[House Report 117-159]
[From the U.S. Government Publishing Office]


117th Congress    }                                   {       Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                   {       117-159

======================================================================

 
   TO AMEND TITLE 40, UNITED STATES CODE, TO MODIFY THE TREATMENT OF 
  CERTAIN BARGAIN-PRICE OPTIONS TO PURCHASE AT LESS THAN FAIR MARKET 
                     VALUE, AND FOR OTHER PURPOSES

                                _______
                                

November 1, 2021.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. DeFazio, from the Committee on Transportation and Infrastructure, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 2220]

    The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 2220) to amend title 40, United 
States Code, to modify the treatment of certain bargain-price 
options to purchase at less than fair market value, and for 
other purposes, having considered the same, reports favorably 
thereon without amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose of Legislation...........................................     1
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Legislative History and Consideration............................     3
Committee Votes..................................................     4
Committee Oversight Findings.....................................     4
New Budget Authority and Tax Expenditures........................     4
Congressional Budget Office Cost Estimate........................     4
Performance Goals and Objectives.................................     4
Duplication of Federal Programs..................................     4
Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
  Benefits.......................................................     5
Federal Mandates Statement.......................................     5
Preemption Clarification.........................................     5
Advisory Committee Statement.....................................     5
Applicability to Legislative Branch..............................     5
Section-by-Section Analysis of the Legislation...................     5
Changes in Existing Law Made by the Bill, as Reported............     5

                         Purpose of Legislation

    The purpose of H.R. 2220 is to modify the treatment of 
certain bargain-price options in leases to purchase real estate 
at less than fair market value by the General Services 
Administration (GSA).

                  Background and Need for Legislation

    GSA is authorized to enter into lease agreements for 
commercial real estate for the purposes of providing space for 
a federal agency.\1\ According to the Government Accountability 
Office (GAO), negotiating an option to purchase as part of a 
lease agreement could reduce costs to the taxpayer by providing 
a future option to own the building as often GSA may lack the 
budget authority to purchase a building outright.\2\
---------------------------------------------------------------------------
    \1\40 U.S.C. Sec. 585.
    \2\Federal Real Property: Leases with Purchase Options Are 
Infrequently Used but May Provide Benefits, Government Accountability 
Office, GAO-16-536R.
---------------------------------------------------------------------------
    In the 1990s, changes in budgetary scorekeeping rules 
established by the Office of Management and Budget (OMB) 
adjusted how the inclusion of discounted purchase options in 
leases are treated under the budgetary scoring rules.\3\ For 
example, OMB scoring rules state that, ``[w]hen the lease 
agreement contains an option to purchase at less than fair 
market value . . . and the option can be exercised without 
additional legislation, it will be presumed that the option 
will be exercised . . .''.\4\ As a result, when GSA includes 
such options in its leases, OMB will presume GSA will exercise 
those options and eventually own the property. Such leases--
leases leading to ownership--are generally treated as capital 
leases for the purposes of budgetary treatment and scoring.\5\ 
The budget authority needed for a capital lease in essence is 
the total cost of such lease over the entire lease term.\6\ As 
a result, GSA would need to have the full budget authority for 
the total value of the lease upfront making it impractical 
given the budgetary constraints as noted by the GAO.\7\
---------------------------------------------------------------------------
    \3\Id.
    \4\OMB Circular No. A-11, Appendix B.
    \5\Id.
    \6\Id.
    \7\Supra note 2.
---------------------------------------------------------------------------
    A recent example of the impact of the current OMB scoring 
rules on GSA's management of buildings is the Department of 
Transportation (DOT) headquarters building in Washington, D.C. 
In 2002, GSA sold property at the then-federally owned 
Southeast Federal Center to a private company for $40 million 
to develop and build a new DOT facility.\8\ OMB scoring rules 
limited the ability of GSA to maintain an interest in the real 
property for these purposes, such as through a leaseback 
arrangement which would have allowed GSA to maintain equity in 
the property.\9\ In 2006, GSA began leasing the newly built 
building and while the lease included an option to purchase, 
due to the scoring rules, such option could not be at a 
discounted amount unless GSA had the budget authority upfront 
for the full cost of the lease over the term of the lease.\10\ 
If GSA had access to full, upfront funding, GSA may have been 
able to construct the DOT building for $294 million and avoid 
leasing altogether.\11\ Instead, GSA leased the building and 
spent $753 million from 2006 to 2020.\12\ Unable to negotiate a 
discounted purchase option upfront, GSA purchased the building 
in 2020 for $768 million based on its fair market value.\13\
---------------------------------------------------------------------------
    \8\Budget Issues: Alternative Approaches to Finance Federal 
Capital, Government Accountability Office, GAO-03-1011, August 21, 
2003.
    \9\See OMB Circular No. A-11, Appendix B.
    \10\Capital Fund Proposal: Upfront Funding Could Benefit Some 
Projects, but Other Potential Effects Not Clearly Identified, 
Government Accountability Office, GAO-21-215, September 10, 2021; see 
OMB Circular No. A-11, Appendix B.
    \11\Capital Fund Proposal: Upfront Funding Could Benefit Some 
Projects, but Other Potential Effects Not Clearly Identified, 
Government Accountability Office, GAO-21-215, September 10, 2021.
    \12\Id.
    \13\Id.
---------------------------------------------------------------------------
    Despite examples of savings from GSA's use of purchase 
options below market value, GSA's ability in recent years to 
negotiate leases with such options has been severely limited 
due to the budgetary scoring rules.\14\
---------------------------------------------------------------------------
    \14\Supra note 2.
---------------------------------------------------------------------------
    H.R. 2220 amends GSA's leasing authority to allow GSA to 
include discounted purchase options in its leases by conforming 
such authority to the current budgetary scoring rules by 
requiring congressional authorization for GSA to exercise such 
options. By removing the presumption outlined in the rules that 
such options will be exercised resulting in a capital lease, 
inclusion of such a purchase option in a GSA lease in and of 
itself would not trigger a capital lease.

                                Hearings

    For the purposes of rule XIII, clause 3(c)(6)(A) of the 
117th Congress, the following hearing was used to develop or 
consider H.R. 2220:
    On May 13, 2021, the Subcommittee held a hearing titled 
``Federal Real Estate Post-COVID-19 Part One: A view from The 
Private Sector.'' The Subcommittee received testimony from Ms. 
Kay Sargent, Senior Principal, Director of WorkPlace, HOK, on 
behalf of the International Facility Management Association; 
Ms. Genevieve Hanson, Principal, Strategy & Transactions, Real 
Estate Planning, Execution and Operations, Ernst & Young LLP; 
Ms. Kelly Bacon, Principal, Global Practice Lead, Workplace 
Advisory Design and Consulting Services, AECOM; Ms. Marcy Owens 
Test, Senior Vice President, CBRE Federal Lessor Advisory 
Group; and Mr. Norman Dong, Managing Director, FD Stonewater. 
This hearing provided Members an opportunity to examine the 
impact of COVID-19 on future federal office space planning and 
managing and included discussion regarding alternative 
financing for federal space.

                 Legislative History and Consideration

    H.R. 2220 was introduced in the House on March 26, 2021, by 
Mr. Guest, Mr. Webster of Florida, and Mr. Pence and referred 
to the Committee on Transportation and Infrastructure. Within 
the Committee, H.R. 2220 was referred to the Subcommittee on 
Economic Development, Public Buildings, and Emergency 
Management.
    The Subcommittee on Economic Development, Public Buildings, 
and Emergency Management was discharged from further 
consideration of H.R. 2220 on July 28, 2021.
    The Committee considered H.R. 2220 on July 28, 2021 and 
ordered the measure to be reported to the House with a 
favorable recommendation, without amendment, by voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires each committee report to include the 
total number of votes cast for and against on each record vote 
on a motion to report and on any amendment offered to the 
measure or matter, and the names of those members voting for 
and against.
    No record votes were requested during consideration of H.R. 
2220.

                      Committee Oversight Findings

    With respect to the requirements of clause 3(c)(1) of rule 
XIII of the Rules of the House of Representatives, the 
Committee's oversight findings and recommendations are 
reflected in this report.

               New Budget Authority and Tax Expenditures

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause (3)(c)(3) of rule XIII of the Rules 
of the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has requested 
but not received a cost estimate for this bill from the 
Director of Congressional Budget Office. The Committee has 
requested but not received from the Director of the 
Congressional Budget Office a statement as to whether this bill 
contains any new budget authority, spending authority, credit 
authority, or an increase or decrease in revenues or tax 
expenditures. The Chairman of the Committee shall cause such 
estimate and statement to be printed in the Congressional 
Record upon its receipt by the Committee.

               Congressional Budget Office Cost Estimate

    With respect to the requirement of clause 3(c)(3) of rule 
XIII of the Rules of the House of Representatives, a cost 
estimate provided by the Congressional Budget Office pursuant 
to section 402 of the Congressional Budget Act of 1974 was not 
made available to the Committee in time for the filing of this 
report. The Chairman of the Committee shall cause such estimate 
to be printed in the Congressional Record upon its receipt by 
the Committee.

                    Performance Goals and Objectives

    With respect to the requirement of clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives, the 
performance goal and objective of this legislation is to 
conform GSA's leasing authority to budgetary scorekeeping 
guidelines to facilitate the ability of GSA to negotiate 
discounted purchase options in lease agreements.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that no provision 
of H.R. 2220 establishes or reauthorizes a program of the 
federal government known to be duplicative of another federal 
program, a program that was included in any report from the 
Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

   Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    In compliance with clause 9 of rule XXI of the Rules of the 
House of Representatives, this bill, as reported, contains no 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of the rule 
XXI.

                       Federal Mandates Statement

    An estimate of federal mandates prepared by the Director of 
the Congressional Budget Office pursuant to section 423 of the 
Unfunded Mandates Reform Act was not made available to the 
Committee in time for the filing of this report. The Chairman 
of the Committee shall cause such estimate to be printed in the 
Congressional Record upon its receipt by the Committee.

                        Preemption Clarification

    Section 423 of the Congressional Budget Act of 1974 
requires the report of any Committee on a bill or joint 
resolution to include a statement on the extent to which the 
bill or joint resolution is intended to preempt state, local, 
or tribal law. The Committee finds that H.R. 2220 does not 
preempt any state, local, or tribal law.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

             Section-by-Section Analysis of the Legislation


Section 1. Limitation on discounted purchase options

    Amends Section 585 of title 40, U.S.C., to add a new 
subsection (d) requiring that any bargain-price option to 
purchase in any lease agreement entered into on or after 
January 1, 2021, may be exercised only to the extent provided 
for in appropriations or other acts of Congress.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

TITLE 40, UNITED STATES CODE

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SUBTITLE I--FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES

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CHAPTER 5--PROPERTY MANAGEMENT

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SUBCHAPTER V--OPERATION OF BUILDINGS AND RELATED ACTIVITIES

           *       *       *       *       *       *       *



Sec. 585. Lease agreements

  (a) In General.--
          (1) Authority.--The Administrator of General Services 
        may enter into a lease agreement with a person, 
        copartnership, corporation, or other public or private 
        entity for the accommodation of a federal agency in a 
        building (or improvement) which is in existence or 
        being erected by the lessor to accommodate the federal 
        agency. The Administrator may assign and reassign the 
        leased space to a federal agency.
          (2) Terms.--A lease agreement under this subsection 
        shall be on terms the Administrator considers to be in 
        the interest of the Federal Government and necessary 
        for the accommodation of the federal agency. However, 
        the lease agreement may not bind the Government for 
        more than 20 years and the obligation of amounts for a 
        lease under this subsection is limited to the current 
        fiscal year for which payments are due without regard 
        to section 1341(a)(1)(B) of title 31.
  (b) Sublease.--
          (1) Application.--This subsection applies to rent 
        received if the Administrator--
                  (A) determines that an unexpired portion of a 
                lease of space to the Government is surplus 
                property; and
                  (B) disposes of the property by sublease.
          (2) Use of rent.--Notwithstanding section 571(a) of 
        this title, the Administrator may deposit rent received 
        into the Federal Buildings Fund. The Administrator may 
        defray from the fund any costs necessary to provide 
        services to the Government's lessee and to pay the rent 
        (not otherwise provided for) on the lease of the space 
        to the Government.
  (c) Amounts for Rent Available for Lease of Buildings on 
Government Land.--Amounts made available to the General 
Services Administration for the payment of rent may be used to 
lease space, for a period of not more than 30 years, in 
buildings erected on land owned by the Government.
  (d) Any bargain-price option to purchase at less than fair 
market value contained in any lease agreement entered into on 
or after January 1, 2021, pursuant to this section may be 
exercised only to the extent specifically provided for in 
subsequent appropriation Acts or other Acts of Congress.

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