News Type: Roundtable Weekly

Guidance on Business Interest Deduction Limit May Address Real Estate Investment Issues

Posted on by Trey Jackson

The Treasury Department and Internal Revenue Service are close to issuing draft regulations on the new business interest expense limitation, enacted in last year’s tax overhaul.  Regulations related to the Tax Cuts and Jobs Act can be designated for an expedited, 10-day review by the White House Office of Management and Budget before publication and public release, though the timetable can be extended if needed.

A Feb. 21, 2018 Roundtable letterurged Treasury to clarify that interest (other than investment interest) on debt that is allocable to an owner of an entity engaged in a real property trade or business is exempt from the new business interest limitation rule – if that trade or business has elected out of the rule.

  • The Tax Cuts and Jobs Act capped the amount of interest that a business with revenue over $25 million can deduct annually – to no more than 30 percent of earnings before interest, taxes, depreciation, and amortization.  The provision also includes an important exception for an “electing real property trade or business.” 
  • This exception reflects policymakers’ understanding that limits on the deduction for interest expense could have enormous negative consequences for property values, real estate markets, and economic growth.  (Reference: Real Estate Forum, Jan/Feb 2018,  Decoding The New Tax Bill) 
  • The Real Estate Roundtable on Feb. 21, 2018 wrote to Treasury Secretary Steven Mnuchin and offered a number of recommendations to resolve ambiguities in how the new limitation will apply.  The Roundtable requested clarifications to ensure the exception operates as intended for common real estate ownership arrangements – focusing on the scope and application of the exception for an electing real property trade or business. 
  • The letter urged Treasury to clarify that interest (other than investment interest) on debt that is allocable to an owner of an entity engaged in a real property trade or business is indeed exempt from the new business interest limitation rule – if that trade or business has elected out of the rule.  As relevant examples, the letter describes four common scenarios where the financing of a real property trade or business occurs through a tiered structure. Clarifying the rules for real estate in the context of tiered arrangements will help avoid potential disruptions.  (Roundtable comment letter, Feb. 21, 2018)
  • In April, Treasury and the IRS released Notice 2018-28 to provide interim guidance on the new limit until the proposed regulations are issued. For real estate investors, however, the Notice leaves unanswered some of the key issues related to the financing of real estate.  (IRS, April 2 and Roundtable Weekly, April 6)   
  • On Oct. 25, OMB’s Office of Information and Regulatory Affairs (OIRA) acknowledged receipt of the proposed section 163(j) rules from Treasury.  After OIRA completes its review, the proposed guidance will be issued.  A second set of regulations, focused specifically on pass-through entities, is expected in December.

The Roundtable’s Tax Policy Advisory Committee will continue to seek appropriate clarifications as Treasury moves forward with regulatory projects related to implementation of the Tax Cuts and Jobs Act.

President Trump Aims to Negotiate Infrastructure Plan With Democrats; Gateway Project Faces Federal-State Cost Share Issues

Posted on by Trey Jackson

This week President Trump and key Democrats have spoken out about the possibility of a “grand bargain” infrastructure deal in the new Congress, if Democrats gain control of the House in the mid-term elections next month. (Politico, Oct. 22).

 In February, the Trump Administration released its long-awaited Legislative Outline for Rebuilding Infrastructure in America.

  • In February, the Trump Administration released its long-awaited Legislative Outline for Rebuilding Infrastructure in America, proposing at least $1.5 trillion in new investment across infrastructure asset classes; incentivizing greater state and local funding; and shortening the project permitting process to two years. (Roundtable Weekly, February 17, 2018).
  • President Trump recently told Fox Business that his administration is aiming to slash the amount of time it takes to complete transportation projects and will focus on infrastructure legislation in the upcoming congressional Lame Duck session.  “Infrastructure is going to be starting right after the midterms and we think that is going to be an easy one,” Trump said.  (Fox Business, Oct. 17)
  • Despite both parties acknowledging the importance of infrastructure legislation, the fundamental issue of how to pay for projects remains – with many Republicans expected to balk at massive deficit spending to fund the package.  ( Politico, Oct. 22)
  • Last week, New York Gov. Andrew Cuomo sent a video to President Trump, urging him to provide federal aid for the completion of the Gateway tunnel project that connects New York and New Jersey, and services a key rail link in the Northeast Corridor between Washington, D.C. and Boston. Both New York and New Jersey have already agreed to contribute half of the estimated $12.7 billion it will cost to repair and rebuild, and the states expect the federal government to contribute the remaining amount.  (Curbed New York, Oct. 19) The Trump administration, however, has stated the federal commitment for Gateway should not exceed 20 percent.  (POLITICO Magazine, July-August 2018). 
  • In September 2017, The Roundtable submitted comments to the Federal Transit Administration (FTA), in response for public input on a proposed rule that would make “greater use of public-private partnerships (P3s) and private investment in public transportation capital projects.” The comments emphasize how real estate and infrastructure have a synergistic, two-way relationship, where growth in one asset class benefits the other. (Roundtable Weekly, Sept. 29, 2017)

    Roundtable President and CEO Jeffrey D. DeBoer addressed the impact of these demographic trends, and their impact on real estate and the nation’s evolving infrastructure needs, in an interview on CNBC’s SquawkBox last June. (CNBC Squawkbox interview and Roundtable Weekly, June 9, 2017).

  • Another influence on the need for innovative transit-oriented infrastructure projects are societal trends. As Millennials dominate the work force and Baby Boomers retire from it, more public transportation options will be critical as profound changes are anticipated in car use and ownership. Innovations in driverless vehicles and ride-hailing services are accelerating a “transportation revolution” as household vehicle ownership is forecast to drop, massive numbers of parking spaces may become obsolete, and billions of square feet of transit-oriented real estate could be unlocked for development.
  • Roundtable President and CEO Jeffrey D. DeBoer addressed the impact of these demographic trends, and their impact on real estate and the nation’s evolving infrastructure needs, in an interview on CNBC’s SquawkBox last June. ( CNBC Squawkbox interview and Roundtable Weekly, June 9, 2017).
  • In January of this year to President Trump on infrastructure development, Roundtable President and CEO Jeffrey DeBoer commented on the positive economic benefits that infrastructure legislation would bring to the nation. “Modernizing our roads, tunnels, mass transit, drinking water, power grid, and telecommunications systems – in rural and urban areas alike – are vitally important to economic growth, productivity and America’s global competitiveness,” DeBoer said.

He added, “Real Estate Roundtable members are experienced in addressing the financing, permitting and government partnership issues that frequently slow or stop infrastructure projects.  We intend to provide positive feedback and ideas to all policymakers working to facilitate improvements in our nation’s infrastructure.”  (Roundtable Letter on Infrastructure Funding, Jan. 11) 

Pipe-Bomb Mailings Draw Attention to Building Security, Terrorism Risk Insurance Program

Posted on by Trey Jackson

In the wake of this this week’s national pipe-bomb mail campaign, the implications for building security and terrorism risk insurance are profiled in today’s The Real Deal.  (Real Deal NY, Oct. 26)

In the wake of this this week’s national pipe-bomb mail campaign, the implications for building security and terrorism risk insurance are profiled in today’s The Real Deal.  (Real Deal NY, Oct. 26)

  • Real Estate Roundtable Senior Vice President Chip Rodgers is quoted in the article, which reports how numerous building managers are ramping up security after multiple suspicious packages containing potential explosive devices were found mailed to high-profile Democrats throughout the country. 
  • The Real Deal also reports that the Terrorism Risk Insurance Act (TRIA) helps building owners manage the risks associated with large-scale acts of terrorism.
  • Rodgers comments that although the small size of the devices discovered this week are not likely to trigger TRIA, the attempted attacks show how “terrorism continues to pose a clear and present danger to our nation, to American businesses and to real estate.” 
  • With the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) scheduled expiration date at the end of 2020, The Roundtable is advocating for the long-term reauthorization of the program.Rodgers also notes that “TRIA does not stop terrorist attacks, but it does undermine the goals of terrorists who seek to weaken or destroy our economy.”  He adds other nations have permanent terrorism insurance programs because they “recognize that markets cannot underwrite this risk.”
  • “There is no homeland security without economic security,” Rodgers told The Real Deal.

The Roundtable’s Homeland Security Task Force (HSTF) and Risk Management Working Group (RMWG) met on Oct. 18 at the Federal Bureau of Investigation’s New York City office to discuss the threat landscape and real estate industry concerns.  HSTF and RMWG will meet next on Nov. 13 at the FBI’s Washington, DC headquarters.

Real Estate Roundtable Perspective: Opportunity Zone Regulations Answer Critical Questions Regarding Real Estate Investment

Posted on by Trey Jackson

Recent Proposed Treasury Regulations governing the new “Opportunity Zone” investment program – and its potential to spur productive real estate investment in struggling, low-income communities – is the focus of an Oct. 26 GlobeSt.com interview with Real Estate Roundtable President & CEO Jeffrey DeBoer and Roundtable SVP and Counsel Ryan McCormick. 

  • In the interview, DeBoer and McCormick provide answers to critical questions regarding the highly anticipated regulatory guidance and its implications for the real estate industry.
  • DeBoer notes, “For real estate, the proposed regulations are unquestionably positive. They clarify key technical questions and open issues, and they should allow investments in funds and in underlying projects to go forward. While some important questions remain, we continue to believe that the Opportunity Zone program will be a powerful catalyst for transformational real estate investment in these designated low-income areas.”
  • The Treasury in June designated more than 8,700 low-income census tracts in the United States, Puerto Rico, and territories as qualified Opportunity Zones. (IRS Notice 2018-48 and Roundtable Weekly, June 22 and Interactive Map, Economic Innovation Group)
  • The Wall Street Journal reported this week that the highly-anticipated guidelines have offered investors greater certainty to begin the process of raising and investing billions of dollars into new real-estate funds targeting opportunity zones.  (WSJ , Oct 23)
  • The GlobeSt Q&A also clarifies who can defer gain by investing in an Opportunity Fund; the 180-day time period when investors are required to roll capital gain into a Fund; and how the proposed rules allow a Fund to mobilize capital over a period of nearly three years. 
  • McCormick explains in the article : “The proposed rule creates a ‘working capital safe harbor.’ Opportunity Funds have a minimum of 31 months to invest their working capital in qualified opportunity zone property. The longer runway aligns better with the practical realities of real estate investment.”  
  • DeBoer also offers clarifications about the “original use” and “substantial improvement” tests of an Opportunity Zone property, noting that they “… are critical elements of the Opportunity Zone program, and they are clarified in important ways in the proposed rules. Keep in mind, Congress wanted to stimulate new capital investment, not simply the transfer of income-producing assets from one owner to another. Therefore, property must either be put to its original use by the fund, or the fund must substantially improve the property. The Opportunity Zone law defines substantial improvement as the doubling of the adjusted tax basis of the property. The regulations provide that the original use and substantial improvement requirements only relate to the structure and not the underlying land.”
  • Further clarification about the program is expected.  According to DeBoer, “Some of the most important questions relate to Opportunity Fund transactions and the tax consequences when a fund buys, sells, and/or reinvests in Opportunity Zone property … Treasury and the White House have indicated that additional guidance is forthcoming before the end of the year. The Roundtable will be working with policymakers to ensure the next tranche of guidance and the final rules maximize productive, job-creating investment in Opportunity Zones.”

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), the original author and sponsor of Opportunity Zone legislation.  TPAC’s Opportunity Zone Working Group will continue to provide insight into 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) 

Treasury Releases Proposed Rules on Opportunity Zones Program

Posted on by Trey Jackson

The Treasury Department today released Proposed Regulations giving investors added guidance regarding the new “Opportunity Zone” investment program.  The Real Estate Roundtable’s Tax Policy Advisory Committee (TPAC) Opportunity Zone working group will analyze the much-anticipated regulatory proposal and their consequences for real estate-related jobs and investment.  (IRS proposed rules, Oct. 19)

In late June, The Estate Roundtable provided formal comments to Treasury Department and IRS officials regarding implementation guidance that could maximize real estate investment, capital flows and jobs into newly designated Opportunity Zone communities. (Roundtable Weekly, June 29)

“Real estate development and redevelopment is a key component of any region’s economic strength and growth,” wrote Roundtable President and CEO Jeffrey DeBoer.  “In our view, successful implementation of the Opportunity Zone program requires careful consideration of how the new rules will apply to real estate and real estate investment activities.” 

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 must invest in tangible business property located in a qualifying zone, which can include real estate, and the tax benefits 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.

The Treasury in June designated more than 8,700 low-income census tracts in the United States, Puerto Rico, and territories as qualified Opportunity Zones. (IRS Notice 2018-48 and Roundtable Weekly, June 22) 

Certain elements of the Proposed Regulations may be relied upon immediately, whereas others will take effect when final regulations are issued.  Comments are due 60 days after the proposed guidelines are published in the Federal Register, and a hearing will be held on January 10, 2019.

 

 

Congressional Lame Duck Session Could Consider Condominium Tax Accounting and Other Real Estate Tax Policy Issues

Posted on by Trey Jackson

Following the Nov. 6 mid-term elections, a “Lame Duck” session of Congress is expected to consider various tax policies of importance to commercial real estate.   

Several tax issues of importance to real estate may be in play during the November “Lame Duck” congressional session, including  condo tax accounting rules; technical corrections; the cost recovery period for qualified improvement property (QIP);and tax extenders.

  • As part of a potential year-end omnibus spending bill to fund the government, tax policies that may be addressed include condo tax accounting rules; technical corrections; the cost recovery period for qualified improvement property (QIP); and tax extenders.  (Roundtable Weekly, Oct. 12) 
  • Current condo tax accounting rules require multifamily developers of buildings with five or more residential units to recognize income and pay tax on their expected profit as construction is ongoing — well before pre-sale transactions are closed and full payment is due from the buyer.  This mismatch of cash flow and tax liability prevents income tax deferment until a condo building is finished.   Home builders of single-family homes, townhouses and row houses are not subject to this accounting rule restriction. 
  • A House bill introduced last summer by Reps. Carlos Curbelo (R-FL) and Joe Crowley (D-NY) aimed to correct this disparity.  Although the Fair Accounting for Condominium Construction Act (H.R. 3659) stalled in 2017, it could serve as a template for inclusion in year-end tax legislation.  The Real Estate Roundtable supports lawmakers’ efforts to pass H.R. 3659. 
  • Other congressional efforts to ensure that development accounting rules treat condos like other residential construction included a 2016 letter from 10 members of the Senate Finance Committee urging regulatory corrections to former Treasury Secretary Jack Lew. 
  • Roundtable President and CEO Jeffrey DeBoer on April 7, 2017 sent a letter to Treasury Secretary Steven Mnuchin   outlining eight regulatory actions the Treasury Department could take to stimulate new real estate investment, job creation, and economic growth.  Among the recommendations addressed in the letter are tax accounting for new condominium construction; the Foreign Investment in Real Property Tax Act, tax treatment of private real estate funds and partnership tax rules. 

Last week, an article on the condo tax accounting issue in The Real Deal included a quote from Roundtable Senior Vice President & Counsel Ryan McCormick, who commented on the outlook for correcting the current rules.  “Legislation may be the most likely route, in light of all the work ongoing at Treasury with tax reform,” McCormick said.

Roundtable and Business Coalition Seek Administrative Relief, Shorter Cost Recovery Period for Nonresidential Real Estate Improvements

Posted on by Trey Jackson

This week The Real Estate Roundtable, along with 239 businesses and trade groups, wrote to Secretary Mnuchinurging the Treasury Department to provide taxpayers with administrative relief from a drafting mistake in last year’s tax overhaul that increased the cost recovery period for qualified improvement property (QIP).

This week, The Real Estate Roundtable, along with 239 businesses and trade groups,  wrote to Secretary Mnuchin  urging the Treasury Department to provide taxpayers with administrative relief from a drafting mistake in last year’s tax overhaul that increased the cost recovery period for qualified improvement property (QIP).

  • The drafting error in the tax law has resulted in a significantly longer 39-year cost recovery period for new, qualified nonresidential interior improvements.  The intent of Congress was to allow the immediate expensing of QIP – or provide a 20-year recovery period in the case of taxpayers electing out of new limitations on the deductibility of business interest. 
  • In the Oct. 9 letter to Secretary Mnuchin, the coalition addressed the need for a QIP correction, along with the unintended consequences if action is not taken.  The letter raised concerns that the drafting error is resulting in “[d]elays in store and restaurant remodeling projects,” “[b]usinesses refraining from purchasing or leasing vacant stores or other leasehold spaces that require improvements,” and “[l]oss of construction jobs associated with commercial renovation projects.”  
  • The coalition letter was sent in response to the Administration’s request for comments on newly proposed regulationsimplementing the additional first year depreciation deduction (immediate expensing) benefit.  The coalition submission also included two recent letters—one from 16 Democratic Senators to Treasury Secretary Steven Mnuchin and the other from 58 House Republicans to GOP leadership—reiterating the importance for policymakers to correct this unintentional drafting mistake in last year’s legislation, while recommending that Treasury should issue interim guidance and refrain from enforcing the drafting error.  (House Letter, Oct 2 and Senate Letter, Sept 24)
  • The Real Estate Roundtable and a broad-based business coalition urged Secretary Mnuchin in August to issue guidance clarifying certain provisions included in tax overhaul legislation enacted last year – including the cost recovery period for qualified improvement property. (Coalition letter, Aug. 22)

Congress could address the issue during the lame duck congressional session between the mid-term election and January. Senate Republican Conference Chairman John Thune (R-SD) said GOP lawmakers are motivated to address a number of tax issues that are outstanding, including tax reform technical corrections and expired tax provisions. (The Hill, Oct. 11)

 

Roundtable Comment Letter Urges Treasury to Simplify, Streamline New Pass-Through Deduction Regulations

Posted on by Trey Jackson

The Real Estate Roundtable on Monday submitted detailed recommendations to the Treasury Department on simplifying and streamlining  the new 20 percent tax deduction for pass-through businesses. (Roundtable letter, Oct. 1)

The   Real Estate Roundtable on Monday submitted detailed recommendations to the Treasury Department on simplifying and streamlining  the new 20 percent tax deduction for pass-through businesses. (Roundtable letter, Oct. 1)

  • Passed as part of last year’s tax overhaul, the deduction can reduce the top tax rate on qualifying pass-through income, including rental income, to 29.6 percent.  Once it is fully implemented, section 199A will be a powerful incentive for capital investment and job growth.
  • The comment letter from Roundtable President and CEO Jeffrey DeBoer suggests four major simplifications that would provide greater certainty, lessen the need for wasteful restructuring, and reduce taxpayer-government controversies.   

 Trade or business definition  
The final regulations should clarify that rental income from real property held for the production of rents will be considered a trade or business for purposes of section 199A;

Aggregation  
The final regulations should allow taxpayers to treat all qualifying real estate rental activities, whether held directly or through a pass-through entity, as if held in a single “trade or business” for purposes of section 199A;

Non-recognition transactions 
When assets with associated unadjusted basis immediately after acquisition (UBIA) are transferred in a non-recognition transaction (such as a like-kind exchange or the contribution or distribution of assets involving a partnership or S corporation), the general rule should be that the UBIA of an asset (and its duration) carries over; and

Separating trades and businesses 
The final regulations should provide rules to help taxpayers ascertain when multiple activities (including multiple activities conducted in a single entity) constitute discrete trades or businesses.

  • With a few exceptions, last year’s Tax Cuts and Jobs Act limited the pass-through deduction to businesses with employees or capital-intensive businesses that invest in long-lived (i.e., depreciable) assets, including real estate.  This so-called wage/capital limitation applies to partnerships, S corporations, and sole proprietorships, but does not apply to ordinary REIT dividends and income from publicly traded partnerships.
  • During the tax reform debate, The Roundtable’s Tax Policy Advisory Committee (TPAC) formed a task force to review the regulations, analyze their impact on real estate investment and jobs, and craft specific recommendations for policymakers. 
  • The pass-through deduction (section 199A) was a key element of Roundtable President and CEO Jeffrey DeBoer’s testimony before the Senate Finance Committee shortly before lawmakers released the first version of the proposal in the fall of 2017.   (Roundtable Weekly, Sept. 22, 2017)

TPAC will continue to offer insight to Treasury officials and congressional tax-writing committees before final regulations are expected by the end of the year.

 

Senate Democrats and House Republicans Urge Tax Policy Correction for Real Estate Improvements’ Cost Recovery Period

Posted on by Trey Jackson

Two recent letters – one from 16 Democratic Senators to Treasury Secretary Steven Mnuchin and the other from 58 House Republicans to GOP leadership – urge policymakers to fix an unintentional drafting mistake in last year’s tax overhaul that mistakenly increased the cost recovery period for qualified improvement property (QIP).  (House Letter, Oct 2 and Senate Letter, Sept 24) 

The tax policy drafting error currently affects leasehold improvements, expenditures made to improve common spaces in shopping centers and office buildings, and other interior improvements to nonresidential structures.

  • The drafting error in the tax law has resulted in a significantly longer 39-year cost recovery period for new, qualified nonresidential interior improvements.  The original intent of Congress was to allow the immediate expensing of QIP – or provide a 20-year recovery period in the case of taxpayers electing out of new limitations on the deductibility of business interest.  
  • The mistake currently affects leasehold improvements, expenditures made to improve common spaces in shopping centers and office buildings, and other interior improvements to nonresidential structures.  The current, longer cost recovery period effectively increases the after-tax cost of upgrading and improving commercial real estate.  (“Correcting the Drafting Error Involving the Expensing of Qualified Improvement Property” – The Tax Foundation , May 30)     
  • In Monday’s joint letter to House Speaker Paul Ryan (R-WI) and House Ways and Means Committee Chairman Kevin Brady (R-TX), 58 House Republican members state, “While they wait for Congress to act to correct this error, these businesses are forgoing renovations, halting plans to revitalize declining malls, and placing safety improvements on hold.  Not only does this hurt restaurants and retailers, but also the businesses involved in the planning and renovations, and ultimately our communities.  
  • This week’s House letter urges GOP leadership to address the QIP investment drafting error via legislation, while also recommending that Treasury should issue interim guidance while refraining from enforcing the drafting error.  

    Congress could address the issue during the lame duck congressional session between the mid-term election and January.

  • In the Sept. 24 joint letter to Secretary Mnuchin, 16 Senate Democrats address the need for a QIP correction, stating: “Improper implementation of this portion of the 2017 law would cause disruption to a wide range of industries, including the nation’s retail, restaurant and commercial property industries. Given this, and the potential for considerable harm to local economies, we believe it would be prudent for Treasury to address this issue and its interpretation through guidance.” 
  • The Real Estate Roundtable and a broad-based business coalition urged Secretary Mnuchin in August to issue guidance clarifying certain provisions included in tax overhaul legislation enacted last year – including the cost recovery period for qualified improvement property. (Coalition letter, Aug. 22) 
  • Roundtable President and CEO Jeffrey DeBoer stated, “In 2015, Congress voted overwhelmingly to permanently extend the 15-year recovery period for certain property improvements.  By passing tax reform, Congress intended to consolidate those changes.  Treasury should now use its authority to provide taxpayers with relief until a technical corrections bill is enacted.  Treasury guidance will remove taxpayer uncertainty, unlock investment, and spur job-creating property upgrades and renovations.”  (Roundtable Weekly, Aug. 24)

Congress could address the issue during the lame duck congressional session between the mid-term election and January. A number of tax issues are outstanding, including tax reform technical corrections and expired tax provisions.

 

Banking Regulators Invite Comments on Proposed Rule for High Volatility Commercial Real Estate (HVCRE) Loans

Posted on by Trey Jackson

Three federal banking agencies on Tuesday invited public comment on a proposal to modify capital rules for high volatility commercial real estate (HVCRE) exposures – as required by Sec. 214 of the bipartisan Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155).  (Roundtable Weekly, May 25)

Three federal banking agencies on Sept. 18, 2018 invited public comment on a proposal to modify capital rules for high volatility commercial real estate (HVCRE) exposures.

  • Following the enactment of S. 2155 on May 24, federal regulatory agencies were tasked with developing a rule to clarify the treatment of High Volatility Commercial Real Estate acquisition, development, or construction (HVCRE ADC) loans in accordance with the new statute. 
  • The law’s changes to the HVCRE capital rules are aimed at clarifying and promoting sustainable acquisition, development and construction and lending by addressing key deficiencies in the agencies’ prior regulations governing the criteria for HVCRE or HVADC loans. (Roundtable HVCRE Comment Letter, March 2) 
  • The proposal by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation also asks for comment on certain terms contained in the revised definition of high volatility commercial real estate.
  • The changes, when finalized, would apply to all banking organizations subject to the agencies’ capital rules. Comments will be accepted for 60 days after publication in the Federal Register.  

Since 2015, The Roundtable’s HVCRE Working Group and industry coalition partners have played a key role in advancing specific reforms to the HVCRE Rule and will develop a comment letter to the agencies in response to the current proposal.