BOMA local associations and state coalitions are making great strides in positioning the commercial real estate industry as a political force in state capitals and local governments across the country. To recognize these efforts, BOMA Intl. created the Government Affairs Awards of Recognition Program. In 2008, BOMA Intl.'s State Government Affairs Committee chose to recognize the work of BOMA/Metropolitan Detroit and Texas BOMA for their advocacy efforts in the previous year.
BOMA/Metropolitan Detroit was honored for its strong emphasis on advocacy. The committee's efforts led to success on several key issues, including tax and private-property rights.
Faced with a state economy that significantly lags behind the rest of the nation, BOMA/Metropolitan Detroit addressed several tax issues in 2007 that negatively impacted the commercial real estate industry. The association was able to defeat two bills that would have eliminated the "additions and losses" section—a statute upheld by the state Supreme Court in 2002, which exempts new construction and improvements from property-tax assessments. Through its work with a coalition of Michigan business groups, it was able to delay a 2-percent business-to-business tax on services like construction, legal, accounting, custodial, and landscaping. It's now working with lawmakers, tax groups, and other interested parties to develop long-term alternatives that are favorable to the commercial real estate industry.
The protection of private-property rights also became a concern when legislation that would have given cable and video service providers unfettered access to commercial buildings was introduced. BOMA/Metropolitan Detroit members, in conjunction with their lobbyists, worked with legislators to ensure that forced access would not be an unintended consequence of the bill through the addition of clarifying language.
Recognized for its statewide commitment to advocacy, Texas BOMA was honored in the Government Affairs Program/Seminar category for its "2007 Texas BOMA Statewide Advocacy Day." The state coalition has long identified advocacy as the primary mission of its members. As part of this goal, it holds an advocacy day during the state's biannual legislative session.
To maximize the success of its lobby day, the Texas BOMA Advocacy Day Committee identified several critical elements to ensure its success:
- A streamlined agenda.
- Proximity of the event site.
- The concise identification of key legislative issues.
- Early and frequent contact with legislators regarding the event.
- Thorough member education on the issues to be covered.
- Better-organized legislator visits.
Additionally, three priority issues were picked: the coalition's opposition to mandatory sales price disclosure, its support of the elimination of pass-through payments from the Margin Tax under both gross-rent and net-rent leases, and its desire for legislative recognition that a portion of that tax was a substitute for ad valorem taxes.
Sales price is generally not the best indicator of value for commercial properties. Typically, the income approach is a better, fairer method. Confronted with legislation requiring mandatory sales price disclosure, Texas BOMA cited findings from the state's Task Force on Appraisal Reform, which found that most appraisal districts don't have the infrastructure to analyze complex commercial transactions. It also found that mandatory sales price disclosure could lead to "sale-price chasing"—a practice that values all property on the most recent and expensive sale, and does not look at differences between individual properties.
Texas BOMA pushed for the elimination of flow-through payments from the state's Margin Tax under gross-rent and net-rent leases, as well as the legislature's acknowledgement that a portion of the tax is a substitute for ad valorem taxes. Texas' Margin Tax is levied on almost all entities other than sole proprietorships and general partnerships. It exempts certain pass-through funds from the definition of gross receipts. The exemptions include payments made to general contractors that are designated for subcontractor work, claimant funds held by attorneys, and funds mandated by law. Landlords do not profit from these funds, regardless of whether they come via gross rents or net rents. The legislature stated that one of the primary justifications for the tax reduction was the reliance on ad valorem taxes in the state. Most commercial leases allow landlords to pass ad valorem taxes through to tenants as property operating costs.
Texas BOMA's increased visibility and lobbying paid off. In working cooperatively with other groups, it succeeded in keeping the sales-price disclosure issue from being voted on in the Senate. It was also able to push a technical correction through that changed the calculation of partnership rentals from net to gross. Legislation was stripped, preventing the prohibition of taxpayers passing the margins tax through to their consumers.
These industry efforts are examples of how BOMA local association and state coalition volunteers turn their time into advocacy successes.
For more on these and other issues, call BOMA Intl. at (202) 408-2662 or visit www.boma.org.
