Volume VIII, Number 4 - December 2003

In this bulletin:

•	New And Revised Statements Of Public Policy Adopted At CCIM San Antonio
•	Leasehold Improvements Depreciation
•	Expiring Tax Provisions Receive New Life
•	Energy Bill Containing Tax Deductions Stalled In Senate
•	Internet Tax Moratorium Expires, Action Possible In January
•	Tort Reform Legislation Likely By Early 2004
•	Fair Credit Report Act(FCRA) Status
•	House Approves Spam Legislation
•	Flood Insurance
•	Banks In Real Estate
•	Do Not Call/Do Not Fax Registry Update
•	CCIM Institute Submits Comments On New Basel Capital Accord
•	Final Meeting Completed On EPA Rules Regarding Brownfields
•	Postal Service Mailbox Proposed Regulation
•	Water and Water Sub-Metering
•	IRS Cracks Down On Certain Workman’s Comp Payments

New And Revised Statements Of Public Policy Adopted At CCIM San Antonio

The CCIM Legislative Affairs Subcommittee approved amendments to three current statements of public policy: Tort Reform, Lead Paint and Budgetary and Monetary Policy. In addition, the Subcommittee approved a new statement of public policy on commercial real estate financing and the Basel Accord.

Leasehold Improvements Depreciation

The American Jobs Creation Act of 2003 (H.R.2896) includes an important provision that would reduce the depreciable life for tenant leasehold improvements from 39 to 15 years for property placed into service in 2004 and 2005. The bill passed the House Ways & Means Committee, and House leadership would like to bring it up for a vote on the floor of the U.S. House of Representatives before they adjourn for the year. CCIM Institute, the Institute of Real Estate Management (IREM), and the REALTORS Commercial Alliance sent Calls to Action to their respective membership requesting contact with Members of Congress asking for their support of H.R. 2896. CCIM Institute has also sent a letter of support to the Ways and Means Chairman Bill Thomas who has repeatedly expressed his support for a reduction in the number of years of depreciable life for tenant improvements.

The bill, H.R. 2896, is primarily focused on overhauling the rules governing many facets of the taxation of multinational corporations, but also contains some domestic reforms that simplify business taxation, while enhancing productivity and increasing jobs.

It’s not too late – For more information on this Call to Action go to:
http://www.ccim.com/members/gov_index.html

Expiring Tax Provisions Receive New Life

The House approved by voice vote last Thursday a bill (H.R. 3521) that extends 15 tax provisions for one year. They were set to expire on December 31, 2003. Important to the commercial real estate industry, the legislation includes extensions of the deduction for brownfields cleanup expenses. The Senate proposed bill, S. 1896, is much different from the House passed bill. The Senate is expected to act to extend the expiring tax provisions before adjournment.

**Contact your Representative or Senator! Do you have something to say to your elected officials about any of these issues or others? Go to http://www.congress.org and plug in your zip code to write them about your position.**

Energy Bill Containing Tax Deductions Stalled in Senate

Legislation that would overhaul the nation’s energy policy was unable to overcome a Senate filibuster and will likely be shelved until next year. The bill contained a provision favorable to the property management industry that would provide a tax deduction of up to $1.50 per square foot to anyone installing equipment in lighting, heating, cooling or hot water systems or the building envelope that meet energy cost savings targets. The bill has encountered resistance from both the right and the left because of its cost and concerns over environmental issues. It is unclear whether a workable compromise can be reached.

Internet Tax Moratorium Expires, Action Possible in January

The Senate has failed to reach an agreement on an extension of a moratorium on the taxation of consumer access to the Internet. The bill, which would have permanently extended a prohibition that was first enacted in 1998 and expired in November, is likely to be considered when Congress returns in January. Though there is growing momentum behind the permanent ban, Senators were unable to reach agreement on how to redraft the law to take into account the growth of new forms of Internet access, such as DSL and cable modems. Proponents of the ban also ran into resistance from states currently exempted from the ban (Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Tennessee, Texas, Washington, and Wisconsin) but would have to give up their taxes on Internet access under the permanent prohibition. Also not receiving action was a proposal that would create a framework allowing states to collect sales and use taxes on the purchase of goods over the Internet. CCIM Institute has statements of public policy endorsing both proposals in principle.

Tort Reform Legislation Likely By Early 2004

Legislation closely watched and supported by CCIM Institute that would reform the way class action lawsuits are handled was passed by the House of Representatives earlier this year, but has come up short of the 60 votes needed to break a filibuster in the Senate. The bills, H.R. 1115 and S. 1751, would make important changes to the rules governing class action lawsuits, moving many lawsuits from state to federal courts and limiting a number of abusive practices, such as settlements that give plaintiffs nearly useless coupons or vouchers while their lawyers reap millions and the practice of filing lawsuits in courts most likely to award multimillion dollar judgments. After passing the House in mid-June, the bill failed to overcome a filibuster in the Senate by one vote in October. Since then, Senate Republicans have reportedly reached a compromise with 3 holdout Democrats, Senators Chuck Schumer (NY), Chris Dodd (CT), and Mary Landrieu (LA), that would assure the bill’s passage, either in December or sometime in January.

**Contact your Representative or Senator! Do you have something to say to your elected officials about any of these issues or others? Go to http://www.congress.org and plug in your zip code to write them about your position.**

Fair Credit Report ACT (FCRA) Status

The House and Senate completed action on H.R.2622, the Fair and Accurate Credit Transactions Act of 2003. The bill contains a number of provisions including notice of negative credit score treatment caused by credit inquiries; prompt reinvestigation and correction of inaccurate information; and a study of the effects of credit scoring on insurance and other financial products. The bill would also permanently extend expiring FCRA provisions that preempt many state consumer-protection laws. This is particularly important to property managers since, without them, each state could develop their own requirements with respect to adverse action notices, consumer report contents, and furnisher obligations adding new operational costs on rental housing firms and increasing uncertainty about the credit and legal history of residents.

The House passed the compromise version by a vote of 379-49 and the Senate cleared it by voice vote. President Bush signed the legislation on December 4th.

House Approves Spam Legislation

On Friday, November 21st, the House passed legislation to control unsolicited commercial e-mails on a 392-5 vote. In an effort to adopt legislation that could be easily accepted by the Senate prior to the fall adjournment, the House approved a modified version of S. 877, the Senate bill approved late last month. The measure was sought by retailers, marketers and Internet account providers seeking a single set of rules that would apply nationwide and preempt a tough new California anti-spam law taking effect January 1, 2004.

The compromise bill does not ban unsolicited commercial e-mails but identifies a series of practices that must be observed by senders of commercial e-mails. The bill requires senders to:

•	include a legitimate return email and physical postal address;
•	include a functioning opt-out mechanism, clear and conspicuous notice of the opportunity to opt-out and requires senders to honor any such opt-out request;
•	include a clear and conspicuous notice that the message is an advertisement or solicitation; and,
•	clearly identify messages with pornographic or sexual content as such.

In addition, the bill prohibits senders from falsifying or disguising their true identity and bans the use of incorrect, misleading or fraudulent subject lines.

The bill also calls on the Federal Trade Commission (FTC) to report to the Senate and House on a plan and timetable for establishing a nationwide Do-Not-Email registry as well as the practical, technical, security, privacy, enforceability, or other concerns that the Commission has regarding such a registry. The Washington Post reported on Saturday that "...the FTC, which opposes a spam registry on the grounds that spammers would ignore it, would have to come up with a plan for the list but would not be obligated to implement it."

The Senate will consider the House-approved bill prior to adjournment and President Bush is expected to sign the bill before year's end. In an effort to avoid the nasty surprise received by the real estate industry last summer after the Do Not Call/Do Not Fax Registry rules were published, the National Association of REALTORS have already approached the Federal Trade Commission about setting up meetings regarding implementation of the Do Not Email rules.

Flood Insurance

The House of Representatives has approved H.R. 253, a flood insurance repetitive-loss bill, and sent it to the Senate. The bill also provides for a multi-year reauthorization of the National Flood Insurance Program (NFIP). The current authorization of the NFIP will expire on December 31, 2003. The Senate will not take up H.R. 253 until next year. To ensure that the NFIP authorization will not lapse, Congress will pass a 3-month stopgap reauthorization prior to adjournment, which will ensure authorization of the federal flood insurance program through March 2004.

Banks In Real Estate

Effectively buying time in the Banks and Real Estate fight, the conferees on the Treasury, Transportation and Related Agencies Appropriations bill agreed to retain language prohibiting the Treasury Department from finalizing the banks in real estate rule during FY 2004. The language was inserted in the House appropriations bill by Rep. Anne Northup (R-KY) and its retention was urged by Conference Chairman Richard Shelby (R-AL). The conference report now heads to the House and Senate floors for final approval and continues to the White House for the President's signature.

Do Not Call/Do Not Fax Registry Update

Background: The goal of the Do Not Call Registry is to stop most unwanted telemarketing calls to consumers. Residential telephone subscribers can now make one request per phone number to the Federal Trade Commission (FTC) to have their number added to the registry.

If your marketing practices include telephone solicitations to residential telephone numbers, they you must check the registry prior to making the call. The registry is maintained by the FTC and can be accessed at www.telemarketing.donotcall.gov. The list is sorted by area code and telemarketers are able to obtain the requested area codes from the FTC. It is the responsibility of the telemarketers to update their lists quarterly. Telemarketers are prohibited from calling anyone whose name is on the list unless they meet certain criteria such as having written permission to call or fall under one of the exemptions.

The FCC granted a stay on the Do-Not-Fax rules until January 2005. CCIM Institute is working with the National Association of REALTORS® to monitor developments regarding these restrictions.

What Can You Do? The National Association of REALTORS® (NAR) rolled out a Do-Not-Call/Do-Not-Fax Toolkit at the 2003 Conference and Expo in San Francisco. The Toolkit provides realty professionals with over 100 pages of information on the new Do-Not-Call and Do-Not-Fax Rules including information on the safe harbor provision, how to access the registry, sample FTC Registry web pages, FTC and FCC consumer advisories, and NAR's webcast seminars on complying with the rules.

Copies are available to associations and members at cost for $15.00 per Toolkit. Orders can be placed at the REALTOR.org Store (Research Section) at http://www.realtor.org/prodser.nsf/OpenProd?OpenForm&Login&IN=186-100.

To place a phone order, please call NAR Information Central at (800) 874-6500 and press Option #1.

CCIM Institute Submits Comments On New Basel Capital Accord

CCIM Institute submitted comments to the OCC, Federal Reserve, FDIC and the OTS on their Advanced Notice of Proposed Rule Making governing the risk-based capital guidelines in the new Basel Capital Accord. CCIM Institute supported the National Association of REALTORS position for a more efficient regulatory capital framework, but also stated concern about how the new Accord, as currently drafted, would have a significant negative impact on the flow of credit to the real estate industry – particularly to commercial and multifamily property owners and developers. The measure could also disrupt the commercial mortgage-backed securities (CMBS) market.

The Federal Reserve has indicated to the industry that they would consider additional performance information and re-evaluate the capital charge requirements for CMBS. They want to develop a more accurate determination of the concentrations of commercial and multifamily real estate (CRE) loans and CMBS holdings. Also, the Basel Committee recently agreed to take an additional six months to consider simplifying a number of key provisions in the new Accord so the final version of the new Accord will not be released at the end of this year as originally planned but by mid 2004.

Final Meeting Completed On EPA Rules Regarding Brownfields

NAR participated in the sixth and final meeting of an ongoing EPA-sponsored negotiated rulemaking to create regulations pursuant to the "All Appropriate Inquiry" provisions of the Small Business Liability Relief and Brownfields Revitilization Act (The Brownfields Bill). In order to be able to raise the "innocent landowner" defense if hazardous substances are found on a recently purchased property, prospective purchasers of a property must have conducted "all appropriate inquiry" activities prior to purchase to determine whether or not hazardous substances existed on the property. The goal of the negotiated rulemaking is to specify the activities that are required to comply with the "all appropriate inquiry" provisions. EPA is required by statute to publish a proposed rule on complying with the "all appropriate inquiry" provision in January, 2004.

NAR is participating in this negotiated rulemaking to ensure that the requisite "all appropriate inquiry" activities to be specified in the rule are not overly burdensome and costly to conduct, but are still protective of human health and the environment. This activity is important to commercial real estate members involved in purchasing and redeveloping property and who want to avoid being part of the costly clean-up of hazardous waste on a brownfield site. If they conduct the appropriate "all appropriate inquiry" activities - as specified under the regulations - and hazardous substances are subsequently found on the site, they will be able to claim the "innocent landowner defense" and avoid being sued to pay for the clean up of the site.

Postal Service Mailbox Proposed Regulation

The United States Postal Service (USPS) regulates wall-mounted mailboxes that are used for central delivery. These include all properties that have wall-mounted banks of mailboxes that are served by a postal delivery person who sorts the mail into boxes on site -- such as apartment buildings, condominiums, and some office buildings. The USPS is preparing new specifications for the shape and size of these boxes, making them larger by over 50%. The Institute of Real Estate Management (IREM) is participating in a stakeholders’ Consensus Committee convened by the USPS to revise the federal apartment mailbox standard. USPS says the current standard, adopted in 1975, needs to be updated to accommodate growing mail volume and improve mail safety and security.

The USPS plans to require a change from the current vertical and horizontal receptacles, which have compartments that are 5” x 6” x 15”, to a horizontally-configured receptacle that is 3" high x 12" wide x 15" deep. It also expects to require inclusion of parcel receptacles (Standard = 15” high x 12” wide x 15” deep; Large = 18” high x 12” wide x 15” deep), probably in a ratio of about one package receptacle for every 8-15 addresses within the building. The exact ratio is still undetermined.

While discussions are ongoing, there has been tentative agreement that the new mailbox standard would only be required in new construction and substantial rehabilitation. Existing buildings would be encouraged to replace existing boxes at the end of their useful life with the new mailbox standard.

Water And Water Sub-Metering

The Environmental Protection Agency (EPA) has published a proposed rule to repeal their policy requiring properties that sub-meter to conform to the regulatory requirements of the Safe Drinking Water Act (SDWA). Under current regulation, properties that sub-meter or utilize a Ratio Utility Billing System (RUBS) are treated as if they were public water systems, and are subject to all testing and water quality rules. In this proposed revision, EPA acknowledges the disincentive this policy places on properties that wish to sub-meter or use RUBS. The National Association of REALTORS (NAR) and the Institute of Real Estate Management (IREM) submitted joint comments supporting the proposed revision. Sub-metering and RUBS have been proven to promote water conservation, and changing EPA's policy will encourage more properties to do so. A final rule is not expected until the Spring.

IRS Cracks Down On Certain Workman's Comp Payments

The Internal Revenue Service (IRS) has recently decided that taxpayers have been abusing provisions allowing those who make payments into trust funds in anticipation of liabilities arising out of workmen’s compensation and litigation to take deductions for the payments.

The IRS believes that the provision has been abused by people who set up trusts with third parties as the custodian of record but retain access to the funds or control of their distribution. In these cases, taxpayers are not eligible to take deductions if they retain control over the funds or if the funds can be distributed before the conflict is resolved. This decision is retroactive to 1984 and the IRS will carefully scrutinize these deductions to ensure compliance.

CCIM Institute Legislative Leadership
Bruce Baker, CCIM, Chair, Director
Raymond Boro, CCIM, Vice-Chair, Director

CCIM Institute Legislative Staff
Charles Achilles at cachille@irem.org or at (312) 329-6020

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