The largest voice for brokers in Washington is not finished lobbying on tax reform.
The National Association of Realtors, by far the highest-spending real estate lobbying group, on Tuesday announced its final campaign to preserve homeownership incentives and brokerage business benefits in the new tax plan. The House of Representatives and Senate are reconciling a final bill, which some lawmakers expect to be ready for the floor by early next week.
In a letter addressed to House Ways and Means Committee Chairman Kevin Brady (R-TX) and Senate Finance Committee Chairman Orrin Hatch (R-UT), the 1.3 million-member group detailed its major gripes with the existing versions of the bill.
NAR’s first complaint regards proposed rules that would change the amount of time homeowners have to keep a property as their primary residence before they can sell it with the profits excluded from capital gains taxes. The current rule requires two years of primary residence out of five years of ownership, but both the Senate and the House bills would require five years of residence out eight years of ownership. NAR claims that would bring “hardship to millions and unfairly penalize them by changing the rules in the middle of the game.”
The organization’s other pleas to Congress are mostly focused on the differences between the House and Senate bills.
For example, NAR argued that while the Senate bill includes industry-favorable language about what would qualify as a “pass-through” entity subject to lower tax rates, the House version could complicate matters for real estate players. The organization said that many brokers and developers would “face the glaring and potentially jarring incentive to convert to corporate status” in order to take advantage of the top corporate rate of 20 percent proposed in both the House and Senate bills. And while the Senate version of the bill includes quicker depreciation schedules that allow property owners to write down the value of real property to zero within 25 years, the House bill does not include them.
The House bill also halves the $1 million cap on home value to qualify for a mortgage interest deduction, which NAR says will have a “very negative impact on many high cost markets.” The Senate bill, meanwhile, leaves the deduction untouched.
In June, NAR’s Jamie Gregory told The Real Deal that doubling the standard tax deduction and cutting state and local tax deductions — which both bills propose — would effectively eliminate the mortgage interest deduction as an option for most homeowners. The Senate and House bills would allow up to $10,000 in property tax to be deducted, but in its final push NAR is asking lawmakers to consider the inclusion of local income and other taxes into that equation. “If property taxes are the only deductible levies, we fear that state and local governments will shift more of the tax burden onto owners of real property.”
NAR said last month that its best shot at making changes to the final bill would come during the reconciliation process. The organization spent $32.27 million on lobbying this year through Oct. 21, according to the government watchdog site OpenSecrets.org.