In this issue: Advocacy Update | Public Policy Update | New Sub-Committee | Annual Conference Update | ADISA Resource: Strategic Partners

Congressional Meetings

ADISA continues to meet with members of Congress urging them to oppose President Biden’s proposal to limit Section 1031 exchanges. ADISA strongly opposes limits on 1031s and has been meeting with officials directly, in addition to a coordinated effort with the Real Estate Roundtable and other coalition member organizations, as we advocate to keep the 100-year-old like-kind exchange policy unchanged.

This week, ADISA met with staff from the offices of Rep. Lou Correa (D-CA-46), Rep. Vincente Gonzalez (D-TX-15), Rep. Sanford Bishop, Jr. (D-GA-2) and Rep. Jared Huffman (D-CA-2). Most members with whom ADISA has met support our perspective and agree that limiting 1031s, as the President has proposed, will cause severe economic disruption, increase the wealth gap and cost states, cities and municipalities hundreds of millions of dollars in lost transfer fees – all particularly ill-advised as the country continues to recover from the COVID-19 pandemic.

We want to thank ADISA members for their continued engagement on this issue, and their time joining ADISA staff to advocate with members of Congress. In particular, thanks to David Wilson (Equifinancial), Warren Thomas (ExchangeRight), Larry Sullivan (Passco Companies), Kirk Montgomery (Practus, LLP), John Isakson (Preferred Apartment Communities), Greg Mausz (Preferred Capital Securities), Bill Exeter (Exeter Co.), Dean Antonopoulos (Endeavor Investment Resources), Lee Iredell, Michael Underhill (Capital Innovations), and Mark Atchity (Cabin Securities) for sharing your stories with the offices of Congress. Doing so is one of the most meaningful ways we can impact decisions in Washington.

Infrastructure Bill & 1031 Amendment

This week, the U.S. Senate concluded the first step in the 2022 budget reconciliation process, introducing and passing a budget resolution on a strict party line vote of 50-49 (one Republican senator was absent). ADISA applauds Senator John Kennedy (R-LA) for his non-binding amendment to the $3.5 trillion budget outline, calling for no changes to be made to the treatment of like-kind exchanges in the U.S. tax code. Senator Kennedy’s amendment was just one of 23 amendments to pass.

The infrastructure bill is a bipartisan piece of legislation; the budget outline passed on a strict party-line basis and is a blueprint for Democrats to massively increase spending on social welfare entitlement programs. What’s next?

For the Senate, they begin work on reconciliation – the 12 Senate committees are currently developing the specific provisions to include in reconciliation with a September 15 deadline. In the House, there is a bit more contention – Democrats are divided on the size and focus of both items. Speaker of the House Nancy Pelosi stated that she will hold the bipartisan bill until after reconciliation; moderates, the Problem Solvers Caucus, want to move the bipartisan infrastructure bill forward now, while progressives, the Congressional Progressive Caucus, have said they will not approve that legislation until after reconciliation. As negotiations and discussions proceed, it’s clear that with a mere three-seat margin, the need for unity among House Democrats is crucial.

Policy/Legislation

Senate Passes Bipartisan Infrastructure Bill: The Wall Street Journal reports that the Senate passed a roughly $1 trillion infrastructure package with broad bipartisan support this week, advancing substantial federal investments in roads, bridges and rail. The vote was 69 to 30, with 19 Republicans joining all 50 Senate Democrats to pass the bill. The bill faces an uncertain House future as House Speaker Nancy Pelosi (D-CA) says the chamber wouldn’t take it up until it is coupled with a separate $3.5 trillion tax and spending increase budget plan, itself the subject of challenging negotiations that could take months.

Senate Democrats Pass Massive Tax and Spend Budget Outline: The Senate passed a $3.5 trillion budget blueprint early Wednesday by a 50-49 party-line vote, the first step in an arduous process designed to allow Democrats to push through a sweeping package of tax increases, education, healthcare, climate and other provisions without GOP support. The plan would offer universal prekindergarten, two free years of community college, and expanded Medicare to cover hearing, dental and vision care. Democrats are planning to raise taxes on corporations and individuals to partially cover the cost of the $3.5 trillion plan, which also calls for a federal paid leave benefit, a series of energy tax incentives, and a program to push the U.S. to receive 80% of its electricity from clean sources by 2030. Republicans have assailed the $3.5 trillion proposal, arguing its tax increases and expansive spending would increase inflation and harm the economy.

A dozen Senate committees will now debate details of the final reconciliation package, eyeing the week of Sept. 15 for a deadline to have the legislation completed. The bill is expected to include the PRO Act, which ADISA strongly opposes.

Senate Adopts Non-Binding 1031 Budget Outline Amendment: During its budget outline debate, the Senate agreed by voice vote to a non-binding amendment by Sen. John Kennedy (R-LA) which recommended that no changes be made to the treatment of like-kind exchanges in the U.S. tax code. “President Biden’s tax-and-spending binge would be a direct tax on the middle class, and he wants to make that load heavier by limiting tax deferrals through like-kind exchanges. Like-kind exchanges directly benefit Middle America by creating jobs and affordable housing. Congress should pursue economic policies that multiply opportunity and productivity,” said Kennedy on his website. 

ADISA strongly opposes President Biden’s plan to limit 1031 exchanges as part of the budget package. We encourage all ADISA members to continue their outreach to members of Congress in support of Section 1031 and like-kind exchanges.

House to Come Back Early for Budget Outline: The Hill reports that the House will interrupt its summer recess later this month to begin the process for passage of the Democrats' $3.5 trillion tax and spending plan. House Majority Leader Steny Hoyer (D-MD) announced in a letter to lawmakers on Tuesday that the chamber will return to session on Aug. 23 to consider the budget resolution. Centrist House Democrats have urged Speaker Nancy Pelosi (D-CA) to allow a swift vote on the bipartisan infrastructure legislation. But progressives are insisting that a vote on the bipartisan plan be delayed until their priorities are adequately addressed.

Senator Wyden Proposes Tax On Unrealized Gains: Bloomberg reports that Senate Finance Committee Chairman Ron Wyden is looking to overhaul how derivatives are taxed as Democrats begin crafting a giant spending bill funded in part by levies on American businesses and taxpayers. Wyden’s proposed legislation, which he has been refining for years, would require derivatives investors to pay tax annually on unrealized gains at income-tax rates; President Joe Biden has proposed boosting the top marginal rate to 39.6% from 37%. Investors would be able to deduct losses. Wyden’s legislation would upend longstanding rules that require many investors to only pay taxes when they sell their holdings. Some derivatives trades are currently eligible for the preferential 20% capital gains rate.

Regulation

DOL Rules on ESG Investments Land at OMB: ThinkAdvisor reports that the U.S. Department of Labor has sent its proposed rules related to environmental, social or governance (ESG) factors in retirement plan accounts to the Office of Management and Budget for review. The plan by the DOL’s Employee Benefits Security Administration seeks to either suspend, revise, or rescind agency rules that limited investments focused on ESG factors in retirement plan accounts and limited plan fiduciaries from voting in favor of climate-related shareholder proposals. OMB reviews typically take 90 days. Once the OMB approves the plan, the DOL will issue it for public comment. Under Biden, the DOL abandoned the Trump-era rules in March.

Board Diversity Rule Gets SEC Approval: The Wall Street Journal reports that Nasdaq Inc.’s push for greater diversity on corporate boards cleared a key hurdle, as regulators approved the exchange operator’s proposal to include gender and race in its listing rules. In an order released last week, the SEC agreed to Nasdaq’s proposed rule changes. Under the proposal, Nasdaq-listed companies would need to meet certain minimum targets for the gender and ethnic diversity of their boards or explain in writing why they aren’t doing so.

New ADISA Sub-Committee:

Impact Investing and ESG

This sub-committee will seek to educate ADISA’s alternative investment sector to help meet the increasing demand from their clients to align their capital with their passions or values and to serve as a trusted resource for stakeholders within this investment space and to further fair and transparent progress in the field.

More than 250 firms have already signed up to attend. Add your name to the list!

View the full list of attending companies, here.

Educational Tracks:

Portfolio Management/Products, led by Dustin Zachmeyer (Bluerock) 

Tax Treatment (1031 Like-Kind Exchanges, Opportunity Zones), led by Heidi Wheatley (Keystone National Properties) and Denise Kramer (Inland Real Estate Investment Corporation)

ESG, Impact Investing and Emerging Products, led by Taylor Garrett (Orchard Securities) and Jeff Shafer (CommonGood Capital)

Practice Management & Technology, led by Karen Templeton (Pinnacle Capital Securities) and Kevin Hull (Robert A. Stanger & Co.)

Fundamentals & Leading-Edge Discussions, led by Kara Howard (MBD Solutions) and Michael Underhill (Capital Innovations)

RIA Session, led by Rajeev Kotyan (Innovative Advisory Group) and Craig Covington (DAI Securities)

Broker-Dealer Session, led by Ann Moore (International Assets Advisory)

*Draft as of 8/13/2021

Click here to register!

Sponsors & Affiliates: Register by Thursday, Sept. 2, to receive reduced rates!

Associates: Register as soon as possible to ensure your room at The Wynn Las Vegas.

ADISA Resource: Strategic Partners