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February 12, 2010
Washington Leadership Forum 2010 – REIT CEOs "Hike the Hill"
All NAREIT member CEOs are invited to participate in the 2010 Washington Leadership Forum (WLF), scheduled for Feb. 23 and 24. WLF brings REIT executives from across the country together to meet with key policymakers in Congress and the Administration to discuss the latest developments in our industry and NAREIT's legislative agenda for the upcoming year. If you have not done so already, please encourage your CEO to attend WLF to help promote your company and the industry within the halls of Congress.
This year's WLF includes a number of special guests and events. Alan Sloan, Senior Editor-at-Large for Fortune magazine and a weekly contributor to Public Radio International's Marketplace, will speak at the board meeting. Later that afternoon, several NAREIT executives have joined with REITPAC, NAREIT's political action committee, to host an event in support of the campaign of Rep. Richard E. Neal (D-MA), a senior member of the House Ways and Means Committee and co-chairman of the Congressional Real Estate Caucus. All WLF attendees are invited to the Board meeting and all NAREIT members are encouraged to contribute to the fundraiser.
The WLF dinner will include featured guest Peggy Noonan, a columnist for The Wall Street Journal, a best selling author of seven books on American politics, history and culture, and a former White House assistant to President Ronald Reagan and chief speechwriter for George H.W. Bush for his presidential campaigns. Also during dinner, NAREIT will present its 2009 Small Investor Empowerment Award to Rep. Pete Stark (D-CA).
On Wednesday, Feb. 24, after breakfast remarks from Senate Majority Whip Richard Durbin (D-IL), REIT executives will meet with members of the House and the Senate to update legislators on the state of the industry and on NAREIT's 2010 legislative priorities. WLF is an important part of NAREIT's efforts on Capitol Hill and we look forward to your company's participation.
Bill Introduced to Enable Additional Foreign Equity Investments in U.S. Real Estate
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.
Increased foreign investment in U.S. real estate is viewed as one way to bridge this equity gap. NAREIT continues to support legislative solutions that would remove barriers to foreign investment that were established by the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).
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). To read the Jan. 28, 2010, FirstBrief with more information on H.R. 4539, the Real Estate Revitalization Act of 2010 (RERA), CLICK HERE.
NAREIT supports RERA as one of many possible constructive steps to reform FIRPTA.
Congress Considers Measures Allowing REITs to Benefit from Renewable Energy and Energy Efficiency Incentives
NAREIT continues to pursue legislation to enable REITs to fully benefit from a variety of federal tax incentives for investments in renewable energy and energy efficiency.
In particular, NAREIT supports 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). We urge you to reach out to the Congressmen representing your company's headquarters and the districts in which your company operates to ask them to co-sponsor this bill. For the complete list of co-sponsors to date, CLICK HERE.
Rep. Sanchez has also worked with Rep. Earl Blumenauer (D-OR) to craft legislation, H.R. 4599, the Renewable Energy Expansion Act of 2010, 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, and placed into service by a specified date determined by the relevant property type. NAREIT and Rep. Sanchez have worked with Rep. Blumenauer to include clarification in his bill that would make REITs eligible for the proposed credit without regard to the dividends paid deduction. For more information on the bills introduced by Reps. Sanchez and Blumenauer, CLICK HERE.
NAREIT also continues to work with Sens. Olympia Snowe (R-ME), Jeff Bingaman (D-NM) and Diane Feinstein (D-CA), to determine how REITs could fully utilize S. 1637, their proposal to enhance the deduction for energy efficient commercial buildings and extend energy efficient home credits to apartments. Specifically, NAREIT has recommended both 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.
NAREIT will pursue these and other legislative solutions and is hopeful that these proposals will be considered as part of upcoming legislation to spur job growth and other domestic investments.
Senate Banking Committee Expected to Act Soon on Financial Regulatory Reform
The Senate Banking Committee is expected to formally consider a comprehensive package of financial regulatory reform proposals in the coming weeks. Among other things, this effort will attempt to address systemic risk, increase consumer protections, impose new regulations on the over-the-counter (OTC) derivatives market, and provide new oversight over the credit rating agencies, investment advisers and private pools of capital.
After hitting a roadblock in negotiations last year, Committee Chairman Chris Dodd (D-CT) and Ranking Member Richard Shelby (R-AL) tasked bipartisan working groups to find agreement on the various proposals. While the bipartisan groups have not fully completed their work, Chairman Dodd has instructed his staff to draft a comprehensive bill for Committee consideration by the end of February. On Feb. 11 it was announced that Sen. Bob Corker (R-TN), a member of the Banking Committee, is working with Chairman Dodd in this effort. This recent development may help Democratic leadership find the 60 votes they will need to pass legislation on the Senate floor.
NAREIT staff, with guidance from the members of the NAREIT Derivatives Reform Task Force, continues to work with the Coalition for Derivatives End-Users to maintain 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 calls. For more information on this issue and NAREIT's efforts, CLICK HERE.
While the Coalition for Derivatives End-Users successfully advocated for a number of protections in the bill that the House passed in December 2009, Senate consideration will present its own unique challenges. The Coalition continues to engage both the Senate Banking Committee and the Agriculture Committee, which share jurisdiction over derivatives legislation. To read a letter sent by the Coalition to every member of the Senate, which was signed by 176 companies and trade associations, CLICK HERE.
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.
"Check-the-Box" Change for Non-U.S. Subsidiaries Not Included in Obama Administration's Budget Proposal
NAREIT is pleased to report that the Obama Administration's Fiscal Year 2011 budget proposal, released on Feb.1, 2010, does not contain a change to "check-the-box" (CTB) rules that currently allow companies to disregard for tax purposes their wholly-owned non-U.S. corporate subsidiaries. This is a departure from the Obama Administration's first budget submission for Fiscal Year 2010, which would have ended the application of the Clinton Administration CTB regulations for most wholly-owned foreign subsidiaries.
The Administration's earlier position was based on a concern that CTB rules were being used inappropriately to defer foreign income. However, the proposal raised significant issues for the REIT industry because it could have affected a REIT's tax qualification notwithstanding that REITs that elect to disregard their foreign subsidiaries for tax purposes generally do so to allow for current pass-through to shareholders of foreign earned income and to maintain compliance with the REIT rules that prohibit the ownership of more than 10% of another corporation.
NAREIT has worked independently to educate lawmakers and the Administration about the specific REIT concerns about the CTB proposal, and as part of a coalition of businesses that argued that it should only be considered in the context of larger international tax reform proposals. To read the Feb. 1, 2010, FirstBrief with more information about the proposal and NAREIT's efforts, CLICK HERE.
Obama Budget Plan Again Proposes Changes to TRIA
The Obama Administration has again proposed revisions to the Terrorism Risk Insurance Act, or TRIA (Pub. L. 107-297) that would decrease the potential federal share of compensation that would result from an act of terrorism. Specifically, the Administration has proposed eliminating TRIA coverage for acts of domestic terrorism. It also proposes unspecified increases in 2011 and 2013 to the insurer deductible, the insurer's co-payment, and the $100 million event trigger amount for Federal payments. Additionally, the proposal recommends a reduction to post-event recoupment payments to 100%, and allowing insurers additional time to remit their surcharges to Treasury. To view the proposal as contained in the Obama Administration's Fiscal Year 2011 Budget proposal, CLICK HERE.
NAREIT believes the Obama Administration's proposal would result in higher terrorism insurance premiums to the commercial real estate industry, and that it would be very difficult to obtain coverage against domestic terrorism despite the Administration's assertions to the contrary. When this proposal was included in the Obama Administration's Fiscal Year 2010 Budget proposal, it received no support from Congress and it did not receive further consideration. NAREIT and its partners in the Coalition to Insure Against Terrorism (CIAT) have already received indications from key policymakers that they expect the same result this year.
NAREIT and CIAT strongly supported the 2007 legislation that extended TRIA through 2014 and made critical policy changes to stabilize terrorism insurance. NAREIT also successfully argued for the inclusion of coverage for domestic terrorism. NAREIT will continue to closely monitor any proposed modifications to TRIA.
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