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In December 2019, a year ahead of the 2020 deadline, Congress passed a 7-year reauthorization of the Terrorism Risk Insurance Program. ICSC is an established member of the Coalition to Insure Against Terrorism (CIAT), a coordinated group of policyholders advocating for a long-term reauthorization of the program. Created in the years following the 9/11 attacks, TRIA was designed to maximize private sector participation in covering terrorism risk, while providing a federal backstop to ensure that the economy is not paralyzed in the wake of truly catastrophic events. ICSC is very pleased that Congress and the Administration have enacted the reauthorization, providing, among other things, certainty in the marketplace for property owners.
The Office of Global Public Policy published Strong Infrastructure Drives Retail Success: The Link Between Infrastructure Investment and the Retail Real Estate Industry. The purpose of the paper is to provide ICSC-driven thought-leadership related to an important and enduring policy issue impacting the retail real estate industry and the communities it serves. The ICSC white paper focuses on practical strategies for making progress on infrastructure and was crafted to provide ICSC members with a tool to educate community stakeholders about the industry’s significant contributions to infrastructure and improve the environment to partner with public officials in the development process. The report cites two general priorities: restoring and modernizing federal infrastructure funding—especially in the area of public-private partnerships—and streamlining permits to make infrastructure funding more efficient.
2020 Outlook: It is difficult to see a pathway for major infrastructure legislation as originally envisioned by the Trump Administration, but there is hope that a narrower bipartisan reauthorization of the surface transportation act will emerge. This legislation could provide opportunities to further streamline overlapping permitting and environmental review processes, increase funding and improve opportunities for transit-oriented development. In the meantime, states and local governments continue to find ways to improve infrastructure development.
ICSC has continued to provide input and comments to the U.S. Treasury Department as it writes guidance/regulations to implement the tax reform law, the Tax Cuts and Jobs Act (TCJA). ICSC weighed in with specific comments on the interest deduction limitation, Opportunity Zones, and proposed reporting requirements for pass-through entities.
As well, ICSC is working to restore the tax exemption for “contributions to capital,” which was repealed in TCJA. These contributions included land, grants, or proceeds from Tax Increment Financing (TIF) made by a local government to encourage economic development. Legislation has been introduced in the Senate (S. 2942) and ICSC is working with our allies to introduce a House bill in 2020.
2020 Outlook: A carryover issue remains with the “qualified improvement property” (QIP) for businesses. A drafting error in tax reform lengthened the depreciation period for certain property improvements to 39 years, not 15 years. This drafting mistake affects shopping center owners and tenants who make updates to the components of their buildings. ICSC supports bipartisan legislation (S. 803/H.R. 1869) that would correct the error retroactively to the passage of TCJA.
Democratic Presidential candidates have proposed several changes that would negatively impact our industry, including higher tax rates for capital gains and ending carried interest. ICSC will continue to build relationships with the tax-writing committees and key Members of Congress to have strong advocates in place regardless of the outcome of the 2020 elections.
The Opportunity Zone program was created by the 2017 tax reform law to spur investment into distressed communities. ICSC was a supporter of these provisions and GPP organized member content including a standing room-only panel at RECon to discuss the benefits and pitfalls of the opportunity zone program. ICSC submitted feedback on the initial proposed guidance. The final Treasury guidance released December 2019 adopted many of ICSC’s recommendations.
2020 Outlook: ICSC will seek further clarifications from Treasury on outstanding issues and we may see legislation requiring further reporting. Additional educational events on this topic are planned for upcoming conferences.
Congress is moving legislation to increase the reporting of “beneficial ownership” in small corporations and LLCs. The proposed legislation aims to address a perceived loophole in current money laundering laws that allow criminals to use U.S. incorporation flexibility to create shell entities. While supporting the purpose of this effort, ICSC believes that the onerous administration, privacy concerns, and significant liability associated with these small business reporting requirements could be problematic for many ICSC members.
2020 Outlook: The U.S. House of Representatives has passed legislation and there are several strong champions pushing to enact similar reporting laws in the Senate.
As a result of the U.S. Supreme Court ruling in Wayfair v. South Dakota, nearly every state has implemented legislation requiring online retailers to collect and remit sales taxes. Most have used a minimum threshold standard similar to South Dakota and several states have also instituted marketplace facilitator laws to ease implementation to out-of-state vendors.
2020 Outlook: Florida and Missouri still need to make policy changes related to implementation of Wayfair. Additionally, the opposition to remote sales tax collection is laying the groundwork to dispute the Wayfair decision in states that have strayed from the South Dakota model encouraged in the Supreme Court ruling.
The Federal Communications Commission (FCC) is undertaking a rulemaking related to competition in broadband deployment in serving multi-tenant environments. In the fall of 2019 ICSC joined several other national real estate organizations in the comment process and continues to engage to rebut allegations made by one particular telecommunications company that certain shopping center operators are engaging in anti-competitive policies and procedures. We strongly believe that a commercial multi-tenant property owner should have the right to know who is accessing their buildings and control areas to ensure physical safety, cyber safety and uphold relevant environmental standards associated with the property.
2020 Outlook: GPP has arranged FCC meetings with our members in January. We expect proposed regulations in Q1 2020.
In September 2019, the U.S. House passed the Secure and Fair Enforcement (SAFE) Banking Act, legislation that would give cannabis businesses access to banking and financial services. The bill, which passed in a 321-103 vote, would shield banks from federal prosecution for serving cannabis retailers and their landlords in states where the drug is legal. However, the federal prohibition on the sale of marijuana remains. The move by some states to permit the sale of cannabis has created public safety concerns because, without access to bank accounts, cannabis businesses have been forced to transact in cash, making them a target for criminals and producing challenges between landlords and their tenants. ICSC supported passage of the SAFE Banking Act because the protections for ancillary businesses are seen as critical for retail landlords considering leasing space to tenants operating in compliance with federal and state laws governing the emerging legalized cannabis and cannabidiol (CBD) market.
ICSC does not have an official position on legalization, decriminalization or prosecution related to the use of cannabis products or illicit drugs. Our support of H.R. 1595 reflects growth in the marketplace associated with numerous states’ efforts to legalize cannabis, both recreationally and medically, and the avoidable challenges associated with the unresolved liability to financial institutions and other ancillary businesses related to the broad authority of the Controlled Substances Act.
2020 Outlook: The SAFE Banking Act or similar legislation faces an uncertain future in the U.S. Senate, with Senator Mike Crapo of Idaho, Chairman of the Senate Banking Committee, signaling concern.
EPA and the Army Corps of Engineers are rewriting the Waters of the United States (WOTUS) rule that existed prior to the 2015 Rule—ending a regulatory patchwork that created uncertainty to real estate developers across the United States. The 2015 WOTUS Rule was officially repealed in September 2019 as part of a two-step rulemaking process to define the scope of WOTUS that are regulated under CWA.
2020 Outlook: The draft rule, which is expected to be finalized this Spring, provides regulatory certainty as to the definition of WOTUS following years of litigation surrounding the 2015 Rule. The proposed definition would replace the approach in the 2015 Rule and the pre-2015 regulations. ICSC has provided input throughout the rulemaking process and is supportive of this outcome.
ICSC is monitoring federal, state, and local guidelines against the use of poly- and perfluoroalkyl substances (PFAS). PFAS are chemicals that do not naturally break down and often used in car wash, dry cleaning and fire suppression materials, and can cause adverse health effects. A hazardous designation for every PFAS chemical could seriously complicate site redevelopment opportunities.
2020 Outlook: The U.S. Senate and House of Representatives have each passed legislation to address the use of PFAS chemicals, and some local and state governments are investing in cleanup and writing new guidelines limiting the substances. EPA is also likely to designate PFOA and PFOS, two substances in the PFAS family, as hazardous substances under Superfund law.
Fifteen site visits were completed across the country as the ICSC Global Public Policy team pushed to grow its site visit program. Site visits are an increasingly positive way to educate legislators on the important role shopping centers play in their local communities, highlight key policy issues and encourage personal relationships with local business owners. The visits to ICSC member properties take many forms, from general tours to ribbon cuttings and town hall meetings.
2020 Outlook: As the ICSC Office of Global Public Policy pivots to a more integrated structure, the site visit program will be incorporated into the 2020 Strategic Fly-Out program and is an option to connect ICSC members with their elected policymakers.
The ICSC Key Contacts Program, combined with the ICSC PAC, remain essential tools for ICSC GPP. The Key Contacts Program continues to grow in size and in efficacy. With nearly 250 Key Contact relationships established since the program's inception and an increased grassroots network that has also developed, ICSC has strengthened its ability to reach legislators at the grassroots level. In the current state of Capitol Hill politics, that capability will continue to prove to be an essential asset. ICSC's grassroots effort has become a fully integrated component of the public policy mission, generating GPP awareness, PAC contributions, Strategic Leadership Summit (SLS) attendance and general advocacy.
ICSC is preparing for the “Schools and Communities First” California statewide referendum on the November ballot. Simply put, the measure, if passed, will erode the tax certainty created by Proposition 13. ICSC strongly opposes this effort and believes the ballot initiative would have the opposite effect of the referendum’s stated goal of helping schools and communities. The measure would instead harm California’s economy, hurt local businesses, reduce jobs and increase costs for consumers and property owners.
This referendum would dismantle Proposition 13, which is considered to be a key driver for investment in California. Passed in 1978, Proposition 13 limits property tax increases on both residential and commercial property to no more than 2% per year. The value of the property is based on its purchase price and reset after a change in ownership. The proposed ballot initiative would radically increase the property tax burden of retail and other small business owners by creating a “split roll,” with one set of taxes for residential property owners and another for certain business properties.
The measure, if passed, would require immediate reassessment of all commercial, industrial and retail properties, with regular reassessments every three years. In addition to paying more in taxes because of the new assessment, the outcome of the referendum would create vast uncertainty about the level of commercial property tax rates going forward.
The proposed tax change would be particularly harmful to small retailers and family-owned businesses, most of which rent the property where they operate. In many cases the increase in costs will be passed down to tenants and then on to consumers. Consumers will face higher costs for food, clothing, and other essential products. Brick-and-mortar businesses that might be struggling or with tight margins may have no choice but to close, leading to fewer job opportunities in our local communities.
The upcoming referendum would increase taxes by another $11 billion, despite the state running a $22 billion budget surplus.
ICSC is part of a coalition fighting this initiative. We have a strategy in place to educate more of our membership and equip them to 1) assess the impact 2) communicate their concerns and 3) engage in the fight. Staff will also redeploy GPP resources as necessary to engage on this issue.
Efforts continue in Tallahassee to lower the business rent tax. The tax will go from 5.7% to 5.5% at the beginning of 2020 and legislation is being considered to cut another .5% from this tax.
ICSC is watching a proposal from Gov. J. B. Pritzker that would change the state's individual income tax system from the current flat rate to a progressive scale, which would impose increasingly higher tax rates on higher-earning individuals or businesses.
More states will be looking at various regulatory issues and policy implications around cannabis legalization and its role in a market economy. Traditional commercial laws and customs need to reflect the changes in the marketplace as state grapple with tax, law enforcement, employment law, healthcare and other areas as well as some states efforts to expunge past convictions for possession. Revenue allocation will also be considered.