In this issue: ADISA Advocacy Update | Public Policy Update | ADISA Resource

ADISA advocacy efforts continue to focus on the preservation of Section 1031 exchanges, the U.S. Department of Labor fiduciary rule, the U.S. Securities and Exchange Commission’s definition of an accredited investor, and the Protecting the Right to Organize Act of 2021.

1031s. ADISA has initiated outreach efforts to Members of Congress, including the Congressional Black Caucus, to educate them on the important impact like-kind exchanges have on local communities throughout the country. We will be meeting with Senator Alex Padilla (D-CA) next week and continue to schedule meetings with other first-term members. As part of our efforts, ADISA has been holding online training sessions for ADISA members to participate in outreach efforts.

ADISA opposes the Biden Administration’s proposal to limit 1031s. To view our policy statement on Section 1031 exchanges, please click here.

DOL Fiduciary Rule: We are monitoring signs at the DOL that it might seek to toughen the fiduciary rule’s approach to conflicts and disclosure, especially as compared to Regulation Best Interest. As noted below, some advisors are stepping back from rollover advice due to DOL concerns. So, too, some advisors remain concerned over compliance with the DOL’s final fiduciary exemption. ADISA will remain vigilant in following the DOL’s actions.

The PRO Act. The Biden Administration has made it clear that among its top priorities is passage of the PRO Act, which would invalidate state right-to-work laws and require companies to treat independent contractors as employees in most instances. As previously reported, the Biden Administration ordered the withdrawal of the independent contractor rule that the DOL adopted late in President Trump’s term, which made it harder to force employers to treat workers as employees. 

ADISA opposes the PRO Act. To view our policy statement on the PRO Act, please click here.

Accredited Investors. The SEC, under its new Chair Gary Gensler, may try to re-introduce the concept of indexing net worth or income requirements in the accredited investor definition. That would likely move the net worth calculation high enough to cut off a significant number of investors. ADISA will continue to monitor and engage on this issue.

Policy/Legislation

ADISA Executive Director Defends 1031 Like-Kind Exchanges: The DI Wire published commentary by ADISA Executive Director John Harrison pointing out that 1031 exchanges, established in 1921 and proposed for limitation by President Biden, are in fact a major source of tax revenues. “In truth, the 1031 exchange process generates a fair share of tax revenue for the U.S. Treasury. It also provides many additional benefits, including less debt and higher capital liquidity,” Harrison wrote. “The like-kind exchange is misunderstood. It offers a huge economic impact, adding $55 billion annually to the GDP and creating half a million jobs.”

Biden Backtracks on Infrastructure: The Wall Street Journal reports that President Biden walked back comments tying the fate of a roughly $1 trillion bipartisan infrastructure agreement to a separate, Democratic effort to pass a $6 trillion spending and tax increase plan, recommitting to the bipartisan deal after Republicans threatened to withdraw their support.

Some GOP Senators Feel Double Crossed: The Hill reports that Republican senators warned that they could drop their support for a bipartisan infrastructure framework amid growing GOP fury over President Biden's threat to link it to a Democratic-only bill, which Democrats hope to pass in the Senate with just 50 votes through budget reconciliation. Without 10 GOP senators, the smaller bipartisan infrastructure deal could face a filibuster. Senate GOP Leader Mitch McConnell (R-KY) said tax increases in the Democratic plan are a Republican red line and appealed to the Democratic leadership to support the bipartisan infrastructure bill as a stand-alone measure.

Pelosi Doubles Down on Two-Tracks: Democrat leaders in the United States House of Representatives and the United States Senate are still demanding that both infrastructure packages pass together. House Speaker Nancy Pelosi (D-CA) amplified her plans to link a bipartisan infrastructure agreement to a second package of Democratic tax increases and spending priorities, reports The Hill. In a closed-door meeting with her caucus in the Capitol, Pelosi said her initial strategy — to withhold a House infrastructure vote until the Senate passes a larger, partisan families plan — remains unchanged.

House May Wait for Senate on Budget: Roll Call reports that House Democrats may not take up their own budget blueprint next month and instead wait to see what the Senate can produce, according to Budget Chairman John Yarmuth. The Kentucky Democrat had planned to mark up a fiscal 2022 budget the week of July 12. However, he said after a caucus meeting Tuesday that party leaders hadn't decided yet whether they will have the votes to adopt a separate House budget resolution or if they need to wait to see what can get through the Senate. A budget resolution is needed to provide the instructions to relevant committees for drafting the massive filibuster-proof fiscal package to implement much of President Joe Biden's domestic agenda. Budget Chairman Bernie Sanders is trying to craft a state and local taxes deduction compromise to keep high-tax state Democrats on board. The bottom line: the strategy and timing behind a budget resolution and reconciliation package keep getting murkier.

Regulation

Some Advisors Stop Giving Rollover Advice Due To DOL Rule Complexities: Some RIAs are deciding not to provide investors with “rollover” retirement advice because of the complexity and expense of building technology that would satisfy the DOL fiduciary rule requirements, FA Magazine reports. The new rule, which goes into effect December 21, requires that advisors who recommend that an investor roll over their IRA or qualified plan into another vehicle much justify and explain the benefits, expenses and all conflicts of interest associated with the rollover, as well as benchmarking advisor compensation.

Supreme Court Upholds Eviction Moratorium: The Hill reports that the Supreme Court on Tuesday left intact a nationwide pause on evictions put in place amid the coronavirus pandemic. The 5-4 vote rejected an emergency request from a group of landlords asking the court to effectively end the Centers for Disease Control and Prevention's eviction moratorium, which is set to run through July. The landlord group had asked the justices to lift the stay on a ruling by a federal judge in Washington, D.C., that the moratorium amounted to an unlawful government overreach. Property owners said they have lost $13 billion each month because of the eviction freeze.

ADISA Resource: Industry Terms