2021 Public Policy Year in Review and 2022 Outlook

ICSC's office of Global Public Policy had a busy year advocating on behalf of the Marketplaces Industry in Washington, DC and in state legislatures.

“Coming off a tumultuous 2020, legislative activity in 2021 showed no signs of slowing down,” said ICSC Senior Vice President Betsy Laird. “Even with the pandemic and virtual committee sessions, legislators at the federal and state level stayed busy and there were numerous opportunities for ICSC GPP to make an impact on policy.”

Below is a brief synopsis and look ahead.

Federal

Freshman Outreach Program
Utilizing the strength of the breadth of ICSC membership, the Office of Global Public Policy kicked-off 2021 with a first-time program to introduce ICSC to newly elected federal officials in the House and Senate. Zoom calls were conducted with ICSC staff and members with 32 offices, representing 44% of the incoming policymakers. In 2022, ICSC will be conducting an open-seat candidate interview process in conjunction with the ICSC PAC to jump start the introduction and education of incoming members of Congress.

COVID Relief
Following Congressional approval of a second draw of Paycheck Protection Program (PPP) loans at the end of 2020, ICSC vigorously supported efforts to extend that program through the end of May. Ongoing discussions with the Small Business Administration (SBA) resulted in a streamlined PPP loan forgiveness process for small PPP borrowers and major enhancements to the low-interest Economic Injury Disaster Loan (EIDL) program.

Virtual Fly-In
The GPP team conducted a targeted Virtual Fly-In (VFI) focused on proposed tax changes that would have presented a material and negative impact on many ICSC members. The VFI took place over a two-week period in September with 80 congressional offices (members of the House and Senate tax writing committees) and included significant training and engagement from ICSC members. We were very pleased at the positive outcome, when our tax priorities were NOT included as pay-fors for the Build Back Better (BBB) package ultimately passed in the U. S. House.  

Tax Issues
ICSC lobbied actively and successfully throughout 2021 against tax increases that would have been detrimental to the Marketplaces Industry. Those increases were proposed by President Biden in April to help pay for his Build Back Better agenda. They included limiting like-kind exchanges (Sec 1031) to no more than $500,000 of gain, restricting the 20% pass-through deduction (Sec 199A), ending capital gains treatment of “the promote” or carried interest and taxing appreciated real estate assets at death by ending stepped-up basis for inherited assets. 

As mentioned above, all of these proposals were dropped from the BBB package approved by the House. However, they remain potential risks in 2022 as Democratic lawmakers consider how to recraft a package that can muster 50 democratic votes in the Senate.

Looking Ahead: ICSC is also working to reinstate the Employee Retention Tax Credit (ERTC) for the third quarter of 2021. The ERTC became law in 2020 to encourage employers to keep workers employed during the pandemic by providing up to $7,000 per employee per quarter. The credit was terminated three months early to help pay for the Bipartisan Infrastructure bill. While that decision made sense in the late spring when the bill was negotiated, many businesses and tenants need continued assistance to deal with the latest COVID variants. ICSC supports the bipartisan ERTC Reinstatement Act (H.R. 6161). A Senate companion bill is expected to be introduced in early February. Click here to support this effort. 

Adaptive Reuse
A proliferation of legislation has been introduced to redevelop retail, office and hotel properties into housing or other community-based solutions. Most relevant for ICSC is the introduction of H.R. 5041, the GREATER Revitalization of the Shopping Centers Act, to provide HUD Section 108 loan guarantees to local government groups seeking to reimagine grayfields into solutions for community priorities like affordable housing, transit-oriented development, tech hubs, schools or health care providers. ICSC has been central to helping to shape this legislation. 

Looking Ahead: In 2022 we will be working closely with the bill sponsor to create pilot program within the Section 108 program for grayfield redevelopment.

Organized Retail Crime
In 2021 ICSC joined a coalition led by the Retail Industry Leaders Association (RILA) promoting legislation at the state and federal levels to provide transparency for consumers and law enforcement to stop the online fencing of stolen goods on third-party marketplaces.

Other coalition partners include CVS, Rite Aid, Walgreens, Ulta, Dick’s Sporting Goods, JCPenney, Neiman Marcus, The Gap, Target, Home Depot and Lowe’s.

Looking Ahead: The coalition has secured sponsorship of S. 936/H.R. 5502, the INFORM Consumers Act, which is expected to be scheduled for a floor vote in Q1 2022. Additional efforts to curtail smash and grab operations may be possible, both at the federal and state level.

Pandemic Risk Insurance
Working in concert with Nareit, the Real Estate Roundtable (RER), the National Restaurant Association, National Retail Federation (NRF), plus events and entertainment groups, ICSC helped to form the Business Continuity Coalition to provide a forward-looking risk management tool for future pandemics. H.R. 5823, the Pandemic Risk Insurance Act, was introduced again in 2021 to provide a program similar to the Terrorism Risk Insurance Act. Due to the lack of significant market disruption and opposition from the major insurance trade groups, this legislation has not gained traction and does not have bipartisan support.

Looking Ahead: This year will be spent continuing to push for a proactive plan that provides for business continuity in a future pandemic. This could include H.R. 5823, another approach or a state level advocacy proposal.

Protecting Landowners’ Rights in Broadband Deployment
The Federal Communications Commission (FCC) continues to examine the rules regarding telecommunication access to serving multi-tenant environments. ICSC joined several other national real estate organizations in the comment process and separately provided a response to the Commission addressing allegations that certain shopping center operators are engaging in anti-competitive policies and procedures. ICSC strongly believes that a commercial multi-tenant property owner should have the right to know who is accessing their buildings to ensure physical safety, cyber safety and uphold relevant environmental standards associated with the property.

Looking Ahead: ICSC will continue to monitor this regulatory proceeding and react to the FCC’s next steps.

Cannabis and the SAFE Banking Act
The interest in cannabis retailers as tenants has grown within ICSC membership, but federal laws that classify it as the highest level of controlled substance create legal problems. Unfortunately, efforts to enact laws that would decriminalize or provide safeguards for banking and ancillary services for cannabis retailers continue to stall in Congress. 

ICSC does not have an official position on legalization, decriminalization or prosecution related to the use of cannabis products or illicit drugs. We have in the past supported legislation that reflects the growth in the marketplace of more than 35 states that have legalized cannabis, recreationally or medically.

Looking Ahead: The SAFE Banking Act likely has enough support to pass the Senate, but current leadership is pushing for full legalization and decriminalization, which does not have enough votes. The pathway for this issue will not improve if Republicans take back control of the Senate in 2022.

Waters of the U.S. (WOTUS) Rule
For the third time in three Administrations, the EPA and the Army Corps of Engineers are rewriting the rule governing the Waters of the United States (WOTUS) under the Clean Water Act. Adding to this uncertainty for real estate developers across the country, the Army Corps of Engineers has withdrawn all jurisdictional determinations made under the Trump Administration. 

Looking Ahead: In 2022 ICSC will engage in this rulemaking process through its membership in the Waters Advocacy Coalition (WAC), which represents nearly all the leading trade associations whose members are impacted by WOTUS. The goal is to help shape a reasonable new water regulation in this area, but the reality is the upcoming rule will undoubtedly be more burdensome than the Navigable Waters Protection Rule (NWPR).

PFAS Guidelines
ICSC is monitoring federal, state, and local guidelines against the use of poly- and perfluoroalkyl substances (PFAS). PFAS are widely used chemicals that do not naturally break down and are 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.

Looking Ahead: ICSC expects more states to set very low thresholds for PFAS. In the meantime, we will call on the EPA to designate PFOA and PFOS, two substances in the PFAS family, as hazardous substances under Superfund law.

State

E-fairness
In 2021 Florida and Missouri became the final two states to enact laws compelling out of state sellers to charge, collect and remit sales taxes on purchases made by in-state customers. These changes are the feather in the cap for e-fairness and complete the success of the 2018 U.S. Supreme Court ruling in Wayfair v. South Dakota. Most states have 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.  

Looking Ahead: With the significant strides in ecommerce shopping due to the pandemic and the accompanying revenue stream for states and localities, it is unlikely that e-fairness laws will be challenged.

California: Split Roll Ballot Initiative
Even though the split roll initiative known as Prop 15 was defeated in 2020, proponents of the tax increase are trying again and have submitted a new proposal to the Attorney General under the guise of the “Housing Affordability and Tax Cut Act of 2022.” 

The new measure would amend the California Constitution to increase the homeowner property tax exemption and more than double statewide property tax assessments on all properties with full cash values of $4 million or more. Properties with a value of more than $5 million will be assessed a “surcharge” of no less than 1.2% and no more than 1.4% of the full cash value of the property. Properties with a value of between $4 million and $5 million will also be assessed a surcharge of 1.2% percent divided by $1 million multiplied by the full cash value of the property minus $4 million.

Looking Ahead: Split roll 2022 was recently cleared for signature gathering and proponents have until May to collect the signatures required to qualify for the November ballot. Once again, ICSC and the California Business Property Association (CBPA) are working with business coalitions in opposition to the new tax effort.

Florida: Business Rent Tax
ICSC successfully helped paired the collection of online sales taxes in Florida with a 3.5% reduction of Florida’s Business Rent Tax. (5.5% to 2%, effective 2025, or upon replenishment of the unemployment compensation trust fund.) The bill was signed into law in April 2021 and will save commercial tenants an estimated $1.23 billion annually. ICSC had been a strong advocate for this change for a number of years.

Hawaii: Eviction Moratorium/Rental Deferment
Early in 2021 onerous legislation (S.B. 563/H.B. 581) was introduced in both legislative chambers that would have prohibited commercial landlords from any eviction action for a tenant unable to pay rent as a result of COVID-19. The legislation would also allow tenants to walk away from an existing lease if they were not able to reach an agreement with the landlord on modification of lease terms. The proposal would have shifted the financial burden from one business onto another and removed substantial basic contractual rights from those who happen to be in the business of leasing space. It strongly resembled a California pandemic relief bill that ICSC, CBPA and others defeated in 2020.

ICSC, along with BOMA, NAIOP and a strong coalition of property owners, successfully stopped this legislation as there was no action by the relevant Senate Judiciary committee. By rule, this legislation is still technically alive in the 2022 legislative session and has been remanded back to the same committee. It is unlikely to receive further consideration.  

Maryland: Personal Liability Provisions in Commercial Contracts
ICSC successfully negotiated a veto of Maryland H.B. 719 by Governor Larry Hogan. If enacted this legislation would have negated bargained-for personal liability provisions in commercial contracts. While the legislation was intended to provide relief to commercial tenants impacted by government mandated COVID closures, as passed by the legislature, it set a bad precedent for the state by treading into long established contract law. H.B. 719 prohibited enforcement of a personal liability clause if the commercial tenant was required to cease certain on-site services, or close to the public during specifically established dates of the pandemic. The ban on bringing an enforcement action would have remained effective until a state of emergency no longer existed, plus 180 days after that date.

ICSC argued that a better solution would contemplate more economic relief, not the approach taken by the legislature which was potentially unconstitutional. In mid-December 2021 the legislature ultimately acted to override the veto, however, it was after the state of emergency had been lifted by the Governor and had no negative impact to members prior to its expiration.  

New York: Landlords Duty to Mitigate Damages & Personal Liability Provisions
In 2021 legislation was introduced that would have required landlords to mitigate damages when commercial tenants vacated a premise even if it was prior to the expiration of the lease and in violation of the terms of the lease. ICSC successfully prevented the bill from advancing by meeting with legislators, issuing letters in opposition and engaging stakeholders to support our position. ICSC predicts the issue will return in 2022. 

ICSC also weighed in opposing a bill like Maryland’s that would have rendered unenforceable personal liability provisions. Because of our efforts, legislation did not advance.

For more information on the issues listed above please contact ICSC at gpp@icsc.com.