President Joe Biden on March 31 announced the first part of his sweeping economic growth proposal focused on infrastructure and clean energy – a $2.3 trillion, eight-year plan that White House officials said would be funded, over 15 years, by corporate and international tax increases. (Wall Street Journal and White House Fact Sheet: The American Jobs Plan, March 31)

Why It Matters

• The enormous scale of the proposal seeks to use federal spending to address a wide-range of economic and social issues widely defined as infrastructure while strengthening America’s long-term competitiveness against challengers like China.
  
  
• Biden stated, “It’s a once-in-a generation investment in America, unlike anything we’ve seen or done since we built the Interstate Highway System and the Space Race decades ago.” (Remarks by President Biden on the American Jobs Plan, March 31)
  
  
• The White House proposal would direct federal spending to transportation, manufacturing, buildings, schools, water systems, broadband, health care, and energy infrastructure assets. (USA Today, April 1, “These 4 charts show where the money would go”)
  
  
• A “Made in America Tax Plan” would pay for the proposal. It would increase the corporate tax rate from 21% to 28%; set the minimum tax for multinational corporations with U.S. operations at 21 percent; and eliminate certain incentives affecting the offshoring of jobs. (The Hill, March 31)

Impact on CRE

• The Biden proposal would spend $213 billion to produce, preserve, and retrofit two million homes and commercial buildings. In particular, it recommends:
  
  
  • Tax credits and grants with a goal of one million new and renovated, affordable and efficient, rental housing units;
    
    
  • Extend and expand energy efficiency tax incentives for homes and commercial buildings;
    
    
  • A new competitive grant program for cities and localities that eliminate exclusionary zoning policies – like minimum lot sizes, mandatory parking requirements, and density restrictions;
    
    
  • Mobilize private sector investment in distributed energy resources, and to de-carbonize the electric grid;
    
    
  • Drive clean energy deployment by requiring federal buildings to purchase 24/7 clean power; and
    
    
  • Support private development of idle Brownfields into hubs of economic growth.

• The proposal does not affect the federal eviction moratorium, which was recently extended by the Centers for Disease Control and Prevention (CDC) until June 30. (CDC order and CNBC video, March 30)

Transportation Infrastructure

• $115 billion in the White House proposal would focus on repairing Main Street roads, highways and bridges.
  
  
• $80 billion would be devoted to inter-city high-speed rail to address Amtrak’s repair backlog and modernize the Northeast Corridor.  This is of significance to national and regional projects like “Gateway,” the rail tunnel project between New York City and New Jersey.

What’s Next

• Senate Minority Leader Mitch McConnell (R-KY) said, “This proposal appears to use 'infrastructure' as a Trojan horse for the largest set of tax hikes in a generation,” and that Biden’s proposal “is not going to get support on our side.” (The Hill, March 31 and Bloomberg, April 1)
  
  
• House Speaker Nancy Pelosi (D-CA) signaled she would like to see an infrastructure bill pass the House by July 4. She added that “hopefully” a final infrastructure package will include a repeal of the $10,000 cap on state and local tax deductions. (Associated Press, March 31 and BGov, April 1)
  
  
• The Roundtable is part of the Build by the 4^th coalition, led by the U.S. Chamber of Commerce, which encourages the Biden Administration and Congress to pass a comprehensive infrastructure deal by Independence Day 2021.
  
  
• The Biden administration is planning a second legislative package for April that could seek an additional $1 trillion to expand family support such as the child tax credit and paid leave. (B-Gov, March 31)

President Biden's infrastructure plan will be a focus of discussion during The Roundtable’s April 20 Spring Meeting (remote).

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Roundtable-supported legislation that would accelerate depreciation for high performance upgrades in commercial and multifamily buildings – creating jobs and reducing the built environment’s carbon footprint – was reintroduced this week by House Ways and Means Committee members Brad Schneider (D-IL) and Tom Rice (R-SC).

The E-QUIP Approach

• The bipartisan Energy Efficient Qualified Improvement Property (E-QUIP) Act (H.R. 2346), originally introduced last December by Reps. Schneider and Rice, encourages energy efficiency building retrofits to replace aging and obsolete HVAC, lighting, windows, roofs, and windows with state-of-the-art systems.
  
  
• The Real Estate Roundtable has rallied a unique coalition of environmental, manufacturing, and business groups to support the bill. The coalition sent an April 1 letter to members of the House Ways and Means Committee, and the Energy and Commerce Committee, to enact the E-QUIP Act and include it in any infrastructure package.
  
  
• Roundtable President and CEO Jeffrey DeBoer stated, “The E-QUIP Act checks all of the boxes for smart energy, climate, and economic policy. Installation of high performance HVAC, lights, windows, and other building components will modernize aging buildings, save businesses billions of dollars on their energy bills, create tens of thousands of jobs, and avoid carbon emissions equal to taking 22 million cars off the road for a year.”
  
  
• DeBoer added, “The E-QUIP Act can also encourage state-of-the-art retrofits that enhance outdoor air ventilation rates — a key practice to improve a building’s health and indoor air quality, according to the best available science.”

Support for an Energy Efficient Economy

• The American Council for an Energy-Efficient Economy (ACEEE) has  prepared a fact sheet and analysis that estimates the climate, energy, and jobs benefits of E-QUIP Act retrofit projects: 
  
  
  • 130,000 net additional job-years.
  • $15 billion energy bill savings.
  • 100 million tons of carbon dioxide emissions avoided – or the equivalent emissions from 560,000 rail cars full of coal or taking 22 million cars off the road for one year.
    
    
• Key elements of the E-QUIP Act are:
    
  
  • Elective 10-year, straight-line cost recovery period for a new category of depreciable property that meets the E-QUIP Act’s high-performance standards.
  • Available to replace or retrofit systems and components in buildings that are at least 10 years old.
  • Certification requirement that E-QUIP is designed, installed, operated, and maintained by credentialed professionals.
  • Five-year duration of incentive.
    
    
• A uniform 10-year depreciation period for components that meet E-QUIP standards would simplify the current cost recovery “patchwork” in the federal tax code for building investments.

The E-QUIP Act and advocacy efforts to include it as part of infrastructure legislation will be a focus of discussion during The Roundtable’s April 20 (Remote) Spring Meeting.

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Several progressive members of Congress, led by Senator Chris Van Hollen (D-MD), above, on March 29 proposed legislation that would tax appreciated and unrealized capital gains when property is transferred at death or by gift. Meanwhile, Senate Republicans on March 9 reintroduced legislation to repeal permanently the federal estate and gift tax, commonly known as the “death tax.” (Wall Street Journal, March 29 and Fox Business, March 11).

Stepped-Up Basis

• Taxing gains at death would mark a major departure from longstanding current law in which the basis of property is “stepped up” to its fair market value when a taxpayer dies or transfers property by gift. 
  
  
• Under the Sensible Taxation and Equity Promotion (STEP) Act, capital gains taxes would be applied at the time of inheritance transfer, with a $1 million per-person exemption. (Van Hollen news release, March 29 / one-page bill summary / section-by-section explanation)
  
  
• A House companion bill (H.R. 2286) was introduced by Rep. Bill Pascrell (D-NJ), a member of the House Ways and Means Committee. (Pascrell news release, March 29)
  
  
• President Biden backed elimination of stepped-up basis during his campaign. (CNBC, “This is how Joe Biden will tax generational wealth transfer,” March 13 / CNBC, June 30, 2020 / ABC News, Oct. 8, 2019)
  

Why It Matters

• Repealing stepped-up basis and treating death as a taxable event would be particularly burdensome for real estate owners because of the illiquid and indivisible nature of real assets relative to a holdings like a portfolio of publicly traded stock. 
  
  
• The legislation could force owners to sell properties if no cash income is available to pay the tax.  The bill would also pull capital out of real estate markets at a time when it will be needed to help repurpose existing properties in the post-pandemic era. 

Estate Tax Repeal 

• Senate Republicans on March 9 unveiled the Death Tax Repeal Act of 2021 (S. 617) to permanently repeal the federal estate tax. The legislation, introduced by Sens. John Thune (R-SD.) and John Kennedy (R-LA) would eliminate the federal tax levied on estates worth more than $11.7 million after the death of the owner. (Sen. Kennedy news release)
  
  
• Reps Jason Smith (R-MO) and Sanford Bishop (D-GA) on March 10 introduced companion legislation in the House. (Rep. Smith news release)
  
  
• The Real Estate Roundtable, as part of the Family Business Estate Tax Coalition (FBETC), this week wrote to Sen. Thune and the House co-sponsors in support of S. 617 and the permanent repeal of the estate tax. (Coalition letter, April 2) 
  
  
• The letter states that the FBETC “... supported the temporary estate tax relief in the Tax Cuts and Jobs Act (TCJA), which doubled the exemption to approximately $11.7 million for tax year 2021 and indexed future increases for inflation through 2025. However, without further congressional action, the temporary increase in the exemption amount will expire… repeal is the best solution to protect all family-owned businesses from the estate tax.” 

Proposals to raise the tax burden on appreciated property at death could be considered in the next wave of domestic economic legislation.  President Biden is expected to roll out more tax proposals aimed at upper-income taxpayers over the next few weeks. 

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