FRONT LINES: Washington Report

Flooding Congress

REALTORS® and other critics of a proposal to allow national banks into real estate brokerage and management have sent Congress more than 140,000 letters since mid-September in NAR’s biggest call for action ever. The letters urge Congress to go beyond the temporary banks-in-real-estate ban that lawmakers have been passing annually since 2002 and to make the ban permanent.

One vehicle for a permanent ban took a step forward in late September when the Senate Appropriations Committee passed fiscal 2005 federal appropriations legislation that permanently prevents the U.S. Treasury Department from finalizing the rule it published with the Federal Reserve in 2001 to allow banks into real estate.

The House also took action against banks in real estate in its fiscal 2005 appropriations legislation, but its ban is limited to the fiscal year that ends Sept. 31, 2005.

A House-Senate conference committee, which would meet after the Senate passes its appropriations bill, would determine which version of the ban would go to the president for signature. This could happen early next year, say NAR analysts.

Leasehold depreciation shortened

A new federal law reduces the depreciation period for tenant leasehold improvements to 15 years from 39, an important, if temporary, victory for commercial practitioners. The reduction sets a precedent in statute that the appropriate depreciable life of assets is 15 years, say NAR analysts.

The House and Senate passed a final version of the American Jobs Creation Act, H.R. 4520, in October. President George W. Bush signed the bill Oct. 22. The leasehold depreciation provision is in effect for assets placed in service between the date of the president’s signature and Dec. 31, 2005.

The bill eliminates a small-business expensing provision popular with practitioners that allowed them to deduct the full cost of deluxe sport utility vehicles. The bill limits that deduction to $25,000.