On Friday, December 6th, the IRS/Treasury delivered to the White House’s Office of Management and Budget (OMB) , approximately 500+ pages of final regulations for Opportunity Zones. Hey now!
Read more on our new Opportunity Zones blog.
Philadelphia Passes Mandatory Building Energy Efficiency Tune-Up Bill
Philadelphia’s City Council unanimously passed a bill requiring owners of non-residential commercial buildings larger than 50,000 square feet to perform regular building tune-ups to improve their energy efficiency performance.
This policy marks Philadelphia’s first mandate regarding building energy performance improvements and is intended to help meet Mayor Jim Kenney’s clean energy goals to reduce citywide carbon emissions 80% by 2050.
The Bill requires small low- or no-cost adjustments to existing building energy systems and controls that improve their energy efficiency performance. According to the Institute for Market Transformation (“IMT”), these minor tweaks on average result in 10-15% annual energy savings, more comfortable tenants, and less equipment failure issues down the road.
Philadelphia’s new law builds upon its prior 2012 mandatory energy benchmarking policy and program. The 2012 benchmarking law requires building owners to measure and publicly report their yearly energy usage using Energy Star’s Portfolio Manager (a free tool available from the EPA).
Since making a building more energy efficient requires professionals to work directly in that building, energy efficiency jobs typically lead to higher local employment, as these jobs tend to be locally-based jobs that cannot really be outsourced.
Following Seattle, Philadelphia is the 2nd city in the U.S. to enact a building tune-up policy, and are several other key big cities have taken similar action through laws such as retro-commissioning or energy audit requirements, including Atlanta, Boston, and Los Angeles.
Per IMT, a few local jurisdictions are going even further by enacting building performance standards to reduce carbon emissions and waste. The New York City and Washington, DC policies that were passed earlier in 2019 are some of the most ambitious climate actions cities have taken to date, requiring building owners to achieve a certain level of performance that is set by the cities, with sizable fines for those who do not comply.
As cities account for a high percentage of nationwide greenhouse gas emissions, cutting the energy use from their buildings will meaningfully contribute to reducing our national carbon footprint.
To date, only a few cities have actually mandated building energy performance improvements. Philadelphia, has now taken this step forward.
From the Land of OZ: House Legislation Would Establish OZ Reporting Framework and Penalties; Senate Bill Would Limit Application of OZs
While impeachment discussions continue to garnering most of the headlines, Representatives Ron Kind, D-Wis., Mike Kelly, R-Pa., and Terri Sewell, D-Ala., introduced legislation in the House to establish a reporting framework, disclosure requirements and a penalty structure for qualified opportunity funds (QOFs).
Read more on our new Opportunity Zones blog.
Climate Change viewed as a Major Problem in NJ according to a recent Stockton University poll – Brad A. Molotsky, Duane Morris, LLP
According to a Stockton University poll released earlier this week, 2/3 of New Jersey residents believe climate change is a crisis and almost 75% believe it is affecting New Jersey.
Per Stockton’s press release, “the results show climate change is a concern to people all over New Jersey and not just those who live along the Jersey shore,” said John Froonjian, interim director of the William J. Hughes Center for Public Policy at Stockton, who presented an overview of the results at Coast Day at Stockton Atlantic City on Oct. 13.
As reported in Bisnow, among those who believe climate change is currently affecting NJ, more than 75% cited rising sea level, earth warming, harming or changing the ocean, extreme weather, and worsening pollution as major problems they are concerned about.
Beach erosion was cited by 70% as a major problem, while harm to farming was mentioned by 68%, flooding by 66%, and health effects by 57%.
More than half of respondents (56%) believe government could or should do more, and 31% say the government response is totally inadequate.
Per the poll, views did vary along party lines. Democrats (92%) and independents (64%) were more likely to see climate change as a crisis or major problem than Republicans (35%). Women (72%) were also more likely to view it as a crisis or major problem than men (62%).
The results also showed while young people are the most concerned about the issue, concern cuts across age, racial, ethnic, economic, gender and geographic lines. Almost 80% of respondents ages 18-29 see climate changes as a crisis or a major problem. That percentage drops to under 70% for those over 65.
We will continue to monitor trends and thinking in ESG and climate change and report back. If you have any questions, please do not hesitate to contact me at bamolotsky@duanemorris.com and I will direct your question accordingly.
-Brad A. Molotsky, Esq., LEED AP – O+M
CA does NOT elect to conform to Federal Opportunity Zone program for CA property – Brad A. Molotsky, Duane Morris LLP
Sept. 12, 2019—The California state legislature adjourns tomorrow for the rest of 2019 without considering opportunity zones (OZ) state conformity legislation.
While 38 other states have followed federal form and allow for the waiver/elimination of capital gains on the sale of qualified property after 10 years in those states, California is NOT one of them.
The deadline to introduce legislation for consideration in the 2019 legislature was Sept. 10.
The next chance for the California state legislature to address OZ conformity will be when it reconvenes in January 2020.
If you have any OZ questions or comments, please let us know. bamolotsky@duanemorris.com
New Markets Tax Credits – Application process and key dates announced by the CDFI – Brad A. Molotsky, Duane Morris
Earlier today, September 4, 2019, the Community Development Financial Institutions (CDFI) Fund announced the opening of the calendar year 2019 allocation round of the new markets tax credit (NMTC).
For those who participate in the New Markets arena, applications are due Oct. 28, 2019.
The CDFI Fund anticipates announcing 2019 NMTC awards in summer 2020.
If of interest to you, the NMTC program application, a notice of allocation availability, an introduction to the NMTC program, an Awards Management Information navigation guide, a frequently asked questions guide, and an application roadmap presentation are all available on line.
Copies of these materials can be found at www.newmarketscredits.com. If you have any questions, please do not hesitate to call or contact us – bamolotsky@duanemorris.com
NJEDA launches Opportunity Zone Challenge Program – Brad A. Molotsky, Esq.
On July 16th, the New Jersey Economic Development Authority (NJEDA) launched its previously announced Opportunity Zone Challenge Program. The Challenge Program is a competitive $500,000 grant program aimed at supporting community efforts to attract investments in NJ Opportunity Zones. Grants awarded through the program will fund municipal and county-level financial and technical planning around Opportunity Zone (OZ) economic development.
The OZ program is a federal incentive program which was part of the 2018 Tax Act that enables investors to re-deploy capital gains into low-income areas (which are the areas targeted by the designated Opportunity Zones) via the use of a Qualified Opportunity Zone fund (QOF). These Qualified Opportunity Zone funds or QOFs may be self-directed and self-certified. Capital gains placed into these QOFs must then be invested into real estate or a qualified business within applicable opportunity zones that exist within all 50 states in the US.
New Jersey has 169 separate Opportunity Zones which span 75 municipalities across all 21 NJ counties.
According to NJEDA, the Challenge Program is intended to encourage and assist communities in developing specific action plans to guide their pursuit of Opportunity Zone–based investments. The Challenge Program will award 5 grants of up to $100,000 each to select municipal or county governments or municipal partnerships of 2 to 5 municipalities whose applications demonstrate a clear strategic plan to build investment capacity in their applicable Opportunity Zones. The Challenge Program grants are open to all 75 NJ municipalities and 21 counties.
As part of the application process, the applicants are required to designate at least one strategic partner whose external expertise will be used to achieve the Challenge Program’s goals.
Our team is available to answer applicable questions about the Opportunity Zone program and the Challenge Program. Brad A. Molotsky, Esq. (bamolotsky@duanemorris.com)
Opportunity Zones – Additional States Continue to Join the Growing List of Places (39 States in All) Following Federal Form – Brad A. Molotsky, Esq.
Busy times continue in the Opportunity Zone world now that we have gotten past the clarion call of 2018 partnership rollovers into Qualified Opportunity Funds and Qualified Opportunity Zone Businesses that occurred on or before June 28, 2019. In our little corner of the world, deals are getting closed and new engagements happening, in particular on the business side of the ledger and some on the community impact side as well. Interesting and exciting stuff.
Based on my conversations with friends and colleagues at KPMG (thanks team for your continued excellent efforts) regarding the various states and their conformity with the federal OZ program – as of July 14th, 39 states for corporations and 33 states for individuals have elected to follow form with Pennsylvania being the latest to join the hit parade as of last week:
For Corporations:
— 39 states currently are conforming (rolling or updated state IRC conformity; AZ and MN are recent changes; AZ retroactively conforms starting TY18; HI conforms starting in TY19; IA conforms starting in TY19; MN might be retroactive but DOR guidance has not been issued yet)
— 2 states didn’t update IRC conformity
(CA, NH)
— 1 state updated IRC conformity but decoupled from IRC 1400Z (NC)
For Individuals:
— 33 states currently conforming (rolling or updated state IRC conformity; AZ and MN are recent changes; AZ retroactively conforms starting TY18; HI conforms starting in TY19; IA conforms starting in TY19; MN might be retroactive but DOR guidance has not been issued yet)
— 1 state didn’t update IRC conformity (CA)
— 1 state updated IRC conformity but decoupled from IRC 1400Z (NC)
— 6 states where IRC conformity is different for personal income tax or only have selective IRC conformity (AL, AR, MA, MS, NJ, PA) of which three do not conform (AL, MA, MS), one conforms (NJ), one will conform (PA for TYB 1/1/20), and one conforms but only with respect to QOZs located within this state (AR)
Check it out and let us know if you have any questions or need help on your various deals and transactions.
Brad A. Molotsky, Duane Morris LLP
Proposed Federal Bill targets an Additional $500 Million in NMTC Allocation for Rural Job Zones – Brad A. Molotsky, Esq.
Despite the DC gridlock and Democratic Presidential debates, the Rural Jobs Act was introduced this week in the House and Senate to authorize an additional $500 Million Dollars in annual new markets tax credit (NMTC) allocation for 2019 and 2020 that would go to rural job zones.
The rural job zones are defined as low-income communities with a population of 50,000 residents or less that are not adjacent to any urbanized area.
At least 25% of the new NMTC allocation authority would be prioritized for counties with persistent poverty and high migration.
Lead sponsors of the bicameral and bipartisan legislation are Reps. Terri Sewell, D-Ala., and Jason Smith, R-Mo., and Sens. Mark Warner, D-Va., Roger Wicker, R-Miss., Shelley Capito, R-W.V., and Ben Cardin, D-Md.
Glimmers of hope. Have a super weekend. -Brad
#DuaneMorris
Climate Risk and Real Estate Investment Decision Making – ULI –
The Urban Land Institute (ULI) released its new report entitled “Climate Risk and Real Estate Investment Decision-Making” this week at their Spring conference. This report is a follow on to their 2018 report entitled “Ten Principles for Building Resilience”. This year’s report addresses the state of current practice for assessing and mitigating climate risks in real estate as well as highlighting best practices across the real estate industry. was developed using a proactive approach to address climate risks.
Per the report’s conclusions, “a failure to address and mitigate climate risks may result in increased exposure to loss as a result of assets suffering from reduced liquidity and lower income, which will negatively affect investment returns. At the same time, investors who arm themselves with more accurate data on the impact of climate risks could help differentiate themselves and benefit from investing in locations at the forefront of climate mitigation.”
Continued focus and monitoring of results from an Environmental, Social, Governance (ESG) and social impact investing point of view, continue to be the touchstones as 2019 marches on.
-Brad A. Molotsky, Duane Morris LLP