Volume XII, Number 2 - June 2007
In this bulletin:
Capitol Hill Visit Day a Success
CCIM Institute and IREM members joined together to lobby their legislators on Wednesday, April 25, 2007. This year’s Capitol Hill Visit Day event was the fifth time that CCIM s joined CPM, ARM, and IREM Associate Members on the Hill. A combined total of over 275 participants representing forty states and Washington, D.C., lobbied their representatives and senators and their staff in 226 separate meetings. Members lobbied their legislators on the following four pending legislative initiatives: Banks in Real Estate; Leasehold Improvements; Property/Casualty/Terrorism Insurance; and Climate Change/Energy. Issue papers on the four issues are posted on the CCIM Institute Capitol Hill Visits Day page.
View photos and read highlights of the Hill Visits, as well as the briefing papers.
Stand Alone Leasehold Improvements Legislation Introduced
CCIM Institute and IREM members lobbied in support of H.R. 1591, an appropriations bill that included a leasehold improvement provision, on April 25, the Capitol Hill Visit Day. That evening, the House agreed to the conference report by a vote of 218 to 208. Unfortunately, H.R. 1591 was vetoed by the President on May 1, 2007. The House voted 222 to 203 to override the veto, but fell short of the 2/3 vote, or 290 votes, required.
During their meetings, CCIM Institute and IREM members asked their legislators to sponsor legislation that included a leasehold improvement provision or stand alone legislation. Senator Conrad of North Dakota and Senator Kyl of Arizona introduced legislation (S. 1361) on May 10 that would permanently extend the 15-year recovery period for the depreciation of certain leasehold improvements. Prior to the introduction of S. 1361, CCIM Institute and IREM members lobbied Senator Kyl’s staff on April 25 requesting that he sponsor an extension of leasehold improvements. The Senate Finance Committee was assigned S. 1361. The companion bill in the House--H.R. 2014—is sponsored by Representatives Crowley (NY) and Weller (IL).
CCIM Institute Approves New Statement of Policy on Climate Change and Energy
In response to Congress’s increased focus on climate change and energy conservation, the CCIM Institute has taken an official position on the issue. CCIM Institute approved a new statement of policy in May at the mid-year meetings stating its’ strong support for positive incentives for energy conservation activities.
The CCIM Institute strongly urges Congress to focus on voluntary standards for new construction and existing properties. In recognition of the serious concerns of global warming, the CCIM Institute supports the development of voluntary standards for reducing greenhouse gas emissions. The Institute supports the use of sustainable materials in the construction of buildings, and programs that reduce the “carbon footprint” of real estate assets. However, requirements to retrofit existing buildings must take into consideration the needs of the buildings and costs associated with such changes.
Senate Begins Energy Debate
The Senate is currently debating an energy bill, S. 1419, the "Renewable Fuels, Consumer Protection, and Energy Efficiency Act of 2007." This bill contains a number of provisions to raise fuel economy standards, combat gas price gouging, and promote energy efficiency. Under energy efficiency, the bill would require improvements in federal buildings, lighting and appliance standards, and automobiles. Tax provisions have not yet been added to the bill, but are expected to be included while the bill is on the Floor of the Senate. These provisions will extend the energy efficiency tax credits in current law. The House passed a similar energy bill in January.
Post- Capitol Hill Visit Day Increase in Co-Sponsorships of Legislation Keeping Banks Out of Real Estate
On June 11, 2007, the House Appropriations Committee approved a one-year provision prohibiting the Federal Reserve and Treasury Department from finalizing the rule allowing banks to engage in real estate brokerage. The current moratorium on the Federal Reserve Board’s and the U.S. Treasury Department’s proposed rule to expand the powers of national banks is set to expire in September 2007. This is the same provision which has passed for the last 5 years. The full House is expected to vote on the Appropriations bill in the next week. The Senate will take it up shortly. The National Association of REALTORS® (NAR) and CCIM Institute are working to get a prohibition included in the Senate bill as well.
NAR, the CCIM Institute, and IREM strongly support “the Community Choice in Real Estate Act,” H.R. 111/ S. 413. That legislation clarifies Congressional intent that real estate brokerage and management are not banking activities. Currently, H.R. 111 is in the House Financial Services Committee and S. 413 is in the Senate Banking, Housing, and Urban Affairs Committee.
CCIM Institute and IREM members who participated in the Capitol Hill Visit Day were given their legislators’ voting records prior to their meetings. The members thanked numerous senators and representatives for co-sponsoring H.R. 111 and S. 413. If a legislator was not a co-sponsor of either H.R. 111 or S. 413, then the IREM and CCIM Institute members that met with that legislator requested that he or she be added as a co-sponsor. Soon after the Capitol Hill Visit Day, six representatives (Mica (FL), Westmoreland (GA), Walberg (MI), Kennedy (RI), Doggett (TX), and Cannon (UT)) became cosponsors of H.R. 111 and two senators (Chambliss (GA) and Sarbanes (MD)) became cosponsors of S. 413. Currently, there are 255 Representatives cosponsoring H.R. 111 and twenty-one Senators cosponsoring S. 413.
Congress Affirms Separation of Banking and Commerce
On May 21, 2007, the U.S. House overwhelmingly passed H.R. 698, the “Industrial Bank Holding Company Act of 2007,” by a vote of 371 to 16. This legislation strengthens our national policy against mixing banking and commerce by closing a loophole that allows commercial companies, such as Home Depot, to own certain state-chartered, federally regulated banks. This bill will help restore the wall between banking and commerce and limit the expansion of the ILC charter. The bill now moves to the Senate, where there is currently no companion legislation.
Terrorism Insurance Update
The CCIM Institute is concerned about the escalating insurance costs and the lack of coverage for events related to terrorism and war. CCIM Institute and IREM members lobbied their legislators during the 2007 Capitol Hill Visit Day to extend the Terrorism Risk Insurance Extension Act (TRIEA) that provides a federal backstop for commercial property and casualty insurers arising from terrorism. The program is necessary in order to avoid economic slowdown and to provide adequate economic protection against terrorism. The private market has not yet shown that it is capable of providing this insurance on its own at an affordable price.
Congress has held several hearings dealing with terrorism insurance thus far this year. Commercial REALTOR® Joe Ditchman, of Cleveland, Ohio, recently testified on behalf of NAR and the Coalition to Insure Against Terrorism. While a number of members of Congress have expressed support for extending the terrorism insurance program, which is set to expire on December 31, 2007, legislation has yet to be introduced. The CCIM Institute will continue to work for introduction and passage of this important legislation.
TIC Update
NAR is in discussion with the U.S. Securities and Exchange Commission (SEC) to enable real estate professionals, under certain limited conditions, to advise on Tenant in Common (TIC) securities transactions and receive compensation without significantly impacting SEC rules and the role of securities professionals.
If the SEC and NAR come to an agreement, real estate professionals will be able to offer and show TIC securities properties as a real estate option for clients under certain circumstances and limitations. Professionals would have to enter into a special buyer agent agreement that specifies their limitations to comply with securities law.
NAR has expressed its confidence that the SEC will respond favorably to NAR’s request. For that reason NAR has been working with industry partners, such as ARELLO, to educate them on the potential impact on state securities and real estate regulation.
IRS May Modify Remic Rules
The IRS is in the process of deliberating what changes to the real estate mortgage investment conduit (REMIC) rules should be made. REMICs are a vehicle by which commercial mortgages are securitized. Currently, borrowers with loans securitized through a REMIC are unable to substantially modify their properties to meet changing market trends. Consequently, the attractiveness of securitizing commercial loans is limited as well as the flexibility of borrowers to meet debt obligations as market trends change.
NAR, in cooperation with an industry group coalition, has requested that the IRS modify the REMIC rules to allow common modifications to collateral provided that the basic terms of the securitized loan remain the same. The coalition submitted comments on April 30 to the IRS on how the REMIC regulations can be improved, including allowing the following: collateral modification, prepayment of the loan, and the addition or substitution of an obligor.
Recently on May 31, NAR and coalition members met with IRS staff to answer specific questions on the proposed REMIC changes. The coalition argued that current regulations do not reflect the dynamic nature of commercial real estate and that the proposed changes would make the securitization of commercial mortgages more attractive to borrowers. The IRS stated that it will address the proposed changes soon.
View the CCIM Institute statement of policy on REMIC and then go to page 63.
Immigration Reform—a Compromise?
Congress continues to struggle with immigration reform. A few weeks ago it appeared that a compromise between the Congress and the President had been achieved. That soon dissolved, but hope is again on the horizon. The current proposal would offer legal status to 12 million illegal immigrants in the U.S.; would create a guest-worker program; and provide funding to tighten border security. The debate on legislation is expected to stretch out through the remainder of this legislative calendar.
Record Number of Immigration Reform Bills Being Considered by State Legislatures
State legislators in all of the 50 states introduced over 1,000 bills and resolutions related to immigration or immigrants this spring. That number is more than double the total number of bills introduced last year.
A total of 57 related bills have been enacted this spring by the following
states: Arkansas, Colorado, Hawaii, Idaho, Indiana, Kansas, Kentucky,
Maryland, Montana, North Dakota, Nebraska, New Mexico, New York, South
Dakota, Utah, Virginia, West Virginia, and Wyoming.
In addition, a number of state legislatures adopted resolutions. More
activity is expected.
Most of the proposals relate to employment, benefits, education, and law enforcement. More than forty states have considered proposals related to employment, including legislation that prohibits employment of unauthorized workers, adds penalties, and requires verification of work authorization.
Legal Battles Over Local Immigration Ordinances that are Burdensome to Commercial Real Estate Professionals
At least thirty municipalities have passed ordinances in an attempt to enforce immigration laws and deter illegal immigrants from settling in their communities. In addition, another seventy municipalities are considering similar ordinances. These ordinances prohibit landlords from leasing to illegal immigrants and penalize businesses for employing illegal immigrants.
Pro-immigrant groups brought suit against the city of Hazelton, Pennsylvania in opposition to its ordinance that fines landlords who rent to illegal immigrants $1,000 a day and revokes the licenses of business for five years if they hire illegal workers. The Hazelton immigration ordinance trial ended on March 30. The verdict has not been announced yet. Immigration rights groups and immigration reform groups are each hoping for a victory, knowing it will have an effect on other city council votes and trials on related ordinances.
Other localities that have passed immigration ordinances are also facing legal battles. A federal judge issued a temporary restraining order on a Dallas suburb’s ordinance that places an undue burden on apartment owners and managers. The Farmers Branch ordinance would require landlords to verify that apartment rental applicants are U.S. citizens or legal immigrants before leasing to them. Exceptions are provided for the elderly and minors. An apartment owner or manager could be fined up to $500 a day by the city if the owner or manager rents to an illegal immigrant. Apartment owners and managers expressed concerns that they do not have the necessary training and resources to check immigration status. The temporary restraining order will be in effect until June 19 then the judge will decide whether to issue an injunction.
Landlords in the city of Valley Park, Missouri have had success in fighting the “Illegal Immigration Relief Act Ordinance” that punishes landlords who rent to undocumented workers. Shortly after the ordinance had passed a coalition of landlords challenged the ordinance. On March 12, a Missouri judge granted a permanent injunction against the ordinances blocking the enforcement of the law.
Identity Theft Legislation
On April 25, 2007, the Senate Commerce Committee approved S. 1178 (Inouye, D-HI; Stevens, R-AK; Pryor, D-AR), the Identity Theft Prevention Act. The first of what is expected to be a series of bills responding to the rising incidence of database breaches, S. 1178 would require businesses that collect sensitive personal information to (1) develop a written security program outlining steps that are to be taken to protect client information, (2) notify consumers whose information has been lost of the loss in a timely manner, (3) provide these same consumers with a toll-free telephone number to contact the firm following a breach and (4) report the breach to the Federal Trade Commission (FTC). The FTC would also be responsible for enforcement, although the state attorneys general would also be authorized to enforce the measure. The bill does not create a private right of action.
While this measure did pass the committee on a voice vote, getting a bill to the floor will be difficult because at least six congressional committees have jurisdiction over the issue. Jurisdictional spats derailed efforts to get a consensus bill last year.
Alternative Minimum Tax Relief
Ways and Means Committee Chairman Charlie Rangel has announced that Committee Democrats have reached general agreement about the broad outlines of a package that would overhaul the Alternative Minimum Tax (AMT). He has not yet had an occasion to review it with Ranking Member Jim McCrery (R-LA), so no details have emerged. Early leaks suggest that the AMT would not apply to anyone with adjusted gross income (AGI) lower than $250,000 and that the AMT's principal burden would be borne by those with more than $500,000 AGI. Under current law, as many as 34 million taxpayers are exposed to the AMT. Rangel has indicated informally that about 1 million taxpayers would pay the AMT under his approach. Meanwhile, in the Senate, Chairman Max Baucus (D-MT) has indicated that he will simply extend the current law "hold harmless" patch. Rangel hopes to move an AMT package by June.
Estate Tax Update
During the Senate vote on the FY 2008 Budget Resolution, five separate amendments were offered directing the tax-writing committees to craft permanent rules on the estate tax. The amendments ranged from full repeal with carryover basis to very specific plans with estate tax exclusions ranging between $3.5 million and $5 million and maximum tax rates between 35% and 45%. All the amendments failed. The coalition that has supported full repeal (NAR is a participant) is now telling Congress that certainty is the primary goal of small business owners today. In addition, many organizations have highlighted the problems associated with the carryover basis rules presently scheduled to be in effect in 2010.
Brownfields Changes Pass House
The House of Representatives on February 27 passed H.R. 644, the Brownfields Redevelopment Enhancement Act, by voice vote. The bill amends the Housing and Community Development Act of 1974 to authorize the Secretary of HUD to make grants (without certain otherwise-required loan guarantees) to eligible public entities and Indian tribes to assist in the environmental cleanup and economic development of brownfield sites. The bill also makes brownfields-related environmental cleanup and economic development activities eligible for community development block grant (CDBG) assistance. Further, the bill authorizes CDBG use to administer renewal communities. There is not yet companion legislation in the Senate.
Basel I-A And Basel II Update
On March 26, 2007, NAR submitted comments to the federal banking regulators on their proposed rules to change the capital rules for banks and thrifts. Two new capital standards are being developed. The Basel II standard would only apply to the ten to twenty largest banks and is intended to align bank capital to risk through complex formulas and each bank's own historical data on loan performance and losses. The Basel I-A standard would be a new optional capital standard for all other banks that could remain under the existing Basel I standard.
The NAR letters included suggestions for improving the capital rules as they affect commercial real estate lending. NAR urges the regulators to amend the Basel I-A rule to take into account the varying risk profiles of commercial real estate loans, so banks may hold less capital for multifamily residential property with a history of high occupancy and revenue generation.
View NAR’s letter on Basel I-A
View NAR’s letter on Basel II
CCIM Institute Legislative Affairs Sub-Committee Update
The Legislative Affairs Sub-Committee recently met during the mid-year business meetings in Indianapolis on May 3. Committee chair Jay Verro, CCIM, and vice-chair Harold Huggins, CCIM, led the meeting.
CCIMs will be heading to the Hill with IREM members once again in 2008. The committee approved the motion for the CCIM Institute to conduct another joint “Commercial Real Estate Capitol Hill Visit Day” with IREM members in Washington, D.C. in April 2008.
The CCIM Institute approved a new statement of policy on Climate Change/ Energy. The CCIM Institute strongly supports positive incentives for energy conservation activities. In addition, the Institute strongly urges Congress to focus on voluntary standards for new construction and existing properties.
The Sub-Committee is on track to complete all four of its goals for
2007 by the end of the year. The following is the status of each goal:
1. The Sub-Committee is working to increase chapter and regional participation
in legislative affairs on the state and local level and in the annual
CCIM Institute Congressional visits.
2. The Sub-Committee contributed to the success of the 2007 Capitol
Hill Visit Day that took place on April 25, 2007.
3. The Sub-Committee continues to work on efficient methods of delivering
and communicating state legislative issues to CCIM Institute members.
For instance, each chapter was asked to designate a Legislative Chair
to serve as a contact for such issues.
4. The Sub-Committee works with CCIM Institute staff to increase awareness
of legislative issues through communications and publications such
as I-News and CIRE.
The next Sub-Committee meeting will be held during the business meetings immediately prior to the Success Series in San Antonio, Texas, in October.
Sexual Orientation Discrimination Banned by Nineteen States
The Fair Housing Act does not prohibit discrimination based on a person’s sexual orientation. However, an increasing number of states, now totaling nineteen, have laws prohibiting discrimination in employment, housing, and access to public accommodations.
The Iowa Civil Rights Act was amended on May 25 when the Governor signed S.F. 427 into law making it illegal to discriminate in employment, public accommodation, credit, housing, and education based on a person's sexual orientation or gender identity.
Recently, the Governor of Oregon signed legislation into law that bans discrimination based on sexual orientation. The law, effective January 1, 2008, bans discrimination against gays, lesbians, and transgendered people in employment, housing, and access to public accommodations.
Currently, the following states prohibit discrimination based on sexual orientation in housing: California, Connecticut, Washington, D.C., Hawaii, Iowa, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, and Wisconsin.
Landlords need to check state and local laws to ensure they are in compliance.
Bright State Budget Outlooks, for Now
In fiscal year 2007, corporate income, personal income, and sales tax receipts met or exceeded budgeted estimates in forty-one states, according to the National Association of State Budget Officers (NASBO). Of those states, the following ten have surpluses over a billion dollars: Alaska, California, Florida, Georgia, Louisiana, Massachusetts, Minnesota, New Jersey, New York, Oregon, and Texas. In comparison, every state either exceeded or met its revenue projection in fiscal year 2006. To read the “Fiscal Survey of States: June 2007” NASBO report, click here.
Budget outlooks for fiscal year 2008 are not as bright as they have been the last couple years. One indicator is that state budget surpluses are declining. Another indicator is that nine states, including California, Florida, and Maryland, are reporting lower revenue collections than they anticipated. States have reported that their sales tax collections are below target, unlike last year. As a result, state officials are concerned. A representative for Maryland’s Office of Policy Analysis was quoted by Statenet that Maryland is concerned “because sales-tax performance was a leading indicator of fiscal problems the last time we went into an economic downturn."
Eminent Domain Bill Passes U.S. House
The House Agriculture Committee passed an eminent domain bill on Thursday, May 17th. The bill, H.R. 926, would deny federal economic development assistance to any state or local government that uses eminent domain powers for economic development purposes and that involves transfer of property from one private owner to another. The CCIM Institute supports states’ rights in deciding under what conditions eminent domain may or may not be used. H.R. 926 was also referred to four other House committees, none of which have yet held hearings; therefore, consideration on the House floor does not appear imminent.
Governors Push for State Universal Health Care
During 2007 state legislative sessions, thirty-four governors proposed universal health plans. Those proposals for fiscal year 2008 total $18.4 billion, according to Statenet. Universal health care is when all residents of a geographic area have their health care paid for, regardless of medical condition or financial status, typically by that government. The theme of many of the proposals is to provide subsidiaries to those that do not have coverage or tax incentives for companies to provide insurance to their employees. Massachusetts and Vermont lead the trend in 2006 when each state enacted universal health care legislation into law.
This year the Governor of Pennsylvania introduced a comprehensive health care reform plan called “Rx for Pennsylvania” that would provide all uninsured Pennsylvanians access to health insurance. The plan is included in House Bill 700 that was assigned to the House Insurance Committee. The Governor hopes it will pass the House before the summer recess, and pass the Senate in September. A January 2008 implementation date is the Governor’s goal.
Currently, of the 767,000 uninsured Pennsylvania adults, 71% are employed, 75% work for private companies, 62% are in the service industry and 21% are in retail, and 76% have incomes below 300% of the federal poverty level. Half of the uninsured in the state are between 18 and 34 years old. In comparison, 41.6 million Americans under the age of 65 lacked health insurance in 2004, according to the U.S. Centers for Disease Control and Prevention.
The CCIM Institute has been monitoring health insurance legislation at the state and federal level. Thirty percent of Realtors® lack health insurance.
Forced Access Update
The CCIM Institute has long been opposed to legislation mandating that building owners and managers provide telecommunications companies access to private rights-of-way and to the insides of the buildings of property owners and managers. Below you will find information on state legislative proposals and a map reflecting which states have mandatory access laws.
Illinois’ mandatory access statute will likely be reauthorized this month. State franchise legislation reauthorizing the state’s mandatory access statute that was to sunset this November is expected to become law.
In Massachusetts a cable rewrite bill has been introduced. The bill does not address forced access. Current state law requires all telephone and cable operators to obtain “…the consent of the owner or lawful agent of the owner…” of any property it seeks to attach its equipment. Unfortunately, state law provides for an automatic approval in favor of cable operators seeking access to a multiple dwelling unit (MDU) where a tenant has requested service. If the proposed legislation is enacted in Massachusetts, any telephone company may be able to attach its mandatory access rights into an MDU for the provision of cable to provide telephone services.
Special thanks to Gerry Lederer, of counsel to Miller & Van Eaton, P.L.L.C., who works with the Real Access Alliance, for providing CCIM Institute legislative staff information for this update as well as the map of states with mandatory access.
Recently in the New York Senate, a bill titled “Discrimination Against Telephone Companies,” S.B. 5145, was introduced. The bill, which has been in the Committee on Energy and Telecommunications since early May, adds a new section titled “Landlord-Tenant Relationship” to the public service law. If this bill becomes law, landlords and building owners will be prohibited from interfering with the installation of telecommunications facilities by a telephone service provider upon the landlord or owner’s property or premises. The bill also prohibits landlords and building owners from asking for or accepting payment from any tenant in exchange for permitting telecommunication services on the property. In addition, telephone service providers may not enter into agreements with building owners, landlords, and lessees served by a telephone service provider that would diminish or interfere with the existing rights of any tenant to use or avail him of telecommunications equipment.
Newly Enacted State Laws Affecting Commercial Real Estate Professionals
Check out the member-exclusive CCIM Institute State Legislative Database at its direct link to search all fifty states or a select state on a several issues. Read on below to find out what laws impacting landlords have been enacted this spring.