Debt Ceiling Compromise Passed Days Before National Default Deadline

Capitol side view

Congress passed compromise legislation this week to suspend the debt ceiling for two years and restrain government spending, sending it to President Biden for his signature and calming world financial markets days before a US government default. (CQ and Wall Street Journal, June 2)

After the Debt Ceiling

  • The House on Wednesday night passed the Fiscal Responsibility Act (H.R. 3746)—forged by President Joe Biden, House Speaker Kevin McCarthy (R-CA), and their negotiation teams—to suspend the nation’s $31.4 trillion debt limit until Jan. 1, 2025 and cut spending by at least $1.5 trillion. The Senate approved the bill last night by a bipartisan vote of 63-36. (Congressional Budget Office, May 30 and Associated Press, May 26)
  • “No one gets everything they want in a negotiation, but make no mistake: this bipartisan agreement is a big win for our economy and the American people,” President Biden stated last night. “I look forward to signing this bill into law as soon as possible…” (White House statement, June 1)
  • House policymakers have signaled they may follow the debt ceiling crisis with a legislative tax proposal that could include significant measures affecting commercial real estate. (Roundtable Weekly, May 26)
  • Congressional action on such measures would come at a time when the office sector faces difficult conditions, including asset price discovery and tighter liquidity. (Wall Street Journal, May 30 Financial Times, May 29 | GlobeSt, May 26) 

Economic Conditions & CRE

Ross Perot, Jr. on Bloomberg TV

  • Real Estate Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) explained the economic conditions facing CRE and the office market, along with other pressures such as remote work and a shortage of labor, in a May 26 Boston Globe interview. “We’re in a very precarious situation,” Fish said.
  • Roundtable Board Member Ross Perot, Jr., above, (Chairman, The Perot Companies and Hillwood) discussed the financing challenges faced by some CRE sectors in an interview with Bloomberg TV on Wednesday. “If the industry can’t get a construction loan, real estate will have a recession,” Perot said. “The key to commercial real estate today will be banking.”
  • The Federal Reserve’s “Beige Book” issued this week also reported on the nation’s current overall economic activity, noting, “Commercial construction and real estate activity decreased overall, with the office segment continuing to be a weak spot.” (GlobeSt, May 31)
  • Additionally, Trepp’s CMBS Delinquency Report issued this week showed the nation’s overall CMBS delinquency rate hit a 14-month high, topping 4% for the first time since 2018. Although May’s delinquency rate jumped to 3.62%, up 53 basis points for the month, the all-time high registered 10.34% in July 2012 and the COVID-19 high reached 10.32% in June 2020.
  • Federal Reserve monetary policies, congressional fiscal policy, potential tax measures, and other issues impacting CRE will be discussed during The Real Estate Roundtable’s Annual Meeting on June 13-14 in Washington, DC.

The Roundtable meeting includes policy advisory committee meetings—open to all members—that will feature prominent policymakers, including Senate Banking Committee Member Bill Hagerty (R-TN); House Ways and Means Committee Chairman Jason Smith (R-MO); David Crane, the US-DOE’s Director of the Office of Clean Energy Demonstrations; and Alejandra Nunez, US-EPA Assistant Administrator overseeing climate policy.

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Administration Unsuccessfully Seeks to Add Like-Kind Exchange Restrictions to Debt Ceiling Talks

LKE form 8824 held by business person

President Joe Biden and House Speaker Kevin McCarthy (R-CA) signaled progress this week on debt limit and federal spending talks after they assigned teams of negotiators to bang out an agreement before a looming national default “x-date” is reached in June. (BGov and CQ, May 18)

LKE Restrictions Rejected

  • One cost-cutting measure proposed by the administration’s team, and rejected by Republicans, would have imposed limitations on the use of Section 1031 like-kind exchanges. (Washington Post, May 15)
  • President Biden has consistently proposed limiting the use of LKEs, most recently as part of his FY2024 budget proposal submitted earlier this year. (Roundtable Weekly, March 10)
  • “The administration’s proposal to severely limit the use of section 1031 would destroy jobs, lock properties into unproductive uses at a time when a realignment of real estate assets is needed, harm housing supply, and end a mechanism used by environmental groups to conserve land and natural spaces,’ said Real Estate Roundtable President and CEO Jeffrey DeBoer.
  • “It is an idea that has been debated by Congress numerous times and always rejected, most recently in a unanimous vote on the Senate floor,” DeBoer continued. “Perhaps most importantly, the proposal would eliminate one of the only real estate market liquidity tools available at a time when credit markets and banks are tightening, as they are today.”
  • Academic and other economic research has repeatedly demonstrated the positive economic contribution of LKEs and their importance to the US economy. (Roundtable Weekly, July 1, 2022 and EY report—“Economic Contribution of the Like-Kind Exchange Rules to the US economy in 2021: An Update”)

Looming Deadline

US Capitol
  • President Biden and Speaker McCarthy assigned five Washington insiders on May 16 to the immense negotiation task, in hopes that an “agreement in principle” can be reached this weekend, which would allow the House and Senate to vote before June 1. (The Hill and BGov, May 17 | Associated Press, May 18)
  • “I’m confident that we’ll get the agreement on the budget and America will not default,” Biden said before departing this week for a meeting of world leaders at the G-7 annual summit in Japan. (CBS News, May 17)
  • McCarthy said yesterday, “I see the path that we can come to an agreement. And I think we have a structure now and everybody’s working hard.” (Politico, May 18)

House Democrats this week began preparing an emergency “discharge petition” to raise the debt ceiling if negotiators are unable to reach an agreement, though its odds of passing are uncertain. (Wall Street Journal, May 17)

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Debt Ceiling Talks Inch Forward as Republicans, Democrats Prioritize Permitting Reform for Energy Projects

Big Four with President Biden

A May 9 meeting between President Joe Biden and the “Big Four” congressional leaders about the debt ceiling and federal spending ended with little progress—yet the policymakers agreed to meet early next week as their respective staffs begin separate budget discussions. (The Hill, May 11 and Axios May 9 | Roundtable Weekly, May 5)

 Talks Begin 

  • As the “X date” for defaulting on the national debt looms in June, House Speaker Kevin McCarthy (R-CA), Senate Minority Leader Mitch McConnell (R-KY), Senate Majority Leader Chuck Schumer (D-NY), and House Minority Leader Hakeem Jeffries (D-NY) met to discuss raising the $31.4 trillion U.S. debt limit with President Biden, who described the gathering as “productive.” (Associated Press and Reuters, May 10)
  • McCarthy commented he “didn’t see any new movement,” but added he was willing to discuss spending cutbacks such as clawing back funding for pandemic programs. He added that Biden may also be open to discussing permitting reform for energy infrastructure projects, though the two parties are far apart on the specifics of their legislative proposals. (Washington Post and CNN, May 10 and BGov, May 9)

Energy Infrastructure Priorities 

White House Senior Advisor John Podesta

Related Energy News  EPA logo

  • The Environmental Protection Agency released a proposed rule today to cut carbon emissions by 90% from the nation’s power plants, drawing a “counterattack from Republicans and coal-state Democrat Sen. Joe Manchin” (D-WV), chairman of the Senate Energy Committee. (New York Times, May 11 and POLITICO, May 11)
  • De-carbonizing the electric grid, and moving utilities away from combusting coal and natural gas, would help building owners and commercial tenants reduce their “indirect” Scope 2 GHG emissions attributable to the electricity they purchase.
  • Meanwhile, the General Services Administration (GSA) announced yesterday it will leverage $3.4 billion it received under the IRA to pursue new public-private partnerships that will improve energy efficiency, reduce onsite emissions, and encourage electrification in federal buildings. (GSA news release, May 10)
  • The GSA will advance the White House’s  Climate Smart Buildings Initiative. It aims to modernize 41 federal facilities in DC and the Midwest through long-term “performance contracts” with private sector companies that guarantee projects will pay for themselves over time through energy savings that accrue from retrofit installations. (BGov, May 10). See GSA’s National Deep Energy Retrofit program

The Roundtable will focus on the impact of the debit ceiling and federal energy policy priorities during its all-member Annual Meeting on June 13-14 in Washington. 

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Policymakers Face Debt Ceiling Crunch After Treasury Forecasts June “X Date”

Capitol building

Pressure on Congress and the White House ratcheted up this week after Treasury Secretary Janet Yellen warned that the U.S. could default on its $31.4 trillion debt as early as June 1. President Joe Biden will meet on May 9 with House Speaker Kevin McCarthy (R-CA), Senate Minority Leader Mitch McConnell (R-KY), Senate Majority Leader Chuck Schumer (D-NY), and House Minority Leader Hakeem Jeffries (D-NY) to discuss raising the US debt limit and Republican concerns about federal spending levels. (Treasury letter, May 1 | Bloomberg and New York Times, May 2)

Looming Deadline

  • The estimated date that Treasury will run out of money to pay its bills is called the “X date.” Moody’s Analytics Chief Economist Mark Zandi told the Senate Budget Committee yesterday that the best case scenario for hitting the X date is August 8 and the worst is June 1. (BGOV, May 5)
  • Zandi testified, “The Treasury debt limit drama is heating up and is sure to get much hotter in coming weeks as we have a better understanding of the 2023 tax filing season and the actual X-date.”
  • Zandi also noted how a debt ceiling extension could be combined with annual budget talks. “If the X-date is as soon as early June, it seems a stretch for lawmakers to come to terms fast enough, and they instead will decide to pass legislation suspending the limit long enough to line the X-date up with the end of fiscal 2023 at the end of September. This will buy time and combine the debt limit decision with the federal government’s fiscal 2024 budget, which is also must-do legislation for lawmakers to ensure the government is funded and avoids a shutdown,” Zandi stated. (Senate Budget Committee hearing, May 4)
  • Office of Management and Budget Director Shalanda Young suggested this week that the White House may be open to a short-term debt ceiling extension. “I’m sure one of the things on the table we will have to work through is how long. I’m not going to take anything off the table,” Young said. (Reuters and The Hill, May 4)

Policy issues related to raising the debt ceiling and CRE market conditions will be discussed be during The Roundtable’s all-member meeting on June 13-14 in Washington, DC.

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House Republicans Pass Debt Ceiling Bill

House Passes Debt Ceiling Bill

House Republicans this week narrowly passed legislation—the Limit, Save, Grow Act (H.R. 2811)—that would slash government spending and rescind much of the Biden administration’s climate-related incentives in an effort to spur bipartisan talks on raising the nation’s $31.4 trillion debt ceiling. (Roll Call, April 26 and Reuters, April 27)

Avoiding Default

  • The White House issued an April 25 Statement of Administration Policy that the GOP bill would be vetoed if it ever made it to President Biden’s desk. Biden added he is willing to meet with House Speaker Kevin McCarthy (R-CA), but that extending the debt limit is “not negotiable.” Senate Majority Leader Chuck Schumer (D-NY) responded to passage of the House bill by stating it “has no hope of ever becoming law.” (Schumer Floor Remarks, April 27)
  • The Congressional Budget Office released an analysis this week showing that H.R. 2811 would reduce $4.8 trillion from the deficit by setting caps on federal spending over the next 10 years—with an additional $570 billion in savings coming from rescinding energy tax provisions passed in the Inflation Reduction Act. (Tax Notes, April 27 and Roundtable Weekly, Aug. 12, 2022)
  • Mark Zandi, the chief economist at Moody’s Analytics testified before Congress last month that if no resolution to the debt limit is reached before mid-August, “a default would be a catastrophic blow to the already-fragile economy.” (Zandi’s written testimony, March 7)
  • A previous standoff over the debt limit in 2011 led to a downgrade of the government’s credit rating, which pushed borrowing costs higher. (ABC News, Jan. 24)

Roundtable ResponseRER's Jefrey DeBoer and John Fish

  • The Roundtable and 13 other national real estate organizations sent a joint letter last month urging congressional leaders to raise the debt limit to avoid agitating the stability of U.S. financial markets and roiling significant sectors of the American economy unnecessarily. (Coalition letter, March 29)
  • Real Estate Roundtable Chair John Fish, right above, (Chairman and CEO, SUFFOLK) and President and CEO Jeffrey DeBoer, left, have also called on Roundtable members to contact both policymakers in Congress and the White House to raise the debt ceiling. (Roundtable Weekly, Jan. 20)
  • DeBoer said, “Some threats to the U.S. economy are unavoidable, others are ones of our own making and entirely unnecessary. The potential for a default on the federal debt is a needless and inexcusable risk with potentially dire consequences for U.S. real estate, workers and retirees, and the entire economy. The full faith and credit of the United States government should not be open to negotiation.”

The impact of negotiations over federal spending and raising the debt ceiling on the national economy and CRE markets was a focus of discussion during The Roundtable’s Spring Meeting this week (see story above). It is possible that intense discussions among DC policymakers on these issues will be underway during The Roundtable’s all-member meeting on June 13-14 in Washington, DC.

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Looming Debt Limit Expiration Dominates Congressional Agenda

U.S. Capitol at dusk

House Republicans this week proposed the Limit, Save, Grow Act to cut federal spending and spur negotiations to raise the nation’s $31.4 trillion debt ceiling for approximately one year. President Joe Biden and Senate Democrats oppose the bill and propose lifting the debt ceiling without conditions. (The Hill, April 19 and Committee for a Responsible Federal Budget, April 20) 

X Date Approaches 

  • House Speaker Kevin McCarthy (R-CA) stated he aims to schedule a vote next week on the bill and begin negotiations with Democrats over raising the debt limit. McCarthy needs approval from 218 House members to pass the legislation, meaning he can only afford to lose four votes from his conference to pass it without Democratic support. (NBC News, April 19 and CBS News, April 18)
  • On Wednesday, the Problem Solvers Caucus—comprised of 32 moderate Democrats and 31 Republicans in the House—proposed their own plan to raise the debt ceiling. (Caucus news release and Axios, April 19)
  • The nonpartisan Congressional Budget Office estimated that Treasury will run out of money sometime between July and September, a point referred to as the “X date” (CBO analysis, Feb. | ABC News, April 15)
  • Mark Zandi, the chief economist at Moody’s Analytics testified last month before Congress that if no resolution is reached before mid-August, “a default would be a catastrophic blow to the already-fragile economy.” (Zandi’s written testimony, March 7) 

Congressional Hearings 

SEC Chairman Gary Gensler

  • A House Ways and Means Committee hearing on Wednesday focused on the Limit, Save, Grow Act’s proposal to strike the package of clean energy tax incentives that Democrats passed last year in their signature climate law, the Inflation Reduction Act (IRA). (Roundtable Weekly, Aug. 12, 2022) 
  • The Republicans’ proposed repeal is unlikely to pass the Senate’s Democratic majority and President Biden has stated he would veto if it ever reached his desk. A Joint Committee on Taxation (JCT) report summarized the IRA’s incentives—and The Roundtable has prepared fact sheets on the credits and deductions relevant to CRE.
  • The day before the hearing, Rep. Bill Pascrell (D-NJ), Ranking Member of the Ways and Means Subcommittee on Oversight, introduced the Ending Wall Street Tax Giveaway Act, which would eliminate the current tax treatment of carried interest. (Pascrell news release, April 18)
  • On Tuesday, a House Financial Services Committee hearing on “Oversight of the Securities and Exchange Commission” featured testimony from SEC Chairman Gary Gensler, above. A final SEC rule on climate reporting, which derives from a proposal for sweeping disclosures on Scope 3 GHG emissions, is anticipated this spring. (Roundtable Weekly, March 25, 2022 and Roundtable Comments on the SEC Proposal, June 10, 2022)
  • Gensler testified that the agency is not interested in capturing emissions from all sources and small businesses in a reporting company’s Scope 3 “value chain.” He stated, “We only oversee seven or eight thousand public companies … It is not a rule about the rest.” 

The importance of the nation’s supply chains to the economy was also addressed when Commerce Secretary Gina Raimondo testified before a House appropriations panel this week on the department’s 2024 budget. Secretary Raimondo will discuss national economic conditions during The Roundtable’s Spring Meeting next week in Washington. (Roundtable-level members only

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Real Estate Coalition Urges Congress to Raise Debt Limit ASAP

Capitol building

The Roundtable and 13 other national real estate organizations this week urged congressional leaders to raise the debt limit as soon as possible. The joint letter noted that the possibility of inaction could agitate the stability of U.S. financial markets, and policymakers should avoid roiling significant sectors of the American economy unnecessarily. (Coalition letter, March 29) 

August X Date 

  • The debt limit, which puts a statutory cap on the amount of debt outstanding and the ability to issue securities to fund the government’s obligations, was reached when the government hit its $31.4 trillion borrowing limit early this year. Treasury Secretary Janet Yellen informed House Speaker Kevin McCarthy in January that the U.S. would begin taking “extraordinary measures” to pay its bills. (Yellen letter, Jan. 19)
  • The so-called “X date,” when the U.S. will be unable to meet all its financial obligations, looms as policymakers search for consensus on raising the debt ceiling. (NPR, Feb. 17)
  • Mark Zandi, chief economist of Moody’s Analytics, told the House Budget Committee this week that Treasury’s extraordinary measures are likely to be exhausted this summer—and if the debt limit is not increased, the blow to the economy would be devastating. (Zandi’s written testimony, March 29)
  • “As we approach that so-called X date in mid-August, pressures in the financial system are going to build,” Zandi said. “And as we can see from recent events, given the banking crisis, the system is very fragile at this point-in-time and adding the debt limit as an issue for investors would be particularly inopportune.” 

Real Estate Markets Susceptible 

Debt limit

  • The real estate coalition’s letter this week emphasized that housing and real estate markets are particularly susceptible to any instability stemming from concern about the U.S. meeting its financial obligations, given that more than $10.3 trillion in mortgage debt is backed by the federal government through Fannie Mae, Freddie Mac, Ginnie Mae, and other federal agencies.
  • The 14 industry organizations informed Senate and House leaders that bipartisan negotiations should pursue solutions as part of the budget and appropriations process. “We have no collective preference for the manner or legislative vehicle you use to resolve this critical issue and protect the full faith and credit of the United States,” according to the joint letter

Policymakers & the Debt Ceiling 

  • Republicans have expressed interest in using some elements from a sprawling energy bill as part of debt ceiling negotiations. Certain measures in the bill, such as streamlining the permitting process for energy projects, have attracted support from both parties. (Bloomberg, March 30 andThe Hill, March 29)
  • Yesterday, the House of Representatives passed the bill, which is focused on fossil-fuel measures, with four Democrats joining all but one Republican. Senate Majority Leader Chuck Schumer (D-NY) has called the overall bill dead on arrival in the Senate, but has expressed interest in striking a deal on permitting reform. (Reuters and CBS News, March 30)
  • The chairman of the House Budget Committee, Rep. Jodey Arrington (R-TX) said this week that it could take months for Republicans to complete the budget process. “The more urgent matter is to address the debt ceiling and negotiate spending limitations and broader fiscal reforms in the process,” Arrington said. (Roll Call and Wall Street Journal, March 29) 

As Congress began its two-week recess yesterday, with no votes scheduled until April 17, the White House released fact sheets to show the impacts of Republican requests for spending limits. (White House, March 30) 

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Roundtable Issues Call-to-Action to Members Concerning the Debt Ceiling

U.S. Capitol from side with cloudsThe Real Estate Roundtable yesterday urged its membership—leaders of the nation’s top publicly held and privately owned real estate ownership, development, lending and management firms—to contact federal lawmakers to raise the nation’s debt ceiling. Treasury Secretary Janet Yellen said the U.S. reached the maximum amount it can legally borrow yesterday, and that “extraordinary measures” would allow the country to continue paying its bills, but only until early June. (NPR and Yellen letter to House Speaker Kevin McCarthy, Jan. 19)

Call-to-Action

  • In the all-member Call-to-Action, Roundtable Chair John Fish (Chairman and CEO, SUFFOLK) and Roundtable President and CEO Jeffrey DeBoer wrote, “We now believe the risk of a default on the federal debt in 2023 is a real and meaningful concern that must not be taken lightly.” Congress has faced this statutory limit on debt 78 times in the past, yet has always acted to increase the debt limit. The note expressed their concern that Congress will face more difficulty in reaching an agreement on the debt ceiling now amid a substantial increase in political acrimony.
  • Today, DeBoer said, “Some threats to the US economy are unavoidable, others are ones of our own making and entirely unnecessary. The potential for a default on the federal debt is a needless and inexcusable risk with potentially dire consequences for U.S. real estate, workers and retirees, and the entire economy. The full faith and credit of the United States government should not be open to negotiation.”
  • Federal Reserve economists believe a prolonged stand-off could cause private interest rates to rise sharply, create liquidity pressures, and severely impair financial markets. “As default risk rises, the impacts will be felt throughout the economy, but especially in borrowing-intensive industries such as real estate,” the Call-to-Action added.
  • The Roundtable note encourages its members to contact both policymakers in Congress and the White House to raise the debt ceiling soon.

Policymaking in the 118th Congress and significant challenges such as the debt ceiling will be discussed during The Roundtable’s State of the Industry Meeting next week in Washington, DC.

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118th Congress Faces Looming Debt Ceiling and Funding Deadlines

Janet Yellen testifying

Today, Treasury Secretary Janet Yellen notified Congress that the federal government is expected to reach its $31.4 trillion debt limit by Jan. 19, officially triggering the start of a potential standoff between House Republicans, the Democratic-controlled Senate, and the White House about how to increase the debt ceiling. (New York Times and Politico Playbook PM, Jan. 13)

Looming Standoff

  • Yellen wrote, “Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.” (Yellen letter, Jan. 13)
  • Yellen noted that while the Treasury will take steps to preserve cash, the government may only be able to pay its financial obligations until early June. Treasury’s “extraordinary measures” could include halting pension fund contributions and prematurely redeeming federal bonds. (New York Times, Jan. 13 | Committee for a Responsible Federal Budget, Oct. 28, 2022)
  • The 118th Congress will eventually need to raise the debt limit to avoid a first-ever national default and global recession. (Politico, Jan. 12)
  • Some Republicans have discussed achieving spending cuts by setting caps on discretionary government funding at FY 2022 levels. This approach would result in a cut of approximately $130 billion from current levels appropriated in the omnibus spending law enacted last month—a non-starter for Democrats. (The Hill, Jan. 10 | Roll Call,  Jan. 9 | Roundtable Weekly, Dec. 22)
  • Rep. Kevin McCarthy (R-CA) secured his new position as House Speaker on Jan. 7 by appeasing a small group of hardline Republican conservatives with concessions, which included unspecified spending cuts in exchange for raising the national debt ceiling. (Reuters, Jan. 7 and AP, Jan. 11)
  • White House officials are mounting an outreach campaign to freshman lawmakers and moderate Republicans in an attempt to attract enough votes to avoid a fiscal cliff vote over the debt ceiling. (Politico, Jan. 12)

Government Funding Deadline

Rep. French Hill

  • Another deadline on the financial horizon is Sept. 30, when funding for the federal fiscal year expires. A legislative standoff on spending priorities could lead policymakers to vote on a “Continuing Resolution (CR)” to fund the government programs at current levels or allow a partial government shutdown. (CQ, Dec. 29, 2022)
  • Rep. French Hill (R-AR), above, one of Speaker McCarthy’s allies who helped negotiate with the hardline GOP faction, said Republicans were seeking to design an automatic trigger for a CR in the event that the Senate does not act on House spending proposals.
  • Hill said, “It would be a way for all members of Congress to say, look, we want to fund our government, we want to rein in spending. But if the Senate doesn’t act in the right way, we’ve agreed on this CR that would be triggered by the lack of certain bills not being passed on Oct. 1.” (CQ, Jan. 9)

Rep. Hill will address policymaking in the 118th Congress and capital markets during The Roundtable’s State of the Industry Business Meeting on Jan. 24 in Washington.

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Congress Extends Government Funding Until February 18, Faces Debt Ceiling Deadline; Senators Begin Consideration of Build Back Better Act

Capitol from upper Pennsylvania Avenue

A Continuing Resolution (CR) that would fund the government until Feb. 18 passed the House yesterday and the Senate last night, sending the bill to President Biden for his signature to avoid a partial government shutdown at midnight. (CNBC, Dec. 2). Senate leaders this week also continued negotiations to extend the national debt ceiling to avoid default and began discussions about potential changes to the House-passed $1.7 trillion Build Back Better (BBB) Act. [Further Extending Government Funding Act (H.R. 6119) and section-by-section summary]

Debt Ceiling Looms

  • Treasury Secretary Janet Yellen and the Congressional Budget Office this week urged Congress to increase the debt ceiling as soon as possible to avoid a national default in December. (Bloomberg, Nov. 30)
  • Yellen testified Monday before the Senate Banking Committee about the need to increase the debt limit. She stated, “If we do not, we will eviscerate our current recovery. In a matter of days, the majority of Americans would suffer financial pain as critical payments, like Social Security checks and military paychecks, would not reach their bank accounts, and that would likely be followed by a deep recession.” (The Hill, Nov. 30 and Yellen testimony)
  • Senate Majority Leader Chuck Schumer (D-NY) and Senate Minority Leader Mitch McConnell (R-KY) expressed optimism this week about their discussions to raise the federal government’s $28.9 trillion debt limit soon. (Reuters, Nov. 30)

BBB Act & Tax Issues

House Ways and Means Chairman Richard Neal (D-MA)
  • House Ways and Means Chair Richard Neal (D-MA), above, on Wednesday stated that a vote on the BBB package may be pushed into next year, given the urgent agenda Congress faces this month. (BGov, Dec 1)
  • The House-passed BBB Act and its potential impact on the taxation of real estate was also the focus of a Nov. 30 report in Commercial Property Executive – “Tax Policy Largely Stays the Course for CRE Execs.” Roundtable President and CEO Jeffrey DeBoer was quoted in the article – “I think that there has been a clash between expectations and reality. Expectations were high because Biden won, he had a Democratic House, and the Senate was 50/50. But the reality is that none of these issues are easy.”
  • The current BBB bill – when compared to the President’s budget and the bill passed by the House Ways and Means Committee in September – reflects major progress on a number of tax issues important to real estate and prioritized by The Real Estate Roundtable.  (Roundtable Weekly, Oct. 29)
  • The current bill would not limit like-kind exchanges, increase the 20% capital gains tax, or cap eligibility for the 20% pass-through business income deduction.  It also does not include changes in the tax treatment of carried interest or repeal the step-up in basis of assets at death.  The key tax issues in the bill are addressed in a Roundtable comparison of the tax-related provisions in the BBB package. 

Green Energy Provisions

Bloomberg Center energy efficiency canopy
  • The Senate this week also began consideration of the BBB Act following the House’s passage of the multitrillion-dollar legislation on Nov. 19. Clean energy tax credits make up the most significant portion of the BBB Act’s climate policies.
  • Schumer and Senate Energy and Natural Resources Chair Joe Manchin (R-WV) met this week to discuss climate policies in the House package. E&E News reported, “Manchin said he is negotiating ‘adjustments’ to the energy and climate provisions of his party’s $1.7 trillion social spending bill, in what could be part of a larger suite of changes to the legislation as it moves through the Senate.”
  • The Roundtable on Nov. 16 sent a letter to congressional tax writers detailing five recommendations that would improve green energy tax provisions in the BBB Act affecting real estate.  (Roundtable Weekly, Nov. 19)
  • The letter’s recommendations, listed below, would increase and scale deployment of low- and zero-carbon technology in the nation’s commercial and multifamily building infrastructure.
  1. Clarify that “thermal energy storage systems” are eligible for incentives under the Section 48 Investment Tax Credit.
  2. Further revise the 30C tax credit to support EV chargers in the non-public, but widely used, parking lots and garages that serve America’s residential and business tenants who seek to conveniently “charge-up” while at home or at work.
  3. Better align the BBB Act with the Biden Administration’s long-term climate strategy – by providing accelerated depreciation and other incentives for heat pumps and other components that “electrify” commercial and multifamily buildings.
  4. Induce more “retrofits” of aging buildings by allowing taxpayers to claim the 179D deduction in the year high-efficiency equipment is placed in service.
  5. The inclusion of Davis-Bacon and apprenticeship hiring will seriously undermine climate goals – because the high costs to comply with these labor standards will more than offset the BBB Act’s “bonus rates” for clean energy projects. Congress should not hinge the “bonus rates” on unrelated labor issues that fail to accelerate achievement of GHG reduction strategies. 

Fiscal policy, the BBB Act and how it may affect tax and climate issues of importance to CRE will be topics for discussion at The Roundtable’s Jan. 25-26 State of the Industry Meeting in Washington, DC. 

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