President Obama's Better Buildings Initiative
On February 3, 2011 President Obama released a plan to create more energy efficient American businesses through the “Better Buildings Initiative.” This includes voluntary programs to encourage green retrofitting of commercial buildings using tax incentives and a new grant program. The President hopes to make commercial buildings 20% more energy efficient by the year 2020 as well as lower companies’ energy costs by roughly $40 billion each year.
The new initiatives include:
More financing opportunities for commercial retrofits: Increase access to financing these energy efficient upgrades by encouraging lenders to take advantage of recently increased loan size limits to promote new energy efficiency retrofit loans. Through the President’s budget, there will be a proposal to create a pilot program through the Department of Energy to secure loans for energy efficiency upgrades at hospitals, schools and other commercial buildings.
Training the next generation of commercial building technology workers: The Administration is currently working to implement several reforms including launching a Building Construction Technology Extension Partnership and providing increased workforce training in energy auditing and building operations.
The Better Buildings Challenge: This will challenge CEOs and University Presidents to make their organizations more energy-friendly. They will in turn become eligible for benefits including public recognition, technical assistance, and best-practices sharing through a network of peers.
“Race to Green”: Encourages states and municipalities to regulate and alter codes, and performance standards relating to commercial energy efficiency.
Tax incentives for building efficiency: President Obama is encouraging Congress to implement a more generous tax credit rather than the existing Section 179D tax deduction for energy efficient upgrades on commercial buildings.
Along with these new initiatives, the President hopes to build on previous plans for government and residential buildings that were included in the American Recovery and Reinvestment Act (“ARRA” or “Stimulus Bill”).
IREM has historically supported voluntary and positive incentive programs such as the existing EPA Energy Star program consisting of voluntary opportunities for increased energy efficiency and the Green Lights program, aimed at promoting energy efficiency through investment in energy-saving lighting. IREM has been an Energy Star Partner for over twelve years, and has signed on to EPA’s Energy Star Challenge to make companies aware of the economic benefits of energy efficiency.
IREM is also a member of the U.S. Green Buildings Council (USGBC), an approved education provider for continuing education credit towards USGBC’s LEED AP designation, and an industry-sector partner for their annual Greenbuild conference and trade show. IREM’s Sustainable Real Estate Management course (SRM001) is also approved for elective credit towards the National Association of Realtor’s Green Designation; and it can be used to satisfy education requirements to participate in the U.S. Housing and Urban Development (HUD), Office of Affordable Preservation Green Initiative providing incentives for green building principles and practices.
IREM publishes A Practical Guide to Green Real Estate Management, and has created a “Sustainability” Knowledge Center on its interactive, online knowledge management system, IREMFIRST. The site is available to the public and has articles, checklists, and other tools and resources for practicing sustainable real estate management.
We remain consistent in our opposition to any mandatory energy-efficient retrofitting and encourage Congress to support voluntary energy efficiency programs which are encouraged by using incentives and tax credits.
Although IREM initially supports the concepts of President Obama’s Better Buildings Initiative, this is not a piece of legislation and we will wait to analyze any bill language relating to this new plan. IREM Legislative Staff will monitor this initiative and report back when necessary.
Update on Mark-to-Market
Late in January, 2011, The Financial Accounting Standards Board (FASB) decided to ease-off the proposed “mark-to-market” or “fair value” reporting requirements they had proposed in May 2010. At this point, banks can continue to report assets and liabilities at the amortized cost. Fair value reporting would force the value of assets and liabilities to be based on current market value. Reporting at amortized cost is more reliable, some say, because it includes long-term cash flow whereas fair value is short-term and susceptible to misrepresentation from fluctuations in interest rates.
FASB will continue to reconsider various aspects of this proposal. The final rule is to be released in June of 2011. This decision came in response to the Board being inundated by over 2,800 letters of opposition. IREM Legislative Staff will monitor this issue and report back when necessary.
Additional information can be found at:
How will the Frank-Dodd Act Impact Me!?
In July 2010 President Obama signed the Dodd-Frank Act into law. At a time when the U.S. economy is stumbling to get back on its feet, the Dodd-Frank Act is an attempt to prevent future catastrophic economic falls. The legislative origins of the Dodd-Frank Act are rooted in modernizing bank regulation.
With the progression of time and the legislative process, the Dodd-Frank Act morphed into one of the most significant financial pieces of legislation. The overarching themes to this law are consumer protection and accountability for Wall Street and big banks. While consumer protection and corporate accountability are at the forefront of the Dodd-Frank Act, the world of real estate may be impacted.
The Dodd-Frank Act will change the dynamics to some existing financial regulatory bodies while creating entirely new rule making bodies. Some of the specific rules will be ironed out over the next year or so. The comment period for some rules have started and the final rulemaking period will continue through 2012 and beyond.
Regulatory Agencies Undergoing Change:
Consumer Financial Protection Bureau (CFPB)
Federal Insurance Office
Financial Stability Oversight Council
Federal Deposit Insurance Corporation (FDIC)
Office of Financial Research
Office of Credit Ratings
Office of Minority and Women Inclusion
Office of Housing Counseling
Office of Municipal Securities
Securities and Exchange Commission (SEC)
Securities Investor Protection Corporation
The National Association of Realtors (NAR) helped to secure language in the final bill signed into law which is “exclusion for real estate brokerage activities”. This exclusion applies to the Consumer Financial Protection Bureau (CFPB). CFPB “may not exercise any rulemaking, supervisory, enforcement, or other authority under CFPB with respect to a person that is licensed or registered as a real estate broker or real estate agent.” (Section 1027b Dodd-Frank Wall Street Reform and Consumer Protection Act). This is good news for real estate; however, there are possible regulations other Departments can propose and implement.
IREM Legislative Staff will monitor and track the implementation of this Act including changes to existing regulatory bodies and the development of new ones. For more information or clarification contact IREM’s Legislative Liaison, Beth Price, toll free at (800) 837-0706 ext. 6021 or bprice@IREM.org.
Tax Bill En Route for President’s Signature
December 17, 2010
Last night the House of Representatives passed a tax cut bill, previously passed by the Senate, extending the Bush tax cuts just two weeks before they were set to expire. This is relatively good news for virtually all Americans. Although the tax bill is temporary (two years), there will not be any substantial changes in regard to federal tax policy until 2012. Eliminating unknown tax changes allows individuals and businesses to move somewhat confidently forward into 2011.
A boost in confidence will offset several reservations in the marketplace. Individuals may feel more inclined to make big ticketed purchases and businesses may increase hiring or spending on capital improvement projects. Basically this tax bill is an economic stimulus. Efforts to boost spending on several fronts will help to create a healthy flow of dollars in America. At least that is the theory.
Federal tax policy beyond two years will be up for debate as Congress must re-examine taxes in 2012. Debate may begin next year. Highlights of last night’s bill include:
Individual tax brackets—six brackets same as 2010, including maintaining the Capital Gains tax at 15% which was an IREM Call to Action item in 2010
There is no change to carried interest, at capital gains rate of 15%, an issue we lobbied on in 2010
Social Security tax on wages from 6.2% to 4.2%
Alternative Minimum Tax (AMT)—extends the patch for 2010 and 2011
Leasehold Improvements—extended 15 year depreciation timeline
Businesses are able to write off 100% of capital investments between Sept. 9, 2010, and Dec. 31, 2011
Extends research and development tax credit
Extends unemployment insurance benefits for 13 more months
Estate tax plan with a $5 million exemption per individual and at a 35% rate
IREM is pleased with the passage of this tax cut legislation. We believe it is beneficial to members, particularly with regards to the Capital Gains tax rate extension (15%). We will continue to monitor any pertinent legislation and report back when necessary.
Bed Bug Laws and Pending Legislation
With the recent uprising of bed bug infestations in the United States, several states have introduced legislation to mitigate this pest. Currently there are some states that have laws already enacted to address this problem. Recently, state-wide legislation was passed in Maine, New Jersey and New York.
The law in New York only pertains to areas within New York City, although there are plans to introduce similar legislation that would apply to the whole state. Governor Paterson signed this bed bug legislation in late August, 2010 and decrees that landlords must disclose any history of bed bugs in a building within the preceding year to prospective tenants. In 2009 there were 11,000 reported bed bug complaints in the city.
The law in Maine was signed into law in March and took effect July 12, 2010. This law requires landlords to disclose existing or past problems with the bugs, but also addresses how and who will pay for the remedy of the pests. Landlords are required to pay for the extermination of bed bugs if detected. However, if tenants do not cooperate with the extermination efforts, the tenant could then be held responsible for subsequent treatment costs.
A bed bug bill has also been in the works in New Jersey. A bill was passed in the House and sent to the Senate where it awaits further action. This bill states that landlords of multiple-dwelling units must provide pamphlets to tenants and other information on bed bugs and preventative methods. Landlords must have bed bug infestations exterminated directly after learning about them. Landlords who do not take immediate actions may face fines for infested bedroom and/or infested common areas.
Massachusetts law states that bed bug infestation issues fall under current statute that landlords are required to “maintain the dwelling you own without insect infestation” (MA: 105 CMR 410.550). Landlords must inspect each unit and take action to remedy any bed bug infestations.
Other states have introduced and pushed for state-wide legislation addressing the bed bug issue. Alabama had pending legislation that would define the responsibilities of landlords, however, this bill failed. Illinois has pending similar legislation and also has discussed the possibility of petitioning the federal government to waiver previously banned insecticides in order to treat bed bugs in residential units. Ohio has already signed on to petition the federal government to use these chemicals. Ohio also has pending legislation that would establish a bed bug awareness and prevention program. There is a federal bill pending in the US House of Representatives that would establish a grant program to assist states in inspecting hotel rooms for bed bugs. This legislation is pending in multiple committees.
Homeowner Association / Common Interest Development (CID)
Condominiums offer an affordable option and are the first step to homeownership for many home buyers. In many areas across the country, the real estate crisis left the condominium market devastated. Today, the condo market isn't stabilizing as quickly as other types of housing, resulting in significant losses for current condo homeowners and tighter underwriting guidelines for potential buyers. In order for the housing economy to stabilize, it is important that there be a healthy condo market. With this said, Homeowners Associations (Common Interest Development-CID) and the management of those properties will be affected by these conditions.
FHA, and the GSEs (Freddie Mac and Fannie Mae) have implemented a number of new policies that will impact the operation and management of condominium associations. Association legal counsel should review lender provisions in the CC&Rs to see if the association needs to comply with GSE guidelines. These policies include:
Limit single entity investment ownership to 10% of a project
No more than 15% of units delinquent in dues (even 30 days)
New Insurance Requirements
Reserves funded at 10% of budget
Condominium association should consider changing their bylaws to meet the following guidelines:
Investors. Associations should amend their CC&Rs to limit persons or entities from owning more than 10% of a project.
Insurance. Some blanket and self-insurance plans are no longer permitted. In light of the new Fannie Mae guidelines, all PUD and Condominium boards should have their insurance brokers review their policies and make recommendations.
Unit Insurance. If an association's CC&Rs require owners to provide their own insurance, no action is required by the board. If the CC&Rs are silent, boards should consider amending their documents to require owners to carry their own insurance and to allow the association to purchase "bare walls" policies. This will keep premiums down.
Fidelity Insurance. Associations with 20 or more units are required to obtain fidelity insurance.
Collection Policy. Boards should have written collection policies in place and closely follow those policies.
Future Fannie Mae Requirements. Associations should consider adding language that gives boards the ability to amend their documents to meet Fannie Mae requirements without the slow, costly, and uncertain process of a membership vote every time Fannie Mae changes its requirements. Boards should check with their legal counsel about doing the same.
Recently, the Financial Accounting Standards Board (FASB) proposed changes to the way lessors and lessees account for leases. Under these new rules, entities must recognize assets and liabilities arising from lease contracts which is different from current regulations that allow leases to be considered operating expenses which do not appear on balance sheets. This could lead to a bloated balance sheet that would result in a host of potential problems. IREM has become aware of this issue and has worked to voice concern for these changes. Please see the links below to view the newly adopted Statement of Policy on FASB Lease Accounting as well as two coalition letters IREM signed onto to formally voice their opposition. IREM Legislative Staff will be attending hearings regarding this issue on January 5 in Chicago and will report back if necessary. Please contact IREM Legislative Liaison, Beth Price, with any questions. She can be reached at email@example.com or 312-329-6021.
Statement of Policy on FASB Lease Accounting
Coalition Letter #1
Coalition Letter #2
Lead Based Paint in Commercial Properties
In July, IREM partnered with various associations in the commercial real estate and property management industry and formed a coalition in response to the Advance Notice of Proposed Rulemaking issued by the U.S. Environmental Protection Agency (“EPA”) concerning the Renovation, Repair and Painting Program (“RRP”) for Commercial and Public Buildings (lead based paint). The Coalition submitted comments to the EPA with respect to RRP activities. The letter hit on multiple various points including:
Coalition believes that EPA must consider the scope of its authority before proceeding with any regulations. The Toxic Substances Control Act limits the Agency’s authority to promulgate regulations that govern RRP activities in commercial and public buildings.
Among other things, EPA must complete a congressionally-mandated study of RRP activities in commercial and public buildings and the extent to which they create lead-based paint hazards before it can proceed with any regulations.
In addition, EPA must consider a variety of factors in any rulemaking efforts related to RRP activities in commercial and public buildings. For example, the Agency should take into account the fact that RRP activities in commercial and public buildings may present very different patterns of exposure to lead-based paint hazards than the RRP activities in residential settings on which the Agency has previously focused.
In addition, EPA should take into consideration the very limited use of lead-based paint in commercial buildings since 1978. EPA must also consider the potential impacts that the imposition of regulatory requirements may have on other national priorities such as increasing energy efficiency.
IREM legislative staff will continue to monitor this issue and report back to members if necessary.
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Fluorescent T12 Ballast Manufacturing Update
According to the National Lighting Bureau, the July 1, 2010 date marks the last step of a multi-step phase-out plan that began on July 1, 2005, the date when ballast manufacturers could no longer sell T12 magnetic ballasts for use in new fixtures with full-wattage T12 lamps. March 31, 2006 was the last day lighting-fixture manufacturers could incorporate the ballasts in new fixtures with full-wattage T12 lamps. And on July 1, 2010, the manufacturing of T12 magnetic ballasts solely for replacement purposes that do not meet the new requirements will cease.
There are, however, exceptions to this rule, including ballasts designed:
• for dimming to 50 percent or less of their maximum light output;
• for use with two F96T12HO lamps at ambient temperatures of -20ºF and for use in outdoor signs; or
• labeled for use only in residential applications and have a power factor of less than 0.90.
On July 14, 2012, recently enacted DOE regulations will take effect that will also eliminate the T12 lamps that the ballasts operate.
To find out how to purchase energy efficient and compliant fluorescent ballasts, visit the link below:
For more information on this rule, please click on the link below:
To see an article summarizing these regulations, see the link below:
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Americans with Disabilities Act Update on New Regulations
Monday, July 26 marked the 20th anniversary of the signing of the Americans with Disability Act (“Act”) of 1991. Since the historic legislation became law twenty years ago, there have been a number of revisions and additions to the Act. In July, 2010, several changes were approved and published by the Department of Justice (“Department”) as a final rule to Title III. Revised regulations that are pertinent to the property management and commercial real estate industry are:
Adoption of the 2010 ADA Standards for Accessible Design: The Department has adopted revised design standards and they have been harmonized with the Federal standards implementing the Architectural Barriers Act as well as with private sector codes that most States have adopted.
Effective Date: These revised regulations will become effective six (December 26, 2010) months after publication in the Federal Register. Compliance with the new 2010 Standards will be required within eighteen months (December 26, 2011) of publication for new construction, alterations, and barrier removal.
Element by Element Safe Harbor: 1991 covered facilities Standards are not required to comply with 2010 Standards until the project was subject to a planned alteration.
Service Animals: The recent rule defines “service animal” as a dog that has been trained to do work or perform tasks for the benefit of an individual (including dogs that assist with emotional support) with a disability. The rule states that other animals, wild or domestic, do not qualify as service animals. Dogs that are not trained to perform tasks that mitigate the effects of a disability (including emotional support) are not service animals. The rule allows the use of properly trained miniature horses as alternatives to dogs, with some limitations. A miniature horse is not included in the definition of a “service animal.”
Wheelchairs and Other Mobility Devices: A two-tiered approach was taken regarding wheelchairs and other “power driven mobility devices” in the final rule. Other powered mobility devices include a variety of devices, such as the Segway®, not designed specifically for people with disabilities. Wheelchairs and other similar devices must be permitted in all areas open to pedestrian use. Other “power driven mobility devices” must be permitted unless the covered entity can demonstrate that such use would alter its programs, services or activities, create a direct threat, or create a safety hazard. The rule gives factors to consider in making this determination.
Timeshares, Condominium Hotels, and Other Lodging: The rule requires that timeshare and condominium properties that operate like hotels are subject to Title III; also lists facility requirements if not an inn, motel, or hotel to qualify as a place of lodging. The rule limits obligations for units that are not owned or substantially controlled by the public accommodation that operates the place of lodging. Such units are not subject to reservation requirements pertaining to the “holding back” of accessible units. These units are also not subject to barrier removal and alterations requirements if the physical features of the guest room interiors are governed by their individual owners rather than by a third party operator.
Egress and Access to Properties: The 1991 Standards require the same number of accessible means of egress to be provided as the number of exits required by applicable building and fire codes. The International Building Code (IBC) requires at least one means of egress and at least two accessible means of egress where more than one means of egress is required by other sections of the building code. The changes in the 2010 Standards are expected to have minimal impact since the model fire and life safety codes contain the very similar requirements regarding the number of accessible means of egress.
The 2010 Standards include the requirements established by the IBC. The IBC requires a building with four or more stories to have an evacuation elevator with standby power that can be used by people with disabilities in an emergency. Exit stairways and evacuation elevators must be able to be used as an accessible means of egress in conjunction with areas of refuge or horizontal exits. This change will have minimal impact due to fire and safety codes, already adopted in most states, containing similar requirements.
Parking Spaces: The 2010 Standards require accessible parking spaces to have signs that display the International Symbol of Accessibility. Section 215.6, Exceptions 1 and 2, of the 2010 Standards exempt certain accessible parking spaces from this signage requirement. One exemption is sites that have four or fewer parking spaces. The other exemption is residential facilities where parking spaces are assigned to specific dwelling units.
Handrails: The 1991 Standards at sections 4.8.5, 4.9.4, and 4.26, and the 2010 Standards, at section 505 contain technical requirements for handrails. The 2010 Standards add a new technical requirement at section 406.3 for handrails along walking surfaces and also give more flexibility than in 1991. Information on individual gripping surfaces, dimensions and diameters are located in sections 4.1.6(3), 4.26.4, 4.8.5, and 4.9.4 of the 1991 Standards and sections 505.3, 505.6, 505.7, 505.8, and 505.10 of the 2010 Standards.
For additional information and resources on Title III, please visit http://www.ada.gov/regs2010/ADAregs2010.htm
. You can also call the ADA Information Line at 1-800-514-0301 (voice) or 1-800-514-0383 (TTY).
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Tax Extenders Update, July 2010
Since the early months of 2010, IREM legislative staff has been monitoring Federal tax issues, including the controversial carried interest tax language. During the recent recession, Congress focused on extending several tax cuts set to expire at the end of 2010. In order to fund these extensions, Congress sought other sources of revenue. Included in the original legislation, H.R. 4213, is a provision to change the tax treatment on carried interest from capital gains to ordinary income. Currently, the capital gains rate is 15% and would jump to 39.5% if changed to ordinary income rates. Changing the tax treatment of carried interest would be detrimental to commercial real estate because taxing the general partner at an ordinary income rate would create a disincentive for real estate investment, further damaging an already fragile market.
IREM members took this issue to their respective U.S. Congressional members during the 2010 Capitol Hill visits and participated in two concurrent Calls to Action urging elected officials to vote against this provision. Your efforts and consistent involvement in the carried interest tax issue have not gone unnoticed. In fact, because of your swift action, the Carried Interest language was completely removed from the "Tax Extenders" bill (H.R. 4213, later changed to “The American Jobs and Closing Tax Loopholes Act of 2010”) before it passed the U.S. Senate on July 20. We are very grateful that our elected officials listened to the voices of real estate and property management professionals, thus removing this damaging provision from the bill. Despite the carried interest tax issue being defeated four times, we believe this issue may arise again in the distant future. The IREM legislative staff will continue to monitor this issue and report back when necessary.
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Status of Tax Extenders Bill
Over the last several months, IREM and CCIM Institute members have lobbied their members of Congress on the issue of tax treatment of carried interest. This issue is critical to both the recovery of commercial real estate, as well as the overall economic recovery.
On May 5, 2010, 265 members of IREM and CCIM Institute participated in a joint visit to Capitol Hill lobbying their federal lawmakers on issues affecting the commercial real estate industry. One of the key issues members presented to lawmakers was the issue of tax treatment of carried interest.
Under consideration was a piece of legislation known as the “Tax Extenders Package” (H.R. 4213). The bill aimed to extend certain Bush era tax cuts, as well as fund an extension of unemployment benefits set to expire. However, the legislation also carried a price tag of $127 billion, and would have added $84 billion to federal deficit over the next decade. In order to fund the extensions, Congressional members included $43 billion of tax increases- including a provision to change the tax treatment on carried interest from capital gains to ordinary income. This would raise the tax rate on carried interest from 15% to as high as 39.5%, adding further stress to the already overburdened commercial real estate industry.
On May 14, 2010 and June 2, 2010, IREM and CCIM Institute initiated a Call to Action, urging members to contact their federal lawmakers and ask them to oppose the carried interest provision in the Tax Extenders Package. Following the Calls to Action, IREM legislative staff received an overwhelming number of emails and phone calls from members who had contacted their legislators and expressed their opposition to the bill.
To date, lawmakers have held three votes on legislation concerning tax extensions and carried interest. Each attempt to pass the legislation has failed. IREM legislative staff would like to stress that the bill appears to be stalled, not defeated. It is likely that the measure will be taken up again.
IREM legislative staff would like to thank all who took action in contacting their members of Congress and expressing their position on the carried interest issue. Your actions have served to educate lawmakers regarding the negative economic impact posed by the legislation, preventing them from passing this dangerous bill. Thank you for taking action on this important matter.
IREM legislative staff will continue to update you on any future developments regarding this issue.
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Final Rule – Lead Based Paint
On June 18, 2010, the U.S. Environmental Protection Agency (EPA) issued an amendment to the final Renovation, Repair and Painting Rule (RRP Rule), effective April 22, 2010. The RRP Rule requires that contractors who work in residential buildings built before the 1978 outlaw of lead based paint be certified by a government-approved trainer and follow particular safety rules. The ruling aims to reduce the amount of lead dust created during home renovation and repair, and affects tens of millions of homes, including multifamily units.
The RRP Rule requires that certified firms engaging in repair, renovation, or painting activities that disturb lead based paint be certified by the EPA. Some of the requirements outlined in the RRP Rule include information distribution to building occupants to notify them of the work being conducted, obtaining written certification from the adult occupant that the information has been received, postage of signs defining the work area, isolation of the work area by covering all ducts with taped down plastic, closing window and doors and covering them with plastic sheeting, covering the floor with taped down plastic, negatively pressurizing the work space, storing daily waste under containment that prevents the release of dust, disposing of the waste in a sealed bag approved by the EPA, placing all waste in a lined container and disposing of it into an EPA approved site, etc.
Following an outcry from industry groups including IREM and CCIM Institute, politicians, and homeowners, all claiming the new rule would drive up development costs and derail economic recovery, the EPA postponed enforcement of the RRP Rule’s certification requirement until October 1, 2010. The EPA will also not enforce against individual renovation workers who have applied to enroll in, or have enrolled in, a certification class no later than September 30, 2010. Renovators must complete training by December 31, 2010.
You may access the RRP Rule Memorandum issued by the EPA through the following link:
IREM and CCIM Institute legislative staff will continue to monitor this issue, and will keep you informed of any new developments.
To view archived legislative news from 2009, click here.
To view archived legislative news from 2008, click here.
To view archived legislative news from 2007, click here.
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