Governmental Affairs Rochester Chapter

December 13, 2017

From the Desk of John Rynne, MAI, RAC NYSCAR Governmental Affairs Chair:

One of the biggest concerns in Governmental Affairs is the national issue of the tax reform bill.  Both National Association of Realtors (NAR) and the New York State Association of Realtors (NYSAR) are adamantly against part of the tax reform bill and in favor of much of the remainder proposed by both the House of Representatives (House) and the Senate.   A conference committee has been set up between the House and the Senate bills to compromise by December 15, and at the latest, December 22 for the President to sign.  NAR estimates that if some of the provisions of the bill are put in place, there will be a 10% decrease in single-family residential values in the United States.  States such as New York, California and New Jersey, which are highly taxed, will feel the worst impact.  Low tax states such as Florida, Alabama, Nebraska, etc., will probably benefit from the bill, but the overall impact is a 10% decrease in overall single-family property values according to NAR.

Other negative impacts of the bill include the mortgage interest deduction, which is currently at a $1M ceiling.  The new bill proposes that amount will be reduced to $500,000 for new mortgages.  The state and local tax (SALT) deduction is at risk.  The House version eliminates the SALT deduction 100%. The Senate version has a $10,000 deduction protection ceiling.  This level will protect low-income and many middle-income homeowners.

Another aspect of the bill is that the standard deduction will be increased to $24,000.  That will make it more difficult to itemize taxes for many low- and middle-income households.  There will be limits on the exemption of capital gains tax from the sale of a primary residence from 2 years of residency out of 5 years ownership to 5 years of residency over an 8-year ownership period. According to NAR, this will increase the negative effect from 4% of homeowners to 12-22% of homeowners.  Also, the bill will eliminate second home deductions unless it is a rental unit.  There will be an elimination of the deduction for moving expenses, interest on student loans, medical expenses, alimony expenses and gambling losses.  This part of the bill, reportedly, will benefit single persons with no children who rent and are high income earners.

On a positive note, the corporate tax cut will be 35% to 20-22%, but in the House version, it will not encompass the Sub-Chapter S Corporations.  However, it will benefit large and medium corporations. Reportedly, the Senate bill will encompass S corporations on some basis. S corporations represent millions of small companies.  Thus, the Senate bill has a provision, which will encompass S corporations who could also benefit, including many small and medium size businesses.

Another National issue for NAR is Net Neutrality, which was established during the Obama Administration through the Federal Communications Commission (FCC).  This regulation gave more equal access and rates across the board.  The Trump Administration wants to repeal this because it represents too much government control on prices, which discourages market competition and innovation.  However, NAR is in favor of keeping net neutrality.  The National Flood Insurance Program (NFIP) was set to expire at the end of September.  It has been temporarily extended to December 8, 2017, and more recently, has been extended to December 22, 2017, along with the Continuing Resolution (CR), which is a stop gap measure to keep the government fully funded since there is no agreement on a final budget.  The NFIP program did pass the House, but the Senate has not passed it yet.  This will insert more private insurance into the system along with other reforms and should decrease flood hazard insurance rates.  Previously, the rates and insurance were essentially through the Federal government.  As was previously reported, Waters of the United States (WOTUS), an EPA regulation, was partly reversed by the Trump Executive Order on February 28, 2017.   It was put into the Federal Register on July 27, 2017 to replace the burdensome 2015 EPA/Army Corp. of Engineers Regulation.  WOTUS reportedly will cover only wetlands and waterways with a surface connection to navigable waters.  There is interest in exempting surface connections to small navigable water ways.

The New York State Association of Realtors (NYSAR) has a number of issues. There is the first-time home buyers legislation that has passed both in the NYS assembly and the NYS Senate and is waiting for the Governor’s signature.  This will give a tax deduction to singles at $5,000 and couples at $10,000 for first-time homeowners or home buyers.  This has to be signed by the Governor this week, or by December 15.  Lobby Day is scheduled in Albany for many New York State issues, which will be  discussed in later newsletters in 2018.

In summary, hopefully the House and Senate final version of the tax reform bill will maximize benefits to property owners and all tax payers.  Remember to stay involved and informed, so property rights can continued to be bolstered as one of our most important freedoms.

September 7, 2017

National Flood Insurance Extended

Statement From NAR President William E. Brown:
“Extending the National Flood Insurance Program was a must-do item, and Congress delivered. That’s good news for consumers, as well as an opportunity for proponents of meaningful reform. With a short extension on their side, leaders in the House and Senate should continue work on the 21st Century Flood Reform Act to strengthen the NFIP and ensure the long-term certainty that current and future homeowners demand.” Continue reading

August 31, 2017

NAR Call for Action: Reauthorize the National Flood Insurance Program (NFIP)

Let Congress Hear Your Voice; Act Now!

The National Association of REALTORS (NAR) needs your help to send messages to Members of Congress urging them to support a comprehensive reauthorization of the NFIP.

Reauthorization will make a number of critical improvements to the NFIP including increased funds for mitigation activities, caps on overall premium increases, improved claim and mapping processes, as well as removing hurdles for more private market participation in the flood insurance market.

Reauthorization of the NFIP will help over 5 million homeowners in 22,000 communities around the country, so it is critical Congress acts now.

If Congress fails to take action to reauthorize the NFIP, it will expire by September 30, 2017. More information: NAR Flood Insurance Portal

April 7, 2017

From the Desk of John Rynne, MAI, RAC NYSCAR Governmental Affairs Chair:

There are a number of current federal issues concerning the National Association of Realtors (NAR).  A federal tax reform bill has been proposed, which will call for the replacement of the current depreciation system for building and equipment with an immediate first-year write-off of the entire cost of the investment.  There is currently not a lot of detail.  It’s not certain if passive investors will be included.  This could lead to the repeal of interest expense deductions and/or 1031 tax free exchanges for investment property. I think this will be difficult to pass.  Carried interest is also being targeted which is taxed below the high-income tax rates of wages/salaries.  The real target is hedge fund managers, but if passed could affect real estate developers/investors.

NAR is supporting legislation now in Congress to outlaw the Water of the United States (WOTUS) policy of the Environmental Protection Agency (EPA), which gives the federal government jurisdiction over almost all waters including non-navigable waters such as ponds, standing water, drainage ditches, etc.  As I reported last year, some federal courts blocked WOTUS temporarily.  The issue was winding its way to the Supreme Court.  However, it’s anticipated that President Trump’s appointment as head of the EPA will eliminate WOTUS.  Therefore, Supreme Court and Congressional action may not be needed in the short run;

NAR has disapproved of the current Clean Power Plan (CPP) policy of the EPA, which requires power plants to reduce emissions of CO2.  This rule will substantially increase electric rates.  Fortunately, some of the lower courts have temporarily blocked this regulation.  Also, it is anticipated that Trump’s EPA nominee will negate the CPP regulation.

NAR is supporting 179D Energy Efficient Commercial Buildings Tax Deduction, which are both set to expire in 2017.  Other federal issues include the regulation Drones Approval for Use for Commercial Real Estate without 333 FAA exemption.  The 333 exemption is issued by the Secretary of Transportation who will decide whether, based upon the physical weight, size, etc., Unmanned Aircraft Systems (UAS) are allowed in National Airspace System (NAS).  The Appraisal Institute is putting on a Drone Technology Seminar on May 12.  The current National Flood Insurance Program (NFIP) expires on September 30, 2017.  The House passed legislation 419-0 which is known as the Market Flood Insurance Law.  It still has to go through the Senate.  It will allow the private sector to provide insurance in place of NFIP.

The New York State Association of Realtors (NYSAR) have numerous issues.   In New York State, the Democrats technically won control of the New York State Senate 32-31.  However, the Independent Democratic Conference (IDC) has seven members, which most consistently vote with the Republicans.  According to a number of political experts, the Republicans will, therefore, effectively maintain control of the Senate.  This will help to neutralize the NYS Assembly, which is controlled by Downstate legislators who favor many laws and regulations, which are harmful to real estate property rights.   The New York State budget was due on March 31, 2017.  The Legislature was granted an extension until May 31.  Real estate taxes, which are the highest in the U.S., may slow down in regard to increases.  There was a 2% cap on real estate taxes.  Of the 648 school districts, only 13 are seeking to increase over the cap.  For school districts, a referendum must be instituted in order to override the tax cap.   For regular municipal taxes, I think the respective legislative bodies can vote to pass an override without a voter referendum. 

Other NYS issues include the NYSAR Realtor’s Political Action Committee (RPAC) fund raising goal of $1,078,550 for the year with over 30% already raised.   Also, Lobby Day is May 23.  Some of the key NYS legislation that NYSAR supports among others include:  A) Scaffold Law, B) Vested Rights For Property Owners, C) Mandate Relief, D) Tax Credit for Fire Sprinkler System.  NYSAR opposes some key legislation among others:  A) Increasing Mortgage and Transfer Tax, B) Well Water Education Act, C) Imposed RE Transfer Tax to Create Community Preservation Fund, D) Expanded Agriculture Disclosure Notice, E) Requirement of License Number Disclosure, F) Source of Income as Protected Class; this could interfere with property rights when selecting purchasers and/or tenants, G) Citizen Suits via the Environmental Conservation Law (ECL), H) Doubling Fines for Violation of RE License Law, I) Restrictions on Property Owners Use of Apartments. 

In summary, NAR and NYSAR is trying to preserve one of America’s most basic premise; that being property rights.

January 9, 2017

From the Desk of John Rynne, MAI, RAC NYSCAR Governmental Affairs Chair:

Federal Issues Concerning NAR:

A federal tax reform bill has been proposed which will call for the replacement of the current depreciation system for building and equipment with an immediate first-year write-off of the entire cost of the investment.  There is currently not a lot of detail.  It’s not certain if passive investors will be included.  This could lead to the repeal of interest expense deduction and/or 1031 tax free exchanges for investment property. I think this will be difficult to pass.

Carried interest is being targeted, which is taxed below the high-income tax rates of wages/salaries.  The real target is hedge fund managers, but if passed, could affect real estate developers/investors.

NAR is supporting legislation now in Congress to outlaw the Water of the United States(WOTUS) policy of the Environmental Protection Agency (EPA,) which gives the Federal government jurisdiction over almost all waters including non-navigable waters such as ponds, drainage ditches, etc.  As I reported last year, some federal courts blocked WOTUS temporarily.  The issue was winding its way to the Supreme Court.  However, it’s anticipated that Trump’s appointment as head of the EPA will eliminate WOTUS.  Therefore, Supreme Court and Congressional action may not be needed in the short run.

NAR has disapproved of the current Clean Power Plan (CPP) policy of the EPA, which requires power plants to reduce emissions of CO2.  This rule will substantially increase electric rates.  Fortunately, some of the lower courts have temporarily blocked this regulation.  Also, it is anticipated that Trump’s EPA nominee will negate the CPP regulation.

NAR is supporting reauthorizing the National Flood Insurance Program and the 179D Energy Efficient Commercial Buildings Tax Deduction, which are both set to expire in 2017.

In New York State, the Democrats technically won control of the New York State Senate 32-31.  However, the Independent Democratic Conference(IDC) has seven members, which most consistently vote with the Republicans.  According to a number of political experts, the Republicans will, therefore, effectively maintain control of the Senate.  This will help to neutralize the NYS Assembly, which is controlled by Downstate legislators who favor much legislation that is harmful to real estate property rights.

View 2016 Governmental Affairs Archive