With housing prices on the rise for the past several months, I don’t need to tell you that we’re finally seeing a turnaround in the housing market. However, looming tax reform could soon put a halt to it. In late June, the U.S. Senate announced plans to adopt a “blank slate” approach to reform the tax code. A blank slate approach would eliminate all tax expenditures (including tax deductions such as the mortgage interest deduction, tax exemptions such as the capital gains exemptions on the sale of a primary residence, and the deduction of state property taxes). Senators will have to request tax expenditures be added to the reform legislation, which would raise tax rates. This approach allows the Senate Finance Committee to highlight just how much tax rates could be reduced by eliminating all the tax expenditures. Senators have until July 26 to request that real estate expenditures be added to the reform legislation before the Finance Committee begins drafting a tax reform package.
How does this affect you? A wide range of provisions in the tax code affect residential, investment, and commercial real estate, so NAR and C.A.R. will work to defend each of those tax provisions and identify champions for each provision. We’ll also be working to improve certain provisions or make some temporary provisions permanent. Rest assured that NAR and C.A.R. will work hard to ensure that real estate tax provisions are maintained in any rewrite of the tax code, but we need your help as well.
Please join your fellow REALTORS® in this Call for Action to make your voices heard now and to encourage Congress to “Do No Harm” to real estate.
Earlier this month, House Financial Services Chairman Jeb Hensarling introduced a comprehensive discussion draft on mortgage finance reform, titled the Protecting American Taxpayers and Homeowners (PATH) Act. PATH includes reforms to FHA and the GSEs and would rewrite the role and mission of the FHA so only first-time home buyers and low- and moderate-home buyers would be allowed to use FHA financing. It also calls for the elimination of the conforming loan, while not providing any guaranteed mortgage product to replace it. C.A.R. believes the legislation would drastically increase the cost of financing for home buyers – especially in high-cost states like California – while reducing the availability of mortgage capital. C.A.R. has asked California’s members of Congress who sit on the House Financial Services committee to oppose the bill when it is marked up in committee next week, and we will continue to work with Congress to pass responsible housing finance reform.
As I mentioned last month, C.A.R. has been working for the past several months toward the passage of C.A.R.-sponsored bill SB 30, which provides tax relief to those who are selling a home in a short sale. In late May, the Senate Appropriations Committee linked C.A.R.-sponsored bill SB 30, which provides tax relief to those who are selling a home in a short sale, to SB 391, a C.A.R.-opposed bill that creates a recording tax. This link, in the form of an amendment, says that SB 30, which passed off the Senate floor in late June, cannot take effect unless SB 391 does as well. C.A.R. worked with The Orange County Register’s editorial board to publish an editorial in support of delinking the two bills. “Taxes and Fees Burdening Already Struggling Homeowners,” in the Friday, July 12, edition states, “For insight into the overly cynical world of the California state Capitol, one need only look at a sensible, bipartisan bill designed to offer tax relief to hard-pressed homeowners who sell their properties through short sales. The bill is widely supported, but an underhanded “poison pill” was included with the legislation.” It adds, “California’s Assembly should strip away the tax-increase provisions – something that only adds to the already costly process of closing on a home – and give California home sellers a needed break.” C.A.R. will continue to work toward the passage of SB 30, the defeat of the recording tax, and the delinking of the two bills.
I will continue to provide updates on all these issues as they unfold.
Sincerely,
Don Faught
President
CALIFORNIA ASSOCIATION OF REALTORS®