With a new day dawning in Washington, D.C., at least some insiders are “cautiously optimistic” that policies of the Bush administration will be favorable to the real estate industry.

Perhaps the key issue affecting real estate is in the arena of tax cuts, where the Bush agenda stands in stark contrast to his predecessor’s. In addition, a Republican-dominated Congress offers perhaps the strongest prospects for tax cuts in some years.

“The best thing to come out of the election of George Bush is that we now have a president who ran on the policy of a tax cut,” said Marty DePoy, vice president government relations for the National Association of Real Estate Investment Trusts (NAREIT). “The previous administration always showed reluctance to support a tax bill of any sort.

DePoy added that attitudes toward a tax cut have changed significantly in Washington, D.C., over the past several months. This shift has been prompted by an economic slowdown, combined with burgeoning federal surpluses and support by Federal Reserve Chairman Alan Greenspan.

NAREIT this year plans to pursue changes in tax provisions regarding leasehold improvements. Currently, landlords make improvements for incoming tenants, they are required to depreciate the expense for those improvements over the life of the building (39 years).

But DePoy points out that in reality, these fixtures tend to have a life of only five to 10 years, which is the length of an average lease. NAREIT wants depreciation of these improvements to match their life span.

Last year, a provision to do just that was included in a U.S. Senate tax bill. It was stripped out, however, before the bill was approved. DePoy has high hopes that the provision may become law this year.

“Each year we get closer and closer to the goal line on this issue,” he said.

On the property rights front, real estate professionals hope the election of George W. Bush will quash the telecommunications industry’s hopes of reviving forced building access.

“I think that issue is turning in our favor,” DePoy said.

Last year, the Federal Communications Commission (FCC) considered imposing regulations on the real estate industry, forcing building owners to allow multiple telecommunications companies to reside on their property. The measure was pushed by the telecom industry, which claimed there was not enough competition in the marketplace and that tenants did not have access to enough services.

The measure was supported by FCC Chairman William Kennard, who now has been replaced by the Bush administration with Republican Michael Powell, son of the newly confirmed secretary of state.

After controversy erupted over the measure last year, the real estate industry agreed to set up a model license agreement. This agreement would speed up lease negotiations between telecom companies and landlords, facilitating speedy delivery of new services to tenants.

DePoy said that a model agreement has been authored and is on the Internet for comment. At the end of February, it will be available to the public for comment before editing and implementation. NAREIT hopes the agreement will keep would-be regulators at bay, preventing further efforts to force building access.

Rounding out the immediate agenda for real estate is the issue of e-commerce taxes. NAREIT frames this as “e-fairness.” Online retailers do not have to collect sales tax, like brick-and-mortar outlets do, unless there is a “nexus” between the online retailer and the consumer. In other words, a shopper ordering online from a business in their home state must pay sales tax. But if that same shopper orders something from an out-of-state retailer, they don’t pay sales tax.

“From a real estate perspective, about 25 percent of our members own shopping centers,” DePoy said. “We are concerned about the viability of those shopping centers, if retailers at disadvantage since they must charge sales tax.

The crux of NAREIT’s position lies in the total of tax dollars collected. As more consumers turn to the Internet to make purchases, the total number of sales tax dollars paid will decrease.

“If the diminution of sales tax continues, there will be pressure on state legislators to find sources for more taxes, like real estate taxes. If the inequity between Internet retailers and brick-and-mortar businesses is not cleared up, sales taxes will dry up and states will continue to raise real estate or other taxes,” DePoy said.

For more articles by Lesley Hensell, please press here.

Published: January 30, 2001

Use of this article without permission is a violation of federal copyright laws.