Roundtable Weekly – Page 41 – The Real Estate Roundtable

Treasury and CISA Seek Comments on Potential National Cyber Insurance Program

Posted on October 7, 2022October 27, 2023 by Trey Jackson

As cyberattacks pose an increasing threat to the real estate industry and the U.S. economy, the government is seeking input from policyholders, critical infrastructure owners, and operators on a potential federal response for catastrophic cyber incidents, including whether a national cyber reinsurance program is warranted. (Treasury Department Notice, Sept. 29 and NextGov, Sept. 28)

Response to Catastrophic Cyber Attacks

The Treasury Department’s Federal Insurance Office (FIO) and the Cybersecurity and Infrastructure Security Agency (CISA) are seeking comments by Nov. 14 on the structure and scope of a federal response. (FIO request for comments and Inside Cybersecurity, Sept. 12)
The FIO-CISA request for comments follows a June Government Accountability Office (GAO) recommendation that the federal government assess the need for a potential insurance backstop for cyberattacks. (GAO, Cyber Insurance: Action Needed to Assess Potential Federal Response to Catastrophic Attacks, June 21)
Cyber insurance is a growing market, with approximately $4 billion in direct premiums written in 2020. (FIO’s Effectiveness of the Terrorism Risk Insurance Program, June 2022)
Lloyd’s of London announced in August that it is set to introduce cyber insurance exclusions for coverage on “catastrophic” state-backed attacks from 2023. (Lloyd’s Market Bulletin, Aug. 16 and Industrial Cyber, Aug. 18)

Terrorism & Cybersecurity

The Roundtable and its partners in the Coalition to Insure Against Terrorism (CIAT) have raised concerns about the need for effective insurance products to help manage the risks of catastrophic cyberattacks. (CIAT comment letter on the 2022 Report on the Effectiveness of the Terrorism Risk Insurance, May 16)
Insurers and the federal government’s Terrorism Risk Insurance Program (TRIP) may not cover the expanding range of such losses. For example, TRIP may only cover cyberattacks if they can be considered “terrorism” under its defined program criteria. (Roundtable Weekly, June 24)

Separately, CISA is requesting input on the implementation of cyber incident reporting requirements (due Nov. 14). CISA is also hosting a series of public listening sessions in cities throughout the nation as an additional means of gathering stakeholder responses on definitions for the proposed rules, the form and content of reports, enforcement procedures, and information protection policies. (Federal Register and Notice of Public Listening Sessions, Sept. 12)

Cybersecurity has long been a focus of The Roundtable’s Homeland Security Task Force (HSTF) and the Real Estate Information Sharing and Analysis Center. Cybersecurity issues and CRE will be discussed during the next HSTF meeting on Jan. 25, 2023—held in conjunction with The Roundtable’s State of the Industry meeting. (Roundtable Meeting Calendar)

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Treasury Requests Public Input on Inflation Reduction Act Energy Tax Incentives

Posted on October 7, 2022October 27, 2023 by Trey Jackson

U.S. Treasury Department The Treasury Department and Internal Revenue Service (IRS) issued six separate notices this week to gather public input regarding the clean energy tax credits and deductions in the Inflation Reduction Act (IRA). (Treasury Fact Sheet, Oct. 4 and Roundtable Weekly, Sept. 30)

CRE Impact

The Treasury and IRS notices most relevant to the real estate industry concern the new law’s provisions regarding:
- Incentives to improve energy efficiency such as the tax deduction for commercial buildings (Section 179D) and the credit for single- and multi-family residential construction (Section 45L);
- Credits for specific clean energy technologies like solar panels, energy storage, combined heat and power systems, dynamic glass, and grid interconnection property (Section 48);
- Credit monetization which can allow businesses to transfer the amount of certain credits to third parties; and
- Enhancements to boost the value of certain credits where projects are located in economically distressed areas, or that meet labor requirements for prevailing wages and apprenticeship hiring.
Comments are due to the Treasury and IRS by November 4.
Roundtable fact sheets detail the IRA’s Clean Energy Tax Incentives (Sept. 20) and Revenue Provisions (Aug. 17).

Rapid Implementation

Bloomberg Center energy efficiency canopy

Congress authorized $270 billion to the IRA’s clean energy tax incentives – putting Treasury and the IRS, in coordination with the Energy Department and the Environmental Protection Agency, at the forefront of implementation. (E&E Greenwire, Oct. 5 and Roundtable Weekly, Aug. 12)
One of Treasury’s guiding principles for the public comment process is to “provide clarity and certainty” for businesses and other taxpayers to access the incentives, “so the climate and economic benefits can take effect as quickly as possible.” (Treasury Fact Sheet)
White House Senior Adviser John Podesta said, “We have to get implementation right. That means we have to listen, engage, and move quickly to translate policy into action.” (Reuters and Bloomberg Law, Oct. 5)

The Roundtable, working through its Sustainability and Tax Policy Advisory Committees (SPAC and TPAC), will coordinate with industry partners to develop comments to the Treasury and IRS notices that highlight CRE clean energy priorities.

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Yellen, House Committee Promote Inflation Reduction Act Climate Investments; CRE Webinars Focus on New Tax Incentives

Posted on September 30, 2022October 27, 2023 by Trey Jackson

Incentives in the Inflation Reduction Act (IRA) will accelerate private sector investment in clean energy technologies, according to remarks this week from Treasury Secretary Janet Yellen, above. (Yellen’s remarks, Sept. 27)

Yellen announced that Treasury will host “a series of roundtable discussions to help inform our efficient and effective implementation of the tax credits.” (Barron’s and AFP News, Sept. 27)
A House Committee yesterday considered how the IRA’s climate investments will lower families’ utility bills, create jobs, and expand U.S. manufacturing of green tech and electric vehicles. (Video of Congressional hearing)

Several of the IRA’s revisions to the federal tax code can help the U.S. real estate sector reduce GHG emissions. Roundtable fact sheets detail the IRA’s Clean Energy Tax Incentives (Sept. 20) and Revenue Provisions (Aug. 17)

Industry Education on the IRA

Roundtable Senior Vice Presidents Ryan McCormick (tax counsel), right, and Duane Desiderio, left, (energy counsel) recently participated in a number of panel discussions on how the IRA’s tax credits and deductions can spur energy efficiency and renewable energy projects in buildings. (Roundtable’s IRA fact sheet)
McCormick participated in a Sept. 27 Engineered Tax Services webinar. (Powerpoint slides)

Desiderio participated in a Sept. 27 CBRE podcast moderated by Co-Chair of The Roundtable’s Research Committee, Spencer Levy (Senior Economic Advisor, CBRE) (Podcast transcript).
Desiderio also participated in a Sept. 28 briefing hosted by the Urban Land Institute (ULI) featuring members of The Roundtable’s Sustainability Policy Advisory Committee (SPAC) – Immediate Past Vice Chair Dan Egan (Managing Director, Real Estate ESG – Americas, Blackstone), Suzanne Fallender (VP Global ESG, Prologis), and ULI EVP Billy Grayson.

SPAC Chair Tony Malkin [Chairman, President, and CEO, Empire State Realty Trust, Inc.], center above, led a discussion with Desiderio and McCormick last week regarding the IRA at The Roundtable’s fall 2022 meeting. (Watch the discussion) (Roundtable Weekly, Sept. 23)

The Treasury Department is expected to issue multiple regulations and guidance documents in the coming months to implement the new law. The Roundtable plans to submit comments as the new rules are proposed to help accelerate industry investments in tackling the climate crisis.

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Treasury Issues Final Rule Requiring Disclosure of “Beneficial Owners”

Posted on September 30, 2022October 27, 2023 by Trey Jackson

The Treasury Department issued a final rule yesterday that will require millions of companies to report information about their “beneficial owners”—persons who own at least 25% of a company or exert significant authority over it—to the Financial Crimes Enforcement Network (FinCEN). (Final Rule | Fact Sheet | Wall Street Journal and Bloomberg Law, Sept. 29)

Who Reports?

Treasury Secretary Janet Yellen said, “This rule … will help strengthen our national security by making it more difficult for oligarchs, terrorists, and other global threats to use complex legal structures to launder money, traffic humans and drugs, and commit other crimes that threaten harm to the American people.” (Treasury statement, Sept. 29)
The rule will require most corporations, limited liability companies, and other entities created in or registered to do business in the United States to disclose beneficial ownership information.
FinCEN notes that the definition of reporting company applies only to legal entities that have 20 or fewer employees and less than $5 million in gross receipts or sales as reflected in the previous year’s federal tax returns. These entities also must not otherwise benefit from the exemptions described in the regulations.
Reporting companies created or registered before Jan. 1, 2024, will have one year (until Jan. 1, 2025) to file their initial reports. Those entities created or registered after Jan. 1, 2024, will have 30 days to file their initial reports.

Data Required

The required data about individuals who own, control or create firms will include the name, birthdate, address, and a unique identification number from driver’s licenses or passports—as well as images of the documents. (AP, Sept. 29)
Treasury states the database will be available only to law enforcement and government agencies under the CTA’s beneficial ownership information reporting provisions. (Treasury Department, “Beneficial Ownership Information Reporting”)

Roundtable Concerns

The Real Estate Roundtable submitted comments with other industry organizations earlier this year about CTA’s anti-money laundering regulations affecting real estate transactions. (Industry comment letter and Roundtable Weekly, Feb. 25 | (Coalition letter to FINCEN, Feb. 4)
The Roundtable and three other national real estate organizations submitted detailed comments to FinCEN on May 5, 2021 addressing several implementation concerns related to the beneficial ownership registry. (Roundtable Weekly, May 7)
Separately, a broad business coalition that includes The Real Estate Roundtable submitted comments yesterday to congressional leaders in opposition to the Establishing New Authorities for Business Laundering and Enabling Risks to Security (ENABLERS) Act.
The ENABLERS Act would dramatically expand CTA reporting requirements and subject the owners, board members, and senior executives of most businesses and charities to audits. (Coalition letter, Sept. 29)

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) will continue to work with industry partners to address the implications of FinCEN’s 330-page rule and the impact it could have on capital formation and the commercial real estate industry. RECPAC meets on Nov. 2 in New York City.

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Congress Passes Funding Extension Through Dec. 16, Lame Duck Session Awaits

Posted on September 30, 2022October 27, 2023 by Trey Jackson

A stopgap funding bill that will keep the government open through mid-December passed the Senate yesterday, the House today, and is expected to receive President Biden’s signature tonight. (Bill text and summary)

CR Buys Time

The “continuing resolution” (CR) passed Congress after an energy permitting measure sponsored by Sen. Joe Manchin (D-WV) was removed earlier in the week. (Business Insider, Sept. 27)
The funding bill will keep federal agencies operating through Dec. 16, buying time for lawmakers during the upcoming lame duck session to craft a possible FY2023 “omnibus” budget package by year-end.
The CR includes reauthorization of the National Flood Insurance Program (NFIP), which has been extended more than 20 times. Bloomberg reported that House Financial Services Chair Maxine Waters (D-CA) wants a longer-term NFIP extension and other program changes. “It has to be bipartisan. We are working on keeping the premiums down, and some of the other issues that have been brought to our attention,” she said.

Lame Duck Awaits

After the November election and before the new Congress is seated in January, current members of Congress will return for a “lame duck” legislative session. In addition to addressing outstanding legislative issues, lawmakers will meet with newly elected members, organize their respective party conferences, vote on leadership and committee positions, and discuss their post-election policy agendas.

On Thursday, Senate Leader Chuck Schumer announced the Senate would not return until Nov. 14. (The Hill, Sept. 29)

The House is scheduled to return from recess on Nov. 9, after the midterm elections.

Legislative issues that will vie for attention in the lame duck session include federal appropriations, reauthorization of defense programs, and expiring tax provisions affecting real estate such as certain temporary expansions of the low-income housing tax credit.

The elections, tax policy, inflation and other policy issues were among the topics discussed by industry leaders and national lawmakers last week during the Fall Roundtable meeting in Washington. (Roundtable Weekly, Sept. 23).

Next on The Roundtable’s calendar is the Real Estate Capital Policy Advisory Committee (RECPAC) meeting on Nov. 2 in New York City.

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Congressional and CRE Leaders Discuss Economic, Political Currents Leading to November’s Midterms

Posted on September 23, 2022October 27, 2023 by Trey Jackson

Industry leaders and national policymakers met this week for The Roundtable’s fall meeting to discuss the U.S. political and economic environment, including issues such as inflation, housing, labor shortages, climate change, and November’s midterm elections. (Roundtable Executive Policy Summary and Policy Issue Profiles)

National Policy Issues & CRE

Speakers at The Roundtable’s Sept. 20-21 meeting included:

Roundtable Chair John Fish (Chairman & CEO, SUFFOLK), above, and President and CEO Jeffrey DeBoer opened the meeting with an overview of The Roundtable’s efforts to shape the Inflation Reduction Act (IRA) that passed last month, and how the new law’s tax and sustainability provisions impact CRE. (Watch John Fish’s opening remarks | Roundtable Weekly, Aug. 12)

Senate Majority Leader Chuck Schumer (D-NY) also discussed the IRA and a string of other recent legislation—including bipartisan success on infrastructure spending, investments in U.S. manufacturing, and overhaul of the EB-5 investment program. He also raised the importance of immigration reform and Congress’s current focus to pass a funding resolution by Sept. 30 to avoid a government shutdown.

Rep. Patrick McHenry (R-NC), left, Ranking Member of the House Financial Services Committee, and Roundtable Board Member Ross Perot, Jr., right, (Chairman, Hillwood), discussed affordable housing supply problems, steps to counter local NIMBY opposition, and the need to develop a prudent economic policy response to prepare for future pandemic risks.

Sens. Michael Bennet (D-CO), right, and Mark Warner (D-VA), left, joined Willy Walker, center, (Chairman & CEO, Walker & Dunlop), to discuss supply chain issues, the war in Ukraine, and the importance of GSE reform.

Clean Energy

Roundtable Board Member and Sustainability Committee Chair Tony Malkin, center, [Chairman, President, and CEO, Empire State Realty Trust, Inc.] led a discussion on how the IRA’s “clean energy” tax incentives impact CRE investments with Roundtable Senior Vice Presidents Duane Desiderio, left, and Ryan McCormick, right. (Watch the discussion)
Roundtable fact sheets detail the IRA’s Clean Energy Tax Incentives (Sept. 20) and Revenue Provisions (Aug. 17).

Economic Conditions & Political Landscape

Dr. Austan Goolsbee, right, (former Chairman, White House Council of Economic Advisors) and The Roundtable’s Immediate Past Chair Debra Cafaro (Chairman & CEO, Ventas, Inc.) focused on inflationary pressures, labor shortages, return-to-office issues, and a new era of deglobalization.

A “fireside chat” with Jim Messina, right, (former President Obama’s Deputy Chief of Staff) and Barry Jackson, left, (former House Speaker John Boehner’s Chief of Staff) offered an overview of the current state of U.S. politics and a preview of the upcoming midterm elections.

Next on The Roundtable’s meeting calendar is the all-member State of the Industry Meeting on Jan. 24-25, 2023 in Washington, where The Roundtable will unveil its 2023 Policy Agenda.

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Advisory Panel Endorses SEC Proposed Disclosure Rule

Posted on September 23, 2022March 8, 2024 by Trey Jackson

A Securities and Exchange Commission (SEC) advisory panel on investor issues this week endorsed the agency’s proposed climate disclosure rule, including a requirement for registered companies to support Scope 3 indirect emissions “if material” to investors. (Bloomberg Law and advisory panel recommendation, Sept. 21)

Scope 3 & CRE

The Investor Advisory Committee’s recommendations are not binding, although the SEC could adopt final rules on corporate climate reporting requirements this fall. (BGov, Sept. 21)
The Real Estate Roundtable submitted comments on June 10 objecting to the Commission’s Scope 3 approach. The comments noted that real estate companies neither control nor have access to data regarding emissions from third parties in their “value chains.” (Roundtable Weekly, June 10 and June 24)
A joint industry letter filed on June 13 from 11 national real estate trade groups also opposed the SEC’s proposed approach, emphasizing that corporate disclosures on indirect Scope 3 emissions should be voluntary.

SEC Authority & EPA Funding

Litigation is expected to challenge any final Commission regulation—especially in light of a recent Supreme Court decision in West Virginia v. EPA that questioned whether the SEC has “clear” authority from Congress to regulate climate matters.
House Financial Services Committee Ranking Member Patrick McHenry (R-NC) and other Republican committee members wrote to SEC Chair Gary Gensler this week to request the SEC provide a list of all pending and upcoming rulemakings with the specific Congressional authority supporting each action. (Policymakers’ letter, Sept. 20)
Apart from the SEC, the Environmental Protection Agency (EPA) received a modest sum from Congress ($5 million) under the recently enacted Inflation Reduction Act (IRA) to help standardize voluntary corporate commitments to reduce greenhouse gas (GHG) emissions.
The new EPA funds are not “meant to create a parallel program … in case the SEC rule is scrubbed,” but will rather be used for climate models and software to hold companies “accountable” for the climate commitments they are already making. (BGov, Sept 21)
EPA backed the SEC’s climate disclosure proposal in a recent letter— stating the Commission has “broad authority to promulgate disclosure requirements that are ‘necessary or appropriate … for the protection of investors.’”

The Roundtable’s Sustainability Policy Advisory Committee (SPAC) will remain engaged with policy makers on climate risk disclosure rules that affect commercial real estate.

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House Republicans Unveil Tax Agenda for 2023

Posted on September 23, 2022October 27, 2023 by Trey Jackson

In advance of the November midterm elections, House Republican Leader Kevin McCarthy, above, and the House GOP Conference released their Commitment to America today in Pittsburgh. The platform includes forward-looking tax and economic policy proposals that, if enacted, would impact commercial real estate in important ways. (Document and video, Sept. 23)

GOP Tax Proposals

The Commitment to America is the product of months of work by task forces created by the House Leader to develop a policy agenda to unify House Republicans. The tax proposals are outlined in a document entitled “Growth Through Innovation” developed by Republicans’ Jobs and the Economy Task Force. (Bloomberg Sept. 23; ABC News Sept. 22)
The proposals are aimed at providing more tax relief to individuals and small businesses. Proposals affecting real estate include:
- Permanently extending 20% deduction for pass-through business income enacted in 2017,
- Enacting additional estate tax relief for family-owned businesses, and
- Extending rules that facilitate the full deductibility of business interest expense.

Other areas of focus include middle class tax relief, increasing tax incentives for R&D, bringing jobs back to the United States, and tax simplification.

TCJA Tax Cuts

Senior Ways and Means Republican Rep. Vern Buchanan (R-FL), above, introduced legislation this week to make permanent tax cuts for individuals and small businesses enacted as part of the Tax Cuts and Jobs Act (TCJA) of 2017. The Buchanan legislation was endorsed in House Republicans’ Commitment to America released today. (Buchanan news release, Sept. 21)

The TCJA Permanency Act (H.R.8913) also includes several technical fixes. Without Congressional action, 23 different provisions of the 2017 Republican tax law are set to expire after 2025.
The current deduction for qualified business income (Section 199A) was part of the TCJA. Designed to ensure pass-through businesses received tax relief alongside the large tax cut for public corporations, the provision allows real estate and other pass-through businesses to deduct up to 20% of their net business income.”

Buchanan, the most senior member on the House Ways and Means Committee, is running to become the next top Republican on the powerful tax policy panel. (The Hill, April 15, 2021)

CRE Policy Webinars

“Implications of the Inflation Reduction Act for CRE” will be the focus of a CRE Finance Council webinar on Sept. 28 featuring Real Estate Roundtable SVP & Counsel Duane Desiderio. (CREFC registration)

Desiderio will also participate in another Sept. 28 virtual briefing on the Inflation Reduction Act’s clean energy tax incentives, hosted by the Urban Land Institute (ULI registration). The webinar features members of The Roundtable’s Sustainability Policy Advisory Committee (SPAC)—Immediate Past SPAC Vice Chair Dan Egan (Managing Director, Real Estate ESG – Americas, Blackstone), Suzanne Fallender (VP Global ESG, Prologis), and ULI EVP Billy Grayson.

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Fed Seeks Comment on CRE Loan Accommodations and Workouts Policy Statement

Posted on September 23, 2022October 27, 2023 by Trey Jackson

Federal regulators are inviting comment on an updated policy statement that addresses: (1) short-term commercial real estate loan accommodations; (2) revisions and additions to examples of CRE loan workouts; and (3) accounting developments for estimating loan losses. (Federal Register, Sept. 15 and GlobeSt, Sept. 19)

Why It Matters

The Fed’s proposal would build on existing guidance around the need for financial institutions to work prudently and constructively with creditworthy borrowers during times of financial stress.
The “Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts” was developed jointly by the Federal Reserve’s Board of Governors, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) in consultation with state bank and credit union regulators.
The Fed Board aims to update and expand the 2009 federal regulators’ statement on prudent commercial real estate loan workouts for CRE borrowers experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties. (FFIEC news release, Oct. 30)

Update & Expand

This month’s proposed Fed policy reaffirms two key principles from the 2009 statement:
- Financial institutions that implement prudent CRE loan accommodation and workout arrangements—after performing a comprehensive review of a borrower’s financial condition—will not be subject to criticism for engaging in these efforts, even if these arrangements result in modified loans that have weaknesses that result in adverse credit classification.
- Modified loans to borrowers—who have the ability to repay their debts according to reasonable terms—will not be subject to adverse classification solely because the value of the underlying collateral has declined to an amount that is less than the loan balance.

If finalized, the proposed statement would supersede the 2009 statement for all supervised financial institutions. The proposal would also revise language to incorporate current industry terminology and include updated references to other federal supervisory guidance.

The Roundtable’s Real Estate Capital Policy Advisory Committee (RECPAC) plans to work on comments, which are due by November 14, 2022.

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Senators Challenge SEC Chair on Proposed Climate Rule

Posted on September 16, 2022March 8, 2024 by Trey Jackson

Senate Banking Committee members challenged Securities and Exchange Commission (SEC) Chair Gary Gensler, above, during an oversight hearing yesterday about the agency’s proposed climate disclosure rule. (CQ, Sept. 15 and Yahoo Finance, Sept. 16)

SEC Authority Questioned

Committee Ranking Member Pat Toomey (R-PA) opened the hearing by stating, “The SEC is wading into controversial public policy debates that are far outside its mission and its expertise.”
Toomey pressed Gensler about a June Supreme Court ruling that executive branch agencies “cannot use novel interpretations of existing law to pretend they have legal authority to support sweeping policy changes, including on climate change, that Congress never intended.” (Toomey Opening Statement)
Toomey asked, “In light of the EPA v. West Virginia case, have you given any consideration to rescinding that rulemaking?” Gensler replied that the Commission is “seriously” considering the high Court ruling and 14,000-plus public comments to assess its legal authorities to ensure that registered companies provide material, decision-useful information about climate risks to investors. (SEC docket with list of organizations and individual comments)

Senator Jon Tester (D-MT) explained that the SEC’s proposal would require farms and other small businesses to estimate and disclose carbon emissions because they sell products and services to public companies. Senators Mike Rounds (R-SD) and Steve Daines (R-MT) shared Tester’s concerns (CQ, Sept. 15)

A CRE Priority

The SEC’s climate proposal, if finalized, would require all SEC registrants to quantify direct GHG emissions (“Scope 1”) and emissions attributable to electricity purchases (“Scope 2”) through annual 10-Ks and additional filings. (SEC News Release | Proposed Rule | Fact Sheet, March 22)
The SEC also proposed that a company would need to report on “Scope 3” indirect emissions if they are “material” to investors. In June 10 comments, The Roundtable objected to the Commission’s proposed Scope 3 approach because real estate companies neither control nor have access to data regarding emissions from third parties in their “value chains.” (Roundtable Weekly, June 10 and June 24)
A joint letter filed on June 13 from 11 national real estate industry trade groups echoed the issues raised by The Roundtable in its earlier comments.

The SEC is expected to issue a final climate reporting disclosure rule sometime this fall. If the Commission votes to regulate Scope 3 emissions, the recent SCOTUS decision in West Virginia v. EPA is likely to spark litigation, raising questions as to whether the SEC has authority from Congress to regulate climate disclosures and emissions.

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