Nation

MOTHER OF ALL TAX BILLS ON THE HORIZON

Ways and Means Committee Chairman Rangel (D-NY) continues to say that he will "soon" introduce legislation that will repeal the Alternative Minimum Tax (AMT), revamp the 2001 Bush tax cuts, modify the taxation of so-called "carried interests" and address numerous other issues. He refers to it as the "Mother of all tax bills." Time is growing short for consideration of a bill in the House this year, and most observers believe that the Senate is unwilling to begin a discussion of a far-reaching reform during the Presidential campaign season. Most observers believe that Chairman Rangel will float something more like a discussion draft so that members may begin to consider the enormity of the tasks that lie before them. Merely extending the current "patch" that shields many taxpayers from the AMT will "cost" $55 billion for 2007. Extending the Bush tax cuts will likely exceed the $1.2 trillion 10-year cost of the original 2001 legislation. Currently, all the tax cuts, the 15% capital gains rate and the estate tax repeal are slated to expire as of January 1, 2011. A huge tax reform is likely because of the need to reconsider the shape and scope of not only the income tax, but of payroll taxes, taxes on multinational corporations and estate taxes. Each of those systems is in serious need of revision to reflect the 21st century economy and the imminent retirement of baby boomers.

CAPITAL GAINS TREATMENT MODIFIED FOR SOME VACATION HOMES
A harsh reality of tax law changes is that any benefit provided to taxpayers must be "paid for" with a revenue offset. In order to "pay for" the mortgage cancellation relief, the Ways and Means Committee modified, but did not eliminate, a tax planning opportunity for owners of vacation and rental properties. Under current law, the owner of a vacation home or rental property may sell his/her principal residence, exclude up to $500,000 of the gain from taxation, and then convert the second property into his/her principal residence. Once the 2-year residency requirement has been satisfied, the individual may sell that property and once again exclude as much as $500,000 from taxation.

The new rule modifies the application of the exclusion when an individual converts a rental or vacation property to his/her principal residence. Under the new rule, effective January 1, 2008, the owner will still have the option of receiving the benefit of the exclusion, but will be required to pay capital gains taxes on the appreciation attributable to the time that the property was used as an investment property. The amount excluded will be a fraction, determined at the time the vacation/rental property is sold. Assuming that the owner has satisfied the 2-year residence requirement, the amount of gain that can be excluded will be determined by a fraction. The numerator of the fraction will be the number of years the property was used as a principal residence. The denominator will be the number of years the individual actually owned the property, measured from January 1, 2008. Thus, the legislation has no retroactive impact. Congress sought a policy that would provide a capital gains exclusion on a principal residence only for the time that the property was actually used as a principal residence.

DOJ LAUNCHES CONSUMER REAL ESTATE WEBSITE

This would fit in the "News of the Weird" section if it weren't so serious. Have you checked out the Department of Justices new website for consumers?http://www.usdoj.gov/atr/public/real_estate/index.htm offers advice such as, "Consumers who live in states permitting them the option to choose innovative brokerage options, such as rebates or fee-for-service MLS-only packages, can potentially save thousands of dollars on commission payments. consumers can save as much as $7,500 in commissions on the sale of a median-priced home." This Website is a thinly veiled assault on the real estate industry, Realtors® and NAR. Take a look at this Website. You wont believe how your tax dollars are being spent to drive you out of business.

BILL STRENGTHENS APPRAISAL INDEPENDENCE
Representatives Paul Kanjorski (D-PA) -- Chairman of the House Financial Services Committee on Capital Markets, Barney Frank (D-MA), Chairman of the House Financial Services Committee, Paul Hodes (D-NH), and Charlie Wilson (D-OH) introduced the H.R. 3837 the Escrow, Appraisal and Mortgage Services Improvement Act (EAMSIA) . EAMSIA accomplishes the following NAR policy goals:

Requires that an appraisal be made available to the consumer prior to closing, Mandates a property visit for mortgages covered by the Homeowners Equity Protection Act (HOEPA), Requires the appraisal subcommittee to hold open meetings and publish detailed reports, Amends the Truth in Lending Act to prohibit mortgage originators from improperly influencing the appraisal process -- which is defined as collusion, intimidation, coercion, bribery etc. Amends FIRREA to prohibit those with an interest in the real estate transaction from improperly influencing the appraisal process, with the following exceptions: a) to correct errors, b) to request the appraiser consider additional information, and c) to provide substantiation. EAMSIA also sets Appraisal Qualification Board guidelines as the minimum criteria for state licensing, increases regulatory authority of the Appraisal Subcommittee in sanctioning, reciprocity, and information sharing. According to an October research survey, over 90% of appraisers have felt undo pressure to meet a targeted price, and over 70% feared harm to their business if they failed to do so. This bill is meant to strengthen the appraisal process. There is a small likelihood that this bill may be considered by the full Financial Services Committee as part of a larger mortgage fraud bill in the near future.

SURVEY: PEOPLE WANT MASS TRANSIT NOT NEW ROADS
Three-fourths of Americans surveyed believe that either being smarter about development or improving public transportation are both better long-term solutions for reducing traffic congestion than building new roads, according to a survey sponsored by the NATIONAL ASSOCIATION OF REALTORS® and Smart Growth America.

The 2007 Growth and Transportation Survey details what Americans think about how development affects their immediate community, and traffic congestion was a top concern. Nearly half of those surveyed think improving public transit would be the best way to reduce congestion, and 26 percent believe developing communities that reduce the need to drive would be the better alternative. Only one in five said building new roads was the answer.

"REALTORS build communities and care about improving our cities and towns through smarter development," said NAR President Pat V. Combs, of Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt. "With increased traffic congestion and longer commutes, Americans are receptive to new ideas for handling growth, such as better transit or mixed-use walkable communities that allow people to cut down on their driving, as this survey shows."

Americans give their communities high marks when it comes to providing good public schools, parks and open space. Respondents were less optimistic about their local community's ability to provide practical and convenient transportation and manage growth and development. While one-third approve of growth in their local area, the percentage of those who disapprove of local growth has doubled since 1999, from 10 percent to 20 percent.

This year's survey also showed that Americans are more concerned about how their community is handling that growth and development than they have been in eight years of polling. Only 39 percent say their community is doing an excellent or good job of handling growth, while the majority - 58 percent -believes the community is doing a fair or poor job.

When asked about their top concerns regarding growth and development, respondents consistently cited the loss of farmland to development (72 percent), increased traffic congestion and commute times (70 percent), and loss of open land such as fields and forests (70 percent). Other concerns include the loss of individual character of communities, increased reliance on cars because of sprawl, and the loss of historic landmarks and neighborhoods. The greatest increase was among those concerned about the rise in highway commercial development such as strip malls, up 25 percent in the past six years.

This year the survey also asked about climate change, and more than 70 percent of respondents are concerned about how growth and development affect global warming. Americans expressed strong support for bold measures to combat climate change. Nearly nine in 10 believe that new communities should be built so people can walk more and drive less; cars, homes and buildings should be required to be more energy efficient; and public transportation should be improved and made more available. Americans strongly disapprove (84 percent) of increasing gasoline taxes as a way to discourage driving and reduce energy use.

"With concern about climate change rising along with gas prices, Americans are looking for options that allow them to reduce the time they spend in the car," said Don Chen, executive director of Smart Growth America. "Americans see smarter development patterns as a viable way to achieve that goal, while also reducing greenhouse gas emissions."

Eight in 10 respondents prefer redeveloping older urban and suburban areas rather than building new housing and commercial developments on the edge of existing suburbs. More than half of those surveyed believe that businesses and homes should be built closer together to shorten commutes, limit traffic congestion and allow residents to walk to stores and shops instead of using their cars. Six in 10 also agree that new-home construction should be limited in outlying areas and encouraged in inner urban areas to shorten commutes and prevent more traffic congestion.

With road building costs often exceeding revenues, many states are turning to tolls as a key funding source. Americans are divided on tolls, although 55 percent approve of charging tolls on more roads if that improves roads and decreases congestion. On the other hand, six in 10 are opposed to charging tolls on freeways during rush hour to reduce congestion. Respondents are evenly split on charging tolls during rush hour, even if the money is used to provide transportation alternatives to the freeway.

When it comes to spending taxpayer dollars, respondents believe Congress should spend more money to maintain and repair roads, highways, freeways, and bridges and to expand and improve public transit than build new roads.

Americans are overwhelmingly opposed to the private ownership of roads; that is, selling key roads and highways to private companies who would charge a toll and give a portion of the toll money to the state. Eighty-four percent of respondents oppose private ownership of roads; only 14 percent support the concept. Similarly, 66 percent are opposed to allowing private companies to build, own and collect tolls for new roads - even if those companies gave a portion of the toll money to the state.

The 2007 Growth and Transportation Survey was conducted by telephone among 1,000 adults living in the United States in October 2007. The study has a margin of error of plus or minus 3.1 percentage points.

Source: NAR