Page 26 - Jan 2012 Executive Alert


ARDA Fall Conference: Industry moves forward despite Capitol Hill gridlock


by Alan N. Schlaifer


On the nightly news, in newspaper and magazines, and even Twitter feeds (if you’re into those), the basic story from inside the Beltway has stayed the same.


It is a tale of seemingly complete gridlock, as the so- called Super Committee failed to reach agreement on $1.2 trillion in fiscal savings during the next decade. Be- cause the six Democrats and six Republicans, split evenly from the House and Senate, did not come to terms, automatic cuts equal to that amount will occur.


Fortunately, there is some good news inside the Belt- way. With the help of volunteer members, solid rela- tions on the Hill and in states and agencies, plus a great staff, ARDA has made continuing progress.


Once again, this past fall, as in years past, that progress was evident at ARDA’s Fall Conference at the Fairmont in Washington, D.C.’s West End. The level of profession- alism is so high that an attendee might well be tempted to conclude that ARDA even has influence in the West Wing – of the White House.


If that were so, the economy would be in much better shape. Unlike our elected representatives in both houses of Congress and the White House, ARDA and our indus- try were able to take needed belt-tightening steps. And this year’s conference mood was more upbeat, with an increase in attendance to 450, the highest total in recent years.


Substantive highlights of the conference program included 30 committee, council and task force sessions, and Dr. Peter Morici’s comprehensive keynote National Economic Forecast. Also noteworthy were a vigorous, candid Secondary Market Town Hall and the Chairman’s League Breakfast featuring Fox News’s Tucker Carlson.


Legislative luncheon attendees responded enthusiasti- cally to the pro-business comments of the high-energy speaker, Rep. Michael Grimm (R-NY). Initially elected last year as part of the Republican wave that took control of the House, he is a former Marine, FBI special and un- dercover agent who tackled government and business corruption, small businessman and entrepreneur.


ARDA Trustee members enjoyed their foundation dinner at the French Embassy. All attendees benefited from elegant and active networking at Interval International’s welcome reception at the nearby Westin and RCI’s clos- ing reception in the Fairmont’s colonnade.


Committed to committees


A strong segment of the fall conference continued in a robust menu of committee meetings. These cover a wide range of vital topics, from technology, sales and marketing and state legislative issues to resort manage- ment, construction and design and ARDA functions, such as membership.


One of the best continued to be the two-hour Fed- eral Issues Committee meeting, ably chaired by Andy Marcus, and organized by ARDA Vice President Sandra “Sam” Depoy.


Jerry Kilgore, former Virginia attorney general and now partner at the McGuireWoods law firm, Richmond,


provided stimulating coverage of the 2011 political and legislative landscape. He discussed key national and state races.


He does not believe it possible or probable that Demo- crats will gain control of the House, but does feel they are likely to pick up more seats.


Swing states he says to watch are Florida (usually on the winning side, heavily oriented to the national economy), Virginia, North Carolina (first Republican majority in both houses since 1870), and Ohio (also usually goes to the winner).


Real estate taxation: Carried interest


Attendees received an overview of the House Ways and Means Committee from David Pearce, vice president and counsel, The Real Estate Roundtable. His remarks on Capitol Hill were instructive, saying he had “never seen Congress this divided or dysfunctional. The mood is very partisan.”


He added, “We will have winners and losers. Yet, with redistricting, 80 percent of Congressional seats are not contested. People on Congressional staffs are doing Twitter. Everything is instant, and people are looking at Congress in different ways than in the past.”


We would add that retirements of some current mem- bers of Congress, in both parties and Houses, most recently Rep. Barney Frank (D-MA), will no doubt also have their impact.


One key issue Pearce discussed was so-called “carried in- terest,” which Democrats have characterized as a loop- hole and way to put revenue on the table. Now taxed at capital gains rates, their proposals would convert it into ordinary income, even though it’s “been part of the tax code with the current treatment for 60 years.”


As the Roundtable’s website notes, “[This has been] an investment model for rewarding the general partner in a real estate business venture for taking on the risks and liabilities associated with real estate projects, such as environmental concerns, operational shortfalls, con- struction delays and loan guaranties.”


With “46 percent of partnerships in real estate and the vast majority using a carried interest structure,” Pearce says this change is a “real estate tax. Now is not the time to increase taxes on real estate. Some cities have recovered, others have not.”


His group, in which ARDA participates, is willing to have a full and fair hearing as part of tax reform, not an ab- breviated consideration through the budget process.


FIRPTA


The second issue on which his roundtable is working is FIRPTA, the Foreign Investment in Real Property Act. An Internal Revenue Service notice in 2007 placed an extra 30 percent tax on real estate investment trust (REIT) liq- uidating distributions to covered foreign investors. The roundtable’s position, supported by a bipartisan House coalition, is that this treatment discourages direct for- eign investment by investors, including sovereign wealth funds of other nations.


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