As we approach the end of 2015 – and with it, the adjournment of Congress for the year – it is appropriate to review the progress and state of NAIOP’s public policy agenda in our nation’s capital. In a divided government, with a Republican legislature and a Democratic presidential administration, moving forward on issues important to our members and our industry is a test of patience and energy. This is particularly true when even legislation which enjoys bipartisan support gets stuck in the quicksand of congressional politics, dragged down by what sometimes seems like abstract ideology disconnected from the lives and businesses of everyday Americans.
A unique form of frustration arises among public policy advocates when elected leaders across the board agree with your agenda (such as increasing transportation funding) and yet fail to move bills because of partisan competition or because they are holding out for concessions on unrelated matters. And in an age when almost any bad idea can get traction if it has broad populist appeal – for example, increasing taxes on carried interests to punish hedge funds – then you need to fight off attempts from all sides to attach these ideas to any legislation that could be enacted into law.
Despite this challenging atmosphere, NAIOP and its members will have achieved by the end of this year major policy advances, some of which have been on our agenda for years. Chief among these are:
- Tax Legislation – As of this writing, Congress is on a path to vote on far-reaching tax legislation that will achieve one of NAIOP’s long-standing policy goals – making certain temporary tax provisions important to commercial real estate a permanent fixture of tax law. Most important among these are the provision for 15-year qualified leasehold improvement depreciation, a top NAIOP agenda item. In addition, we will have achieved longer-term extensions (five years) for New Markets Tax Credits and for bonus depreciation. Coupled with two-year extensions on other provisions, including the energy-efficient commercial building tax deduction, this tax legislation will be a major victory for the industry.
- Renewal of TRIA – Last year, Congress failed to renew the Terrorism Risk Insurance Act (TRIA), which provided a federal backstop to private insurers, enabling them to provide terrorism coverage to commercial real estate developers and others. Without TRIA, insurance coverage for damage from terrorism could have dried up, threatening the financing for real estate development. NAIOP argued the threat of terrorism remained a very real one, and renewal of TRIA was an urgent necessity. Congress passed a long-term renewal in January. Unfortunately, the recent events in Paris and San Bernardino showed that our concerns were indeed well-founded. If TRIA had not been in place, commercial real estate insurance markets would now be in turmoil.
- Long-Term Transportation Reauthorization – Major infrastructure and transportation projects often need long lead times and require municipalities and local government to have a predictable source of funding before they can undertake them. However, federal transportation programs, funded by the Highway Trust Fund, have routinely been renewed only on a short-term basis. In fact, Congress had passed more than 30 short-term extensions before agreeing to a $305 billion, five-year reauthorization bill that NAIOP strongly supported. The success of commercial real estate projects depends heavily on infrastructure investments and viable connectivity strategies that incorporate upgrading roads, bridges, ports, and improvements in freight mobility. A long-term reauthorization of transportation programs has been a top NAIOP priority for several years.
- Waters of the United States (“WOTUS”) Regulation – The Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers, compelled by a Supreme Court decision, issued a final regulation defining what constitutes “waters of the United States” or “WOTUS” for purposes of exerting jurisdiction under the Clean Water Act. NAIOP repeatedly met with EPA officials and worked with them to include specific clarifications and exemptions embedded in the rule for practices and features of commercial real estate development (such as storm water systems, ditches, erosional features, etc.). Litigation in U.S. Appeals Courts has put a temporary stop to EPA’s implementation of the rule. However, even if EPA’s regulatory powers are upheld, NAIOP’s positive changes to EPA’s WOTUS regulation will help safeguard its members from many of the adverse impacts the original rule would have had on commercial real estate.
- Energy Legislation – The House of Representatives passed energy legislation, which included NAIOP-supported language on building codes. For years, many in Congress had tried to mandate arbitrary and unrealistic energy efficiency targets for commercial buildings. The House-passed bill included, among other things, language that would require any building codes advanced by the Department of Energy to be cost-effective, having no more than a 10-year payback for developers to recover the initial investment. Similar language has been included in a Senate energy bill, which has already moved out of committee and is awaiting a final vote.
These victories, coupled with what did not happen in Congress – such as a carried interest tax increase or elimination of Section 1031 like-kind exchanges – will provide NAIOP and its members in the commercial real estate industry with some truly remarkable successes on the public policy front. As we enter the presidential election year of 2016, our ability to advance our agenda in 2015 puts NAIOP and its members in a strong position to build upon and continue our effective advocacy on behalf of our industry.