2022 Public Policy Year in Review and 2023 Outlook

ICSC's office of Global Public Policy has been actively advocating on behalf of the Marketplaces Industry in Washington, DC and in state legislatures.

“In spite of the distraction of political noise surrounding the 2022 elections, the 117th Congress and state legislatures, speaking broadly, will go down for what they thankfully didn’t do – raise taxes on the majority of ICSC’s members – and what they did do, enact legislation representing first steps in the fight against organized retail crime (ORC),” said ICSC Senior Vice President Betsy Laird. “Looking ahead to 2023, the crystal ball is murky, but much work remains at all levels on ORC, which is hugely important to our industry, marketplace employees, our customers and the communities where they do business.”

Below is a brief synopsis and look ahead.

FEDERAL

Organized Retail Crime (ORC)
The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers (INFORM Consumers) Act was signed into law in December 2022 by President Biden as part of the Fiscal Year (FY) 2023 omnibus appropriations bill. The legislation, which was supported and driven by ICSC, will combat the online sale of stolen, counterfeit and dangerous consumer products by ensuring transparency of high-volume third-party sellers in online retail marketplaces.

Looking ahead: In the 118th Congress, ICSC is advocating for the reintroduction and enactment of the Combating Organized Retail Crime Act. Originally introduced in September 2022, this important legislation would enable the aggregation and prosecution of offenses across jurisdictional lines and redefine “facilities of interstate commerce” to include use of cellular devices and interstate highways as a criminal offense.  

Tax Issues
The Inflation Reduction Act was signed into law in August 2022 and enacted many of President Biden’s signature policy priorities. President Biden had originally proposed several tax increases to help pay for these changes that would have unfairly singled out the Marketplaces Industry. Those included limitations on like-kind exchanges, ending capital gains treatment for carried interest or “the promote,” taxing appreciated assets at death and eliminating the step-up in basis for inherited assets. ICSC successfully blocked all these tax increases from the final law.

Looking ahead: ICSC will continue to oppose changes to how carried interest, like-kind exchanges and stepped-up basis are handled. In addition, ICSC supports legislation to make the 20% Pass-Through Deduction (Sec 199 A) permanent, such as the Main Street Tax Certainty Act, introduced in the last Congress. Other issues include supporting efforts to extend the 2021 business interest limitation limit to benefit many real estate businesses that are facing climbing interest rates, advocating on behalf of the Opportunity Zones Transparency, Extension and Improvements Act and the Revitalizing Downtowns Act, while also opposing over a dozen technical changes to long-standing partnership tax law proposed as part of Senator Ron Wyden’s (D-OR) “Pass-Through Reform Discussion Draft.”

WOTUS
In December 2022, the Environmental Protection Agency (EPA) and Army Corps of Engineers (Corps) released the pre-publication version of a final rule revising the definition of Waters of the U.S. (WOTUS) applicable to all Clean Water Act (CWA) programs. The final rule repeals the Navigable Waters Protection Rule (NWPR) and codifies a definition that the agencies claim is “generally consistent with the pre-2015 regulatory regime.” The final rule defines “significantly affect” to mean “a material influence on the chemical, physical, or biological integrity of waters;” the rule does not define or quantify what constitutes “relatively permanent” flow. The rule merely says “relatively permanent” includes features that have flowing or standing water year-round or continuously during certain times of the year. In 2022, the Supreme Court announced that it would hear a case (Sackett v. Environmental Protection Agency) that addresses the scope of the CWA’s jurisdiction.

Looking ahead: ICSC has been an active party in the history of WOTUS cases, submitting amicus briefs in both Rapanos v. United States (2005) and Sackett when they first came before the Supreme Court and will likely submit additional briefs in the future. A decision on Sackett by the Supreme Court is expected in Spring 2023; the new rule is expected to go into effect on March 20, 2023 if the Supreme Court does not act first.

Grayfield Redevelopment
The Fiscal Year 2023 omnibus appropriations package included language encouraging the Department of Housing and Urban Development (HUD) to use existing funds “for the redevelopment of shopping malls.” The inclusion of this text indicates that there is bipartisan appreciation for the challenges redevelopment efforts face and the need for a federal role in addressing them. Further, ICSC members and local governments now have explicit language from Congress they can point to when pursuing money from HUD to help with redevelopment projects. 

Looking ahead: ICSC is seeking support for and passage of the GREATER Revitalization of Shopping Centers Act. The bill would establish a grant program at HUD to provide funding to local governments to assist with redevelopment efforts at underutilized shopping malls across the country. 

STATE

Organized Retail Crime (ORC)
Thirteen states – Arkansas, Alabama, California, Colorado, Georgia, Illinois, Iowa, Louisiana, Michigan, North Carolina, Ohio, Oklahoma and Pennsylvania – have enacted similar versions of the federal “INFORM Consumers Act” over the last two years. In addition, 11 states — Arizona, California, Colorado, Connecticut, Florida, Illinois, Michigan, New Mexico, Oregon, Utah and Washington — have established an ORC task force within the Attorneys General offices to investigate and prosecute suspects involved in organized retail crimes.

Looking ahead: ICSC is continuing to monitor and support efforts in the states to enact ORC legislation and task force creation.

Taxes
In 2022, tax policy was defined by states' strong revenue environment: flush budgets meant that lawmakers were far more focused on cutting taxes than raising them. This revenue influx was due to three years of historic tax collection growth and savings. However, it’s inevitable that state revenue will normalize – recent levels of year-over-year growth are not sustainable – but an economic contraction may bring actual revenue declines as well.

Last year, a tax standing case, DCH Auto v. Town of Mamaroneck, in which ICSC and a variety of retailers and municipal groups filed amicus briefs, was decided favorably by the New York state Court of Appeals. In a unanimous 7-0 ruling, the Court of Appeals reversed DCH Auto and established binding precedent clarifying that a net tenant who is contractually obligated to pay real estate taxes has the statutory right to file the administrative complaint. Lawyers involved with the case called it “a complete victory for net tenants whose existing tax certiorari proceedings had been placed at serious risk by the erroneous notion that only the property owner could file the administrative complaint.”

In Arizona, a provision in Arizona Senate Bill 1266 to end the use of the SLBR (Straight Line Building Residual) accounting method to value income producing properties was removed from the legislation. The author agreed to offer the amendment to his original bill following meetings with ICSC and other stakeholders. ICSC also submitted a letter of opposition to the Senate Finance Committee outlining concerns with the legislation.

Looking ahead: California and New York are the two states most likely to consider tax increases in the 2023 legislative session because of their lackluster budget forecasts and democratic trifectas. Tax policy observers have also pointed to Oregon, Maryland, and Massachusetts as other states to closely monitor this year. Meanwhile, Republican state lawmakers are also expected to continue their efforts to reduce, flatten or eliminate the personal income tax this year, as Iowa, Georgia, Mississippi, and West Virginia have all debated doing in the last few years. Given the fiscal realities of the personal income tax, the more states cut, the more likely it is that they will need to raise tax revenues from elsewhere to make up the difference, which could mean expanding the sales tax base to new business services.

Electric Vehicle Charging Stations
In 2022, legislation was introduced in seven states — California, Colorado, Maryland, Massachusetts, Minnesota, New York and Rhode Island — that explicitly requires the installation of EV charging stations at newly constructed service stations and commercial building parking spaces. In Maryland, a bill (MD HB 835) introduced in 2022 would require newly built retail service stations to include electric charging stations. Similarly, in New York, lawmakers introduced legislation (NY AB 8409 & NY SB 6692) in 2021 that would require an equal number or greater number of electric vehicle charging stations to be installed at gasoline stations that are installing new gas dispensing nozzles. A Colorado bill (CO HB 1218) that would require new and existing commercial buildings to include EV parking spots was ultimately vetoed by the Governor citing concerns that the bill would lead to higher housing costs for occupants in commercial rental properties.

Looking ahead: While there is rightfully a lot of focus on how states will spend federal infrastructure dollars on EV charging, private stakeholders like convenience stores, retailers, electric utilities and others will end up owning the bulk of the cost for building out the nation’s charging network. In addition, efforts to decrease the cost of retrofitting commercial buildings to be able to handle the added demand for EV charging will be another issue states and cities will need to address as more EVs enter roadways. The shift away from gas-powered vehicles will no doubt play a critical role in shaping how commercial and residential properties look and feel.

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