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March 2010
REIT CEOs Meet Policymakers on Capitol Hill - WLF 2010 Recap
The 2010 Washington Leadership Forum (WLF) was held on Feb. 23 and 24 in Washington, D.C., with 30 REIT CEOs participating in this year’s activities. WLF provides an opportunity for REIT executives to meet with key policymakers in Congress and the Administration to discuss the latest developments in the industry and NAREIT’s legislative agenda for the upcoming year. This year, WLF participants attended a record number of 40 congressional meetings, including 28 in the House and 12 in the Senate.
WLF attendees discussed three primary issues with lawmakers. First, they requested support for additional non-U.S. equity capital investments in commercial real estate through modifications to the Foreign Investment in Real Property Tax Act (FIRPTA). Second, WLF participants encouraged Members of Congress to make energy tax credits and grants more accessible and workable for REITs. Third, attendees educated lawmakers on the need to preserve real estate companies’ ability to manage risk by accessing reasonably priced and customized OTC derivative products. Finally, executives from mortgage REITs made presentations to Members of the Senate Banking Committee and the House Financial Services Committee on their role in providing liquidity to the commercial real estate marketplace. CLICK HERE to view a special WLF edition of Capitol Report that highlights the activities and congressional meetings at the 2010 WLF.
NAREIT appreciates the special effort made by participants in this year’s WLF, and encourages all NAREIT companies to plan on attending next year’s Washington Leadership Forum to be held in Washington, D.C., on Feb. 22 and 23, 2011.
FIRPTA Reform Effort Picks Up Momentum
With ongoing difficulties in commercial real estate debt markets, there is growing concern that traditional loans and commercial mortgage-backed securitization may not fully address the refinancing needed for the approximately $400 billion of commercial real estate debt matures in each of 2010 and 2011. And, with declines in property values and more stringent lender requirements, new loans may not fully cover maturing debt.
WLF participants raised these concerns in their meetings on Capitol Hill and called on lawmakers to remove unnecessary barriers to foreign investment in U.S. real estate as one way to bridge this equity gap. NAREIT continues to be engaged in an effort to amend the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) to end the punitive tax treatment of foreign equity investments in domestic REITs and other real estate companies.
One proposal to amend FIRPTA was introduced on Jan. 27, 2010, by Rep. Joseph Crowley (D-NY), with co-sponsors Rep. Melissa Bean (D-IL) and Rep. Patrick Tiberi (R-OH). For more information on H.R. 4539, the Real Estate Revitalization Act of 2010 (RERA), CLICK HERE to read the Jan. 28, 2010, edition of FirstBrief. This proposal and the wider effort to reform FIRPTA have gained momentum in both the House and Senate, in part due to the efforts of WLF participants, who helped focus attention on this issue. For example, after meeting with REIT executives, Rep. Linda Sanchez (D-CA) agreed to join as a cosponsor of RERA.
NAREIT continues to work with Rep. Crowley and other interested policymakers to further refine workable FIRPTA reform proposals.
Bill Allowing REITs to Benefit from Energy Incentives Gains Support
NAREIT continues to pursue legislation in the 111th Congress to enable REITs to fully benefit from a variety of federal tax incentives for investments in renewable energy and energy efficiency. This subject was one of the primary issues discussed in congressional meetings at this year’s WLF.
As a result of meetings with REIT executives, Reps. Joseph Crowley (D-NY), Danny Davis (D-IL) and John Lewis (D-GA), all members of the House Ways and Means Committee, cosponsored H.R. 4256, the “Sustainable Property Grants Act of 2009,” introduced by Rep. Linda Sanchez (D-CA). This bill would allow REITs to receive grants made in lieu of tax credits for qualifying investments in renewable energy projects that were enacted as part of the “American Recovery and Reinvestment Act of 2009” (Pub. L. 111-5). Additionally, Sen. Ben Cardin (D-MD), a member of the Senate Environment and Public Works Committee, expressed to several REIT executives his intention to introduce companion legislation in the U.S. Senate that is identical to H.R. 4256. NAREIT expects this measure will be introduced soon with bipartisan support. When Sen. Cardin introduces his proposal, NAREIT will ask for your help in requesting support for the Cardin bill from the Senators representing the states in which your company is headquartered and/or in which it operates.
WLF attendees also advocated for H.R. 4599, the “Renewable Energy Expansion Act of 2010,” introduced by Rep. Earl Blumenauer (D-OR), that would essentially convert the Recovery Act Grants, which expire at the end of this year, into refundable tax credits for investments entered into before Jan. 1, 2013. NAREIT and Rep. Sanchez have worked with Rep. Blumenauer to make REITs eligible for the proposed credit without regard to the dividends paid deduction. CLICK HERE for more information on both H.R. 4256 and H.R. 4599.
In meetings with Sen. Olympia Snowe (R-ME) and the staff of Sen. Jeff Bingaman (D-NM), WLF attendees encouraged these lawmakers to modify S. 1637, their proposal to enhance the deduction for energy efficient commercial buildings and extend energy efficient home credits to apartments, so that it is more effective for REITs. Specifically, NAREIT supports harmonizing the energy efficient buildings deduction for tax and earnings and profits purposes and allowing a REIT to elect an economically equivalent deduction for apartments and senior living facilities in place of the existing energy efficient home credit.
Derivatives Reform Remains on Senate Agenda
Against the backdrop of ongoing bipartisan negotiations on the details of a comprehensive financial regulatory reform proposal, 2010 WLF participants discussed with lawmakers the ways in which real estate companies use derivatives products to manage business risk.
NAREIT staff, with guidance from the members of the NAREIT Derivatives Reform Task Force, have been working with the Coalition for Derivatives End-Users to encourage lawmakers to protect the ability of businesses to use derivatives to manage risk, such as variable interest rate exposure, without being required to tie up working capital to satisfy mark-to-market margin requirements. CLICK HERE for more information on this issue and NAREIT's efforts.
For the past month, Banking Committee Chairman Chris Dodd (D-CT) has been working closely with Sen. Bob Corker (R-TN) to develop a bipartisan and comprehensive reform package. While these conversations are expected to continue, Dodd has announced his intention to begin formal committee consideration of a new proposal during the week of Mar. 22 – with or without Republican support.
At the same time, Sen. Jack Reed (D-RI) and Sen. Judd Gregg (R-NH) have continued their work to find bipartisan approach to derivatives reform for the Banking Committee. Chairman Blanche Lincoln (D-AR) and Ranking Member Saxby Chambliss (R-GA) of the Senate Agriculture Committee have also been negotiating their own bipartisan derivatives reform proposal. It remains to be seen how these proposals will address the concerns of “end-users,” and whether the broader effort will result in an agreement that can earn the 60 votes necessary for passage on the Senate floor.
NAREIT will continue to work with policymakers on financial regulatory reform issues important to REITs and publicly traded real estate companies. If you or your company would like to participate in this effort, please contact Kirk Freeman at kfreeman@nareit.com or 202-739-9415.
Gavel Changes Hands at the Ways and Means Committee
Facing ongoing investigations into allegations of ethical misconduct, Rep. Charlie Rangel (D-NY) announced he was temporarily leaving his post as Chairman of the House Ways and Means Committee on Mar. 3. Political observers watched an inside-the-beltway drama unfold as Democratic Leadership and Ways and Means Democrats determined the path forward for the powerful Committee, which has jurisdiction over tax and trade policy, as well as Medicare and Social Security.
Initially, the chairman’s gavel was passed to Rep. Pete Stark (D-CA), the panel’s second ranking Democrat. The following day, after a meeting with Speaker Pelosi, the Committee announced that Stark was stepping aside and Rep. Sander Levin (D-MI), the panel’s third ranking Democrat was appointed chairman.
By following the seniority system, the Democrats avoided a prolonged and divisive intraparty fight. However, while it is possible that Rangel could resume the Chairmanship pending the outcome of additional ethics committee investigations, it appears likely that several Committee members will vie to be the panel’s top ranked Democrat (either as Chairman or Ranking Member) when the 112th Congress convenes in Jan. 2011. Likely candidates include Levin and Reps. John Lewis (D-GA) and Richard Neal (D-MA).
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