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Government Affairs National News Update


FHFA DIRECTOR WATT OUTLINES DRAMATIC SHIFT IN STRATEGY


From NAA: Mel Watt has made his first major remarks as director of the Federal Housing Finance Agency (FHFA) where he outlined a dramatic shift in housing policy strategy. Specifically, he emphasized that the agency will make changes that would allow banks to offer credit to a wider range of borrowers, which is a switch in philosophy from his predecessor Ed DeMarco who focused on shrinking Fannie Mae and Freddie Mac’s role in the mortgage market. Watt announced the decision in a May 13 speech at the Brookings Institute where he presented FHFA’s 2014 Scorecard, saying that he was motivated by con- cerns about how a reduction in Fannie and Freddie’s role could “adversely impact the health of the current housing finance market.” “I do not see shrinking the GSEs market share as the job of FHFA,” said Watt. “We do not want to remove them from a market without knowing private capital will step in.” Instead, Watt placed the responsibility of reform squarely on Congress and the Administration, while repeatedly referencing the statutory role of FHFA, adding that his role was to maintain a stable housing market. Watt also emphasized that he would not move to reduce the ability of Fannie and Freddie to finance loans for rental properties. “[The GSEs have a] critical, ongoing role in the multifamily sector, especially in affordable rental,” said Watt, adding that this year’s strategic plan provides additional capacity for such rental properties.


House Moves Bonus Depreciation, Senate Works to End Tax Extenders Logjam


From National Multifamily Housing Council (NMHC): As part of ongoing efforts to address expired tax


provisions, the House Ways and Means Committee, on May 29, approved legislation (H.R. 4718) to make permanent so-called bonus depreciation. The measure allows firms, including multifamily opera- tors, to immediately deduct 50 percent of new equipment purchases as opposed to having to depreciate the entire expense over a period of years. The bonus depreciation legislation now joins other tax extenders awaiting action by the full House. Specifically, a bill (H.R. 4457) that allows small businesses, including multifamily firms, to write off up to $500,000 in qualifying investments in the year of purchase could see floor action in the House as early as the middle of June. The $500,000 expensing limit would be phased down if overall investment costs exceed $2 million, limiting the proposal to smaller multifamily operators. Without legislation, in 2014 small businesses can immediately deduct just $25,000


in investment costs. Notably, both the bonus deprecia- tion and small business expensing measures seek to make these tax policies permanent. The “Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act” (S. 2260) is pending in the Senate and seeks to renew expired tax provisions for two years through 2015. The full Senate, however, has yet to break a logjam and pass the EXPIRE Act due to a disagreement between Democrats and Republicans over which amendments may be considered. Ultimately, current divisions between the House and Senate over whether expiring tax provisions should be extended permanently, instead of on a short-term basis, is likely to delay final legislation until after the November elections.


Please see the following multifamily related details of the EXPIRE Act for additional background:


• Flat 9 percent Low Income Housing Tax


Credit (LIHTC) and 4 percent rate for acquisi- tions: Due to low interest rates, the current 9 percent LIHTC is actually set at a 7.58 percent rate, reducing its value by nearly 16 percent. Accordingly, the pro- posal extends the minimum 9 percent rate for newly constructed non-Federally subsidized buildings for which an LIHTC allocation was made prior to January 1, 2016. The proposal also calls for a 4 percent rate for LIHTC acquisitions advocated for by NMHC/NAA which, like the flat 9 percent rate, would make the credit more valuable because low interest rates are diminishing its value. • Bonus Depreciation: While business property must be depreciated over a number of years, so-called bonus depreciation has enabled taxpayers to expense 50 percent of the cost of an investment in the year it was purchased. The provision extends bonus deprecia- tion through 2015 for property with class lives of 20 years or less. • Small Business Expensing: Under current


law, small businesses can expense up to $25,000 in new investments. This amount is reduced as aggregate investments exceed $200,000. The provision restores the law applicable in 2010 through 2013 that allowed small businesses to expense up to $500,000 in quali- fying investment subject to a phase out beginning at $2 million in investment. • Deduction for Energy Efficient Commer- cial Buildings (Section 179D): The bill includes an extension of the Section 179D energy efficiency tax deduction through 2015. NMHC/NAA had advocated for the extension and also for expanding it to allow for retrofits of multifamily properties, but the expansion was not included due to budget concerns. • New Energy Efficient Home Credit (Sec- tion 45L): Improving the energy efficiency of new residential construction is another cost-effective way to move the United States closer to energy indepen- dence. Because the tax credit for new energy efficient homes encourages sustainable and efficient construc- tion methods and helps address the market


failure that can occur when the developer or owner of a home does not bear the direct costs of a home’s energy consumption, it should be extended. New Markets Tax Credit (NMTC): The NMTC provides a tax incentive for qualified equity investments in economi- cally distressed areas and can be used for mixed-use projects. The proposal permits $3.5 billion in new investments for both 2014 and 2015.


OUR MEMBERS’ INFLUENCE: TAA PAC and TCORA


2014 is an exciting year for elections! Not only are all the usual two-year elected offices (many municipal, state General Assembly and US Congressional) up for grabs, but this year the one of our US Senate seats is up for re-election as well. How does this impact you, our valued TAA member? TAA advocates for and against public policy related to the problems and concerns of rental housing own- ers and professionals, but we need your HELP! Candidates elected during this election cycle will become the decision makers of tomorrow. TAA supports those candidates who understand and are receptive to our industry’s positions. If you do NOT protect your industry, who will? In order to make an impact and a difference in our industry WE NEED YOUR PARTICIPATION TODAY. Invest in the TAA PAC and/or the Triangle Community Owners and Residents Alliance (TCORA), a 527 organization, today and help us be the voice of the rental housing industry in the Triangle!


PAC vs 527: what’s the difference? PAC stands for a political action committee. It serves to pool contributions from individuals and distribute them to candidates, political parties and other PACs. PACs can also spend money independently on political activities, including advertising and other efforts to support or oppose candidates in an election. TAA PAC is considered a “connected” PAC in that it can only accept monies from TAA members. In North Carolina, the yearly contribution limit to TAA PAC is $4000 per individual. PAC monies can be given directly to individual candidates or political parties as long as it is done in the name of the PAC.


TCORA is a 527 organization. A 527 is a tax-exempt group that may raise contributions from any individual or corporation, unlike a PAC. Also, unlike a PAC there are no limits on the amount of yearly contributions that a 527 can accept from an individual or corporate entity. However, 527 monies can not be used to specifically advocate for or against any one candidate. Instead, they can be spent on “issue advocacy” and voter education, or letting the voters know the stance of a particular candidate on a specific issue.


the ApartMentor | July/August 9


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