Volume VI, Number 2 - April 2001

In this bulletin:

•	Commentary Deadline Extended For Dept. Treasury/Fed. Reserve Rule On Banking, Real Estate Brokerage And Property Management
•	NAR Fights Federal Reserve Proposal
•	Tenant Leasehold Improvement Legislation Reintroduced/ Depreciation Study Update
•	President Bush's Tax Package
•	Estate Tax Repeal
•	Bankruptcy Once Again Stalled in Congress
•	Telecommunications-Court Cases and Model Access Agreement
•	Telecommunications - The Monitoring Continues
•	Ergonomics Law Undone
•	Brownfields Legislation Moving Through the Senate
•	HUD Extends Compliance Assistance Phase Of Lead Paint Rule
•	Supreme Court Hears Oral Arguments on Private Property Rights
•	House Subcommittee Approves Anti-Spam Bill
•	USPAP Reform
•	Administration Proposes Increase in FHA Multifamily Loan Limits

Commentary Deadline Extended For Dept. Treasury/Fed. Reserve Rule On Banking, Real Estate Brokerage And Property Management

Due to the large number of letters and e-mails received by the Department of Treasury and the Federal Reserve, the Agencies have extended the commentary deadline from March 2, 2001 to May 1, 2001. The CCIM Institute as well as the National Association of Realtors7 and the Institute of Real Estate Management sent a Call for Action to their members requesting them to submit commentary to the Agencies by the March deadline. In lieu of the extension, CCIMs still have time to get their letters and e-mails to the Agencies. Go to www.ccim.com/govt/bankcall.htm in order to access information on how to send correspondence.

The proposed rule would allow banking institutions and holding companies to engage in real estate brokerage and property management activities. According to the Gramm-Leach-Bliley Act, an activity (in this case real estate brokerage or property management) must be deemed financial in nature in order for the banks to participate in that activity. The CCIM Institute opposes changes or interpretations in federal statutes and regulations which would permit any banks or bank holding companies or subsidiaries to enter the field of real estate brokerage and/or property management.

NAR Fights Federal Reserve Proposal

NAR is engaged in an all out war against a recent joint Federal Reserve/Treasury proposal to allow banks to engage in real estate brokerage and property management activities. The proposal background is discussed in the previous article. NAR will be testifying at a Congressional hearing in the House Financial Services Committee on April 5, to explain why the proposal would be bad for real estate and risky for banks. NAR's Call-for-Actions have been very successful, instigating over 45,000 letters to the Federal Reserve and Treasury, and over 30,000 letters to Capitol Hill. To date, NAR lobbying efforts have gotten over 135 Members of Congress to write to the Federal Reserve to express their concern over the proposal. The comment period closes on May 1, and it is expected that the Federal Reserve and Treasury will not respond for several months.

Tenant Leasehold Improvement Legislation Reintroduced/ Depreciation Study Update

H.R. 1030 was reintroduced on March 14, 2001 in the 107th Congress by sponsor Clay Shaw, (R- FL) and referred to the House Committee on Ways and Means. Like the previously introduced bill, H.R. 1030 permits the costs of tenant improvements in non-residential buildings to be amortized over 10 years rather than the current schedule of 39 years. Last year, this legislation was put on hold while Congress awaited the Department of Treasury's study on depreciation.

As reported in the October Legislative Bulletin, Department of Treasury's report was released last summer. The report stated that Aan analysis of the current U.S. depreciation system involves several issues, including those relating to proper income measurement, savings and investment activities, and administrability of the tax system. While the report identified issues relating to the design of a workable and relatively efficient depreciation system, and fleshed out possible improvements, it did not contain legislative recommendations.

While House Ways and Means Chairman, Bill Archer (R-TX) indicated that he would hold hearings on depreciation in the fall of 2000, the tight election and other pressing campaign issues took precedence and hearings were not held. At the National Association of REALTORS7 (NAR) Federal Taxation Committee meeting in November, a Depreciation Work Group was formed in order to assess Treasury's depreciation study, the Deloitte and Touche depreciation study (funded by NAR) and formulate model legislation to present to Congress for consideration. Several CCIMs were appointed to that working group and meetings are ongoing at this time.

President Bush's Tax Package

H.R. 3, or the Economic Growth and Tax Relief Act of 2001, passed the House in early March and has been referred to the Senate. The bill would phase-in a tax rate cut over 5 years. The first cut would be retroactive to January 1, 2001 and it creates a new 10% tax bracket that applies to the first $6,000 ($12,000 joint return) of taxable income. The higher tax brackets would not be affected until 2002. The bill passed mainly along party lines; however, 10 Democrats did vote in favor of passage. The Senate will prove to be a tougher road for the package. At least two Republicans on the Senate Finance Committee have announced that they cannot vote for the bill as it now stands and a bipartisan group of 11 Senate centrists have announced that they believe the tax cut should have a trigger that will prevent tax cuts from being implemented during the phase-in period if the projected federal surpluses do not materialize. In addition, while H.R. 3 does not currently contain any provisions regarding the capital gains tax, key members of the Senate have discussed including some kind of capital gains tax relief. As of this bulletin's publication date, nothing yet has been proposed.

Estate Tax Repeal

On March 22, 2001 the House Ways and Means Committee debated the estate tax repeal. While the estate tax is not included in the President's current tax cut plan (H.R. 3) it is being considered as H.R. 8. H.R. 8 would provide full repeal and retain stepped up basis; however, the approach of the 2000 vetoed legislation is also being considered by the committee. The 2000 vetoed legislation provided a stepped up basis for estates below a fixed amount ($2.8 million in the current Senate version), and carryover basis for all amounts above the step up amount.

Despite the overwhelming support for the estate tax repeal, a group of exceptionally wealthy Americans and the insurance industry came forward in February to oppose the estate tax repeal based on two arguments. First, they believe that the revenue lost by abolishing the estate tax will be made up either by increasing taxes or cutting government programs. Second, they believe the repeal would harm charities, to which many affluent estates make contributions as a way of reducing the size of their estates.

Bankruptcy Once Again Stalled in Congress

Bankruptcy reform legislation has passed both the House and Senate, and is now stalled in conference. Very similar legislation was passed last year by both houses, after lengthy deliberations was agreed to in conference, only to be vetoed by President Clinton. That exact legislation was introduced again this year, and quickly made its way through the House and Senate.

However, a number of amendments were made in Committee and on the floor, and differences between the two bills now exist. The Senate B with a 50/50 partisan split, has yet to determine the make-up of the conference committee (the Democrats want there to be an even split, the Republicans want to retain the majority position). While these procedures are determined, the bankruptcy bill sits in limbo. The CCIM Institute has three provisions in the bankruptcy bill dealing with eliminating the cap on single asset bankruptcies, providing protections for shopping center owners when retailers file for bankruptcy and closing the loophole that allows for residential tenant abuse of the Code to avoid eviction. The language on the rental tenant issue was seriously damaged during Committee and on the Floor of the Senate, and the CCIM Institute is urging Members of Congress to support the House language when the bill finally goes to conference. The other provisions remain intact in both bills.

Telecommunications-Court Cases and Model Access Agreement

The Real Access Alliance is contesting the FCC over the satellite dish rules that allow leasehold tenants to place satellite dishes on balconies or other areas under their control without the permission of the property owner. The Alliance's legal counsel and the FCC presented their oral case (written arguments had been submitted previously), and the court was allowed to question both presenters. The court seemed to question the Alliance's takings argument, but was surprised to hear the degree to which the FCC limited the charging of compensation. The court will now deliberate, and a decision is not expected until the summer.

The Real Access Alliance has developed a model license agreement for commercial properties, which can be used to help facilitate agreements between property owners and telecommunications providers. The agreement is available at www.realaccess.org. The Alliance is currently working on a similar agreement for multifamily properties.

Telecommunications - The Monitoring Continues

In the past few years, numerous states have introduced legislation pertaining to telecommunications - satellite dish placement, inside wiring and forced access. Both the CCIM Institute and state chapters have joined efforts with other industry organizations to fight telecommunications legislation that is unfavorable to the real estate industry in general. As we hope that this issue will just go away, such is not the case for 2001:

Florida SB1736 - A very obscure piece of legislation that provides for an implied grant of way of necessity for cable television and other utility services. Amends existing statute.

Minnesota SF1796- Amends existing statues. Requires a property owner to provide perpetual, nonexclusive access for cable telecommunication companies. Also requires incumbent (existing) cable companies use of all the equipment already installed or in use. The incumbent company can be reimbursed for the use, if that company owns the equipment. This bill pertains to multiple- resident dwellings only.

New York AB1268/SB1085 - Prohibits landlords from interfering with the installation of telephone service. Although this legislation pertains to telephone service, in some cases cable telecommunication is provided by telephone providers, or cable service may be added to the legislation as it moves through committee.

Virginia - Under existing law, landlords are prohibited from accepting compensation from cable telecommunication providers in exchange for access to property. This law was to expire July 1, 2001 and landlords would then be allowed to receive compensation. However, SB 972 amended current law and postpones the effective date of this provision to July 1, 2003. Governor Gilmore (R) signed this into law on March 20, 2001.

Ergonomics Law Undone

In one of his first as President, George Bush signed into a law a statute that disapproves a rule submitted by the Department of Labor in November regarding Ergonomics Program Standards. Signed by President Bush on March 20, 2001, Public Law 107-5 states that the previous rule shall have no force or effect.

As reported in the January 2001 Legislative Bulletin, the Department of Labor intended to address work-related musculoskeletal disorders (MSDs), caused by exposure to the following risk factors: repetition, force, awkward postures, contact stress, and vibration. The rule would have required employers to educate employees on MSDs, comply with certain reporting and remediation standards and follow detailed record keeping requirements. Only businesses with 10 or fewer employees were exempt from the record keeping requirements.

Brownfields Legislation Moving Through the Senate

In February, Senators Smith (R-NH), Reid (D-NV), Chafee (R-RI) and Boxer (D-CA) introduced S. 350, the "Brownfields Revitalization and Environmental Restoration Act." The bill would amend the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 to promote the cleanup and reuse of brownfields, to provide financial assistance for brownfields revitalization, and to enhance State response programs. The bill also clarifies that prospective purchasers, innocent landowners, and contiguous property owners, are not responsible for paying cleanup costs. Finally, this legislation offers finality by precluding EPA from taking an action at a site being addressed under a state cleanup program unless there is an "imminent and substantial endangerment" to public health or the environment, and additional work needs to be done. The bill was approved by a 15-3 margin in the Senate Environment and Public Works Committee a few weeks ago, and the House has held several hearings on the issue, although a companion bill has yet to be introduced.

HUD Extends Compliance Assistance Phase Of Lead Paint Rule

On September 15, 2000, HUD's regulation on lead paint in federally assisted properties went into affect. After vigorous lobbying by the multifamily industry, HUD agreed to defer compliance in those jurisdictions that submitted a statement of inadequate capacity. The deferral was effective until March 15. However, HUD has now agreed to extend this time period. For those jurisdictions who have previously submitted a statement of inadequate capacity, HUD is allowing those areas (including 43 states and hundreds of local jurisdictions) to request an extension until August 10, 2001.

To qualify for the extension, a jurisdiction must submit an updated Transition Assistance plan, explaining that they are still unable to comply with the federally assisted rule due to a lack of qualified workers. For a list of states that previously qualified for the Transition Assistance, visit http://www.leadlisting.org/leadlisting/TransitionAssistance.nsf/docs/home.

Supreme Court Hears Oral Arguments on Private Property Rights

The Supreme Court heard oral arguments recently on Palazzolo v. Rhode Island, an important case that addresses a number of takings and property rights issues. Palazzolo v. Rhode Island is testing several key takings issues, including: (1) whether a landowner is barred from claiming a taking when the landowner purchased the property with knowledge that a regulation reducing the property's value existed; (2) whether a landowner must bear the burden of numerous filings with state agencies in order to determine when the land is sufficiently encumbered for purposes of creating a takings claim, and (3) whether the fact that the land retains some residual value automatically invalidates a takings claim.

The broad questioning from the Justices led some legal observers to conclude that the high court may rule on several issues that could significantly benefit property development and curtail some land use and development regulations. A decision from the court is due before the close of the 2000-2001 session, at the end of June.

House Subcommittee Approves Anti-Spam Bill

The House Energy and Commerce Subcommittee on Telecommunications and the Internet approved H.R. 718, the Unsolicited Commercial Electronic Mail Act of 2001 on March 21, 2001. It would place limits on "spam," or unsolicited commercial e-mail messages that are often sent out by the millions. Internet users and access providers complain that spam clogs networks and inboxes with unwanted offers for everything from credit cards to pornography to pyramid schemes.

The bill would give Internet users the right to remove their names from the e-mail lists of marketing companies. Spammers would be required to notify all recipients of this right and include a valid return e-mail address in their messages. Internet Service Providers would provide policies for sending spam to their customers and would be able to sue for damages when those policies are not followed. Financial service representatives and direct marketers are opposed to this last part of the bill, and will work with staff to develop an alternative.

The bill provides consumers and Internet Service Providers with the ability to sue violators for up to $500 per infringement, up to a maximum of $50,000. Private attorneys would be prohibited from bringing class action lawsuits against violators of the bill. State attorneys general would be entitled to bring such actions on behalf of the states' residents. This provision could be narrowed before the full committee markup which will take place in the near future.

Some property owners, managers and brokers may use the Internet to advertise their business. While the CCIM Institute opposes burdensome regulations, which would hinder the utilization of such advertising practices, the Institute would support such consumer protection legislation, like H.R. 718, that would model the current law in effect for unsolicited phone calls to apply to Internet applications.

USPAP Reform

Three project teams have been formed in order to advise the Appraisal Foundation on better processes for handling changes to the Uniform Standards of Professional Appraisal Practice (USPAP)(Process Project Team), how appraisers can do specific assignments under USPAP (Scope Project Team), and changing USPAP itself, in particular the eradication of Standards 4 and 5. The National Association of Realtors7 will have members assigned to the Process and Scope Project Teams (the third project team is open only to Appraisal Foundation Sponsors.) These project teams are the result of Appraisal Foundation Sponsors' and Affiliate Sponsors' meetings in January 2001. The consensus reached was that the process used by the Appraisal Standards Board (ASB) to change USPAP is both cumbersome and results in a document that changes too frequently.

Based on member review of the proposed changes, the CCIM Institute and the Institute of Real Estate Management (IREM) filed commentary with the ASB in 2000 stating their opposition to any language found to negatively affect typical business activities of real estate professionals and language that may require them to pursue another license. CCIM Institute/IREM commentary encouraged the ASB to modify the various definitions in the Exposure Draft to address the aforementioned concerns. While the ASB did not make changes based on the Institutes' concerns, the aforementioned project teams will be closely monitored to determine if the changes exacted by their policy suggestions address the overall concerns the Institutes and NAR have with the current document.

Administration Proposes Increase in FHA Multifamily Loan Limits

HUD Secretary Mel Martinez has proposed that the loan limits for the FHA multifamily program be increased by 25%. Two weeks previously, NAR, as a founding member of the Coalition for Affordable Rental Housing, participated in a press conference calling for an increase in the limits. Recent reports have shown that more than three million moderate-income working families live in either sub-standard housing, or spend more than 50% of their income on housing. The Coalition believes that increasing the loan limits will stimulate not only new construction, but also rehabilitation of the existing multifamily housing stock. Congress will consider the proposal, after the formal budget submission by HUD, expected in early April.

CCIM Institute Legislative Leadership
Hal Maxfield, CCIM, Chair, Legislative Affairs Committee
Sig Buster, III, CCIM, Vice Chair, Legislative Affairs Committee

CCIM Institute Legislative Staff
Chuck Achilles, IREM VP Legislative & Research, 312.329.6020, cachille@irem.org

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