HOUSE-SENATE CONFERENCE UNDERWAY ON COMPREHENSIVE FINANCIAL REGULATORY REFORM BILL
PROPOSED AMENDMENT TO SENATE TAX “EXTENDERS” BILL WOULD CONTINUE ENERGY GRANTS PROGRAM, INCLUDE REITs
EPA CONSIDERING ACTION ON STORMWATER AND LEAD-BASED PAINT REGULATIONS; NAREIT SUPPORTS INDUSTRY EFFORTS EXPRESSING CONCERNS
For the first time since the Sarbanes-Oxley Act made its way through Congress in 2002, House and Senate negotiators are engaging in a formal conference process to sort out the differences between the comprehensive financial regulatory reform proposals that passed in each chamber. This process is playing out in a very public and formal way as negotiators seek to complete their work so the legislation can be passed and sent to the President prior to Independence Day.
NAREIT has been closely monitoring provisions in each proposal that would reform the over-the-counter derivatives market. From the beginning of this debate, NAREIT, with guidance from its Derivatives Reform Task Force, has supported new transparency requirements for all derivatives transactions, while also advocating for clear protections for derivatives "end users" from mandatory clearing or margin requirements. For more information on NAREIT's efforts, CLICK HERE.
Unfortunately for end users, the conferees are using the Senate proposal as a starting point, which, among other things, could significantly impact the ability of REITs and publicly-traded real estate companies to utilize low-cost derivatives to manage their exposure to risk. This is primarily because the Senate bill narrowly defines the type of businesses that can avail themselves of end user protections in a way that does not clearly include owners, operators or developers of commercial real estate.
This is different than the House approach, which would focus clearing and margin requirements on those entities whose derivatives transactions could pose risk to the broader financial system, while protecting non-systemic entities that rely on derivatives to hedge risk – regardless of their primary business activity. NAREIT and nine other real estate organizations have engaged with policymakers to encourage their support of the House language. To view a letter sent by the real estate organizations, including specific legislative remedies to further protect real estate end users, CLICK HERE.
Many policymakers have strongly supported the issues raised by end users. In particular, 43 members of the New Democrat Coalition, a group that was instrumental in crafting the balanced House bill, signed a letter to the Conference Committee urging them provide meaningful end user protections in the final bill. To view this letter, CLICK HERE.
The Conference Committee is expected to address the issue of derivatives later this week. NAREIT, both independently and in coordination with the Coalition for Derivatives End-Users, will continue to urge policymakers to come to a balanced compromise. If you would like to participate in this advocacy, please contact Kirk Freeman, Senior Director, Government Relations at firstname.lastname@example.org.
As the Senate continues to consider legislation to extend certain expiring tax provisions, Sen. Maria Cantwell (D-WA) and Sen. George LeMieux (R-FL) plan to offer an amendment to extend the expiring energy grants program authorized in last year’s economic stimulus law (Pub. L. 111-5) through 2012.
Included within the Cantwell/LeMieux amendment is language that is identical to the “Sustainable Property Grants Act,” legislation introduced in both the House (H.R. 4256) and the Senate (S. 3289), that will allow REITs to fully participate in the program. To read the text of the amendment, CLICK HERE.
NAREIT has been advocating the inclusion of similar language in legislation moving through the Congress since the beginning of the year. NAREIT is pleased these Senators recognize the importance of extending the energy grants program to encourage renewable energy technology, but also broadening the program to include a significant segment of the commercial real estate sector.
Even though this amendment has bipartisan support, it remains to be seen whether the Senate will consider and adopt it prior to final passage of the “extenders” legislation. NAREIT will continue to work with Sens. Cantwell and LeMieux to encourage other Senators to support the amendment should it be considered by the full Senate next week. To read a letter of support NAREIT sent to Sen. Cantwell, CLICK HERE.
The Environmental Protection Agency (EPA) is pursuing new regulations related to stormwater run-off and lead-based paint in commercial real estate. NAREIT has joined a coalition that includes The Real Estate Roundtable, the International Council of Shopping Centers, and the Building Owners and Managers Association, to express the industry’s concerns with these proposals.
In a departure from the agency’s historical regulation of stormwater run-off only from active construction sites, the EPA has expressed interest in expanding its regulatory reach to fully developed and operating properties. This could require significant retrofitting of existing commercial buildings and properties in order to obtain permits under the federal Clean Water Act (CWA).
As part of the initial rulemaking process, EPA has put forward a lengthy questionnaire that it plans to send to thousands of real estate owners and developers later this summer. Among other things, the questionnaire would request confidential information related to the recipients’ balance sheets, cash flows and project costs for previous stormwater projects. EPA indicates such information is necessary in order for the agency to craft the new rules, which it hopes to finalize by November 2012. To view the questionnaire drafted by EPA, CLICK HERE.
On June 9, NAREIT and its partner real estate organizations sent a letter to the EPA questioning the agency’s authority under the CWA pursue this regulation, and raising concerns about the questionnaire’s request for confidential information. To view the coalition’s letter, CLICK HERE. The coalition has also met with key Congressional staff to alert them to this issue.
The EPA is also pursuing a rulemaking that would regulate commercial building remodeling and renovation activities that may create hazards from lead-based paints. This would be the first time a rulemaking has been proposed to regulate lead-based paint in commercial buildings, and the EPA intends to use its existing residential lead paint rules as a model for this effort. The EPA hopes to have the rules targeted at exterior commercial building renovation in place by July 2013, and those focused on interior renovations in 2014. To view the EPA’s proposal, CLICK HERE.
NAREIT and its coalition partners have begun to voice concerns about this rulemaking proposal, and will work with legal experts to craft an appropriate response to the EPA’s rulemaking proposal.