E-FAIRNESS

OUR POSITIONIt is time for Congress to pass legislation to level the playing field for community based-retailers. These retailers currently face a significant price disadvantage versus their online-only competition. Sellers should compete on price, inventory and customer service, not on tax treatment. This issue is the International Council of Shopping Centers’ top legislative priority.

HOW WE GOT HEREUnder the current state sales and use tax system, local retailers must collect sales taxes on all sales, while their online-only counterparts are exempt. When a retailer does not collect the tax at the time of purchase, the consumer is responsible, by law, for remitting the use tax. This is rarely factored into the purchase decision and as a result local merchants suffer from this government-sanctioned price disadvantage.

In a 1992 pre-Internet Supreme Court case (Quill v. North Dakota) the high court ruled that a business must have a physical presence in a state for that state to require it to collect sales taxes. However, the court explicitly stated that Congress can overrule the decision through legislation. ICSC has been aggressively advocating that Capitol Hill do just that – enact e-fairness legislation to reflect 21st Century retail. Since Quill, technological advances have become readily available to address the issues of complexity that may have previously existed. On March 3, 2015, Supreme Court Justice Anthony Kennedy issued a new call for this issue to be resolved.

In the 114th Congress, Senators Mike Enzi (R-WY), Dick Durbin (D-IL), Lamar Alexander (R-TN) and Heidi Heitkamp (D-ND) introduced S.698, the Marketplace Fairness Act of 2015, which mirrors legislation that was passed with strong bipartisan support (69-27) in the Senate in 2013. ICSC appreciates the hard work and leadership of the Senate sponsors and supports this bill.

In the House of Representatives, Congressmen Jason Chaffetz (R-UT) and Steve Womack (R-AR) introduced H.R. 2775, the Remote Transactions Parity Act of 2015 (RTPA), which has support from a broad group of stakeholders. RTPA grants states the authority to require remote sellers to collect sales taxes. It includes several provisions that will protect sellers, such as extensive audit protections and free sales tax collection software. RTPA also provides a transition period for small remote sellers. ICSC is strongly in favor of this legislation.

Judiciary Committee Chairman Bob Goodlatte (R-VA) has put forth a draft proposal, referred to as the Online Sales Simplification Act (OSSA). While we continue to work with Chairman Goodlatte, ICSC has significant concerns with aspects of this proposal. Most notably, the Goodlatte framework codifies the current disparity in the marketplace by calculating the consumer’s sales tax based on the sellers location (origin sourcing), rather than the purchaser’s location (destination sourcing) and creates new layers of complicated bureaucracy.

WHAT’S NEXT Community-based retailers have waited for more than two decades for Congress to take action. Meanwhile, states are moving forward with various state laws and litigation, creating marketplace chaos (see reverse). It’s time for Congress to solve this problem for all retailers and support local businesses by giving them a fair chance to compete. The time has come to level the playing field for 21st century retail. A sale is a sale no matter where it takes place!

• ICSC asks Senators to cosponsor S. 698, the Marketplace Fairness Act of 2015.

• ICSC asks Representatives to cosponsor H.R. 2775, Congressman Chaffetz’s Remote Transactions Parity Act.

• 70% of Americans support federal legislation that would require online-only sellers to collect sales tax at the time of purchase.*

• 82% of Americans think it would be easier to collect sales tax from online-only vendors at the time of purchase.*

*Aug. 2014 poll by Opinion Research Organization.

For more information contact Jennifer Platt at jplatt@icsc.org or 202-626-1404.

Rhode IslandCurrently losing more than $30 million per year because of out-of-state sellers.

ColoradoE-fairness legislation faced years of legal battles before finally being upheld in federal appeals court earlier this year.

That's the amount of revenue states missed out on because they didn't collect online sales taxes in 2012.$23.1 Billion

When Will Congress Act To Level The Playing Field For Main Street Business?

As it stands, most states don't collect online sales tax, meaning brick-and-mortar retailers are at a competitive disadvantage. The Senate voted overwhelmingly to close this loophole in 2013. We urge

Congress to act on this issue as soon as possible.

In the last four years, more than 70 bills related to e-fairness have passed. As of May 10th, 42 bills have been introduced in 2016 in 16 states:

SD

ND

MN

ILOH

RI

MA

CT

MD

NJ

NY

LA

MSAL

UTCO

MO

WA

TX

FL

CA

NV

AZ

PA

IN

WI

MI

TN

KY

SC

GA

NC

VAWV

ID

NE

OK

KS

Patchwork Lawmaking Creates Uncertainty For Businesses

Sources: MultiState Insider, University Of Tennessee, and ABA/Civic Economics

AlabamaBegan collecting taxes from out-of-state internet sellers in 2016, with the first payments due February 20.

MissouriCities and municipalities like Columbia are considering cuts to law enforcement and emergency responders due to declining sales tax revenue.

South DakotaNotified certain out-of-state sellers that they must register with the state and begin collecting and remitting sales tax. The state is currently suing some of these sellers for not paying sales tax.

E-fairness Legislation Introducedin 2016 and Still Active (18 bills in 7 states)

E-fairness Legislation Introduced in2016 and No Longer Active (21 bills in 11 states)

Legislation Enacted (3 bills in 3 states, though other active and/or inactive bills may exist)

Previously Enacted E-fairness Legislation

TAX REFORM

OUR POSITION ICSC supports tax reform that is focused on growing the economy in communities across the country, spurring investment and new development. We have concerns about the direct and indirect economic impact of certain previous tax reform proposals, including elimination of like-kind exchanges, treatment of depreciation, business interest deduction and energy efficiency tax incentives.

A typical retail real estate company is organized as a pass-through entity or as a Real Estate Investment Trust (REIT). Some in our industry are concerned that we will not directly benefit from lower corporate tax rates, but will carry the burden of helping to finance the cost of rate reduction. This could materially and disproportionately harm real estate, the valuation of underlying assets, cash flow and capital formation, the institutions that are invested in retail real estate and the economy as a whole.

LIkE-kINd EXCHANGE: Previous tax reform discussion drafts have proposed elimination of Section 1031 like-kind exchange treatment for real property. The current like-kind exchange rules should be maintained for real property as they promote the efficient use of capital and cash flow by allowing taxpayers to shift to more productive like-kind property, change geographic location, diversify or consolidate holdings, or otherwise transition to meet changes in business needs. Furthermore, a study conducted by Ernst and Young exhibits that elimination of Section 1031 would against the stated goal of encouraging growth.

STRAIGHT-LINE dEPRECIATION: Previous tax reform discussion drafts have proposed extended depreciation lives considerably longer than the usable life for most commercial real estate, as a recent MIT/PwC report shows. The longer depreciation periods would result in higher capital costs for building owners, creating disincentives to upgrade and modernize the space for their tenants. ICSC applauds Congress for enacting a permanent 15-year depreciation schedule for tenant, restaurant and retail space to reflect consumers’ expectations and government regulations.

BUSINESS INTEREST dEdUCTION: Various tax reform proposals have suggested limiting or eliminating the ability to deduct the interest associated with business related debt. The use of debt instruments allows for more efficient deployment of capital and is important to maintaining a balanced finance structure for the industry. The proposed changes would disproportionately impact our industry and move our tax system to something similar to a gross receipts tax or VAT.

ENERGy EFFICIENCy: Instead of total repeal, as proposed by previous discussion drafts, Section 179D should be revised with more effective rules encouraging the energy efficiency of buildings, such as providing for a sliding scale that would increase the amount of the incentive for retrofits with greater energy savings.

CAPITAl ConTRIbuTIon by A non-SHAREHoldER (SECTIon 118): State and local economic development incentives, especially those funded by state and local taxes, should be exempt from federal income taxes. It is inappropriate for the federal government to claim 35% of the value of tax increment and other financing provided to encourage economic development in a community.

ICSC looks forward to engaging with the tax-writing committees on how U.S. tax policy can truly provide growth and continued investment in America’s communities.

• based on the aftermath of the 1986 Tax Act, tax reform that is not carefully considered can have disastrous consequences for individuals, institutions and the economy as a whole.

• Proposed changes would increase the rate on straight-line depreciation recapture by over 58%.

• In 2011, leasehold improvement outlays of more than $15.5 billion added nearly $45 billion to the u.S. economy, and supported nearly 342,000 jobs.

• limiting interest deductibility reduces long-run economic growth by $33 billion.

For more information contact Jennifer Platt at jplatt@icsc.org or 202-626-1404.

Sources: ICSC, Bureau of Economic Analysis, CoStar/JREPM, U.S. Census, NAIOP, NAREIT and Lazard Global Real Estate Securities.

Shopping CenterS are Major eMployerS

1 out of every 11 U.S jobs is shopping center-related

(12.7 million).

Shopping CenterS are SMall bUSineSS

88% of U.S. shopping centers are neighborhood/community centers.

almost half of these are occupied by locally-owned businesses.

Shopping CenterS are valUable U.S. aSSetS

the current value of shopping center real estate

in the U.S. is $1.3 trillion.

SALE

retail inveStMentS oUtperforM U.S. Market indiCeS

over the last 5 years: •S&p 500 rose by 106.4% •local retail reit index rose

by 149.9% •regional retail reit index

rose by 227.8% •1/4 of of all reits are

shopping center-related.

Shopping CenterS are a CritiCal revenUe SoUrCe for CoMMUnitieS

•local property taxes: $25.7 billion annually.

•State Sales taxes: $147.2 billion annually.

Shopping CenterS = eConoMiC developMent

$45.8 billion spent annually in the construction of retail

creates $108.4 billion in total economic activity for industries and labor up and

down the supply chain.

HOW DO

Shopping CenterS

IMPACT oUr eConoMy?

Shopping CenterS are big bUSineSS

iCSC members represent 12% of the fortune 100. retail is the

largest employer in more than half the states in the U.S.

Shopping Center jobS are More than jUSt retail

nearly 20% of shopping center tenants are non-retail (e.g. health care, logistics, education) and over 44% of retail occupations are

unrelated to sales. Many of these jobs pay wages well

above the national average.

Shopping CenterS drive U.S. gdp

two-thirds of the $17.7 trillion U.S. gdp comes from consumer

spending on goods and services.

To learn more, visit www.icsc.org

AdA “dRIVE-By” LAWSUITS

OUR POSITIONICSC believes property owners should be given the opportunity to improve access for the disabled community in a defined period of time once an alleged Americans with disabilities Act (AdA) violation has been identified. Current law has created an unintentional consequence – an environment where businesses face the threat of “drive-by” lawsuits that only serve to line the pockets of disingenuous attorneys.

A GROWING COTTAGE INdUSTRy For years now ICSC has heard from various member companies who have been served notice of suits by plaintiffs alleging Title III ADA violations. Title III covers private businesses open to the public. Since current law grants attorney’s fees to plaintiffs pursuing various claims, numerous law firms take advantage of this incentive by issuing demand letters or threatening property owners with lawsuits unless they pay a settlement consisting largely of those fees. This has created a cottage industry of inspecting shopping centers, stores and restaurants in order to allege minor, easily-correctable ADA infractions, such as those relating to parking lot striping and signs, bathroom dispensers and ramps. Many of these property owners reasonably believed their properties were ADA-compliant based on assurances by state or local inspectors and/or outside consultants. Despite the best efforts of some states to curb ADA lawsuit abuse through additional litigation protections (such as special rules in district courts) federal legislation is still needed.

RESTORING THE INTEGRITy OF THE AdA ICSC vigorously supports the letter and spirit of the ADA and recognizes the tremendous positive impact the law, now nearly 26 years old, has had on society. Given this important milestone, it is timely that Congress act to restore the integrity of the ADA by providing clearer rules for identifying and correcting ADA access violations. We share the collective goals of more accessibility, full compliance – and we want it faster, with less costs and more resources devoted to this end – not diverted to enrich certain attorneys.

WHAT’S NEXT ICSC supports H.R. 3765, The ADA Education and Reform Act of 2015, introduced by Congressman Ted Poe (R-TX). This legislation closes the loophole in the federal law that has helped produce these excessive lawsuits and adds additional safeguards that incentivize the remedy of alleged violations – without taking away the right to pursue “bad actors” who ignore compliance.

ICSC supports H.R. 3765 and asks Representatives to co-sponsor this important legislation.

The number of AdA Title III lawsuits rose by more than 63% from 2013 to 2014.*

Examples of “drive-by” litigation include:

• Accessible parking space signs being located a few inches to the right or left of the space centerline, as opposed to being positioned precisely in the middle of the space.

• The bottom edge of a bathroom mirror being located one half-inch above that required in a local law.

The top 5 states for AdA Title III lawsuits are*:

1. California

2. Florida

3. New York

4. Pennsylvania

5. Alabama

*Source: Seyfarth and Shaw LLP, April 2015.

For more information contact Abby Jagoda at ajagoda@icsc.org or 202-626-1403.

St. Augustine inn owner sued by serial AdA lawsuit filer

ST. AUGUSTINE, Fla. -- Mike Walters owns the scenic 29-room Ocean Sands Beach Inn. He bought it three years ago and runs it with his son. It’s clean and decorated just as a Florida beachfront inn ought to be, blue patterned carpet, each room tastefully decorated with relaxing beach decor, a welcoming lobby, and a pool.

Mike cares about his customers, giving out directions when asked and wishing patrons a good day as they pass. He cares about his workers, urging them to, “Get a drink of water, sweetheart, you look flushed.” Perhaps most importantly, he cares about his inn. When Mike acquired the inn he said it was on its last legs. He has worked to restore it to a place where people would want to stay and with its own private beach access he says it’s a great quiet place to spend a weekend away.

Mike and his employees go through great lengths to be accommodating to all the people that stay at his inn, which is why he was surprised when a man who did not stay at his inn slapped him with a lawsuit that said his pool was not in compliance with the Americans with Disabilities Act.

As a double amputee, Mike said he was both outraged and disgusted.

Howard Cohan, the man suing Walters, has filed over 1,000 ADA lawsuits in past couple years. According to the suit, Cohan is a disabled man himself and works as a “tester,” visiting thousands of hotels and filing federal lawsuits against the hotels that are not compliant with ADA standards.

As for the Ocean Sands Beach Inn’s pool, Walters said that some businesses have to lift and some don’t, according to ADA guidelines, it is still unclear whether his business needs to have one.

What is clear is that the Walters has to settle this suit. He said that his lawyer advised him to settle because it would be too expensive to take the case to trial.

Though he is willing to settle monetarily, Walters is very unsettled at what Cohan is doing.

Walters doesn’t think that the way Cohan approaches his lawsuits is beneficial to the handicapped. “If anything he has actually hurt the disabled. Somebody like that who goes out and files these lawsuits give the truly disabled a bad name.”

Walters says there is a solution to Cohan’s aggressive tactics, “What people with physical disadvantages need to know is you can do this through ADA in Washington and it doesn’t cost you or business owners anything and it gets mediated and settled in court.”

It has been said by Cohan’s representation that he does not receive any monetary compensation for these lawsuits and any money made in settlements or winning the trials go to lawyer fees and expenses. Cohan stands by these lawsuits that they are simply injunctions against establishments to get them to be in accordance with ADA guidelines.

Mike Augustine looks out over the private beach access at his inn in St. Augustine

Jacksonville, FloridaMay 16, 2016

AdA “dRIVE-By” LAWSUITS CONTINUE TO RISE

2000

1600

600

800

1000

1200

1400

0

200

400

1800

California ArizonaTexasNew YorkFlorida

995

1866

1659

1338

1553

816

125

212

366

88 91

277

20 8

207

States with Most AdA Title III lawsuits*

201320142015

*Filed in a Federal Court. Source: Seyforth Shaw LLP.

• In 2015, 4,789 ADA Title III lawsuits were filed in federal court, compared to 4,436 in 2014 - an 8% increase. In 2014, however, the number of ADA Title III lawsuits increased 63% over the 2,722 lawsuits filed in 2013.

• California, Florida, New York, Texas and Arizona had the most ADA Title III lawsuits - a total of 3,847 cases. This accounts for 80% of the lawsuits filed nationwide.

• California leads the country with the largest number of ADA Title III lawsuits (40%) but only 12% of the state’s population is disabled.

• Arizona experienced a surge in lawsuits, with plaintiffs filing 25 times more cases in 2015 than in 2014. Other states with substantial increases were Georgia (from 20 to 96), Illinois (from 29 to 84) and New York (212 to 366).

6000

4000

1000

2000

3000

5000

2013 20152014

AdA Title III lawsuits nationwide in Federal Courts

Source: Seyforth Shaw LLP.

0

UNdERSTANdING “NOTICE & CURE”

NOTICEShopping center owners or operators are given written

notice specific enough to allow them to identify the barrier to

accommodation.

The owner or operator has 60 days from the date

of the notice to provide a written description

outlining improvements that will be made to remove the barrier.

CUREThe owner or operator has an addiitonal 60

days in which to remove the barrier (or make

substantial progress in removing the barrier).

Problem is corrected.

Problem is not corrected.

Complainant may proceed with lawsuit.