by Brianna Crandall — January 7, 2015—Both the residential and commercial real estate trade association National Association of Realtors (NAR) and NAIOP, the Commercial Real Estate Development Association, issued statements in recent weeks supporting the congressional passage of key real estate tax extensions and expressing disappointment in the failed renewal of the federal terrorism risk insurance program. Both noted bipartisan support for the measures.
Tax extensions
NAR President Chris Polychron commented, “The package of tax extensions approved by the U.S. House and Senate, and headed to the president’s desk for signature, includes important provisions that will help distressed homeowners and commercial property investors with transactions made during 2014. NAR applauds Congressional leaders in both chambers for their effort to pass this legislation before adjournment.”
The legislation includes one-year extensions of the 15-year depreciation schedule for leasehold improvements and the deduction for improvements to energy-efficient commercial buildings.
NAIOP President and CEO Thomas J. Bisacquino also commented, “Among the most important tax provisions to commercial real estate is the depreciation provision for leasehold improvements. We commend those in Congress who [worked] to ensure that commercial real estate isn’t subjected to a tax increase on qualified leasehold improvements on commercial property, due to expiration of this important part of the tax code.
“However, absent a comprehensive tax overhaul, which we support, Congress must strive for tax policy that goes beyond short-term extensions, and that instead provides certainty for investors and developers so that they continue to make the long-term investment decisions that help fuel our economy.”
Federal terrorism risk insurance program
Bisacquino also issued a statement on the Senate’s failure to address the renewal of the Terrorism Risk Insurance Act (TRIA): “The failure to renew TRIA will come [at] a significant cost to our economy, job growth and progress in the commercial real estate market. It’s more than a speed bump, it’s a stop sign, and that’s the last thing our fragile economic recovery needs right now. We hope the President and the new Congress will make renewal of TRIA the first order of business when they return in January.
Bisacquino called TRIA “vital federal policy for developers and the jobs the industry creates.” In an argument for fiscal responsibility, Bisacquino explained that TRIA is good policy for U.S. taxpayers, “because it places responsibility for the first $100 million in aggregate losses on the insurance industry and private sector capital, not the U.S. Treasury.”
NAR President Chris Polychron also commented, “The U.S. Senate’s alarming failure to renew the federal terrorism risk insurance program before adjournment will stall commercial real estate development around the country. The Senate missed an opportunity to approve a six-year reauthorization of the Terrorism Risk Insurance Act, which passed the U.S. House of Representatives with overwhelming bipartisan support.
“TRIA provides a crucial framework for economic recovery in the wake of a catastrophic terrorist attack and allows the U.S. to maintain a stable terrorism insurance market so employers can invest in properties and create jobs without assuming the risk and liabilities of a terrorist attack. Terrorism risk insurance is also a requirement of many existing commercial mortgage balances, so those whose coverage will lapse at the expiration of TRIA will be in technical default of their mortgage terms.
“Without action, terrorism insurance will become scarce and expensive, causing construction projects to stall, commercial property values to drop, and the ongoing economic recovery to slow. Realtors will work closely with Congress in the new year to swiftly reenact TRIA and provide much-needed certainty to the market.”
