A. REALTOR® Rally -- May 17 B. Committee RPAC Participation C. Participation in Trade Show and Expo
IV. Unfinished Business
A. Tax Reform, MID and Tax Rates 1. Research In anticipation of a Congressional fight over expiring tax provisions, expiring income tax rates, annual budgets, and the increase in the debt ceiling, NAR has been working both internally and with external resources to prepare for the debates over these contentious issues. Real estate tax provisions, will inevitably become viewed as a source of revenue during these discussions and NAR has been working to gather research and information in preparation for the discussions.
2. Focus Groups B. 3.8% Tax The new Medicare tax is for all unearned net investment income and includes interest income, dividends, rents, and capital gains. The new Medicare tax will not impact the capital gains exclusion for principal residences ($250,000 for individuals/$500,000 for married couples). The 3.8 percent tax only will apply to taxable gains above this exclusion. The tax will take effect on Jan. 1, 2013, and will be applicable to high-income taxpayers with adjusted gross incomes of $200,000 or more for individuals, or $250,000 or more for married couples.
C. Mortgage Cancellation Relief Extension Three bills have been introduced by members of the tax-writing committees that would extend the 2007 mortgage cancellation relief that is currently scheduled to expire at the end of 2012. Senators Stabenow (D-MI) and Heller (R-NV) have introduced S 2250 along with several bipartisan cosponsors. Almost all members of the House Ways and Means Committee have cosponsored either H.R. 4336 (Reed -- R-NY) or H.R. 4202 (Rangel - D-NY). While these bills are unlikely to move as stand-alone legislation, having these extensions introduced as separate legislation underscores their importance. More than five dozen tax provisions expired at the end of 2011, and a few dozen more, including mortgage cancellation tax relief, will expire at the end of 2012. Congress has not yet given any signal as to how or when to package these provisions and move them through the process.
V. New Business
A. Internet Sales Tax Issues, S. 1832 An issue that has perplexed state and local taxing authorities since Internet retail has become an increasingly dominant mode of selling goods has been the question of whether a state can collect sales taxes for goods that are shipped from an out-of-state location to a resident of that state. Presently there is no Federal standard that defines the powers of the States to collect these taxes. Current judicial rulings have made it clear that Congress has the authority to make rules for the states, but, to date, Congress has not taken any action.
The theory of Internet sales tax issues is that, as a practical matter, the retail transaction actually takes place when a resident of a state orders goods that are then sent to the state resident, often from an out-of-state vendor. Vendors who provide the goods have generally tried to avoid collecting the tax on the theory that they have no connection to the state where the goods are ultimately delivered. (Note that if a vendor has a warehouse or other presence in the state, then the vendor must collect and remit the sales tax.)
As States have become more starved for revenue, they have become more assertive in attempting to collect the sales taxes on goods shipped into their states. The largest retailer, Amazon, has entered into agreements with some states about what sales taxes it will collect on goods going into particular states. This patchwork and piecemeal approach is becoming more and more unworkable for states and vendors alike.
Senator Mike Enzi (R-WY), along with 13 other Senators, has introduced a bipartisan bill, S. 1832, that attempts to devise a Federal standard for the States to follow. The legislation addresses many of the concerns that corporations have raised about expanding State taxing authority. The bill also gives tacit approval to the agreement that more than 20 States have entered into called the Streamlined Sales Tax Agreement to facilitate sales tax collections by adopting uniform definitions. It also provides guidance for states that have not entered into the Streamlined Sales Tax Agreement.
The major provisions of the bill are as follows:
States that participate in the Streamlined Sales Tax Agreement are authorized to require all sellers to collect and remit sales tax.
States that do not participate in the Agreement are authorized to provide the following for out-of-state vendors: • Designate a state agency to administer all sales tax laws • Provide out-of-state vendors a single audit process for sales tax audits for all state and local taxing authorities • Devise a single tax return for these taxes • Develop a uniform sales tax base for state and local taxing authorities • Develop software that will allow the sellers to impose the correct combined state and local tax rate on the goods they ship into a state. • Hold sellers harmless if they rely on that software but assess an incorrect rate. • Hold sellers harmless if they rely on information provided by the State. • Require local taxing authorities to notify the state taxing authority and the seller when there is a change to the local rate. • Exception: Any out-of-state vendor (also known as a "remote seller" with gross receipts in the prior year of less than $500,000 is exempt from complying with the rules applicable to larger remote sellers.
To address the concerns of large corporate vendors (those with more than $500,000 in gross receipts attributable to remote sales), the legislation provides the following: • The remote seller will not be subject to any state income, franchise, occupation or other taxes that are not sales taxes • The states may not construe the clarifications in this legislation as expanding their taxing authority. • The fact that the vendor collects and remits the sales tax may not be construed as creating nexus for any non-sales tax purpose. (Corporations sought this rule to be protected from non-sales tax litigation.)
NAR adopted policy in the late 1990's specifying that transactions that take place online should be taxed in the same manner as sales occurring in bricks and mortar stores. The policy statement does not provide specific details such as those provided in this legislation.
B. Visa Proposals (Information Only) In an effort to stimulate the housing market, some members of congress have proposed legislation that would ease visa requirements different ways, including the purchase of real estate. Under some proposals, if a non-U.S. resident purchases one or more homes using a minimum amount of cash and stays in the property for a minimum number of days per-year they would qualify for a visa. The alien would not be allowed to work under this specific visa, nor would they be eligible for any form of assistance or benefits.