2009 Legislative
Outlook: Taxes
and Energy
Conservation
Climate change and green buildings
legislation are expected to be high
on the agenda of the 111th Congress
and the new administration. IREM
will continue to push for market-driven incentives, rather than mandates, to encourage energy-efficient
upgrades.
In the tax area, IREM will work
with National Association of realtors
(NAR) to retain current capital gains
rules as they apply to appreciated
property, like-kind exchanges and
carried interest, in particular by
keeping capital gains tax rates at
the existing 15 percent while suspending passive loss rules. Also
of importance is to improve the
depreciation, depreciation recapture
and leasehold improvement rules
without triggering the Alternative
Minimum Tax. IREM will also work
to attract new investment in existing real estate by providing higher
income limits and expenditure limits
to the so called “small investor” provisions of the passive loss rules.
stiMulus PrOPOsals take
aiM at cliMate chanGe
An issue that has gained traction in Congress and attention from President
Obama is climate change. Although this issue was recently put on the back
burner due to the current financial crisis, curbing greenhouse gas emissions
will still be a priority for the Democratic-controlled Congress and President
Obama. Obama and his team are currently laying out the groundwork for a
major stimulus plan, with a substantial focus on green energy. The President’s
plan, along with the election of carbon emissions reduction supporter, Henry
Waxman, to the Chairmanship of the House Committee on Energy and Commerce, will likely usher in a groundswell of energy proposals aimed at reducing
emissions. Such legislation could affect the cost of constructing new buildings
and retrofitting existing buildings, as well as the cost of operating multifamily
and commercial structures.
One proposal aimed at fighting climate change, which gained support in late
2008 from President Obama and many prominent members of Congress, is
a program called emissions trading or “cap and trade.” This type of program
provides economic incentives to achieve reductions in emissions. Under this
approach, regulated industries can buy and sell what are, in effect, permits to
pollute.
This idea is a response to strong science showing that carbon emissions contribute to global warming. However, there is no science that can accurately predict how much economic hardship will be caused as a result of this proposal.
Since 2005, the European Union has required various industries (real estate
exempt) to cut the amount of carbon emissions they produce or buy pollution
credits in the open market. In this type of program, governments set emission
caps, and companies emitting less than their quota can sell, at a profit, their
unused credits to companies that overshoot their caps.
Although there have been studies by the U.S. Environmental Protection
Agency (EPA) and the former Bush Administration showing that a cap and
trade program in the United States may not have a significant impact on economic growth, it is unknown how this type of program will
affect the commercial real estate industry.
IREM supports federal funding of a cost/benefit analysis
and research into the feasibility of an emissions trading program, including the participation and input from IREM, for
the real estate industry. Recognizing the serious concerns
of global warming, IREM supports the development of voluntary standards for reducing greenhouse emissions as well
as economic incentives in the form of tax credits that would
encourage efficiency improvements and assist in paying for
those upgrades.
