2017 Legislative & Political Update. Aquiles Suarez, Vice President for Government Affairs, NAIOP Alex Ford, Director of Federal Affairs, NAIOP

Transcription

1 2017 Legislative & Political Update Aquiles Suarez, Vice President for Government Affairs, NAIOP Alex Ford, Director of Federal Affairs, NAIOP

2 Aquiles Suarez VP for Government Affairs NAIOP Alex Ford Director of Federal Affairs NAIOP 5

3 Tax Reform 6

4 President Reagan signing the Tax Reform Act of 1986 into law 7

5 House Blueprint Broaden the base, lower the rate Most credits, deductions on the chopping block Rate cuts for corporations, pass-throughs, individual filers Interest Deductibility & Depreciation Full Expensing Border-Adjustment Tax Shift from Worldwide Territorial 8

6 The Big Six Mitch McConnell - Senate Majority Leader Paul Ryan - Speaker of the House Kevin Brady - Ways & Means Chairman Orrin Hatch - Finance Committee Chairman Steve Mnuchin Treasury Secretary Gary Cohn Director, National Economic Council Debate over: Revenue neutrality? Permanent vs temporary? Retroactive? Top rates? Taxation of partnerships, pass-throughs? 9

7 GOP Framework 10

8 GOP Framework Category Current Law GOP Framework Income Tax Seven brackets: 10, 15, 25, 28, 33, 35, 39.6% Three brackets: 12, 25, 35% (possible fourth) Standard Deduction $6,350 single, $12,700 MFJ $12,000 single, $24,000 MFJ (Personal exemption eliminated) AMT Applied to certain high-income Eliminated earners Estate tax Applied to single filers w/ estates Eliminated valued at > $5.5m Business Top rate of 35% Top rate of 20%; new 25% passthrough rate Deductions Numerous LIHTC, mortgage, charitable preserved; further decisions left to committees 11

9 GOP Framework Additional Details Business Full expensing with 5-year sunset Structures exempt Special pass-through rate of 25% Interest expense deduction limited (partially eliminated for C corps, unclear for others) Individual 35% individual rate (w/ suggestion that committees consider 4 th bracket for highest-income earners) State and Local Tax Deduction eliminated (for now!) 12

10 GOP Framework Questions for NAIOP Members Carried Interest? Capital gains? Pass-through rate for small and family-owned businesses Interest deduction: small business revenue threshold? Fate of Sec LKEs Interest deductibility? New Markets Tax Credits/Historic Tax Credits Transition Rules? 13

11 GOP Tax Reform Timeline Consensus framework released week of September 25th House and Senate to approve a final budget resolution by mid- October (allowing for reconciliation process ) Brady would release a Chairman s Mark a first draft of the detailed tax reform plan late October/early November Ways & Means Committee markup of the bill Senate Finance Committee action on a bill - November House & Senate Floor votes November/December POTUS signature before the end of the year 14

12 Challenging Road Ahead for Tax Reform Failed ACA Repeal + BAT Elimination = $2 Trillion 15

13 Challenging Road Ahead for Tax Reform Condensed timeline: House end of October/early November Passage end of 2017, early

14 Challenging Road Ahead for Tax Reform 17

15 Concerns for NAIOP Members Key provisions: Carried interest: business income or salary? Sec Like-Kind Exchange: elimination or possible $ level limitations Interest Deductibility: only C corps? Pass through rate: small and family-owned businesses? Full expensing not extended to structures: Rationale to eliminate like-kind exchanges diminished Open to more realistic depreciation schedules for structures (instead of 39-year for buildings, which is too long) 18

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17 Infrastructure 20

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19 Proposals Trump: $1 Trillion ($200B in tax incentives to spur $800B in private investment) Senate Dems: $1 Trillion (Direct federal spending) Shuster: Asset Recycling, P3s Senate EPW: Regulatory Reform 22

20 Roadblocks Pushback from Democrats Pushback from Republicans (Freedom Caucus opposition to cost) Infrastructure Advisory Council disbanded 23

21 Roadblocks Pushback from Trump? 24

22 Trump drops plan to attract private sector infrastructure investment, will instead rely on direct federal funding Trump s original infrastructure proposal Trump s new infrastructure plan P 3 Trump aimed to harness market forces to attract $167 billion in equity investment from the private sector to fund his $1 trillion plan This form of financing lent itself to increased investment in mature, revenue-based infrastructure assets, such as toll roads, which offer a chance of high returns with relatively low risk In January, Senate Democrats unveiled their own $1 trillion infrastructure proposal which relied on direct federal funding. At the time, it was only seen as a starting point for negotiations with Pres. Trump The administration aims to pay for infrastructure upgrades through direct federal spending by paying for projects with new tax revenue or by taking on debt. When asked about a public-private approach a White House official mentioned that there are legitimate questions about the viability of this approach Trump also indicated he aims for states and localities to chip in considerably for infrastructure upgrades Trump s change of heart could lead to increased cooperation with Democrats as his new proposals mirror many aspects of the Senate Democrats plan When will we see an infrastructure bill? Despite being an integral piece of Trump s plan for his first 100 days in office, infrastructure has not been a focus for Trump s presidency so far Congress has said they plan to address infrastructure after health care and tax reform which likely means a bill won t be crafted until late 2018 or [Pres. Trump] emphatically rejected what everybody assumed was his position relative to financing infrastructure He dismissed it categorically and said it doesn t work. - Rep. Brian Higgins (D-NY) 25

23 Capital & Credit 26

24 Capital & Credit HVCRE Loan Issue H.R Clarifying Commercial Real Estate Loans Rep. Robert Pittenger (R-NC-9) 27

25 Regulatory Reform 28

26 Case Study: Infrastructure Regulatory Hurdles: Endangered Species Act National Environmental Policy Act Buy American Act Permitting EA / EIS WOTUS Circular A-11 (Just to name a few) 29

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28 Regulations a Key Focus of Trump Administration One-In, Two-Out Congressional Review Act Executive Orders 31

29 Regulations a Key Focus of Trump Administration 32

30 Regulations a Key Focus of Trump Administration So far Trump has Repealed: 469 Halted: 109 Delayed: 282 Obama-era regulations 33

31 Waters of the US (WOTUS) 45 Years in the Making 1972: Clean Water Act signed into law 1985: US v Riverside (expanded scope of CWA) 1986: First definition of "Waters of the United States" established 2001: Solid Waste Agency v Army Corps (expanded scope of CWA) 2015 (August): WOTUS rule goes into effect (finalized May 2015, w/ three-month 2014: EPA, USACE release proposed rule for public comment 2011: WOTUS rulemaking beings 2006: Rapanos v US (narrowed scope of CWA) 2015 (October): 6th Circuit Court issues stay 2017 (February): Trump issues EO calling for review 2017 (March): SCOTUS agrees to hear case (re: legality of lower court stay) 2017 (July): EPA begins two-step process to repeal, replace WOTUS 34

32 2015 WOTUS Rule (THIS IS NOT SIMPLIFICATION) 35

33 WOTUS Going Forward Kennedy ( Significant Nexus ) vs Scalia ( Navigable Water ) Two-step: repeal and replace Guiding principles Scalia definition Simplicity Certainty 36

34 Do-Nothing Congress? Not so Fast. ADA Reform Brownfields Reauthorization Energy Star Funding 37

35 Q A 38