Green Light: Broad support

“The affordable housing industry has built a very, very strong bipartisan approach to housing,” CohnReznick Affordable Housing leader Beth Mullen said. Housing affordability was a frequent topic on the campaign trail, and we’re aware of lawmakers already talking about getting more resources for the housing credit program in the overall tax changes likely coming soon. A return of 100% bonus depreciation would also be good for investors in tax credit deals.

Yellow Light: Budgetary concerns

Developers are mindful of potential budget cuts, particularly to HUD dollars for rental assistance and new construction; the House budget for the current year was projected to cut 25%, which could be a guide to coming years. Rising costs due to tariffs would bring additional strain. At the same time, immigration policy shifts could be an issue; affordable housing developers depend on a lot of labor to get things built.

Yellow Light: Too early to tell

This area is still broadly unpredictable, as much will depend on who is chosen for the Cabinet and where they stand on cannabis. There is some optimism in the industry that President-Elect Trump will want to take President Biden’s progress across the finish line, which could bring an acceleration of reform. But for the meantime, we will need to wait and see.

Green Light: Favorable tax conditions

Clients we’ve spoken to are generally optimistic about what’s next for the industry: Capital gains rates won’t go up, for example, and people are hopeful that depreciation rules will return closer to the 100% seen under the TCJA. CRE owners are hopeful for an easier environment to do business, with a CRE-friendlier president and Congress.

Yellow Light: Timing

Those in the process of (or considering) refinancing will need to be careful about incurring prepayment penalties. 
While conditions are looking favorable, there are some who are not sure that they will be so favorable again, and are considering selling assets within the next year. A tax bill without offsets, for example, could be inflationary, especially in combination with a decrease in labor.

Green Light: 2025 Financing

2025 looks good from a financing perspective. Interest rates are projected to continue to go down, decreased regulation in banking is likely, and the potential extension of various TCJA provisions would be a positive for industry participants.

Yellow Light: Future strain

Looking further forward, there could be several inflationary policy changes on the horizon – tariffs, immigration policy, tax cuts – and if inflation rises, interest rates will have to rise to compete, which could impact lending or project financing. Tariffs would increase prices on certain materials. Owners will need to watch how infrastructure dollars might be reallocated, potentially shifting their prospects. Labor could also be an escalating issue: It is already the No. 1 concern for a lot of contractors, and further restrictions on immigration and visa programs would put a further strain on the labor force.

Green Light: Improved consumer confidence

Consumer confidence has seen a post-election uptick, and Thanksgiving holiday weekend shopping was extremely strong, particularly in-store. This is especially promising when you consider that the holiday promotion season began in October. A rising stock market, the anticipation of lower taxes and lower inflationary pressure on prices are providing consumers with a positive perspective and an impulse to spend, helping many consumer and retail companies end 2024 on a high note.

Yellow Light: Unpredictable impacts on consumer spending in 2025

As consumer companies and retailers tackle potential policy changes affecting tariffs, labor availability, and their supply chains, and their impact on cost structures and margins, a key question will be how much of these cost increases will be passed on to consumers, and how the consumer will react. For companies that have built distinct and “sticky” relationships with their customers, there may be greater tolerance for price increases. Others may need to gain efficiencies and cut costs in other areas of their operations to offset the impact of these changes and maintain their pricing. Will consumers feel a hangover in 2025 as the impact of these potential policy changes makes its way to their wallets?

Green Light: Cryptocurrency

President-elect Trump’s administration is generally supportive of cryptocurrency. Friendlier regulations and growing market acceptance are expected to lead to increased trading activities and new fund launches.

Yellow Light: Regulation vs. expectations 

While it’s likely that some recent SEC priorities will be de-emphasized, dropped, modified, or repealed, investors still expect continued movement toward increased transparency, improved controls, and tighter due diligence.  Prior regulatory issues like the already-vacated private fund advisor rules and mandates in climate reporting and cybersecurity disclosures set the tone relative to investor expectations. Whether regulated by the SEC or not, fund managers need to be diligent in the attention they pay to protecting the interests of their investors.

Yellow Light: Shifts in spending

As there are changes in government spending, there will be changes at agencies – reducing, restructuring, reallocating. It will be a good time to look at efficiency and innovation. Consider where contractors may play a role.

Yellow Light: Shifting spending priorities

There has been speculation about the spending (and saving) priorities of the Trump administration that has led some to be concerned about funds under the Inflation Reduction Act (IRA) and other acts. While there is cause for caution any time there is a change in administration, a wholesale cancelation of benefits is unlikely due to the degree of lift, the timeline for the political process, and the political ramifications. It is more likely that we will see a change in the distribution of benefits across different types of energy investments, such as opening up grants and tax credits to other energy alternatives such as nuclear or LPG (liquefied petroleum gas). It is also often the case that projects already in process will be grandfathered in relative to any changes in spending priorities. In any event, it is certainly the case that the regulatory obligations attached to the benefits will remain, requiring awardees and tax filers to be intentional about compliance.

Green Light: Transaction prospects

There is a bullish attitude about transactions in this industry. In many cases private equity funds have sat with investments for a longer period and will look to explore exits while also looking to deploy funds on new acquisitions.  

Yellow Light: Labor dynamics

There is concern around impacts of potential immigration policy change and crackdowns on undocumented employees. Restaurants will also need to watch for further imbalance of their labor models – tipped front-of-house workers have long tended to make more than back-of-house workers, and that imbalance would be further exacerbated by the elimination of tax on tips.

Green Light: FDA approval process

There is discussion that the Food and Drug Administration (FDA) may undergo a significant restructuring, and, at a minimum, new leadership, less regulation, and an expectation of faster approvals for new drugs and medical devices. 

There is also an expectation that research and development (R&D) tax benefits will be expanded, leading to an increase in funds available for research.

Yellow Light: Development of new vaccines

New regulations over the Centers for Disease Control and Prevention (CDC) could result in restricting the CDC’s authority to mandate certain vaccines.

While medical device and drug manufacturers may be encouraged to move manufacturing to the U.S., this may result in supply chain issues and higher labor costs, which may cause conflict with the ongoing effort to control drug costs.

Green Light: Funds for investment in stability

In these industries particularly sensitive to tariffs, labor shortages, and supply chain challenges, there is also room for optimism. The reinstatement of favorable TCJA provisions, such as bonus depreciation, interest deduction and expensing of research and development costs, would lead to increased cash flows and provide companies the liquidity to make more substantial investments in technology or further their research and development efforts. Being able to invest in AI, predictive forecasting, inventory management, and other forms of innovation and optimization could in turn help counteract the macro strains that companies are facing.

Yellow Light: Costs and pricing

Still, companies will need to be very thoughtful about how they approach the impacts of tariffs and supply chain factors, especially those not manufacturing in the U.S. or reliant on imported supplies. What could be the impact on freight and margins? Which components of the business should be moved out of China, for example, and into other countries? What pricing strategies might help balance these shifts?

Yellow Light: Funding

Higher education and not-for-profit organizations depend on a variety of funding sources, and the federal government is often one of the largest shares. There is concern in the sector about how much federal funding will be available to deliver on their missions as priorities shift, particularly around education, social justice, environmental action, reproductive rights, and DEIB. While it is too early to tell, it is quite possible that increases in federal funding for causes aligned with President-elect Trump’s priorities may be matched by donors interested in supporting causes that may be in jeopardy. We expect the competition for those donors to be high, emphasizing the need for charities to demonstrate relevance to their stakeholders. Social service organizations, in particular, may need to appeal to broader and more diverse constituencies by getting better at telling their stories and using emerging technologies to find new channels of support. Higher education – the segment of this sector with the biggest federal wallet share – might see regulatory reforms, with special concern around Title IX and LGBTQ+ priorities; schools that support those initiatives may need to double down their fundraising efforts to help fill the gaps in federal funding.

Green Light: Deal appetite 

Reduced regulations could trigger an increase in exits. With less regulatory friction, dealmakers are likely to have greater options when exiting an investment. An increase in exit activity would place more capital into the investment lifecycle, supporting increased capital-raising and M&A activity. More advantageous corporate tax policies could drive improved after-tax profits and higher valuations. We anticipate the acceleration of deal activity will continue as we move into 2025.

Yellow Light: Counter factors

The impact of possible tariffs could lead to short-term upward inflationary pressure, but some of that would be offset by Fed policy and broader market adjustments. Private equity investors and their portfolio company management teams should consider the impact of increasing tariffs on deals and portfolio company operations.

Green Light: Momentum

While parts of the Inflation Reduction Act (IRA) could be repealed, or attempts made at clawing back some of the Greenhouse Gas Reduction Fund (GGRF) dollars, we believe there is too much momentum in states that are benefiting from renewable energy development for there to be much cause for alarm. Red states are building a narrative around grid resiliency, energy independence, national security, and workforce development; blue states, around the low-carbon transition, creating jobs, and a greener, healthier economy. President-elect Trump has been supportive of infrastructure, U.S. manufacturing, and job creation, which are all key components of renewable energy employment.

Yellow Light: Room for cuts

That said, if there is sweeping tax reform, programs may need to be trimmed to pay for that, and the IRA could be a target. We are overall not anticipating a full repeal, but rather a trimming here and there. For now, we’re seeing clients moving ahead, trying to get as much done as possible to finish deals and get funds allocated and obligated, and waiting to see what happens. “We have been hearing about significant clean energy tax credit cuts for many years. There is too much momentum from the states, utilities, and large corporates,” CohnReznick Renewable Energy Leader Anton Cohen said. “We will all know much more in 3-6 months.”

Green Light: R&D taxation

President-elect Trump has stated that he plans to allow full expensing of research and development (R&D) costs in the year incurred for U.S.-based spend, as well as expanded R&D tax credits. Expect significant positive tailwinds to propel domestic R&D investments by technology companies.

Yellow Light: QSBS taxation

A favorite topic of technology investors is the capital gains exclusion allowed under IRC Section 1202, which applies to the sale of qualified small business stock (QSBS) and allows an exclusion of up to the greater of $10 million or 10 times their basis. Currently, we are not aware of planned changes by the president-elect with respect to the capital gains exclusion, but watch carefully, as any deviation could significantly affect ROI.