The BOMA Intl. advocacy staff had a challenging year in 2007, defending and moving a number of its top legislative priorities forward on Capitol Hill in the areas of energy, tax, and insurance. Here is a recap of activity in each one of these important issue areas.
Energy. As part of the first few months of the new Democratically controlled Congress, the House of Representatives unveiled a "100 hours" agenda and, as part of it, quickly passed energy legislation in the form of HR 6. Later on in the year, the House passed yet another energy bill, HR 3221. The Senate also passed an energy bill that was much different than both versions passed by the House. At press time, a conference committee between the House and Senate had yet to meet in an attempt to reconcile these very different bills, and the debate over broad energy legislation will likely be a hot topic of the second half of the 110th Congress.
BOMA Intl. supported the House's first energy bill; however, concerns were raised with Capitol Hill offices by BOMA and other real estate groups over energy requirements for commercial and residential buildings included in HR 3221. The language mandates unrealistic and arbitrary energy-efficiency targets for new construction in state building codes, circumventing the model building code process. Similar language also appeared in climate change legislation, S 2191: America's Climate Security Act of 2007. BOMA continues to voice its concerns over such mandates and is advocating for policies that incentivize energy efficiency through voluntary measures as opposed to mandates such as the Energy Efficient Commercial Buildings Deduction.
Tax. BOMA Intl. encountered an unanticipated tax battle during the first half of the 110th Congress that will surely carry over into 2008 and beyond: the taxation of carried interest. Carried interest is the compensation given to the general partner at the end of a successful real estate deal for the intangible assets, assumption of significant risk, and their intellectual capital as part of arranging and operating the real estate venture. Current law taxes carried interest at the capital gains rate of 15 percent. Last spring, standalone legislation was introduced by Rep. Sander Levin (D-MI) that would change its tax treatment to that of ordinary income, up to 35 percent.
The House of Representatives ultimately passed, on a predominately party-line vote, legislation that included Levin's proposal as part of a budgetary offset to a 1-year hold-harmless "patch" of the alternative minimum tax (AMT) in HR 3996, the Temporary Tax Relief Act of 2007. At press time, the Senate had not acted on the House bill, and Capitol Hill sources told BOMA that it would be difficult for the current carried interest provision to remain in place and ultimately find the 60 votes necessary to avoid filibuster. While BOMA supported the provisions to extend for 1 year the 15-year leasehold improvement depreciation and brownfields expensing that were also included in the bill, it opposed the overall package due to the profound negative impact on commercial real estate investment that permanently increasing the tax rate on carried interest would have. This is supported by 2005 IRS data that indicates nearly half of all partnerships are commercial real estate in nature.
Insurance. Legislation to address BOMA Intl.'s top insurance issue, terrorism risk insurance, was high on Congress' to-do list in 2007. Given that the Terrorism Risk Insurance Extension Act of 2005 was to expire on Dec. 31, 2007, BOMA doubled its efforts, along with the Coalition to Insure Against Terrorism (CIAT), to urge Congress to pass legislation to prevent the program from lapsing. BOMA actively supported HR 2761, the Terrorism Risk Insurance Revision and Extension Act (TRIREA) of 2007, which included a 15-year extension and was initially passed by the House in September. The bill adds coverage for domestically sponsored acts of terrorism, requires insurers to make coverage available for so-called "NBCR" (nuclear-biological-chemical-radiological) risks, and adds group life-insurance coverage. It also includes a "reset provision" that would decrease deductibles for terrorist attacks over $1 billion and decrease the trigger after such events.
Meanwhile, the Senate Banking Committee passed legislation in October extending the current program for only 7 years and did not include most of the additional House provisions. The Bush Administration threatened to veto the House version of TRIA, but signaled it would not oppose the Senate bill. Though it much prefers the House bill, BOMA Intl. - at press time - is hopeful that, before the close of 2007, Congress will have passed and the President will have signed, at the very minimum, a multi-year extension. BOMA spent 2007 urging enactment of a long-term extension of TRIA to avoid the possibility of higher premiums, limited availability, and other negative economic impacts due to instability in the marketplace for coverage.
For more information on these and other issues, call BOMA Intl. at (202) 408-2662 or visit (www.boma.org).