[House Report 117-159]
[From the U.S. Government Publishing Office]
117th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 117-159
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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\
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\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.
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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\
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\3\Id.
\4\OMB Circular No. A-11, Appendix B.
\5\Id.
\6\Id.
\7\Supra note 2.
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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\
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\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.
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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\
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\14\Supra note 2.
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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
* * * * * * *
SUBTITLE I--FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES
* * * * * * *
CHAPTER 5--PROPERTY MANAGEMENT
* * * * * * *
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.
* * * * * * *
[all]