Monthly Archives: July 2015
Fast Fact: If Congress repeals Section 1031 of the Tax Code, our country could lose as much as $120 billion in economic growth in the next 10 years.
Even if you never use Section 1031 of the Tax Code, it can impact you — in a positive way.
This The 1031 Like-Kind Exchange is a tax deferral that helps individuals save for retirement and businesses reinvest and grow, creating jobs and economic expansion for all of us —which in turn creates additional tax revenue.
What, Exactly, Is the 1031 Like-Kind Exchange?
Section 1031 of the U.S. Tax Code lets those who reinvest proceeds from the sale of a non-homestead properties in similar (‘like-kind’) properties defer paying tax on the profit. It’s often referred to as the 1031 Like-Kind Exchange. And it’s been helping our economy grow since 1921.
So why would any member of Congress want to reduce or even eliminate the 1031 Like-Kind Exchange?
Sure the government could collect an estimated $40 billion in taxes over a ten-year period by repealing Section 1031. But the flip side is that it would cost our economy over three times that much in lost growth. And we need that growth now more than ever.
Tell Congress ‘hands off’ the 1031 Like-Kind Exchange!
Property owners in Mississippi’s Gulf Coast region have suffered a number of hardships over the last 10 years, and the Gulf Coast Association of REALTORS® has been working to help them deal with issues arising from those hardships.
Beginning with the devastation of Hurricane Katrina in 2005 and continuing through the BP oil spill of 2010 and its aftermath, southern Mississippi residents have continued to prepare for, and adapt to, the environmental challenges occasioned by their proximity to the Gulf of Mexico.
The GCAR, with the help of a Housing Opportunity Grant from the National Association of REALTORS®, is sponsoring a conference scheduled for the summer of 2015 that will focus on coastal property issues. According to Joe Rogers, the GCAR’s executive director, the event is intended to help REALTORS® understand myriad issues raised by the Federal Emergency Management Agency’s flood hazard mapping program; the National Flood Insurance Program; and the state agencies charged with emergency management and environmental quality. Discussion will be focused on efforts to reduce flood insurance costs, thus making homeownership more affordable in the coastal area.
Local governmental officials, state legislators and members of the state insurance commission are expected to attend the conference.
Nationally recognized experts will also attend and address floodplain mapping and the National Flood Insurance Program. Topics for discussion may also include FEMA grants, mitigation of flood losses, understanding flood insurance policies, and the significance of elevation certificates.
According to Rogers, if the GCAR’s members are able to understand the critical issues raised by floodplain mapping and flood plain insurance in the coastal area, then they will be able to work with the public to address the high cost of flood insurance.
Chicago homeowners are taking control of their property taxes, thanks to the efforts of the Chicago Association of REALTORS®.
“We’re doing something a little different to help homeowners with property taxes here in Chicago,” says Brian Bernardoni, the CAR’s director of government affairs. “We are training REALTORS® on how to use the tax assessment process to reach out to their existing and potential clients, and to then help those people file — and win — residential appeals.”
The project started several years ago during the mortgage crisis when then-Mayor Richard M. Daley reached out to the CAR for help. Chicago’s assessment system, in which the Cook County Assessor’s Office assessed property values every three years, left homeowners tied to artificially inflated property values and the associated taxes with no opportunity to challenge assessments until the start of the next three-year cycle.
The CAR’s advocacy resulted in the county revising its rules. Homeowners were allowed to challenge and correct their tax assessments long before the next cycle. As a result, an estimated 30,000 people were able to save their homes.
When the CAR started its advocacy project, the idea was seen as controversial and reactionary. Now, it is praised as visionary.
But the CAR hasn’t stopped there. It is working to empower homeowners to take a proactive approach to the assessment process. Using resources already at their disposal, REALTORS® reach out to homeowners and offer to assist them in the appeal process.
“We’re pretty passionate about the property tax thing,” Bernardoni says.
Not only do REALTORS® offer to explain the appeal process and help homeowners complete the necessary paperwork, “REALTORS® are able to provide comps for direct appeals to the [Cook County] Board of Review,” he says.
Giving homeowners the tools they need to save money on property taxes not only helps in the short term, it helps when they are ready to sell. A lower tax assessment doesn’t lower the home’s market value, but it does make the home more attractive to buyers.
It seems like each year Connecticut legislators try to increase taxes on homeowners. Well, every year is close to accurate, at least for the last decade.
Every year since 2003, Connecticut lawmakers extended what was supposed to be a temporary conveyance tax, but they made it permanent in 2011. Going for more revenue, lawmakers also wanted to add an additional new tax (up to 1%) on home purchases.
REALTORS® said “enough” and after an aggressive campaign focused on the legislature that utilized radio, billboards, print ads and lots of news coverage aimed at the legislature, the Connecticut Plan was dropped.
With Charlotte, N.C., being one of the fastest growing cities in the United States, the Charlotte Regional REALTOR® Association has been working to ensure the availability of affordable housing in the city and surrounding Mecklenburg County by encouraging local officials to speed up the process for approving new construction.
Charlotte’s rapid growth has sparked high demand for housing, with thousands of new residential construction permits issued by Mecklenburg County in each of the last few years. However, the county’s system for permitting and inspecting new construction was not able to keep up with the pace of demand, resulting in numerous delays.
Consequently, city and county attempts to provide housing to meet the increased demands were frustrated. New-home buyers’ certificates of occupancy and the construction of thousands of new apartment units may have been delayed as well.
Such delays end up increasing expenses for builders, who ultimately pass on the higher costs in higher prices for new-home buyers.
Because the Charlotte Regional REALTOR® Association realized that delays in the permitting and inspection process were costly, it collaborated with other organizations to challenge the county to make the process more consistent and efficient.
In response to this challenge, Mecklenburg County took action. The county implemented many of the group’s recommendations and revised the permitting and inspection process, making inspections more consistent and all steps of the process more expedient. As a result, new-construction costs have stabilized for builders, buyers have been able to occupy their newly constructed homes more quickly, and multifamily construction projects are being completed with far fewer delays, resulting in faster and more dependable availability.
Real estate transfer taxes make buying and selling a home more expensive. Michigan REALTORS® are working to change a part of their state’s transfer tax law that is unfair to buyers and sellers.
Michigan imposes a state tax of 0.75% on the sale of real property and allows counties to collect a tax of 0.11%. Michigan REALTORS® have been a force behind proposed legislation, HB 4173, that would reform the transfer tax.
The bill, sponsored by Rep. Dave Maturen (R-Portage), relates to situations in which transfer taxes have been erroneously paid to the state or a county and a refund is requested. HB 4173 would provide that any party who wrongfully paid the transfer tax could seek a refund.
Although the transfer tax is to be paid by the seller, sales contracts frequently shift the burden of paying the tax to the buyer. If the transfer tax was paid in error (for example, the sale was supposed to be exempt from the tax), a refund may be sought — but only by the seller. This makes it difficult, and sometimes impossible, for a buyer to obtain a refund.
Brad Ward, vice president of public policy for Michigan REALTORS®, says the goal of HB 4173 is to restore the integrity and fairness of the real estate transfer tax. Making sure a refund goes to the person who erroneously paid the tax is an important step in that direction.
Vermont REALTORS® is dedicated to making home ownership equitable and affordable in Vermont. One way it helps do this is by working to reform Vermont’s property-tax structure. Currently, Vermont has the third-highest property taxes in the nation.
Vermont’s education system is funded through property taxes. Despite a decline in school enrollment, property taxes have continued to increase anywhere from 7 percent to 20 percent over the last five years.
The taxes are not borne equally by all Vermonters. The amount of taxes paid is “income sensitive,” meaning the amount paid is based on the taxpayer’s income. Nonresidents, second-home owners, and high-income residents pay a disproportionate share of the school taxes. In some cases, according to Isaac Chavez, the CEO of Vermont REALTORS®, homeowners are paying property taxes equal to 4 percent of the value of their home each year.
Vermont REALTORS®, with the support and assistance of the National Association of REALTORS®, has launched a three-phase campaign aimed at property-tax reform in Vermont. About 18 months ago, the first phase was implemented when an economic study of the current property-tax structure was commissioned. The study provided recommendations as to how the tax structure could be reformed.
In the second phase of its campaign, Vermont REALTORS® reached out to consumers through a media campaign. In a poll of Vermont property owners, 70 percent of those polled said that the property tax structure needed to be reformed. Armed with the results of its report, Vermont REALTORS® focused efforts on educating consumers about property taxes and possible ways that the school-tax structure could be reformed. Thanks to Vermont REALTORS®, information about school spending, how it is funded through property taxes, and the impact of those taxes on homeowners is available online at http://www.knowmorevt.com/. The website also proposes solutions to school funding that would make property taxes within the state more equitable and less burdensome to homeowners and businesses.
Vermont REALTORS® will soon be launching the third phase of its property-tax reform campaign — a call-to-action for homeowners, consumers, businesses, legislators and others in the state. During this phase, Vermont REALTORS® will galvanize the state’s consumers to support legislation to reform the property-tax structure, and the candidates who support those reforms.
Vermont REALTORS® continues to work for property taxes that are fair to all.
The Charleston Trident Association of REALTORS® has more than 4,000 members in Charleston, Dorchester and Berkley counties in South Carolina. In an area composed of suburban, downtown and industrial selling markets, the Association focuses on improving the quality of life, whether economically, socially or environmentally.
Charleston has always been a port town, with much of its economy related to the importation and exportation of goods. The increase in ship sizes and capacities, and competition from nearby ports for manufactured goods, has Charleston in a dilemma of whether to create a deeper and bigger port and harbor. How land purchases and the need to encourage competitive commercial growth, such as the recently located Boeing Co., compete with the property rights of homeowners and business owners are concerns as well.
Meeting housing demand in some localities, such as Mt. Pleasant — the fastest growing city in the nation — can be challenging. City ordinances implemented to restrict growth in these fast-growing suburban areas force housing costs to rise and affordable housing to become even more strained.
Other areas dramatically impacted by housing shortages are the island communities, where the focus is on the conservation and preservation of public lands, and the maintenance of green and open space. Communities and homeowners step up to this challenge to protect their environment, understanding the importance of the low-lying estuaries and Atlantic coastal areas.
Zoning is a major issue for the Association, which advocates for property owners to be free from unlawful zoning variations that restrict their property rights. The Association supports zoning that allows homeowners to use their land to the best of its capabilities; and the Association opposes the devaluation of property due to restrictive zoning ordinances.
Other issues the Association is monitoring are:
- Impact fees: A common requirement for developers, who are charged as much as $700,000 for a study showing the impact of a proposed project on the community’s economy, infrastructure and environment.
- Moratoriums: Restrictions on building for at least a year in the downtown Charleston area, which impact revitalization in the restaurant, club and entertainment districts.
The Charleston Trident Association of REATORS® is a unique association with unique property issues, driven by Charleston Harbor trade, the protection of shorelines and estuaries, the development and revitalization of the downtown area, the history that surrounds the tri-county region, and the intense protection of the rights of property owners, developers and incoming mega-businesses.
For decades, many local governments in southeastern Pennsylvania have had ordinances requiring point-of-sale inspections for residential real estate. The Suburban REALTORS® Alliance, a subsidiary corporation of the Bucks County Association of REALTORS®, Montgomery County Association of REALTORS®, and the Suburban West REALTORS® Association, has mounted a campaign to eliminate these ordinances.
According to Jamie Ridge, CEO of the REALTORS® Alliance, the municipal inspection ordinances typically require sellers of a property to pay for an inspection prior to the property’s sale. Many of these ordinances also require the seller to bear the costs of remediating any code violations uncovered during the inspection. Often, the cost of repairs is high, especially if repairs must be made to expensive items such as sidewalks and heating systems. Sellers who cannot negotiate with buyers over who is responsible for paying for the required repairs may be financially unable to sell their homes.
In addition, some buyers may act on the belief that they are protected by the municipal inspection and so they forego having their own private inspection done. However, a buyer may be unaware of serious issues that were not part of the municipal inspection.
The REALTORS® Alliance is working to ensure that the process of home inspection and repairs is a matter to be freely negotiated between the buyer and the seller. The enactment of point-of-sale ordinances in Franconia Township and Royersford Borough were averted. In both of those communities, the Alliance reached out to the community and informed it about the effects of the proposed ordinance. In Royersford Borough, community members made numerous calls to the Borough offices, objecting to the ordinance; and they appeared at the Council meeting where the proposed ordinance was on the agenda. In Franconia, more than 100 community members called the Township offices, objecting to the proposed ordinance.
The website for the campaign against point-of-sale mandates can be found at www.thisdoesntmakesense.org.
The Suburban REALTORS® Alliance continues to protect homeowners’ rights by working with state and local governments, elected officials, community groups and members of local communities.