On April 17, 2019, the IRS issued its much anticipated second tranche of guidance (the “2019 Proposed Regulations”) on the qualified opportunity zone (QOZ) program established by the 2017 Tax Cuts and Jobs Act. The 2019 Proposed Regulations discuss a number of issues that were left unaddressed by the initial set of proposed regulations issued by the IRS in October of 2018 (the “Initial Proposed Regulations”) and provide further clarity on some issues that were touched upon in those initial regulations. This is welcome news to eager investors interested in taking advantage of the benefits of investing their capital gains in qualified opportunity funds (QOFs), particularly those wishing to deploy capital in businesses outside the realm of traditional real estate development. While we have not attempted to describe every aspect of the 2019 Proposed Regulations, a summary of certain key provisions is set forth below.
LODGING Magazine recently published an article by Pillsbury attorneys Brian Finch and Zack Kessler titled Modernizing Hotel Security Protocols To Protect Against 21st Century Threats. The article discusses the recent bombings and shootings at high-profile hotels in the U.S. and abroad, and how the hospitality industry can benefit from risk management tools available under the Support Anti-Terrorism by Fostering Effective Technologies Act of 2002 (the SAFETY Act), enacted as part of the Homeland Security Act of 2002, Public Law 107-296.
Most companies have been involved in a situation where they want to end their relationship with another company, or with an employee, and to permanently terminate their mutual obligations (e.g., a settlement agreement resolving end-of-project litigation). In 1992, a California Court of Appeals, in Winet v. Price, confirmed that upholding general releases is “in harmony… with a beneficial principle of contract law: that general releases can be so constructed as to be completely enforceable.”
On January 31, an en banc panel of the U.S. Court of Appeals for the Ninth Circuit issued a unanimous ruling in a commercial speech case, American Beverage Assoc., et al., v. City and County of San Francisco. The Panel held that the lower court’s denial of a preliminary injunction requested by the plaintiffs must be reversed, and the matter remanded to the lower court because the plaintiffs were likely to succeed on the merits of their claim that a 2015 San Francisco city ordinance requiring specified health warnings on a host of sugar-sweetened drinks (“WARNING: Drinking beverages with added sugars(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco.”) violated their First Amendment rights.
In September 2017, the California legislature and Gov. Jerry Brown enacted Senate Bill 35 (SB 35) to streamline housing development in cities that are not meeting their housing needs. SB 35 is aimed at easing California’s severe housing shortage and affordability crisis but was highly controversial due to concerns about loss of local control over housing development. In the year since SB 35 was enacted, several development projects in the San Francisco Bay Area have invoked SB 35 to bypass local opposition or cumbersome permitting timelines.
Throughout 2018, we have discussed the implications of the legalization of marijuana on the real estate industry. In this final year-end edition, we provide a few important considerations and recommendations for property owners, landlords and tenants when purchasing or leasing green property.
The California Natural Resources Agency (CNRA) recently posted final adopted text for amendments to the CEQA Guidelines. The result of over five years of development efforts by the Governor’s Office of Planning & Research and CNRA, the amendments are the most comprehensive update to the CEQA Guidelines since 1998. In “Natural Resources Agency Finalizes Updates to the CEQA Guidelines,” Pillsbury environmental attorneys Norman F. Carlin, Kevin Ashe and Eric Moorman explore the wide range of issues covered in the amendments, including the new Vehicle-Miles-Traveled (VMT) methodology for analyzing transportation impacts; use of regulatory standards as significance thresholds; environmental baselines; and numerous procedural and technical improvements.
This update follows an earlier post discussing Proposition 10’s potential impacts and pre-election prospects, available here.
What happened on Election Day
Despite California’s sky-high rents, voters just rejected a ballot measure that would have allowed cities to expand rent control. With 100% of precincts reporting, 61.7% of voters opposed Prop 10, while 38.3% voted to approve the measure. The ballot measure only achieved a majority in one of California’s fifty-eight counties, San Francisco. In Los Angeles County, 47.2% of voters supported the proposition. However, the ballot measure fared substantially worse in Sacramento, San Diego, Fresno and Orange counties. These results highlight the measure’s widespread unpopularity.
The Committee on Foreign Investments in the United States (CFIUS) is an inter-agency committee designed to review foreign investments that raise national security concerns. While you may have seen CFIUS play a role in prior transactions, upcoming expanded regulations will further impact acquisitions of U.S. real estate.
How exactly will this occur?
In less than two weeks, California voters will decide whether to pass Proposition 10, which would allow cities and counties across the state to expand rent control.
Supporters of the measure say it will protect tenants during a time of unprecedented housing affordability problems in California. Opponents argue that the measure will stall housing construction—the levels are already low—and further increase costs.