NCGA to Negotiate Tax Reform in Conference Committee

REBIC, NCAR, NCHBA and NAIOP continue to engage with the North Carolina General Assembly on tax reform issues that affect the real estate industry, as the 2013 session draws to a close.

After a week of hectic activity, the NC Senate overwhelmingly approved a Substitute to HB 998, the tax reform proposal passed by the House last Monday night. At this point, the House and Senate have each passed distinctly different Tax Reform plans, and the leadership from both chambers will shortly be appointing a Conference Committee to work out a compromise proposal, likely behind closed doors. Here’s how the plans stack up:

The House version of HB 998 does the following

  • Eliminates North Carolina’s three-tiered personal income tax bracket system and replaces it with a 5.9% flat rate;
  • Includes mortgage interest and property tax deductions, capped at $25,000 for married couples filing jointly and $12,500 for single filers. the following caps:
  • Allows unlimited charitable deductions;
  • Reduces the corporate income tax rate from 6.9% to 5.4%, and reduces the franchise tax by more than 10%;
  • Modestly expands sales tax to the installation or servicing of tangible material goods, like car repairs, computer warranties, or furniture delivery, while reducing the rate from 6.75% to 6.65% in 2014.

The Senate substitute to HB 998 does the following:

  • Eliminates North Carolina’s three-tiered personal income tax bracket system and replaces it with a 5.4% flat rate (will drop to 5.25% by 2015)
  • Eliminates all credits, exemptions and deductions entirely—including all mortgage interest and property tax deductions;
  • Eliminates the corporate income tax by 2017;
  • Eliminates hospitals’ nonprofit status;
  • Taxes Social Security benefits;
  • Modestly expands sales tax to amusements and entertainment, but excludes food and medicine;
  • Raises LLC fees from $200 to $750 and S-Corp fees to $5,000.

With an ensuing fraction in the Senate Republican Caucus, Sen. Bob Rucho resigned last week as co-chair of the Senate Finance Committee over his disagreement on tax reform with Senate Pro Tem Berger. The following day, Senator Berger politely rejected Rucho’s resignation from the position.
REBIC and NCAR are advocating for passage of the House Tax Reform package, as it is the most equitable approach for North Carolina businesses and homeowners alike. We’ll continue to keep you appraised of the progress on this critical issue in the coming days.

JCSU Study Says Land Use Regulations Make Charlotte Housing Less Affordable

Biddle HallA report issued last week by Johnson C. Smith University says land use regulation has a highly negative impact on housing affordability in Mecklenburg County, with every dollar spent complying with regulation adding nearly $5 to the cost of a new home or apartment unit.

The 2-year study, entitled The Economic Consequences of Land Use Regulations on Jobs, Families, Communities and Housing Affordability in Mecklenburg County, looked specifically at the impact that three Charlotte regulations had on both a single-family and multifamily development project in the city. The ordinances considered were:

The JCSU research team, led by Dr. Linette Fox and Dr. Nick Desai, used a variety of economic indices to determine the impact of these regulations on housing affordability, and came to two key conclusions:

  1. Land use regulations indeed increase the cost of housing, by as much as a factor of 5; and,
  2. Housing affordability declines during recessionary periods of high unemployment and slower job growth

Based on these conclusions, the report recommends policymakers take the following actions to ensure housing remains affordable in Charlotte:

  1. Consider all factors impacting housing affordability and not enact new land-use regulations in isolation;
  2. Identify the local regulatory regimes and incorporate them in the decision-making process;
  3. Review applicable processes as it relates to flexibility and impact on affordability on a regular basis; and
  4. Encourage housing developers and public sector housing proponents to form partnerships in the interest of building more affordable housing.

The JCSU study was funded by the Piedmont Public Policy Institute (PPPI), a 501 (c)(3) organization established to provide independent research, analytical capabilities, and education relating to economic development, the real estate and building industry, transportation, the environment, and related matters relevant to the Charlotte region.

You can download the full study here:

Economic Consequences of Land Use Regulations on Housing Affordability in Mecklenburg County

 

 

NC House Approves Tax Reform Plan; Senate Up Next

legbuilding

In an unusual Friday morning session, the North Carolina House tentatively approved historic Tax Reform legislation by a vote of 72-32, setting up what could be a lengthy debate with the Senate over its own proposal.

HB 998 (Tax Simplification and Reduction Act) would eliminate North Carolina’s three-tiered personal income tax bracket system and replace it with a 5.9% flat rate. The bill provides a $25,000 combined maximum deduction for mortgage interest and property taxes, while deductions for charitable contributions remain unlimited. These deductions were increased from an earlier version of the bill, thanks to the hard work of the North Carolina Association of REALTORS (NAR), which lobbied aggressively to protect the Mortgage Interest Deduction (MID).

HB 998 also doubles the standard deduction and increases the child tax credit from $100 to $250 for families making less than $100,000. Social Security benefits are not taxed under the plan. It cuts business taxes by reducing the franchise tax by more than 10% and reducing the corporate income tax rate from 6.9% to 5.4%.

While HB 998 does expand sales tax to some services, the additional services taxed in the House plan are those that currently collect and remit sales tax revenue. It appears that the House is siding with the Governor’s wishes in not extending sales tax to essential goods such as medicine and food.

HB 998 will be on the House floor again Monday night for 3rd reading before heading over to the Senate where the fate of the bill (and tax reform in general) is still not known.  Once the House disposes of the tax reform bill, it will move on to the budget with the full Appropriations Committee meeting next Tuesday and then floor votes following on Wednesday and Thursday.

Source: North Carolina Home Builders Association (NCHBA)

Charlotte Home Builders Lobby Congress on Housing Issues

 

HBAC President Alan Banks, EVP Kathryn Lewis, and Exec Committee members Bill Saint & Rich Davis on Capitol Hill

Charlotte HBA President Alan Banks, EVP Kathryn Lewis, and Exec Committee members Bill Saint & Rich Davis on Capitol Hill

REBIC joined home builders from Charlotte and across North Carolina in Washington, D.C. last week to advocate for housing issues on Capitol Hill during NAHB’s annual Legislative Conference.

Led by NAHB president and Charlotte home builder Rick Judson, our delegation met with Congressmen Robert Pittenger, Richard Hudson, Mark Meadows and Mel Watt, as well as with Senators Richard Burr and Kay Hagan. Some of the critical issues we discussed were: the housing production credit crisis; federal tax reform; housing finance reform; immigration reform and its impact on the labor supply; and the affordability of the National Flood Insurance Program.

North Carolina home builders hear from Senator Richard Burr during NAHB's Legislative Conference

North Carolina home builders hear from Senator Richard Burr during NAHB’s Legislative Conference

Our Charlotte-area congressmen were generally supportive of our industry’s key issues, but most expected the immigration issue to be the only one Washington would address before the end of the year. Reform of Fannie Mae & Freddie Mac also appear to be on the horizon, with draft legislation already nearing completion. Our builder delegation asked the congressmen we met with to ensure the federal government maintains its role in backstopping the mortgage industry, and to undertake reforms to our immigration policy that would allow for a reliable flow of workers to meet the demands of a growing, but still fragile, housing recovery.

 

Thanks to all the Charlotte HBA members who took time out of their busy schedules to make the trip to Washington!

Charlotte area home builders meet with Congressman Richard Hudson in Washington, D.C.

Charlotte area home builders meet with Congressman Richard Hudson in Washington, D.C.

Mecklenburg County Considering Recycling Requirements for Construction Sites

Will you have to keep one of these on your job site?

Will you have to keep one of these on your job site?

Mecklenburg County is considering changes to its Source Separation Ordinance (SSO) that would remove a Temporary Site exemption and begin requiring recycling on all construction and demolition sites. This change could add significant time and cost to the construction and land development process, and REBIC is working to make sure the interests of the industry are protected.

Elimination of the Temporary Site exemption was proposed in the most recent update of the county’s Solid Waste Management Plan, as a way to capture the estimated 7,600 tons of corrugated cardboard and 4,200 tons of wooden pallets the county believes now passes through local construction sites each year. According to an NAHB Research Center study quoted by the County, the average 2,000 SF home generates approximately 600 lbs of corrugated cardboard during its construction.

If approved, residential construction sites that contract for the pickup of at least 8 cubic yards of trash per week (determined by how often a 30-cubic-yard container is emptied) would be required to establish a process for collecting all recyclable material from their job sites, separating that material from the normal waste flow, and hiring a private company to haul it to a county recycling center. For more information on the proposed rule changes, check out the county’s Source Separation website.

REBIC is advocating to maintain the Temporary Site exemption, or at least to establish high minimum thresholds for compliance. We are also encouraging Mecklenburg County to enact an incentive-based pilot program to encourage builders to take steps to voluntarily recycle on their job sites.

If your company already has an on-site recycling program in place, we’d like to know the details. Also, how would the current proposal impact your business? Please e-mail us at Joe.Padilla@REBIC.com.

REBIC Board Member Selected for NC Housing Hall of Fame

178Longtime REBIC Board of Governors member Tom Pearson, of Pearson Land Corporation, has been selected for induction into the North Carolina Housing Hall of Fame. The NC Housing Hall of Fame honors men and women who have made significant and lasting contributions to housing in North Carolina, the building industry, and the North Carolina Home Builders Association. The induction ceremony will take place during the Installation Dinner at the 2013 NCHBA 4th Quarter Meetings on December 3, 2013.

Pearson left the field of mortgage banking 20 years ago to start Pearson Land Corp. The corporation has developed communities as small as 4 lots to 450 lot neighborhoods in Charlotte-Mecklenburg and surrounding counties. Being involved in the Home Builders Association has always been a part of Pearson’s business plan. He served as President of the Home Builders Association of Charlotte in 1994, and was named Distinguished Builder of the Year by the HBAC in 2010. Pearson remains an active member of the Home Builders Association of Charlotte (HBAC), and serves on a long list of related committees and boards.

REBIC is proud to have one of our board members selected for such a prestigious honor, and we look forward to Tom’s induction this December!

Source: Home Builders Association of Charlotte

NC Building Code Council Amends Residential Fire Separation Requirement

ConstructionThe North Carolina Home Builders Association (NCHBA) scored a major victory for builders, developers and home buyers at the March 2013 State Building Code Council meeting.

The 2012 NC Residential Code had increased the fire separation distance from 3’ to 5’ from the lot line for single family dwellings that trigger the minimum fire-resistance ratings of walls and projections and the openings in walls limits found in Table R302.1. The Rule passed by the Council was approved by the Rules Review Commission on May 16, 2013 and is immediately available for use by permit holders. The effective date for the Rule is June 1, 2013 as adopted by the Building Code Council and approved by the Rules Review Commission.

During the Public Hearing for this important change, Robert Privott, NCHA Director of Codes and Construction explained to the Council that “during this past code cycle, the fire separation distances were arbitrarily increased by a distance of 2’-0’’ without any scientific data or reports that proved the allowable distance found in the previous NCRBC were an increased fire hazard.” Privott further explained that “there are thousands of vacant lots approved for development in North Carolina that are designed for 3’ separation distance from property lines that this modification will continue to allow and that the increased fire separation distance negatively impacts our industry, existing homeowners and the economy.”

The approved amendment to Table R302.1 now reads:

EXTERIOR WALL ELEMENT

MINIMUM

FIRE-RESISTANCE RATING

MINIMUM

FIRE SEPARATION

DISTANCE

Walls

(Fire-resistance rated)

1 hour-tested in accordance with ASTM E 119 or UL 263 with exposure to both sides

5 Feet

(Not fire-resistance rated)

0-Hours

3 5 Feet

Projections

(Fire-resistance rated)

1-Hour on the underside

3 4 Feet

(Not fire-resistance rated)

0-Hours

3 5 Feet

Openings

Not Allowed

N/A

< 3 Feet

25% Maximum of Wall Area

0-Hours

3 Feet

Unlimited

0-Hours

3 5 Feet

Penetrations

All

Comply with

Section R302.4

< 5 Feet

None Required

3 5 Feet