As discussions continue between the House, Senate, and Administration on how to move forward with a tax and fiscal package, The Real Estate Roundtable (RER) and sixteen other national real estate organizations wrote to members of the House Ways and Means and Senate Finance Committees urging them to oppose any proposal that would cap or eliminate the deductibility of state and local business property taxes.  (Letter)

A cap on property tax deductibility could have devastating consequences for commercial real estate owners, developers, and investors nationwide.

Why It Matters

• Republican lawmakers intend to enact a major tax and fiscal package this year, and they are under pressure to identify additional revenue offsets to finance a growing list of priorities.  Ways and Means Committee Republican Members have scheduled all-day, closed-door meetings next week to discuss the details of their tax plan.

• Some lawmakers have raised “Business SALT” and potential restrictions on the deductibility of state and local property and income taxes as a possible revenue offset for the tax bill (Roundtable Weekly, Feb. 28)

• Eliminating the business deduction for property taxes would be the equivalent of raising business owners’ property tax bills by roughly 40 percent, causing employers to owe federal tax on money that they do not have.

• “Business taxes are fundamentally different from state and local individual income taxes.  State and local business taxes are an unavoidable expense, an inescapable cost of doing business,” said Real Estate Roundtable President and CEO Jeffrey DeBoer.  (Roundtable Weekly, Feb. 21)

• DeBoer’s comments were echoed this week in analyses from the Tax Foundation and former Congressional Budget Office Director Douglas Holtz-Eakin.  (Tax Foundation, March 3; American Action Forum, March 6).

• “Firms deduct the costs of generating income—wages, rents, capital costs, etc.—and CSALT is the recognition of those costs. Fully deducting those taxes is … necessary to correctly tax firms. Capping CSALT is professional malpractice,” said Holtz-Eakin.

Effects on CRE and the Broader Economy

• The ripple effects of this proposal would extend far beyond property owners to impact the broader economy and housing affordability nationwide.

• U.S. commercial real estate is valued at $18-$22 trillion, supporting 15 million jobs and generating $2.3 trillion in GDP annually.

• This tax change could reverse the benefits of the 2017 Tax Cuts and Jobs Act (TCJA) and Section 199A, potentially raising effective tax rates to 1970s-era levels near 50%.

• “A cap on the deductibility of property taxes paid by businesses, “would cause self-inflicted injury to the U.S. economy, including unnecessary job losses, higher rents for families and individuals, and other inflationary pressures,” DeBoer said this week.  “It would lower commercial property values and create new stresses in the banking system. It is a recipe for a recession.”

• Additionally, the increased tax burdens could discourage new investment, deter housing development, and exacerbate the national housing crisis.

Call to Action

• RER urges members to amplify this message to their representatives in Congress.

• Given that U.S. businesses paid $1.1 trillion in state and local business-related taxes in 2023 (including nearly $400 billion in property taxes), the stakes are extremely high.

Next Steps

• House and Senate Republicans remain divided on several key issues as they work to prevent a March 14 government shutdown and agree on the parameters of a larger tax and fiscal reconciliation bill. (USA Today, March 7)

The impasse centers on whether to pursue one big bill or a two-bill strategy, the size of spending reductions, how to deal with the debt ceiling, and the budget baseline that will determine the need for offsetting tax increases.  The impasse could push resolution of the tax issues into the second half of the year.

Recent legislative hearings and administrative initiatives have highlighted the critical need for a resilient and affordable electricity supply.​

The Big Picture

• The U.S. electric grid is under increasing strain from surging energy demand, driven by AI-powered data centers, manufacturing growth, and broader electrification efforts. (North American Electric Reliability Corp., Feb. 28) (Wood Mackenzie, Feb. 11)

• EPA Administrator Lee Zeldin’s initiative for “Powering the Great American Comeback,” and DOE Secretary Chris Wright’s 9-point plan for US “energy dominance,” outlined agency strategies emphasizing permitting reform, strengthening grid reliability, expanding U.S. energy production to fuel economic growth, and position the U.S. as a global leader in AI and advanced energy technologies.

• As The Roundtable’s Policy Guide on building performance standards states, the transition to a digital economy raises serious concerns about electricity availability. “AI could soon need as much electricity as an entire country” as “[v]ast swaths of the U.S. are at risk of running short of power.” (Roundtable Weekly, Jan. 25)

Why It Matters

• Policymakers and industry leaders are debating how to balance investment in renewable energy, transmission infrastructure, and traditional baseload generation sources to ensure stable electricity supply. (E&E News, Feb. 26)

• During this week’s joint address to Congress, President Trump emphasized the administration’s focus on reducing energy costs: “A major focus of our fight to defeat inflation is rapidly reducing the cost of energy … That’s why, on my first day in office, I declared a national energy emergency… It’s called drill, baby, drill.”

• In a new report from The Center for Strategic & International Studies warns that while AI is digital, its biggest hurdle is physical infrastructure. The report explores using President Trump’s energy “emergency” declaration to fast-track permitting and urges a stronger DOE role in accelerating nuclear projects. (Axios, March 5)

Congressional Hearing

• On Wednesday, the House Energy and Commerce Committee’s Subcommittee on Energy convened a hearing titled "Scaling for Growth: Meeting the Demand for Reliable, Affordable Electricity.” Lawmakers and experts debated permitting delays, transmission bottlenecks, and regulatory uncertainty affecting the nation’s ability to meet growing energy needs. (Hearing Memo, March 5)

• Industry experts argued that regulatory hurdles are slowing energy infrastructure projects, creating a gap between federal energy goals and grid capacity. (Latitude Media, March 5)

Clean Energy & Economic Impact

• The American Clean Power Association (ACP) reports that while the Inflation Reduction Act (IRA) has boosted clean energy investment, uncertainty over efforts to cut tax credits raises concerns about long-term project financing.

• In 2024, U.S. developers added 48 gigawatts of new utility-scale solar, storage, and wind capacity—a 33% increase from the previous year. (ACP Report, March 5)

• The clean energy industry argues that wind and solar projects can be built faster than natural gas and nuclear, making them essential for stabilizing the grid. (E&E News, Feb.26)

• 79% of operational clean power capacity is now located in Republican-held districts, with GOP districts also home to 77% of new clean energy additions last year. (PoliticoPro, March 5)

• North America’s data center sector doubled its construction supply in 2024 to a record 6,350.1 megawatts (MW), underscoring the increasing power demands of AI-driven computing, according to CBRE’s latest North American Data Center Trend Report.  (ConnectCRE, March 4)

The Real Estate Roundtable will continue working with the administration to advance policies that streamline energy project approvals, strengthen grid resilience, ensuring a stable, reliable power supply to fuel economic growth and innovation.

This week, The U.S. Department of Treasury announced it will suspend enforcement of the Corporate Transparency Act (CTA) for U.S. citizens and domestic reporting companies. (CNBC, March 2)

Why It Matters

• The agency will not impose penalties or fines tied to the CTA’s beneficial ownership reporting requirements, either under current deadlines or future rule changes. (BisNow, March 4)

• Treasury plans to narrow the rule’s scope to apply only to foreign reporting companies, with a forthcoming rulemaking proposal.

• Due to the far-reaching scope of the CTA, RER has long raised concerns about the regulatory burden and cost the CTA would impose on many commercial and residential real estate investment businesses. (Roundtable Weekly, Dec. 2024)

• The decision marks a major shift in financial transparency regulation, easing compliance burdens on small businesses and other domestic entities.

• The law, enacted in 2021, was aimed at curbing illicit financial activity by requiring companies to disclose their beneficial owners the Financial Crimes Enforcement Network (FinCEN).

• The decision aligns with President Trump’s efforts to cut back on regulatory burdens, particularly for small businesses.

What’s Next

• Treasury Secretary Scott Bessent called the move a "victory for common sense," framing it as part of the administration’s broader deregulatory push to bolster economic growth.

• “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy,” said Secretary Bessent. (Treasury Press Release, March 2)

• Treasury will soon propose new rules to formally limit CTA enforcement to foreign reporting companies.

RER’s Real Estate Capital Advisory Committee (RECPAC) will continue to closely track developments related to the enforcement of the CTA.