(The NC REALTORS® Government Affairs Update is published weekly during the legislative session by the NC Association of REALTORS®, Inc. as a service to its membership. This report is sent via email to REALTORS® across North Carolina. If you have any questions, please call the association's Government Affairs Department at 919-856-9155.)

North Carolina Citizens Say “NO” to the Home Tax

By an overwhelming margin, citizens in 16 counties resoundingly defeated a real estate transfer tax on Tuesday night.  The proposed transfer tax would have resulted in property owners being forced to pay an additional tax just for the privilege of selling their home or property.  “The taxpayers of North Carolina spoke loud and clear across the state Tuesday,” said Tim Kent, executive vice president of the N.C. Association of REALTORS®.  “As we have stated all along, the transfer tax would have been grossly unfair, singling out one group of people – those selling their homes – to pay for infrastructure, programs and services that benefit everyone.” 

At the beginning of 2007, under the leadership of President Danny Brock, the NC Association of REALTORS® introduced five Quality of Life principles that we pledged to uphold.  Among them were “protect property owners” and “promote housing affordability.”  In our successful bid to Stop the Home Tax, we were able to preserve those principles!

Once the proposed transfer tax became a local issue, citizen groups in the 16 counties initiated grassroots efforts to inform their friends and neighbors about the negative implications of a transfer tax.  These volunteer efforts, led by your peers, were instrumental in our 16 victories.  “The more than 44,000 realtors in North Carolina care deeply about the communities in which they live,” Kent said.  “They are keenly aware that our local governments have real needs, and they will continue to work with local officials to find the best solutions for these needs.  But they, like those who voted Tuesday, realize the transfer tax is not the answer.”   About 80% of voters over all 16 counties opposed the transfer tax referendum.

Some counties that considered putting a transfer tax referendum on the ballot in 2008 are now discouraged about putting it in front of voters due to the election’s results.  Wake County Commissioners’ chairman Tony Gurley said, “If it goes down everywhere, obviously, that is a pretty clear message.“  Kevin Pressley, chairman of the Union County Commissioners, also stated, “I’m not surprised, nobody wants any kind of tax.  We won’t be dealing with this again.” 

The REALTORS® have vowed to protect housing affordability and homeowners and will continue to fight a land transfer tax if it appears on the ballot in any other county.  “It would be a tough sell,” Durham County Manager Mike Ruffin said.  “The effort to defeat the transfer tax across the state was extremely well-organized and extremely well-funded.”  Five NC counties did vote to approve a broad-based sales tax increase on Tuesday night.

Following is the county-by-county breakdown of Tuesday’s transfer tax election results (as of 11 a.m. Wednesday):

U.S. House Committee Passes Bill to Eliminate Subsidies on Some Primary Residences in National Flood Insurance Program; U.S. Senate Flood Insurance Reform Bill Introduced
The U.S. House Committee on Financial Services on October 31 passed by voice vote H.R. 3959, a bill that would eliminate subsidies in the National Flood Insurance Program on "single family properties used as principal residences" that, after the date of enactment are sold for $600,000 or more. NAR sent a letter to the U.S. Committee on Financial Services opposing the bill that was introduced by U.S. Rep. Scott Garrett (R-NJ) and co-sponsored by U.S. Rep. Barney Frank (D-MA), Chairman of the U.S. House Committee on Financial Services. The bill is expected to pass the U.S. House of Representatives and be joined with H.R. 3121, the comprehensive flood insurance reform bill passed by the U.S. House in September.

An amendment offered by Chairman Frank and adopted by the Committee clarified that this bill applies only to single family properties used as primary residences. Properties affected: Single-family primary residences that are purchased after the date of enactment for not less than $600,000 would see flood insurance premiums rise by 15% per year beginning January 1, 2011 until an actuarial rate is reached. Properties not affected: Existing homeowners paying subsidized rates on their primary residences would not lose their existing subsidy under this bill. (Note, however, that H.R 3121, passed by the U.S. House of Representatives in September, phases out subsidies on all non-primary residences and nonresidential property beginning in January 2011.)

U.S. Senator Chris Dodd (D-CT), Chairman of the U.S. Senate Committee on Banking, Housing and Urban Affairs, on November 1 introduced S. 2284, the Flood Insurance Reform and Modernization Act, a bill that was passed by the Committee on October 17. No date has been set for U.S. Senate consideration of this measure.

Legislation to reform and reauthorize the National Flood Insurance Program (NFIP) must be enacted before September 30, 2008, the date on which the program is set to expire.

FCC Bans Exclusive Contracts - Hurts Video Service for Apartment Dwellers
On October 31, 2007, the Federal Communications Commission (FCC) voted to ban exclusive agreements between video providers and operators of apartment communities. Apartment owners use these types of contracts to leverage the telecommunications options available to them and negotiate the best possible deal for residents in terms of services, costs, reliability and other customer service concerns. By banning both existing and future exclusive access agreements, the FCC will allow the large telecommunications companies to dominate the market. To provide video services, cable companies must invest in the wiring and infrastructure necessary to carry their services. Smaller providers can not afford to make this investment without some hope of recouping these costs through subscribers. Larger telecommunications monopolists can easily afford to overbuild and undercut these companies to the point that they force them out of business. NAR and IREM, as members of the Real Access Alliance had urged the FCC to not adopt this proposal.

The Commission also adopted a Further Notice of Proposed Rulemaking that seeks comments on whether or not they should regulate exclusive marketing agreements or bulk billing agreements. NAR, as part of the Real Access Alliance, will provide comments supporting the continuation of these types of agreements.

U.S. House Committee Approves Two Assisted Housing Bills
Last week the U.S. House Financial Services Committee passed two bills. H.R. 3965, the "Mark-to-Market Extension and Enhancement Act of 2007", introduced by U.S. Rep. Waters (D-CA) makes some helpful changes to the Mark to Market program in the areas of exception rents and transfer of properties. More importantly, it includes language encouraging HUD to address the problem of late Housing Assistance Payments (HAPs). The Committee also reported favorably H.R. 3873, the "Section 515 Rural Housing Property Transfer Improvement Act of 2007" introduced by U.S. Rep. Hodes (D-NH) and U.S. Rep. Capito (R-WV). This bill will expedite the approval of property transfers, preserving more rural housing units. NAR supported both of these bills, which are expected on the U.S. House floor in early December.

Ways and Means Reports "Extenders" Legislation with Harsh "Pay-for"
The U.S. House Ways and Means Committee has reported H.R. 3996, legislation that renews and extends more than thirty expired and/or expiring provisions. The total "cost" of the bill is about $80 Billion. The real estate-related provisions that have been extended include the 15-year life for leasehold improvements (through 12/31/08) and deductions for brownfields cleanup expenditures (through 12/31/08). A single provision overwhelms all the others combined. The committee has agreed to a one-year "patch" that will prevent about 23 million individual taxpayers, mostly from high-tax states, from paying the Alternative Minimum Tax (AMT).

While there is no dispute about the need to repeal the AMT and restructure some aspects of the tax base, the one-year "cost" of the AMT patch is over $50 Billion. The problem grows each year. Chairman Rangel has insisted that the Ways and Means Committee adhere to the so-called Pay-go rules that require that the cost of tax provisions be offset with additional taxes. The huge cost of this extender package required a huge pay-for. On a party-line vote, the Committee accepted a proposal that will adversely affect real estate partnerships where one or more general partners has the benefit of a so-called "carried interest." This highly controversial proposal will change the tax treatment of carried interest income from capital gains rates (15%) to ordinary income rates (as high as 35%).

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November 12, 2007

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