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Stalemate or Cooperation?

Dec. 28, 2010
The mood of the 112th Congress may dictate real estate’s agenda

If you believe everything you heard in the hours immediately following the election, you may believe that the Republican Party can work in a spirit of partnership and cooperation with their colleagues on the other side of the aisle to do the will of the American people. If you kept vigilant for a few more hours, however, you would have noted how quickly that sentiment changed and partisanship resumed its well-established place in 21st century politics.

What does this mean for commercial real estate’s advocacy agenda? Will it be another two years of next-to-nothing, or will we start to see some real compromise? Will a floundering real estate industry, teetering on recovery, finally see some certainty on a myriad of tax issues, including capital gains and leasehold depreciation? Will Congress begin to understand that it’s only through the creation of this certainty that companies will once again begin to hire and make longer term financial commitments?

Throughout the 111th Congress (2009-2010), the Democrats essentially blocked the Republicans from participating in any meaningful bipartisan meetings and tried to run with their own agenda. This worked fairly effectively in the House, where they had a substantial majority and only needed a simple majority to pass legislation. However, in the Senate, it didn’t work at all, as 60 votes were needed to invoke cloture (limit debate and call for a vote), and with only 56 Democrats and 2 Independents, they were dependent on at least 2 Republicans – which didn’t often happen.

Despite the Republican gains, the outcome may not be much different this year. The House Republicans may have some success as their Democratic colleagues did last year, but the Senate can be expected to remain at an impasse.

Throughout the last session, many in Congress had hopes of enacting sweeping climate change legislation. That didn’t happen then, and it is even less likely to happen in the 112th. What we may see (and what BOMA hopes to see), is smaller, bite-size pieces of legislation focused on the issues which have some bipartisan agreement. BOMA’s message will be, "Let’s get back to energy fundamentals, which are all about benchmarking, access to data on which to make educated retrofit decisions, and access to financing and incentives to move forward on projects that make sense (and have positive ROI)."

Representing commercial real estate’s interests, BOMA plans to expend a large part of our political might working with policy makers – at all levels of government – to require utilities to make available whole building aggregate energy consumption data to building owners. This would solve an issue many building owners face in multi-tenant buildings with separately metered tenants: an inability to effectively benchmark.

As more and more cities and states are adopting or considering implementing mandatory benchmarking or mandatory disclosure requirements, it would be helpful to have the capability to comply.

The tax front remains quite muddled. At press time (early December), a lame duck session of Congress was underway, and several of real estate’s tax priorities remained in play. Extending a package of expiring tax provisions (which include the 15-year depreciation period for leasehold improvements) was considered doable, but even if an extension is passed before the 111th Congress adjourns, it’s likely to be only a short-term deal and will have to be addressed again soon. Similarly, Congress hopes to reach compromise on extending (or making permanent) the Bush tax cuts, but the likelihood is that anything that gets passed in 2010 will only be an extension.

And unfortunately, our biggest tax threat from 2009-2010 doesn’t look like it’s going to go away. We must and will continue to oppose any changes to current law on carried interest. It’s unclear if carried interest has any momentum in either body as a revenue raiser to offset the cost of some of the other pending legislative proposals, because the driving force was the soon-to-be minority House Democrats. But Congress will always be looking for revenue, even if the Republicans control one chamber.

No one really knows what to expect. But in the interest of good policy, let’s hope a spirit of compromise prevails. Our country is best served with a judicious legislature united in advancing thoughtful public policy, not one-party domination of the process. If both parties can’t come together to reach a compromise, then maybe we are better served with the status quo – which is what we very well may have for the next two years.

Karen Penafiel is vice president of advocacy for BOMA International. She can be reached at [email protected]. For more information on this and other topics, call BOMA International at (202) 408-2662 or visit www.boma.org.

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