The vital contributions to the U.S. economy and job creation by the travel and tourism industry were the focus of a meeting Tuesday between President Trump and CEOs of 13 hospitality companies, including four members of The Real Estate Roundtable. 

Among the hotel CEOs participating in the White House meeting on travel and tourism this week were former Real Estate Roundtable Chairman Chris Nassetta of Hilton, along with Roundtable members Elie Maalouf of InterContinental Hotels Group; Patrick Pacious of Choice Hotels International; and James Risoleo of Host Hotels & Resorts, Inc.  - enlarge photo -

• The White House meeting focused on ways the Trump Administration and private industry can work together to achieve travel-related economic growth.  Among the policies discussed to help improve inbound travel: expanding and enhancing secure visa policies; supporting the Brand USA destination marketing agency; the importance of international inbound travel to reduce the growing trade deficit; and transportation infrastructure — all critical to increasing both international and domestic travel. 
• Among the hotel CEOs participating in the meeting were former Real Estate Roundtable Chairman Chris Nassetta of Hilton, along with Roundtable members  Elie Maalouf of InterContinental Hotels Group; Patrick Pacious of Choice Hotels International; and James Risoleo of Host Hotels & Resorts, Inc. 
• The Visit U.S. coalition, which includes The Roundtable, is urging Congress to reauthorize Brand USA — the nation's tourism marketing program, which is not supported by taxpayer dollars, but through fees on foreign visitors who do not require a visa when entering the U.S.  Legislation is needed to authorize the program beyond 2020 and ensure that visitor fees authorized for collection from 2021 to 2027 will not be diverted to the Treasury Department, as currently scheduled. 
• An FY2017 return on investment analysis showed each dollar of Brand USA marketing generated almost 28 dollars in visitor spending.  Moreover, Brand USA-generated international visitor spending is estimated to have produced 486 million dollars in federal tax revenue, and another 526 million dollars in state and local tax revenue.
• Roger Dow, president and CEO of the U.S. Travel Association, said, "The president is a keen listener whenever you're talking about growing the economy, and he was receptive to the idea that travel growth can be achieved without compromising security." 

A panel discussion at The Roundtable's June 14 Annual Meeting focused on the travel and tourism issue.  Participants included Senator Amy Klobuchar (D-MN); Roundtable Board Member Anthony E. Malkin, Chairman and CEO, Empire State Realty Trust; USTA's Roger Dow; and American Hotel & Lodging Association's President and CEO Katherine Lugar.  (Roundtable Weekly, June 15, 2018.)

House Financial Services Committee Chairman Jeb Hensarling (R-TX) on Sept. 6 unveiled a sweeping proposal to overhaul the housing finance system in the United States during a hearing entitled, "A Failure to Act: How a Decade without GSE Reform Has Once Again Put Taxpayers at Risk."

House Financial Services Committee Chairman Jeb Hensarling (R-TX) on Sept. 6 unveiled a sweeping proposal to overhaul the housing finance system in the United States during a hearing entitled, "A Failure to Act: How a Decade without GSE Reform Has Once Again Put Taxpayers at Risk."  (Hensarling statement on YouTube).

• This fall marks ten years since the height of the financial crisis, when the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac were placed into government conservatorship on September 6, 2008.  According to a committee summary of yesterday's  hearing, "The subsequent financial bailout of Fannie Mae and Freddie Mac has required over $190 billion in taxpayers contributions to date, and taxpayers remain explicitly obliged to provide over $254 billion should future losses materialize.  Never intended as a permanent solution, the conservatorship continues ten years later." 
• The discussion draft of the "Bipartisan Housing Finance Reform Act of 2018" proposes to "repeal the GSEs' charters, permanently ending their monopoly, and transition to a system that allows qualified mortgages backed by an approved private credit enhancer with regulated, diversified capital resources to access the explicit, full government securitization guarantee provided by Ginnie Mae," according to Chairman Hensarling's opening committee statement.  The bill is co-sponsored by Jim Hines (D-CT) and John Delaney (D-MD). 
• In a Wall Street Journal Op-Ed, Hensarling further explained the proposal – "Loan originators would have to acquire coverage from an approved 'credit enhancer,' or private mortgage credit guarantor, to use the Ginnie Mae system. That would function as a private capital buffer on the loan, which could then be securitized by any of Ginnie Mae's more than 400 approved issuers with an explicit, full government guarantee of mortgage-backed securities." (Wall Street Journal Op-Ed, Sept. 6) 
• The day before the hearing, a coalition of the housing industry's largest trade groups and affordable housing advocates wrote to the Trump Administration and Congress to enact permanent reforms to the government-sponsored enterprises.  ( Coalition letter and HousingWire, Sept 5) 
• A private sector solution to GSE reform was offered in a Sept. 4 Op-Ed in The Hill by Roundtable member Willy Walker, Chairman and CEO of Walker & Dunlop, one of the largest commercial real estate finance companies in the United States.
• In his Op-Ed, Mr. Walker writes, "The GSEs' multifamily lending businesses, where they back loans to owners of apartment buildings across the country, is the model that should be applied to all lending done by the GSEs. It's the same role they play in financing single-family homes, but with a fundamental difference: In the multifamily business, private capital is required to take risk on every loan the GSEs guarantee, protecting the GSEs and taxpayers in the process." (A fix for Fannie Mae and Freddie Mac already exists, Sept. 4) 
• The proposed legislation has slim chances of advancing during an election year, yet Reps. Hensarling and Delaney said it could serve as a road map that lawmakers in the next Congress could use to push for GSE reform.  Hensarling is not running for re-election. (Bloomberg, Sept 6) 

Hensarling concluded his committee statement, "If the political will to enact such reform stalls in this Congress or the next, the Administration can and should effectuate change. The President will appoint a new Federal Housing Finance Agency Director in January. With apologies to The Rolling Stones, 'you can't always get what you want, but if you try some time, you just might find, you get what you need' to avert the next housing crisis."  (Hensarling statement on YouTube)

As House Republican leaders this week promoted a second round of tax cuts before the mid-term elections, Reps. Kenny Marchant (R-TX) and Joe Crowley (D-NY) introduced legislation yesterday to repeal the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). 

A recent report by the Rosen Consulting Group (RCG) estimated that FIRPTA repeal would generate an initial increase of between $65 billion and $125 billion in international investment in U.S. commercial real estate.

• FIRPTA subjects foreign investment in U.S. real property to a much higher tax burden than foreign investment in any other class of assets. As a result, overseas investors are often discouraged from investing in U.S. real estate.  FIRPTA effectively deters billions of dollars of capital that would strengthen U.S. infrastructure, expand the tax base and create much-needed domestic jobs.

• The Marchant-Crowley Invest in America Act would build on FIRPTA reforms Congress passed in the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) by repealing FIRPTA altogether.  

• The PATH Act exempted foreign pension funds from FIRPTA and increased the share of a publicly traded US REIT that a foreign investor can hold without triggering FIRPTA.  The PATH Act changes injected billions of dollars in foreign investment into the U.S. real estate market, and contributed to a spike in capital investment in many parts of the country.  (Roundtable Weekly – Oct 13, 2017)

• A recent report by the Rosen Consulting Group (RCG) estimated that FIRPTA repeal would generate an initial increase of between $65 billion and $125 billion in international investment in U.S. commercial real estate. The report determined that repealing FIRPTA would generate between $26 and $49 billion in total economic activity — a boost of 10 to 30 basis points to U.S. GDP.  This new level of activity would lead to the creation of 147,000 to 284,000 jobs throughout the economy and increase taxpayers' income by $8 billion to $16 billion.  RCG's report concluded that repealing FIRPTA would not have a meaningful impact on the federal budget, as FIRPTA accounted for less than 0.002% of federal tax receipts from 2009 to 2013. (Unlocking Foreign Investment in U.S. Commercial Real Estate, July 2017)

• FIRPTA reform is a long-standing goal of The Roundtable.  The economic benefits of a comprehensive FIRPTA repeal was a focus of testimony by Real Estate Roundtable President and CEO Jeffrey DeBoer before the U.S. Senate Finance Committee on Sept. 19, 2017.  (Roundtable Weekly) 

"In 2015, Congress passed the most significant reforms of FIRPTA since its passage in 1980.  Congress should build on the recent success by repealing FIRPTA outright as part of tax reform. Unleashed by FIRPTA's repeal, capital from abroad would create jobs by financing new real estate developments, as well as the upgrading and rehabilitation of existing buildings. Architects, engineers, construction firms, subcontractors, and others would be put to work building and improving commercial buildings and infrastructure," DeBoer testified.  (Roundtable Statement for the Record, Senate Finance Committee Sept 2017) 

Tax Reform 2.0

GOP leaders aiming to pass another round of tax reforms through the House before the November mid-term elections are planning next week to introduce "Tax Reform 2.0" legislation. The bill would make the individual tax cuts contained in President Donald Trump's December tax overhaul permanent, while expanding taxpayer savings opportunities. 

House Ways and Means Committee Chairman Kevin Brady (R-TX) commented, "... next week we will introduce legislation to make permanent the small business and individual tax cuts that are driving these positive economic numbers. This investment into our workers will produce over a million and a half new jobs, continue to boost wages, and increase America's competitiveness for years to come."  (Accounting Today, Sept. 7).

• Today, House Ways and Means Committee Chairman Kevin Brady (R-TX) commented on the 2.0 legislation expected to be marked up by his committee next week while reacting to the U.S. Bureau of Labor Statistics' August jobs report showing a gain of 201,000 jobs.
• "August was another solid month of job growth, marking over 1.6 million jobs created this year and the highest level of wage gains since 2009. And we know we can do even better to continue creating greater financial security for our workers and Main Street businesses. That's why next week we will introduce legislation to make permanent the small business and individual tax cuts that are driving these positive economic numbers. This investment into our workers will produce over a million and a half new jobs, continue to boost wages, and increase America's competitiveness for years to come," Brady said.  (Accounting Today, Sept. 7)
• In July, Brady released a two-page framework for "Tax Reform 2.0" that would make individual and small business tax cuts.  Although last December's Tax Cuts and Jobs Act made corporate tax cuts permanent, most provisions for individuals and pass-through businesses are set to expire at the end of 2025.  Yesterday, Ways and Means Committee Republicans released an updated outline of the Tax Cuts 2.0 package.
• Bloomberg reported this week that House Majority Whip Steve Scalise stated, "We're not resting on our laurels. We're seeing this great economic growth, and so we're starting to put together tax cuts 2.0."  (Los Angeles Times, Sept. 5)

The central feature of the reform proposal — a permanent extension of tax cuts for individuals — is unlikely to pass the Senate, where it would need Democratic support (The Hill, July 24).  Additionally,  the introduction of a Tax Reform 2.0 bill may delay legislation addressing tax technical corrections until after the November elections. (Roundtable Weekly, July 20)