors, U.S. real estate sponsors, and outside advisors. The principal drafter was TPAC member and Skadden partner Nickolas Gianou.

The current Administration and Treasury leadership have emphasized the importance of passive foreign investment to U.S. job creation and growth. Treasury has not yet indicated when it anticipates finalizing the new Section 892 proposed regulations.

House Passes Bipartisan Housing Package; HFSC Hearings Spotlight Affordability and Secondary Mortgage Market

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This week, the House overwhelmingly passed the bipartisan Housing for the 21st Century Act (H.R. 6644). Following Monday’s vote on this sweeping bill, the House Financial Services Committee (HFSC) held a hearing on Tuesday to examine how policies in the financial services and housing sectors contributed to rising cost-of-living pressures for American families by restricting access to capital and credit. On Wednesday, the Subcommittee on Housing and Insurance held a hearing to examine housing affordability and the role of the secondary mortgage market.

Housing for the 21st Century Act

  • On Monday, the House approved the bipartisan Housing for the 21st Century Act by a 390-9 vote, marking one of the strongest bipartisan housing votes in recent years. (The Hill, Feb. 10)
  • Led by HFSC Chairman French Hill (R-AR) and Ranking Member Maxine Waters (D-CA), the legislation includes provisions to streamline housing production and affordability by updating outdated programs, removing unnecessary federal requirements, increasing local flexibility, and allowing banks to more freely deploy funding.  (The Hill, Feb. 10 | Comment Letter, Feb. 6)
  • The bill addresses a housing shortfall of up to 5.5 million units, driven by regulatory delays, zoning constraints, and rising construction costs. (The Hill, Feb. 6)
  • In a Feb. 6 letter to Congress, The Real Estate Roundtable (RER) joined a group of national real estate and housing organizations in expressing “strong support” for the measure, commending the HFSC for advancing “practical, solutions-oriented housing policy.” (Comment Letter, Feb. 6)
  • The coalition added that the bill “supports increased housing supply, improved access to homeownership, and appropriate consumer protections, particularly in high-cost and underserved communities.” (Comment Letter, Feb. 6)
  • The bill’s passage in the House sets up negotiations with the Senate, which passed its own housing legislation—the ROAD to Housing Act—late last year. The two bills contain similar supply-side reforms but differ on certain grant programs and community bank provisions. (Punchbowl News, Dec. 14)

Hearing on Affordability Crisis

  • On Feb. 10, the HFSC held a hearing titled, “Priced Out of the American Dream: Understanding the Policies Behind Rising Costs of Housing and Borrowing,” focused on legislative and regulatory proposals to address the affordability crisis. (HFSC Hearing, Feb. 10)
  • The hearing noticed three proposals to restrict institutional investment in single-family rentals (SFRs)—a topic that has gained momentum following a related Executive Order issued last month. However, the SFR issue surfaced only briefly during Tuesday’s session, and none of the restrictive measures advanced. (Executive Order, Jan. 20)
  • In a Feb. 10 comment letter to HFSC leadership, RER and national real estate trade groups cautioned against limiting institutional capital in the housing market, including SFR assets. (Comment Letter, Feb. 10)
  • The letter explained, “There is no evidence that institutional investors are crowding out prospective homebuyers,” citing data showing that institutional investors accounted for just 0.3 percent of the $2 trillion in single-family home purchases over the past year. (Comment Letter, Feb. 10)
  • The letter highlighted the positive developments that institutional investors have contributed to the market, stating, “Institutional SFR investment expands rental supply in markets where it was previously limited, increases access to high-opportunity neighborhoods, and benefits households with lower incomes, wealth, and savings.” (Comment Letter, Feb. 10)
  • RER and coalition partners also urged lawmakers to avoid policies that would restrict capital formation and instead prioritize supply-forward reforms to close the nation’s housing gap. (Comment Letter, Feb. 10)

Homeownership and the Secondary Mortgage Market

  • On Feb. 11, the HFSC’s Subcommittee on Housing and Insurance held a hearing titled, “Homeownership and the Role of the Secondary Mortgage Market,” examining the structure, function, and evolution of the market and how the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac impact housing affordability. (HFSC Subcommittee Hearing, Feb. 11)
  • In his opening remarks, Subcommittee Chairman Mike Flood discussed the importance of liquidity and capital efficiency in today’s regulatory environment.
  • “The secondary mortgage market works to provide greater liquidity for lenders and results in greater access to mortgage lending for borrowers. In today’s banking regulatory climate, holding a mortgage on a bank’s balance sheet can result in significant capital costs,” Chairman Flood said. (Rep. Flood Press Release, Feb. 11)
  • Chairman Flood added that no legislation was noticed during the hearing, as the session was intended to explore the subject matter in-depth.
  • Bob Broeksmit, President and CEO of the Mortgage Bankers Association, touched on the substantial role that GSEs play in the secondary market. He also advocated that any reforms enacted to end the GSEs’ government conservatorship provide “an ample runway to ensure deep, liquid secondary markets for single-family and multifamily mortgages through all economic cycles and in all geographic regions.” (MBA Testimony, Feb. 11)

RER will continue engaging lawmakers in both chambers to advance durable housing solutions and sensible GSE reforms that support homeownership, expand affordable housing supply, and sustain economic growth.

House Passes Bipartisan FSOC Reform Bill

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The House passed six bipartisan bills from the House Financial Services Committee (HFSC) this week, including the Real Estate Roundtable (RER)-backed Financial Stability Oversight Council (FSOC) Improvement Act of 2025. (H.R. 3682). (Press Release, Feb 9)

 FSOC Improvement Act of 2025

  • The House passed the bill unanimously by voice vote after the HFSC approved H.R. 3682 during its Sept. 16, 2025, markup.
  • The bill would reform FSOC by strengthening transparency, accountability, and procedural safeguards in its decision-making process. It is intended to bolster due-process protections, improve interagency coordination, and ensure designations are based on rigorous analysis.
  • The bill would require FSOC to consult with a company and its primary regulator before designating a nonbank as a Systemically Important Financial Institution (SIFI). (Letter, Oct. 28)

RER Advocacy

  • RER and coalition partners sent a letter of support for H.R.3682 in October 2025, emphasizing an activities-based approach to systemic risk, transparent cost-benefit analysis, and clear procedural guardrails to improve predictability and interagency coordination. (Roundtable Weekly, Oct. 31)
  • The October letter built on a July 2025 coalition letter urging FSOC to rescind its 2023 interpretive guidance and reinstate its 2019 framework, citing due-process protections and stronger coordination with primary regulators. (Roundtable Weekly, July 18)
  • RER has consistently urged regulators to focus on systemic-risk activities—not broad entity designations that can fuel regulatory overreach and create unintended consequences for liquidity, capital formation, and credit availability.

What’s Next

The bill now moves to the Senate Banking Committee for consideration.

FSOC Hearing Highlights Nonbank Oversight as CRE Reacts to Fed Chair Nomination

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This week, the House Financial Services Committee (HFSC) and Senate Banking, Housing and Urban Affairs Committee held hearings with Treasury Secretary Scott Bessent to review the Financial Stability Oversight Council’s (FSOC) 2025 Annual Report. Lawmakers used the session to raise broader concerns about financial regulation, capital formation, and credit availability, including attention on FSOC’s role in banking regulation.

FSOC and Regulatory Direction

  • In his testimony, Sec. Bessent described a recalibrated approach at FSOC that focuses on identifying specific risky activities, rather than broadly regulating entire firms or sectors. He criticized prior “regulation by reflex” and stated that FSOC should avoid labeling wide swaths of the financial system as vulnerable, absent clear, material risk. (Watch Hearing)  
  • “FSOC should… work with its members to support efforts to avoid or pare back existing regulation that stifles pro-growth lending, capital formation, and innovation. And the best way to achieve these goals is by centering economic growth and economic security at the heart of FSOC’s agenda,” Sec. Bessent said. (Politico Pro, Feb. 4)
  • Several exchanges focused on FSOC’s authority to designate nonbank financial companies as Systemically Important Financial Institutions (SIFIs). Sec. Bessent confirmed a preference for an activities-based framework, signaling openness to clearer standards and restraint in the use of entity-based designations. (Watch Hearing)  
  • Sec. Bessent added that he would propose new nonbank guidance later this year, and that he supports higher deposit insurance to protect small banks’ competitiveness against larger institutions. (Politico Pro, Feb. 4)
  • He also supported HFSC Chairman French Hill’s (R-AR) community banking legislative package. He emphasized that small and community banks need tailored capital and risk standards to succeed. (American Banker, Feb. 4)
  • Democratic lawmakers warned that easing regulatory scrutiny could increase systemic risk and repeat conditions that preceded the 2008 financial crisis, with HFSC Ranking Member Maxine Waters (D-CA) arguing that FSOC should play a stronger role in identifying risks across the financial system, including among nonbank entities. (Watch Hearing)

Affordability and Tariffs

  • During the HFSC hearing, Ranking Member Waters pressed Sec. Bessent on whether the administration’s tariffs have contributed to persistent inflation. Sec. Bessent rejected that characterization and disputed claims that he had previously warned investors tariffs were inflationary. (American Banker, Feb. 4)
  • Ranking Member Waters also linked tariffs directly to worsening housing affordability, pointing to duties on key construction inputs such as lumber, steel, and appliances. (American Banker, Feb. 4)
  • While Democrats argued that tariffs and high prices continue to burden consumers, Sec. Bessent cited a Wharton study that points to immigration-driven demand as a contributing factor to higher housing costs. (CNBC, Feb. 4)

Roundtable Advocacy

  • The Real Estate Roundtable (RER) and coalition partners have supported the Financial Stability Oversight Council Improvement Act (H.R.3682), which would require FSOC to consult with a company and its primary regulator before designating a nonbank as a SIFI. (Letter, Oct. 28)
  • The bill is intended to strengthen due-process protections, improve interagency coordination, and ensure designations are based on rigorous analysis.
  • RER has consistently urged regulators to focus on activities that pose genuine systemic risk, rather than imposing broad designations that can create regulatory overreach and unintended consequences for credit markets. (Roundtable Weekly, Oct. 31)

CRE’s Reaction to Fed Chair Nomination

  • Last week, President Donald Trump announced his nomination of Kevin Warsh, a former Federal Reserve Governor, to succeed Fed Chair Jerome Powell. (Axios, Jan. 30)
  • As industry media outlets have reported, commercial real estate and finance leaders have broadly welcomed the nomination, citing Warsh’s experience from the financial crisis and his capital markets expertise. (Bisnow, Jan. 30)
  • “Kevin Warsh is a smart, thoughtful, and experienced nominee. His deep understanding of monetary policy and financial markets would help maintain and strengthen market confidence at a time when economic certainty matters most,” Jeffrey D. DeBoer, RER President and CEO, said.
  • Bob Broeksmit, President and CEO of the Mortgage Bankers Association, said in a statement that Warsh’s prior service on the Fed board gave him a reputation as “a prudent, thoughtful voice on monetary policy.”(ConnectCRE, Jan. 30)
  • CRE finance experts noted that while Warsh’s nomination could raise expectations for near-term rate cuts, uncertainty surrounding the confirmation process and Fed independence may keep long-term Treasury yields, as well as permanent financing costs, elevated. (ConnectCRE, Jan. 30)

RER remains committed to engaging policymakers on FSOC reform and related financial regulations to ensure oversight frameworks support capital formation, liquidity, and economic growth.

Treasury Considering Extension of Bonus Depreciation to Certain Existing Real Estate Investments

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The U.S. Treasury Department is reviewing real estate industry concerns that many firms may be locked out of the One Big Beautiful Bill (OB3) Act’s restored 100 percent bonus depreciation because of prior elections made to opt out of the Section 163(j) business interest limitation. (Bloomberg, Feb. 3)

State of Play

  • The restoration of 100 percent expensing for capital expenditures, including tenant and nonresidential property improvements, is among the most significant provisions in the OB3 Act.
  • Treasury tax policy advisor Dan Penrith acknowledged the concern at the American Bar Association Tax Section’s midyear meeting in San Diego. Penrith stated that the issue is “on our radar, it’s something that we’re thinking about,” signaling potential openness to targeted administrative relief. (Bloomberg, Feb. 3)
  • The Real Estate Roundtable (RER) has urged Treasury guidance to allow “real property trades or businesses (RPTOBs)” that previously elected out of Section 163(j) to withdraw or amend that election—so they can fully benefit from the OB3 Act’s restored bonus depreciation for eligible property improvements. (Roundtable Weekly, Oct. 17)

Why It Matters

  • The RPTOB election historically enabled full interest deductibility, but required the alternative depreciation system, making taxpayers ineligible for bonus depreciation.
  • Without additional guidance, many taxpayers may not qualify for bonus depreciation on property improvements, despite Congress’s intent to spur investment through 100 percent expensing.
  • There is precedent for allowing flexibility. During the pandemic, IRS Revenue Procedure 2020-22 provided an opportunity for certain taxpayers to withdraw a prior Section 163(j)(7)(B) election in response to CARES Act changes. (Revenue Procedure 2020-22)
  • As RER’s SVP & Counsel Ryan McCormick told Bloomberg Tax: “We’re seeking similar flexibility,” adding that it’s “really important for the future.” (Bloomberg, Feb. 3)

Roundtable Advocacy

  • In an Oct. 17, 2025, letter, RER wrote to Treasury urging guidance to ensure the OB3 Act’s restored 100 percent bonus depreciation provision supports real estate investment, job creation, and economic growth.
  • The letter emphasized that clear implementing rules will help bonus depreciation “facilitate the modernization and repurposing of real estate assets,” including underutilized offices, shopping centers, hotels, and mixed-use properties. (Roundtable Weekly, Oct. 17)

RER will continue engaging Treasury as it considers next steps to ensure the OB3 Act’s bonus depreciation provisions deliver on their intended investment and growth impact.

Energy Policy Update: Permitting Push, ENERGY STAR Preserved, Grid Stressed

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In Washington this week, President Donald Trump signed a bipartisan FY 2026 appropriations bill preserving ENERGY STAR funding, lawmakers refocused on permitting reform, and Winter Storm Fern exposed challenges to electric grid reliability driven by extreme weather.

ENERGY STAR

  • President Trump signed the bipartisan FY 2026 appropriations bill (H.R. 6938) into law on Jan. 23, securing approximately $33 million in funding for EPA’s ENERGY STAR program through Sept. 30. (E&E News, Jan. 29)
  • The agreement preserves the voluntary efficiency labeling initiative after earlier proposals to eliminate it and sets, for the first time, a specific mandatory annual funding level.
  • ENERGY STAR is a long-standing, market-based program that helps lower energy costs and supports “retrofit” investments for all commercial real estate asset classes. (Roundtable Weekly, Jan. 9)
  • The Real Estate Roundtable (RER) has long urged the “business case” to support the ENERGY STAR program. RER is working with a coalition of multi-industry partners in the real estate, manufacturing, consumer tech, and retail sectors to explain to Congress and the administration why ENERGY STAR is critical to the national “energy dominance” agenda. (Roundtable Weekly, June 6; May 23).

Permitting Reform

  • Senate EPW Committee Chair Shelley Moore Capito (R-WV) said permitting reform must be bipartisan, “project neutral,” and provide developers “predictability, consistency and finality” in securing permits in order to be effective. (E&E News, Jan. 29)
  • Abigail Ross Hopper (President and CEO of the Solar Energy Industries Association), testified that permitting reform should rest on three core principles: project certainty for approved projects, reduced timelines through streamlined and coordinated reviews, and a faster transmission buildout supported by stronger planning, permitting authority, and grid modernization. (UtilityDive, Jan. 29)
  • Faster permitting remains central to accelerating the buildout of the generation and transmission needed to meet rising electricity demand and improve reliability.

Winter Storm & Electric Grid

  • Ahead of Winter Storm Fern, the Department of Energy directed grid operators to be prepared to tap backup generation from large facilities—including data centers—to prevent outages and limit price spikes.
  • Energy Secretary Chris Wright framed the directive as part of a response to a “national energy emergency,” reflecting heightened reliability concerns as extreme weather collides with rapidly rising electricity demand from AI and other large loads. (WSJ, Jan. 22)
  • In the wake of this week’s winter storm, the North American Electric Reliability Corp. (NERC) warned that power generation and transmission are not growing fast enough to meet accelerating demand. NERC cautioned that several regions may lack sufficient energy supplies during extreme winter conditions, raising the stakes for grid expansion and resilience planning. (PoliticoPro, Jan. 29 | PoliticoPro, Jan 25)

RER will continue advocating for policies that remove permitting bottlenecks and support cost-effective grid modernization to ensure a robust supply of affordable power and a safe, reliable electric grid.

Fed Holds Rates Steady as Housing Affordability Pressures Shape Policy Debate

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The Federal Reserve building in Washington, DC

After the Federal Reserve’s Federal Open Market Committee (FOMC) concluded its January meeting on Wednesday by holding rates steady at 3.5 percent to 3.75 percent, President Donald Trump announced today he is nominating former Fed governor Kevin Warsh as the next Fed chair. (Axios, Jan. 30 | CBS News, Jan. 28)

Fed Chair

  • “I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” said Trump in a Truth Social post announcing the selection. (CNBC, Jan. 30)
  • Warsh still needs Senate confirmation and, if approved, would take over in May when Powell’s term expires.

Key Takeaways

  • The FOMC voted 10-2 to maintain rates, with Governors Stephen Miran and Christopher Waller dissenting in favor of an additional quarter-point cut. While most Fed officials still expect further reductions in 2026, Chair Powell emphasized that decisions will remain “data dependent.” (Fed statement, Jan. 28)
  • Fed Chair Jerome Powell said the economic outlook has “clearly improved” since the Committee’s December meeting.
  • Fed Chair Jerome Powell said the economic outlook has “clearly improved” since the Committee’s December meeting.
  • He cited growth and signs of stabilization in the labor market, while emphasizing that policymakers want greater confidence that inflation is moving toward the Fed’s 2 percent target before resuming rate cuts.
  • The U.S. economy grew at a 4.4 percent annual rate in the third quarter of 2025. Chair Powell noted that this performance suggests that interest rates are not currently restrictive enough to materially slow economic activity. (AP, Jan. 28)
  • Inflation remains above target, with the Fed’s preferred measure running near 2.8 percent late last year. Chair Powell acknowledged that recent tariff-related price pressures have lifted goods inflation but suggested those effects are likely temporary and could begin easing later this year. (AP, Jan. 28)
  • The Fed’s decision to hold rates steady reinforces expectations that borrowing costs will remain elevated through at least mid-year.
  • For commercial real estate, sustained higher-for-longer rates continue to place pressure on refinancing, valuations, and transaction activity.

Institutional Investor Legislation Introduced

  • Against this backdrop of a pause in rate cuts and broader concerns about housing affordability, lawmakers have renewed efforts to target institutional participation in the single-family housing market.
  • On Jan. 20, Reps. Summer Lee (D-PA), Ro Khanna (D-CA), Mark Takano (D-CA), and Jill Tokuda (D-HI) reintroduced the Stop Wall Street Landlords Act (H.R. 7138). (Press Release, Jan. 20)
  • The bill would deny mortgage interest, insurance, and depreciation deductions for large institutional investors that own single-family homes and impose a 100 percent federal real estate transfer tax on covered properties that are not sold within 18 months of enactment, with proceeds used to fund the federal Housing Trust Fund.
  • The proposal would also bar the Federal Housing Financial Agency, Fannie Mae, Freddie Mac, and Ginnie Mae from supporting single-family mortgages tied to large institutional investors. (CNBC, Jan. 18)
  • Other legislation aimed at restricting institutional investment in the single family rental market include:
  • Rep. Mary Miller (R-IL) introduced the American Family Housing Act (H.R. 7186), co-sponsored by Rep. Buddy Carter (R-GA), which would direct the SEC to enforce restrictions on large institutional investors (those with more than $100 billion in assets under management) from purchasing single-family homes. Rep. Miller serves on the House Agriculture Committee and Rep. Carter on the House Budget Committee.
  • The debate has taken on added political significance following President Trump’s recent statements and Executive Order on curtailing institutional ownership of single-family homes. (CNBC, Jan. 18 | Roundtable Weekly, Jan. 23)

Looking Ahead

  • Proposals such as the Stop Wall Street Landlords Act risk could further restrict housing supply and access to capital at a time when liquidity and investment are already under pressure.
  • As The Real Estate Roundtable (RER) and partners have emphasized, targeting institutional investment does not address the core drivers of unaffordability: high mortgage rates, rising construction costs, labor shortages, and restrictive zoning that limits housing supply. (Roundtable Weekly, Jan. 9)

RER will continue to engage policymakers about the importance of expanding housing supply, preserving access to capital, and maintaining regulatory flexibility to support long-term stability for the commercial real estate industry and the overall economy.

Fifth Circuit Reverses Tax Court, Sides with Taxpayer and Roundtable in Limited Partnership Tax Dispute

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The U.S. Court of Appeals for the Fifth Circuit issued a 2-1 decision in Sirius Solutions, L.L.L.P. v. Commissioner (No. 24-60240) on Jan. 16, restricting the federal government’s effort to extend self-employment taxes to a broad range of limited partners in limited partnerships. The Real Estate Roundtable (RER) submitted an amicus brief in the case, and the Court’s ruling closely aligns with the RER’s position.

Court Ruling

  • Since 1977, the tax code has exempted limited partners from self-employment taxes. In recent years, the IRS has asserted a new and more restrictive test to determine whether a limited partner qualifies for the exclusion.
  • The Fifth Circuit held that the Section 1402(a)(13) “limited partner” exception from self-employment (SECA) tax applies to a partner in a state-law limited partnership who has limited liability. (TaxNotes, Jan. 27)
  • The ruling vacates and remands the Tax Court decision that followed Soroban Capital Partners LP v. Commissioner (No. 25-2079), and applied a “functional analysis” of partner roles and activities to determine whether the SECA exclusion applies. (Sullivan Cromwell, Jan. 27)
  • The Fifth Circuit rejected that approach and held that “limited partner” in Section 1402(a)(13) is a status-based, state-law concept tied to limited liability, not an activity test.
  • The decision is the first appellate ruling to reach the issue and reverse the Tax Court’s restrictive interpretation. (Reuters, Jan. 21)
  • This ruling has set a precedent for future SECA tax cases, with significant consequences for real estate and other industries that use limited partnerships for business purposes.

Roundtable Advocacy

  • In August 2024, RER submitted an amicus brief to the Fifth Circuit. The brief argued that the IRS’s interpretation was flawed and inconsistent with decades of state law recognizing that limited partners can provide services while retaining limited partner status. (Roundtable Weekly, Sept. 6, 2024)
  • The brief emphasized that pre-1977 state court decisions and the IRS’s own 1994 proposed regulations contradict the government’s position that limited partners must be passive to avoid SECA taxes.
  • RER argued the Tax Court’s “passive investor” test is found nowhere in the statute and reflects a misunderstanding of partnership law that real estate and other businesses have relied on for decades.
  • RER has continued this advocacy across the circuits. In Dec. 2025, RER filed an amicus brief with the Second Circuit in Soroban, challenging the IRS’s restrictive interpretation of the “limited partner exception” under Section 1402(a)(13). (Roundtable Weekly, Dec. 19, 2025)
  • This successful outcome in the Sirius case supports RER’s position and could reduce momentum for formal tax guidance that would broaden the reach of SECA taxes.

What’s Next

  • Related appeals are pending in the First Circuit (Denham) and Second Circuit (Soroban). (TaxNotes, Jan. 27)
  • Divergent outcomes could create a circuit split and increase the odds of Supreme Court review. (Skadden Arps, Jan. 27)
  • The First Circuit is scheduled to hear oral arguments in Denham on Feb. 5. (TaxNotes, Jan. 27)

RER remains committed to protecting entrepreneurs’ ability to flexibly organize in partnerships and other pass-through entities that promote capital formation, risk-taking, and economic growth, and it will remain engaged as the SECA dispute moves forward.

RER’s State of the Industry Meeting Spotlights Housing Affordability, Energy, Tax Policy, Capital Markets, and Homeland Security

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This week, The Real Estate Roundtable’s (RER) State of the Industry (SOI) Meeting brought together policymakers, industry leaders, and experts to examine the market and policy landscape shaping the economy and commercial real estate in 2026—from housing affordability and financing conditions to energy constraints, tax policy, homeland security, and geopolitical uncertainty. (Agenda, Jan. Executive Summary, Policy Priorities)

  • The general themes emphasized throughout the meeting by RER members and guests centered on the value of communicating smart, timely issue analysis to policymakers, as well as the benefits to business risk management from political engagement. 
  • RER’s policy advisory committees on capital and credit, tax, sustainability, and homeland security were highlighted for producing trusted, fact-based analysis that strengthens the organization’s credibility and effectiveness. Similarity noted was RER’s political action committee (REALPAC), in supporting the industry’s advocacy goals.
  • RER leaders underscored that Washington policymaking is strategic, coordinated, and increasingly consequential for real estate investment and operations—and that staying engaged is essential as today’s debates will shape tomorrow’s legislative outcomes.

Meeting Speakers

  • Rep. Jason Smith (R-MO) (Chair, House Ways and Means Committee) was presented RER’s Champion of the Economy Legislative Leadership Award for his efforts on the One Big Beautiful Bill Act (OB3). He discussed the committee’s work ahead on bipartisan tax initiatives, trade issues, affordability, and housing-related incentives such as the low-income housing tax credit (LIHTC).
  • Mark Halperin (Editor-in-Chief, 2WAY; Host, “Next Up”) provided an overview of the current political environment, discussing President Trump’s governing style, the dynamics shaping the 2026 midterms, and early positioning for the 2028 presidential field.
  • Rep. Andy Barr (R-KY) (Chairman of the Financial Institutions Subcommittee on the House Financial Services Committee; Member, House Committee on Foreign Affairs) discussed the committee’s expected early action to extend the TRIA Program Reauthorization Act of 2026 (H.R. 7128), emphasized the importance of regulatory reform to strengthen capital formation and credit availability, discussed the Committee’s the bipartisan Housing for the 21st Century Act (H.R. 6644) and argued that boosting housing supply—and supporting financing capacity— is essential to improving affordability.
  • Rep. Mike Lawler (R-NY) (Member, House Committees on Financial Services and Foreign Affairs) stressed the importance of bipartisan legislating, framed housing affordability as a supply-and-investment challenge, and urged regulatory relief to spur new development. He also highlighted his bipartisan, bicameral transit-oriented housing bill, Build Housing, Unlock Benefits and Services (HUBS) Act, which would cut red tape and expand federal infrastructure loan tools to support transit-oriented development and boost housing supply. (Roundtable Weekly, Jan. 16)
  • Philip L. Swagel (Director, Congressional Budget Office) delivered a macroeconomic outlook on growth, inflation, and interest rate expectations, and highlighted long-term fiscal pressures, tariff and immigration dynamics, and the need to reduce regulatory bottlenecks that constrain housing supply and infrastructure investment.
  • Rep. Mike Flood (R-NE) (Chairman, House Financial Services Committee, Subcommittee on Housing and Insurance) joined a joint session of RER’s Real Estate Capital Policy Advisory Committee (RECPAC) and Research Committee to address housing and insurance priorities for the year ahead, including his TRIA Program Reauthorization Act of 2026 (H.R. 7128), the National Flood Insurance Program, and efforts to improve housing supply and affordability.

Committee Meetings

Joint Real Estate Capital Policy Advisory Committee (RECPAC) and Research Committee

  • During the joint session, Hessam Nadji, (President & CEO, Marcus & Millichap) made a presentation on the Commercial Real Estate Investment Outlook for 2026 and led a market discussion with RECPAC Co-Chair Bryan McDonnel (Managing Director, Chair of Global Debt & Agriculture, PGIM Real Estate), David Fowler (BNY), and Andy Richard (Citigroup Global Markets Inc.). Genger Charles (Amherst), Sheila Greenwood (Invitation Homes), Lou Hayden (American Homes), and Ama Romaine (Pretium), held a panel on addressing the administration’s proposed restriction on institutional investments in single-family rentals. (See more in Housing story below)(See more in Housing story below) (Agenda & Speakers)

Tax Policy Advisory Committee (TPAC)

  • Kevin Salinger (Treasury Deputy Assistant Secretary, U.S. Treasury Department), Thomas Barthold (Chief of Staff, Joint Committee on Taxation), and other government speakers joined TPAC Chair Joshua M. Parker (Chairman & Chief Executive Officer, Ancora L&G), TPAC Vice Chair David Friedline (Partner, Deloitte Tax LLP) and committee members to discuss the continuing implementation of the OB3 Act, recent policy developments affecting sovereign investors in U.S. real estate, and the outlook ahead for tax legislation and regulatory changes. (Agenda & Speakers)

Sustainability Policy Advisory Committee (SPAC)

  • SPAC Vice Chair Tamara Chernomordik (VP, Corporate Responsibility, Kimco Realty led discussions on federal-state energy policy dynamics, the solar outlook, ENERGY STAR and Better Buildings, permitting reform, electricity reliability, AI-related load growth, and building performance standards. (Agenda & Speakers)

Homeland Security Task Force (HSTF)

  • Co-Chairs John Giacalone (VP, Global Safety and Security, Hilton Worldwide) and Amanda Mason (Executive Director, Global Intelligence, Related Companies) led a series of discussions on the evolving physical and cyber threat picture. Also joining the discussion were representatives of the FBI who discussed their new Homeland Security Task Force, Foreign Terrorist Organizations (FTO), and Criminal Activity; and Sports and Gaming (in light of the World Cup). The Task Force also discussed the growing importance of data center security as AI drives new operational and counterintelligence challenges. (Agenda & Speakers)

Next on RER’s FY 2026 meeting calendar is the Spring Roundtable Meeting in April. The Spring Meeting is limited to Roundtable-level members only.