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MEMORANDUM
Date: March
18, 2013
To: NAHB Members
From: Rick Judson,
2013 NAHB Chairman
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Dear NAHB Member,
When I became your
chairman I pledged to keep you informed on issues that are important to our
association and that affect your businesses. As my fellow Senior Officers
have previously reported, during the past two years NAHB has worked
diligently to raise housing’s profile among many different stakeholders –
the Administration, Congress, regulators, the media, allied groups and
others – all with the aim to ensure that NAHB has a seat at the table as
Washington policymakers decide issues that will affect our industry and our
livelihoods.
Last Wednesday, the
Senior Officers received a briefing (enclosed below) from our Government
Affairs staff. I felt it was important that I share this with our entire
membership. After reading this, I think you will agree with me that our
efforts to make housing a national priority are paying off. This is an
example that goes to the very heart of the value of NAHB membership and
what your association does for you day in and day out.
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Dear Senior Officers [Re: Tax Reform]:
This is a bit long, but
please bear with me.
As you know, the Ways and
Means Committee created 11 working groups to evaluate different aspects of
the tax code in anticipation of possible tax reform. Yesterday
afternoon, Rick Judson, along with Jim Tobin, J.P. Delmore, and Rob Dietz,
met with the two members of Congress leading the real estate working group
-- Reps. Sam Johnson (R-Texas) and Bill Pascrell (D-N.J.). Also
attending the meeting were Reps. Tom Reed (R-N.Y.) and Lloyd Doggett
(D-Texas), along with approximately 10 staff representing the Ways and
Means Committee, the Joint Committee on Taxation (JCT), and several other
member offices from the Ways and Means Committee. It was a standing
room-only crowd.
This meeting was likely
our only opportunity to meet in person with the working group. We
were scheduled for a 30 minute session, which is an incredibly brief amount
of time. Our presentation was so impactful that the meeting ultimately
lasted for 1 hour and 20 minutes. By the end of the meeting, we were able
to make every single point we hoped to cover, and we feel we made a real
impact.
No one can match the data
and research NAHB has done, and we were able to make a strong case for
preserving the existing tax incentives backed up by years of work. Of
course, it helps when the facts are so clearly on our side.
We started our
presentation by looking at some of the less visible items in the code:
completed contract rules, home equity deduction and remodeling, and depreciation.
The Low Income Housing Tax Credit (LIHTC) generated significant discussion.
Rep. Pascrell asked if the credit could be better targeted for seniors, and
he asked us to dig deeper into that issue. We were asked by several members
to follow up with more information related to demand for the credits.
The discussion then
switched to the state and local property tax deduction. Next, we moved to
the mortgage interest deduction, including the deduction for second
homes. We were able to present our data that shows that the MID makes
the tax code more progressive and also targets the middle class. We also
discussed how the MID is used by looking at the demographics, which
everyone in the room found to be compelling, if we can judge by the notes
taken.
Both Reps. Johnson and
Pascrell agreed with us that the deduction for second homes is often
demonized in discussions on tax reform. We were able to provide impressive
data on second homes, which seemed to resonate with both representatives.
Rep. Pascrell raised an
interesting argument about the gains exclusion on the sale of a principal
residence. He pointed out that the tax code was designed to tax wealth, so
why should so much housing wealth be tax free?
We made an argument that
housing wealth often transfers to retirement wealth, so the gains exclusion
can and should be viewed as equivalent to a Roth IRA. Rep. Pascrell
asked us to do more research into this area.
All in all, we fought the
good fight and came out of the meeting in a good place.
There are several other
working groups that we are engaging with. Tonight, we spent more than an
hour with Rep. Kenny Marchant (R-Texas), who is heading up a working group
focused on “debt, equity, and capital.” Obviously, debt and capital
have a major impact on all level of construction. So next to the real
estate group, we identified debt, equity, and capital as our No. 2
priority.
Rep. Marchant was a home builder in the 1980s and his brother still builds,
so his familiarity with our issues is second to none. We discussed
everything ranging from AD&C loans, carried interest, debt forgiveness
(aka phantom income), depreciation, home equity loans and the mortgage
interest deduction.
We had particularly
lengthy conversations regarding credit availability and phantom
income. In particular, we discussed possible modifications to the
Real Estate Mortgage Investment Conduit (REMIC) rules to ease the creation
of a secondary market for AD&C loans (we passed policy on this at IBS),
and he offered some suggestions that we will research. He was also
sympathetic to our problems with phantom income.
As an aside, Rep.
Marchant mentioned the meeting today between President Obama and the House
Republican Conference. The President met for 90 minutes today with
the Republicans, and one of the issues raised was tax reform. The
President, as relayed to us, said he would support a corporate-only tax
reform bill that was revenue neutral; but if the House wants to do
comprehensive tax reform, the bill would need to raise revenue.
This
is, of course, the underlying divide between the two parties: whether
higher taxes are needed to deal with the deficit or if revenue should go to
lower rates. Corporate-only reform has been dismissed by both parties in
the House and Senate as unpractical because of pass-thrus. So when it
comes to comprehensive reform, it is clear that the two parties remain far
apart on the issue of revenue.
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