Washington Update: January 31, 2008
Find the latest legislative news updates from Washington, D.C., that impact Resort and RLI.
In This Issue
Senate Considers Limit on 1031 Exchanges
Report: Eminent Domain Reform Does Not Limit Economic Development
2007 Farm Real Estate Prices Will Likely Set Record High
House-Passed Economic Stimulus Package Helps Real Estate
NAR Comments on EPA's Wetlands Guidance Document
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Senate Considers Limit on 1031 Exchanges
The Senate version of a major Farm Bill (H.R. 2419) included a limitation on some like-kind exchanges. This bill passed the House earlier in 2007. The proposed modification would disqualify exchanges of "improved real property" with "unimproved agriculture real property." Thus, the owner of a building could not use the 1031 exchange technique to acquire "unimproved agriculture real property." The provision would have the effect of imposing a "toll charge" on any person selling the affected property. The toll charge would take the form of either a reduction in the price that the seller could obtain on sale or the transaction would require a selling farmer/rancher to pay tax on the transaction.
NAR vigorously opposed this provision in the Farm bill. Other organizations followed NAR's lead. NAR is cautiously optimistic that this provision will not be included in any final version of the Farm Bill. Currently, a conference committee is scheduled to convene later in the spring to iron out the many differences in the legislation.
Report: Eminent Domain Reform Does Not Limit Economic Development
The Institute for Justice has published new research that finds that strong protections against eminent domain abuse have no ill effect on economic growth.
IJ’s new study, Doomsday? No Way: Economic Trends and Post-Kelo Eminent Domain Reform,used rigorous statistical methods to examine economic indicators nationwide among states with varying degrees of reform and looked at pre- and post-reform trends. Despite doomsday predictions from some eminent domain experts, even the strongest reforms, like those passed in Florida, have caused no negative economic consequences.
2007 Farm Real Estate Prices Will Likely Set Record High
U.S. farm real estate prices likely set another record last year due to low interest rates, government farm programs and reinvestments to avoid taxes on capital gains, Agriculture Department spokesman Scott Shimmin said yesterday.
USDA's report on 2007 farm real estate prices will not be finished until later this year, but the average sales price will likely be higher than 2006's record 14 percent rise to a then record average of $2,160 per acre.
Society of Professional Farm Managers and Rural Appraisers President Ray Brownfield said rural real estate values continue to rise. In Iowa, for instance, the price of farmland rose 22.6 percent in 2007, according to Farm Credit Services of America, an agricultural lender that tracks real estate values.
House-Passed Economic Stimulus Package Helps Real Estate
The Recovery Rebates and Economic Stimulus for the American People Act of 2008 passed the House on January 31, 2008 and is now awaiting Senate action. This legislation provides a much-needed economic boost and specifically helps real estate by:
- Increases to $250,000 in 2008 the expensing allowance for depreciable business assets;
- Allows business taxpayers a 50% bonus depreciation allowance for equipment placed in service in 2008;
- Raises the statutory ceiling on the maximum original principal obligation of a mortgage, originated between July 1, 2007, and December 31, 2008, that may be purchased by either the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac);
- Expresses the sense of Congress that Fannie Mae and Freddie Mac should securitize mortgages acquired pursuant to the increased conforming loan limits of this Act, if the manner of securitization does not: (1) impose additional costs for mortgages originated, purchased, or securitized under existing limits; or (2) interfere with the goal of adding liquidity to the market; and
- Establishes a temporary loan limit increase for mortgages in specified high-cost areas if the borrower receives credit approval by December 31, 2008, and grants the Secretary of Housing and Urban Development (HUD) discretionary authority to increase loan limits for a specified period.
NAR Comments on EPA's Wetlands Guidance Document
The EPA and the U.S. Corps of Engineers released draft guidance related to the recent decision of the US Supreme Court in Rapanos v. United States. The question presented to the Supreme Court in the Rapanos case involved the scope of the federal government's jurisdiction over wetlands and certain other non-navigable water bodies. NAR submitted comments on this guidance to ensure the real estate perspective was included in their decision-making. The focus of NAR's comments addressed the ways in which the Guidance misinterpreted the Supreme Court decision in Rapano,expressed concern that this Guidance would only serve to further confuse the scope of the federal government's authority to regulate wetlands and which waters should be regulated. NAR suggested that EPA and the Corps should institute a rulemaking that would clarify these issues and help to develop a streamlined and effective wetlands regulatory program.
