Every day, NAR advocates on behalf of you and your more than 1 million member colleagues, as well as 75 million property owners. Our efforts in Washington D.C. are focused on protecting your ability to do business – so that your time can be spent building relationships with your clients, conducting transactions and strengthening your community.
1031 Like-Kind Exchange
In the 113th Congress, proposals to eliminate or drastically limit Sec. 1031 like-kind exchanges were offered, but not adopted; additionally the President’s FY 2015 budget would have limited them to $1million per taxpayer per year. In the 114th Congress, we have yet to see any tax reform plans or other legislation that would repeal or limit Sec. 1031, but any new plans will likely borrow heavily from these previous ones, signaling that Sec. 1031 is vulnerable.
In a recent survey, NAR members reported that over the last four years, most have engaged in between one to six transactions featuring a Sec. 1031 like-kind exchange; of those transactions, between 37%-45% of them likely would not have happened without Sec. 1031, and over 50% would have been smaller. Eighty- five percent of NAR members indicated that they or their clients invest additional capital to improve properties involved in Sec. 1031 exchanges, with more than half of the respondents indicating that the capital allocated to improvements makes up 10%-24% of the properties fair market value. Clearly, this is a provision that is important not just to real estate, but also to the economy as a whole. Sec. 1031 exchanges allow for the efficient use of property, encouraging the flow of capital among investments and supporting economic growth and job creation.
NAR opposes any efforts to repeal Sec. 1031, and is working hard to educate Members of Congress, especially those on the tax-writing committees, on what Sec. 1031 is and why it should be protected. In addition, NAR also participates in two coalitions to protect Sec. 1031, which have commissioned studies on its macroeconomic effects and effects on real estate. NAR participated in a “legislative day” on the issue, meeting with Members of Congress in Washington, D.C. to discuss it, and also has set up in-district meetings for NAR members and other industry groups to meet with their Members on the topic.
While experts expect 2015 to continue on many of the same upward trajectories as 2014, there are four areas with possible changes. The first is through the Financial Accounting Standards Board’s (FASB) proposed changes to lease accounting standards, part of a larger standards convergence effort between FASB and the International Accounting Standards Board (IASB), which began in 2006. The final updated lease accounting standards are expected in late spring or early summer 2015, and will likely be similar to the FASB’s current dual model of lease accounting. NAR has been lobbying on this issue for some time and participates in a real-estate industry coalition which works with both the SEC and Congress on the proposal.
The second change is potential adjustments to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Many of the enhanced banking requirements have now been in place for four years, but many legislators have vowed to scale back those requirements. Given that the 114th Congress has just begun, it is unclear now exactly what those changes will look like, or how successful they will be. This is an area to watch and NAR will continue to monitor it closely for changes.
The third area where change is expected is crowdfund- ing. The Securities and Exchange Commission (SEC) anticipates finalizing its crowdfunding rules in Octo- ber 2015. These rules are the final part of the Jumpstart Our Business Startups (JOBS) Act of 2012 to be en- acted. The first draft of the rules were widely criticized by both supporters and detractors of crowdfunding as a financing vehicle, so it will be interesting to see what comes out of the review process. Many states have al- ready enacted successful intrastate crowdfunding regu- lations. NAR monitored this issue as it has developed at the SEC and will continue to advocate for fair and consumer-friendly rules this fall.
The fourth is the expected wave of CMBS backed loans coming due. Experts are of mixed opinion on this, as it could create excellent opportunities for refinancing, or create too much of a crunch on credit. NAR staff have been watching this issue vigilantly and will keep members informed of any changes.
“Net neutrality” requires that broadband networks be free of restrictions on content, sites, or platforms; they should not restrict the equipment that may be used with them, nor the modes of communication allowed on them. Finally, it ensures that communication is not unreasonably downgraded by other communication streams. As real estate business is increasingly conducted online, through streaming videos, virtual tours, and voice-over-internet protocol, having quality and reliable broadband networks is critical to NAR members. As new technologies are adopted, this will no doubt only grow in importance.
NAR supports policies to ensure that broadband providers adhere to net neutral practices, and was pleased by the announcement of the FCC’s new rules to protect net neutrality in February 2015. These new rules prohibit “paid prioritization,” which would have created a two-tiered internet putting many NAR members and other small business owners at a competitive disadvantage. In the six months prior to the announcement of the new rules, NAR sent six letters to Congress in support of net neutrality, and a comment letter to the FCC on its Open Internet proposed rulemaking. As the FCC implements its regulations, NAR will continue to monitor the issue to ensure that real estate content may be freely and efficiently distributed online.
To stay informed about action NAR is taking on behalf of its members and the real estate industry on these and other issues, visit www.nar.realtor/political-advocacy or email NARCommercial@realtors.org directly to get connected to the NAR Policy Representative monitoring a specific issue.