In This Issue:
State Tuned:
House to Vote on Terrorism Insurance
Legislation to extend the Terrorism Risk Insurance Act for an additional fifteen years is expected to go to the House floor as early as next week. H.R.2761, the Terrorism Risk Insurance Revision and Extension Act (TRIREA) of 2007 was introduced by Reps. Michael Capuano (D-MA) and Barney Frank (D-MA) and was passed out of committee on August 1. The bill would extend and modify the current program which is set to expire at the end of 2007.
In addition to extending the terrorism insurance program for an additional fifteen years, the legislation makes some additional changes to the program that BOMA International and our coalition partners fully support. H.R.2761 would give businesses an important new option to purchase insurance for catastrophic non-conventional terrorism risks – nuclear, biological, chemical, and radiological (NBCR) attacks. The legislation would also eliminate the distinction between foreign and domestic acts of terrorism. In addition, H.R.2761 would lower substantially the program’s trigger level which will encourage smaller insurers, currently unable to participate in the program, to return to the terrorism risk insurance marketplace, thereby providing policyholders with a wider choice of insurance options.
We need your help! Visit BOMA’s Legislative Action Center and send an email to your Representative today to urge them to vote in favor of H.R. 2761.
Contact: Karen Penafiel, (202) 326-6323, kpenafiel@boma.org.
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Congress Returns with Focus on Carried Interest
Congress returned this week from its August recess and immediately turned its attention to the issue of the taxation of carried interest. Hearings were held on September 6 in both the House Ways and Means Committee and the Senate Finance Committee. 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. Currently, carried interest is taxed like a capital gain at the 15 percent rate. The House bill up for consideration, H.R. 2834, would change the tax treatment of carried interest as ordinary income at the 35 percent rate, for most.
BOMA opposes this legislation and is working with its coalition partners in the real estate community to ensure its defeat. Adam Ifshin of DLC Management Corporation represented the real estate industry at the Ways and Means Committee hearing and has also testified on our behalf at a July 31st hearing of the Senate Finance Committee. Download a copy of the testimony from today’s hearing.
Contact: Jason Todd, (202) 326-6356, jtodd@boma.org.
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Natural Catastrophe Bill Introduced in House
Last month, legislation was introduced to attempt to provide alternative and more affordable catastrophic insurance for residential real estate. The Homeowners Defense Act of 2007 (H.R. 3355) , introduced by Reps. Ron Klein (D-FL) and Tim Mahoney (D-FL), would allow for state-sponsored insurance funds to voluntarily pool their catastrophe risk with one another and then transfer that risk to the private markets through the use of catastrophe bonds and reinsurance contracts. Following the risk transfer, state-sponsored insurance funds would be better protected and increasingly able to provide services for those who are not able to find insurance on their own. The bill would also create a National Homeowners Insurance Stabilization Program to provide low interest federal loans to states impacted by severe natural disasters.
BOMA International has met with the staff of both sponsors as well as Rep. Mahoney himself and expressed the need for Congress to also assist in making catastrophic insurance more affordable to the commercial real estate industry in certain high risk markets, such as the Gulf and east coasts. BOMA will continue to advocate to Congress through the Natural Catastrophe Policyholders Coalition (NCPC) the need to address commercial real estate’s challenges in obtaining affordable catastrophic insurance.
Contact: Jason Todd, (202) 326-6356, jtodd@boma.org.
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State Tuned:
Federal Court Rules Kentucky Turf State Policy Unconstitutional
In a ruling this week, the United States District Court for the Western District of Kentucky found the state’s turf state policy unconstitutional. Kentucky’s turf state policy requires anyone who brokers real estate transactions to possess a valid state real estate license. It further requires out-of-state brokers representing clients who wish to purchase property in the state to refer those clients to a Kentucky broker, who must then handle all aspects of the transaction. In essence, this regulation banned real estate brokers from cooperating with Kentucky brokers in the marketing, leasing and management of commercial property located in the state, thereby excluding national brokerage firms from the Kentucky market.
BOMA International, in conjunction with the National Multi Housing Council, filed an amicus brief in support of the plaintiffs’ contention that these prohibitions restrict the interstate marketing and sale of real estate by prohibiting cooperation between Kentucky licensed brokers and out-of-state brokers. BOMA’s participation in the filing was made possible through funding provided directly by the BOMA membership through the Industry Defense Fund.
The Court held that while Kentucky has a right to require licensure of real estate brokers within the state’s boarders (which the plaintiffs did not dispute), the state’s turf state policy is unconstitutional under the Commerce Clause of the United States Constitution. In his ruling, the judge found that the policy’s provisions effectively force both owners and purchasers of Kentucky real estate to work with only state licensed brokers. While this favors in-state interests by ensuring that virtually all commissions from the sale of Kentucky real estate remain with state licensed brokers, it also prevents clients from accessing the national brokerage market and inhibits clients of out-of-state brokers from accessing the state’s real estate market. In other words, these prohibitions constrain interstate commerce in that they isolate Kentucky from the national brokerage market and harm investors in commercial real estate.
It is unclear as to whether the state will appeal this ruling; however BOMA International will continue to monitor all developments in this case.
Contact: James Cox, (202) 326-6364, jcox@boma.org
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BOMA Seattle-King County Launches Kilowatt Crackdown Challenge
BOMA Seattle-King County recently launched a competition, the Kilowatt Crackdown, to challenge its members to assess their building’s energy performance, calculate their Energy Star rating, and improve that score within one year. It also aims to identify the most energy efficient buildings in the market as well as the properties making the greatest gains in performance.
Participants receive an unbiased ranking of their building’s energy performance, a valuable measuring point to gauge future energy performance improvements, and the satisfaction from being an energy leader in the Puget Sound market. They also have the opportunity to win the Kilowatt Cup, a jury awarded trophy recognizing superior achievement in energy management, overcoming unique obstacles and emphasizing energy efficiency through no- and low-cost practices. Other prizes include a party in a private suite at a Seattle Mariners baseball game and passes to the local association’s golf tournament.
Participants are also encouraged to attend the BOMA Energy Efficiency Program (BEEP) presentation of “How to Benchmark Energy Performance” to learn how to benchmark commercial real estate using the EPA energy performance rating system.
BOMA Seattle-King County’s effort supports BOMA International’s “7-Point Challenge” for members to reduce the use of natural resources, non-renewable energy sources, and waste production and work in coordination with building management, ownership, and tenants to positively impact the planet by helping to reduce the commercial real estate industry’s role in global warming.
Contact: James Cox, (202) 326-6364, jcox@boma.org
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