2007 Congressional Session Summary

NMHC Washington Update

NMHC secured several significant victories in the final hours of the 2007 Congressional session. This Washington Update summarizes the outcome of those victories.

LAWMAKERS REJECT PROPOSED CHANGES TO TAXATION
OF CARRIED INTEREST

In what was arguably the industry’s most significant victory in the past year, NMHC and allied real estate organizations successfully convinced Congress not to change the tax treatment of “carried interest” or the “promote” received by a general partner. Congress had considered taxing carried interest as ordinary income rather than at the lower capital gain tax rate. Such a change could have raised taxes on this income by up to 133 percent.

The U.S. House of Representatives voted in favor of the change in November as a way to pay for a one-year “hold harmless” patch for the Alternative Minimum Tax (AMT). Senate Republicans refused to pass AMT legislation that included any tax increases to offset the AMT relief, however, so the carried interest provision was stripped from the final AMT bill that passed both houses yesterday.


CONGRESS RENEWS TERRORISM INSURANCE

NMHC achieved one of its top legislative priorities when Congress approved legislation (H.R. 2761) extending the federal terrorism insurance backstop for seven years. The law makes the federal government the insurer of last resort for terrorism insurance. Absent this extension, multifamily owners would have once again faced conditions experienced in the aftermath of 9 11 when terrorism coverage virtually disappeared.

According to NMHC’s 2007 Cost of Risk Survey, 87 percent of apartment firms surveyed purchased terrorism coverage as part of their property program, reinforcing the importance of the program extension. This new law will bring the much needed certainty that this coverage will remain available and affordable for an extended period.


NEW LAW ADDRESSES METHAMPHETAMINE LAB CLEANUP

Legislation addressing the remediation of methamphetamine labs has passed both houses of Congress. The NMHC supported bill (H.R. 365) directs the U.S. Environmental Protection Agency to work with the National Institute of Standards and Technology to create, within one year of enactment, voluntary guidelines to remediate former methamphetamine laboratories.

The bill also directs the National Academy of Sciences to prepare a report on the health effects posed by former meth labs on “the residents of buildings where such laboratories are, or were, located, with particular emphasis given to biological impacts on children” and calls for research to develop rapid detection kits to identify meth labs.

PRIVATE MORTGAGE INSURANCE DEDUCTION EXTENDED

Congress approved a bill to provide a temporary, three year change to the tax code to eliminate additional taxes on homeowners whose lenders forgive a portion of their outstanding mortgage debt. Unfortunately, the package, which includes an NMHC-opposed provision to extend the deduction for private mortgage insurance (PMI) for three years. NMHC was successful in scaling back early drafts of the measure which sought to extend the PMI deduction for seven years. The legislative struggle over the PMI incentive will continue, however, since its backers are expected to seek permanent status for the provision. NMHC will continue to work with key members of Congress to oppose such action.

NEW FEDERAL POOL REQUIREMENTS ENACTED

The energy bill signed into law recently includes language requiring all public pools and spas, including those located in apartment communities, to be equipped with anti-entrapment devices by. Specifically, the legislation requires that pools be equipped with drain covers that conform to the entrapment protection standards of the ASME/ANSI A112.19.8.

In addition, any pool with a single main drain, other than an unblockable drain, must be equipped with one or more of the following anti-entrapment devices or systems: safety vacuum release system; suction- limiting vent system; gravity drainage system; automatic pump shut-off system; drain disablement; or other systems determined to be as effective as the above. The bill also establishes a grant program to aide eligible state enforcement efforts, but does not provide funds to property owners to defray equipment costs.