Agenda Summary
National Association of REALTORS®
2011 REALTORS® Conference
Anaheim Marriott Hotel
Marquis Ballroom South, Lobby Level
Thursday, November 10, 2011
12:30 p.m. – 2 p.m.

Chair: Robert Goldstein, Fl
Vice Chair: Max Gurvitch, NY
Committee Liaison: Pamela Monroe, NJ
Committee Executive: Vijay Yadlapati, Washington, DC

Purpose: To identify and analyze emerging legislative and regulatory issues that impact commercial real estate; monitor and analyze current and prospective housing issues affecting federal multifamily housing programs and recommends appropriate policy; to develop, communicate, and advocate public policy which benefits the business interest of our commercial members while protecting and enhancing the right to own, use and transfer real property.

I. Call to Order and Opening Remarks

II. Ownership Disclosure and Conflict of Interest Policy

III. Approval of 2011 Mid-Year Meeting Minutes

IV. Important RPAC Message

V. Review and Approval of 2011 Subcommittee Goals

VI. Discussion of Environmental Issues– Russell Riggs, NAR
A. Renovation, Repair and Painting Program for Commercial and Public Buildings
On July 13, 2011, the House Appropriations Committee approved a REALTORS®-supported amendment to halt the implementation of controversial lead paint Renovation, Repair and Painting (RRP) rules until the EPA can ensure that businesses and individuals can comply.

B. National Flood Insurance Program (NFIP)
After the hurricanes of 2005, the National Flood Insurance Program (NFIP) was left insolvent and Congress had to take action by appropriating additional funds to keep the program running.  Congress is now seeking to reform the NFIP in order to avoid insolvency should another tumultuous hurricane season occur.  The current funding authorization expires on November 18, 2011.  Therefore Congress must either pass an NFIP reform bill prior to this date or temporarily extend funding again.

Congresswoman Judy Biggert (R-IL) has introduced HR 1309, the Flood Insurance Reform Act of 2011.  The proposed legislation would:
• Reauthorize the NFIP through September 30 2016,
• Raises the maximum the premium may annually increase from 10% to 20%
• Phases-in the full actuarial rate by 20% each year, beginning a year after enactment, for older properties, including non-residential; non-primary residences; primary residences that sell; are substantially damaged or improved; or have multiple claims.  For newly mapped properties, the phase-in would have same start date but would increase by 50% in the initial year and 20% each year thereafter.
• Indexes and adds options for business interruption and residential loss of use.
• Sets minimum deductibles and allows for quarterly residential rate payments.
• Directs FEMA and GAO to do a study and report on the best ways to privatize the NFIP

The House has passed HR 1309; which now awaits Senate action.  It is unknown if the Senate will address this issue prior to the November 18 deadline, which will force Congress to once again pass a temporary funding bill to maintain the program. 

C. Commercial Building Asset Rating Program
The U.S. Department of Energy (DOE or the Department) seeks to develop a voluntary National Asset Rating Program for Commercial Buildings (AR Program). The AR Program would establish an Asset Rating system for commercial buildings based on a national standard and would evaluate the physical characteristics and as-built energy efficiency of these buildings. It would also identify potential energy efficiency improvements. The goal is to facilitate cost-effective investment in energy efficiency and reduce energy use in the commercial building sector. DOE is seeking comments and information related to the development of the AR Program.

D. EPA Stormwater Rulemaking
EPA has initiated a national rulemaking to establish a program to reduce stormwater discharges from newly developed and redeveloped sites and make other regulatory improvements to strengthen its stormwater program.

The proposed national rulemaking is considering the following key rulemaking actions:
• Develop performance standards from newly developed and redeveloped sites to better address stormwater management as projects are built;
• Explore options for expanding the protections of the municipal separate storm sewer systems (MS4) program;
• Evaluate options for establishing and implementing a municipal program to reduce discharges from existing development;
• Evaluate establishing a single set of minimum measures requirements for regulated MS4s. However, industrial requirements may only apply to regulated MS4s serving populations of 100,000 or more;
• Explore options for establishing specific requirements for transportation facilities; and

The deadline to propose the stormwater rule has been extended to December 2011. EPA intends to take final action by November 2012.

VII. Commercial Real Estate Tax Outlook – Linda Goold, NAR
A. Carried Interest
Many real estate partnerships are organized with general partners, who contribute their expertise (and, occasionally, some capital) and limited partners who contribute money and property (capital) to the enterprise. Generally the profits of the partnership are divided among the limited partners who contribute capital. A common practice among real estate partnerships, however, is to permit the general partner to receive some of the profits through a "carried interest," even when the general partner has contributed little or no capital to the enterprise. The general partner's profits interest is "carried" with the property until it is sold.

During the time that the real estate is held, the general partner receives compensation and fees in the form of ordinary income. The limited partners receive both ordinary income from operations and capital gains income from any profits generated during the year. When the property is sold, the limited partners receive their profits distributions (the earnings on the capital they have invested) as capital gains. The general partner also receives the value of its carried interest as capital gains income.

Congress has proposed treating the income from a general partner's carried interest as ordinary income. Limited partners would continue to receive capital gains treatment for their share of any capital gain.

When Congress lifted the debt ceiling in July 2011, they also created a new "Super Committee" charged with the task of finding an additional $1.4 Trillion in deficit reductions.  That package can be made up of any configuration of spending cuts and/or new revenues that can garner 7 votes.  (The Super Committee will have 12 members, evenly divided between the House and Senate and evenly divided by party.)

If the Super Committee includes new revenues in the package they agree to, many observers believe that changes to the carried interest rules would be high on the list of possible new revenues.

VIII. Other Business

IX. Adjournment