The Environmental Protection Agency (EPA) announced this week that long-anticipated, updated ENERGY STAR scores that rate and compare U.S. buildings' energy performance will be available on Monday, August 27.  [EPA website]

The EPA currently lists 34,226 commercial buildings and plants located in all 50 states as ENERGY STAR-labeled – representing 4.95 trillion square feet of space.

• EPA currently lists 34,226 commercial buildings and plants located in all 50 states as ENERGY STAR-labeled – representing 4.95 billion square feet of space.  This number of "top of class" assets is expected to decrease, as average building "scores" will drop in light of updates to metrics in ENERGY STAR's Portfolio Manager energy usage benchmarking tool.   
• For most types of buildings, an ENERGY STAR score (registered on a scale of 1 to 100) is based on the Commercial Buildings Energy Consumption Survey (CBECS), conducted periodically by the U.S. Department of Energy. The latest CBECS data, which forms the base for the new EPA scores, became available in 2016.  Prior to the update, for years ENERGY STAR scores have reflected data collected in 2003. 
• EPA's move to update its building scores has been in the works for several years and has been a continual focus of The Roundtable's Sustainability Policy Advisory Committee (SPAC).  Many Roundtable member companies own and/or operate ENERGY STAR properties, and market their ratings to attract an increasingly Millennial-dominated workforce.  Pension funds and other institutional investors also rely on the label as a signal for well-managed assets with smaller carbon footprints.   

  EPA's annual Top Cities list shows which metro areas were home to the  most ENERGY STAR certified buildings  in the previous year.

• "We have to face the facts: ENERGY STAR building certification will likely be much harder to achieve," said Tony Malkin, Chairman and CEO of Empire State Realty Trust, and chairman of The Roundtable's SPAC.  "The U.S. commercial real estate industry has made huge strides, and those strides are reflected in the new data set about to be deployed by the EPA.  ENERGY STAR has always been a mark of highest achievement.  With more efficient buildings in the data set, there will be a reduction in the number of buildings which qualify on a relative basis."  
• "There are new technologies and practices, as well as inducements, such as ENERGY STAR for Tenants on which RER worked hard to put in place, which justify capital investments in buildings to reach even higher levels of performance, encourage greater collaboration between commercial landlords and tenants, and create thousands of well-paying retrofit construction jobs that cannot be exported," Malkin continued.  (See Roundtable Weekly, June 15, 2018.)      
• EPA reports that Portfolio Manager will be down on Sunday, August 26. New ENERGY STAR building scores, with updated Portfolio Manager metrics, will be available on Monday, August 27.  EPA encourages ENERGY STAR users to documents their current scores now – and their new scores starting August 27.  

EPA's recommendations for how to prepare for the upcoming changes and webinars about the new metrics are available online.

Club for Growth founder and economic advisor to the Trump 2016 campaign, Stephen Moore, writes in an August 15 op-ed that boosting foreign tourism to the United States will increase economic growth and lower the trade deficit — a view shared by the VisitU.S. Coalition.  (Boston Herald, Aug. 15)

The economic importance of foreign travel and tourism to the United States' economy and commercial real estate industry was the focus of a panel discussion during The Roundtable's 2018 Annual Meeting in June.  – enlarge photo –

• Moore notes in his commentary, "Washington is ignoring one easy way to trim the trade deficit without new tariff threats or complicated trade deals that could take years to consummate.  Get more foreigners to travel to the United States and buy things here. Recently, I met with officials from the Visit U.S. Coalition - which is made up of owners of businesses such as hotels, restaurants, airlines, amusement parks and shopping centers – and they alerted me to this lost opportunity."
• Led by the U.S. Travel Association (USTA) and the American Hotel and Lodging Association (AH&LA), the VisitU.S. Coalition includes The Real Estate Roundtable, U.S. Chamber of Commerce and the American Resort Development Association.  The multi-industry coalition aims to safely and securely welcome more overseas visitors, who stay an average of 18 nights and spend an estimated $4,360 at U.S. hotels, stores, restaurants and attraction properties.
• Moore also comments in his op-ed: "Prior to 9/11, the U.S. was the destination for about 1 in 6 international trips, but now we are the destination for about 1 in 8.  The travel industry economists calculate that this decline has reduced foreign purchases of American goods and services by some $32 billion. They estimate about 100,000 fewer jobs have been created as a result of fewer tourists arriving from abroad."  
• To address the drop of 7.4 million international visitors to America from 2015-2017, the VisitU.S. coalition encourages policies to help the nation regain its lost share of the global travel market by 2020 and help achieve the Administration's economic goals. (Roundtable Weekly, Jan. 19 and  Feb. 9)  

  VisitU.S. Coalition video on the State of International Travel.

• Specifically, the coalition is urging Congress to reauthorize the Brand USA program — the nation's first public-private partnership that markets the U.S. as a premier travel destination and communicates U.S. visa and entry policies.  "The travel industry itself needs to do a better and more comprehensive job marketing America and our natural and man-made wonders," Moore noted in his editorial.   
• Entry fees on foreign visitors – not federal taxpayer dollars – support Brand USA.  An FY2017 return on investment analysis showed each dollar of Brand USA marketing generated almost 28 dollars in visitor spending.  Brand USA is also estimated to have produced 486 million dollars in federal tax revenue, and another $526 million  in state and local tax revenue.  

Travel and tourism policies to boost economic growth were addressed in a panel discussion during The Real Estate Roundtable's June 14 Annual Meeting.  Participants included USTA's Roger Dow, AH&LA's Katherine Lugar, Senator Amy Klobuchar (D-MN) and Anthony E. Malkin (Chairman and CEO, Empire State Realty Trust).  (Roundtable Weekly, June 15, 2018.)

President Trump on Monday signed a defense funding bill into law that includes an expansion of federal authority to review and potentially block foreign investments based on national security considerations. (Law.com, Aug. 13 and Wall Street Journal, Aug. 15)

CFIUS recently ordered Chinese conglomerate HNA Group Co., Ltd  to sell its majority stake in a 21-story Manhattan building whose tenants include a police precinct assigned to protect Trump Tower.

• The defense bill included the Foreign Investment Risk Review Modernization Act of 2018 (FIRMMA), which expands the authority of the Committee on Foreign Investment in the United States (CFIUS) — a U.S. interagency committee that conducts national security reviews of foreign investment. (Pensions & Investments, Aug. 13)
• CFIUS's scope now expands to cover the national security implications of transactions that could result in control of a U.S. business by a foreign person — and to block transactions or impose measures to mitigate any threats to U.S. security. (Law.com, Aug. 13)
• FIRRMA expands the list of covered transactions to include some foreign purchases and leases of real estate near military and other strategic facilities.  Responding to concerns raised by The Roundtable and other industry groups, language is also included that exempts real estate located in 'urbanized areas' from the criteria of a covered transaction.  The Census defines an urbanized area as one comprising more than 50,000 people.  See pages 820-826 of the final congressional conference report. 

CFIUS recently ordered Chinese conglomerate HNA Group Co., Ltd to sell its majority stake in a 21-story Manhattan building whose tenants include a police precinct assigned to protect Trump Tower. (Bloomberg, Aug. 8 and The Wall Street Journal, Aug. 10)

Senate Finance Committee Republicans yesterday sent a letter to Treasury Secretary Steven Mnuchin and Acting IRS Commissioner David Kautter requesting clarifications to the tax overhaul legislation enacted last year – including guidance related to a drafting error that unintentionally pushed the cost recovery period for qualified property improvements (QIP) from 15 to 39 years. (The Hill, Aug. 16)

The August 16 letter, signed by all Republican members of the Finance Committee and Chairman Orrin Hatch (R-UT), urges Treasury and the IRS to "issue guidance that is consistent with the congressional intent" of the new tax law regarding QIP expensing and two other tax policy areas.

• The unintentional drafting mistake has resulted in a longer cost recovery period for qualified nonresidential interior improvements – a category that previously covered leasehold improvements, retail improvements, and new restaurant construction.  (" Correcting the Drafting Error Involving the Expensing of Qualified Improvement Property" – The Tax Foundation, May 30) 
• As a result of the mistake, businesses across the country are delaying, or significantly reducing, capital expenditures for building improvements, undermining job creation and economic activity.  
• The August 16 letter, signed by all Republican members of the Finance Committee and Chairman Orrin Hatch (R-UT), urges Treasury and the IRS to "issue guidance that is consistent with the congressional intent" of the new tax law regarding QIP expensing and two other tax policy areas. 
• On the depreciation of real property, the letter notes: "[I]n eliminating the separate definitions of qualified leasehold improvement, qualified restaurant, and qualified retail improvement property and providing a new single definition of qualified improvement property, the language...failed to designate qualified improvement property as 15-year property under the modified accelerated cost recovery system ("MACRS").  In addition, there is a typographical error in a cross-reference identifying qualified improvement property as property which is recovered over 20 years under the alternative depreciation system ("ADS").  Congressional intent was to provide a 15-year MACRS recovery period and a 20-year ADS recovery period for qualified improvement property. Such intent is set forth in the Conference Report to accompany (the Tax Cuts and Jobs Act )." ( H.R. Rep. 115-466, at p. 366)."  
• During a February hearing in the House, Treasury Secretary Mnuchin testified about the QIP issue: "I am aware of the error and it obviously was unintended. We are looking at whether there is anything we can do with regulations. I think it is likely that this is something that may need to be fixed in the bill. We look forward to working with you." (Ways and Means Committee – Mnuchin's testimony and hearing video and Roundtable Weekly, June 1) 
• The letter, signed by Senate Finance Committee Chairman Orrin Hatch (R-UT) and other GOP tax writers, states they will also introduce legislation to correct unintentional mistakes in the new tax, although support from Democrats would be needed to pass such a bill.  An amendment (# 3597) introduced July 26 by Sen. Pat Toomey (R-PA) to an appropriations bill (H.R. 6147) would have corrected the QIP drafting error, but did not receive a vote.  

The letter also notes that the Finance Committee continues to review the law for potential areas that may require regulatory guidance or technical corrections: "After this review, we intend to introduce technical corrections legislation to address any items identified."  (Senate Finance Committee News Release, Aug. 16)