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Taxes

April Highlights Fair Housing and Tax Day

April is Fair Housing Month. As stewards of the right to own, use, and transfer private property, REALTORS® understand that fair housing protects the real estate industry and our businesses. We depend on a free, open market that embraces equal opportunity. In short, fair housing makes us stronger. This year, we will commemorate this important and historic milestone by highlighting four key issue areas that will set the tone for the future of fair housing.

On March 13, 2019, Rep. David Cicillini (D-PA) introduced HR 5, the Equality Act, in the U.S. House of Representatives. The Equality Act would amend the Fair Housing Act to provide protections for LGBTQ people in key areas of life, such as housing, employment, credit, public accommodations, and voting rights, and is aligned to NAR’s Code of Ethics. As we monitor this bill through the legislative process, we will continue to express our support. If the bill passes, we will work to address our policy issues as any regulations implementing it are developed.

We’ll also continue to work with and support our multicultural partners — the National Association for Hispanic Real Estate Professionals (NAHREP), the Asian Real Estate Association of America (AREAA), and the National Association of Real Estate Brokers (NAREB) — to address immigration housing rights, improving language access to financial materials, and gaps in African-American homeownership.

Don’t forget there are only four days until Tax Day! This is the first filing season that the impact of the 2017 Tax Cuts and Jobs Act will be seen as you are preparing your tax returns. If you still haven’t filed, we encourage you to review What REALTORS® Need to Know About the New Tax Law. There you’ll find helpful videos and other resources available to you. And as always, consult a tax professional if you have more detailed questions.

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State Capital Gains Tax Rates

Most real estate professionals are familiar with capital gains taxes especially at the federal level. Meanwhile, state capital gains tax rates might also impact the bottom line. Capital gains taxes are paid at the time of sale of an asset (i.e. real estate). As of May 2018, Guam has the highest maximum rate at 20 percent whereas North Dakota has the lowest maximum rate at 2.9 percent. Download State Real Estate Capital Gains Rate Chart (log-in required) to learn what your state’s capital gains tax rate.

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Questions? Contact Adriann Murawski at 202-383-1068.

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Ohio REALTORS® Achieve Double Legislative Victory on the Tax Front

There are more than 600 municipalities with an income tax in Ohio, and all business entities and individuals are required to file and pay taxes in each one in which any income has been earned.  To say that the administrative burden this places on real estate professionals is onerous would be a vast understatement, according to Scott Williams, Vice President of Public Policy at Ohio REALTORS®

But all that is about to change:  thanks to a recent legislative dual-victory supported by a REALTOR® Party Issues Mobilization Grant, these filing requirements will be significantly streamlined the next time tax season rolls around.  It also helped to shut down a proposed expansion of the sales tax on professional services.

The income tax issue affected nearly all of the association’s 30,000 members, most of whom had been required to file multiple tax returns because of sales activity in multiple jurisdictions, explains Williams.  “It was not unusual for members to have to file a dozen returns,” he notes.  “In one extreme case, in the metropolitan Cleveland area, where numerous suburbs and bedroom communities are all incorporated as their own jurisdictions, one member told me he’d filed 22 separate returns last year!”  Because no consumer or commercial software was available to handle this filing requirement, multiple returns had to be prepared by hand, a service for which CPAs would typically up-charge REALTORS® by an average of 25%.  For years, Ohio REALTORS® has been at the head of a coalition of business groups supporting a transition to a centralized tax-collection system; this past session, with a newly business-friendly legislature and the support of the governor, was the first time the reform had a chance of passing. 

In a separate issue in the same tax bill, Ohio’s governor was seeking to expand the state sales tax to include professional services due to a revenue shortfall exceeding $1 billion.  Although the attempt didn’t have much support in the General Assembly, it still posed a threat to the real estate industry and the broader state economy, and the REALTORS® actively monitored and opposed the proposal. 

An Issues Mobilization Grant allowed the state association to retain the services of an expert consultant to help develop policy, draft legislative language, and assist with the lobbying effort to secure centralized tax collection.  The consultant, who happens to be a former Tax Commissioner of the State of Ohio, had just the expertise that Ohio REALTORS® needed.  “We don’t have an in-house tax attorney,” explains Williams, “and during deliberations, there were sometimes multiple drafts to review in a single day.  There’s no way we could have done it without an outside expert.”  The consultant’s depth of experience working with the REALTORS® over the years also gave him valuable insight, and a significant base of actual data from which to draw arguments for tax-collection reform.  “He was able to run real world scenarios, stating, for example, that Mrs. X had sold three properties in three different jurisdictions last year, and so her actual compliance cost to file a $32 return was exorbitant,” notes Williams.  “These facts were clear and compelling, and made the necessary impression on our lawmakers.”

Ohio REALTORS® also issued several strategic Calls For Action during the course of the session, which Williams points out had the double benefit of applying pressure to the legislature and educating and engaging the membership.  “The new law, which goes in to effect next year, will streamline tax filing for all business net-profit filers who file in more than one municipality,” he says.  “It’s going to make life much easier and less costly for most of our members at tax time, and we wouldn’t have been able to achieve this without the REALTOR® Party.”     

To learn more about how Ohio REALTORS® has helped to simplify income tax filing and prevent the taxation of professional services in the state, contact Scott Williams, Vice President of Public Policy, at 614-226-3423.

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Wyoming REALTORS® Derails Tax on Services Threat with Timely Advocacy

The Wyoming Association of REALTORS®  (WAR) is careful to use Calls For Action (CFA) sparingly, sending a few out each year to keep members in practice, but “never so many that they feel like we’re asking for help every time they turn around,” says Government Affairs Director Laurie Urbigkit. “Our members know that if they get a CFA from me,” she says, “it means the world is coming to an end!”  

Early in 2017, just such an extreme situation developed in the Wyoming statehouse, and when Urbigkit put out the call, the REALTORS® responded accordingly. The end of the world, in this case, was the threat of a tax on all services that had suddenly appeared on the agenda of the House Revenue Committee, without debate or public testimony. The bill bore the benign title, ‘HB 243 School Finance-Capital Construction Funding,’ but would have imposed a comprehensive sales tax on services provided by all professionals, from barbers to babysitters.  For the real estate industry, it would not only have added to an agent’s commission, but to the appraisal, title insurance, closing fee, loan fees, inspections, repairs, surveys and legal fees.  WAR was keenly aware that, in addition to burdening the operation of real estate brokerages as small businesses, these added costs would effectively block many first-time home buyers from the market.

The association had actually been keeping an eye out for such threats to the industry. In recent years, as Wyoming’s mineral-based economy has been driven down by low oil and gas prices, explains Urbigkit, the state’s general revenue has been substantially reduced, putting pressure on the Revenue Committee to find sources elsewhere. In fact, this bill had died in committee just last September for lack of a motion, “because no one would touch it,” she says. But the committee had experienced a turnover in seven-out-of-nine seats since November’s election, and the chairman decided to revisit the proposal.

Urbigkit leapt to action, alerting all WAR members who are constituents of Revenue Committee members that it was time to make their voices heard. “The REALTOR® Party Hub email communications system is great,” she says. “I can target our members by committee, or by district, and engage them very easily in our advocacy efforts.”  Just as Urbigkit is careful not to ‘cry wolf’ with too many Calls for Action to her members, she also guards the Wyoming legislators from undue bombardment. In order to protect the value of their messages, her members are only asked to contact representatives of their own districts. “Our legislators know that when the REALTORS® are concerned, they’re getting messages from their own constituents, and that carries much more weight than flooding their in-boxes indiscriminately.”       

In response to the urgent CFA regarding the tax on services, a concentrated blast of emails to the House Revenue Committee ensued, complementing WAR’s in-person lobbying efforts. The bill was defeated in a 0-9 vote. “We’re very fortunate to have tools like this at our disposal!” says Urbigkit, adding, “The technology is so precise and effective, and our members are right there with it.”

To learn more about how Wyoming REALTORS® are protecting the real estate industry and keeping homeownership accessible for first-time buyers, contact Laurie Urbigkit, Government Affairs Director of the Wyoming Association of REALTORS®, at 307-851-1191.

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Missouri REALTORS® Form Coalition to Fight Sales Tax on Services

In the past seven years, no fewer than twelve pieces of legislation that could have led to a tax on services, including those provided by the real estate industry, were proposed in the state of Missouri.  “The threat is real,” says John Sebree, CEO of Missouri REALTORS®, whose organization has been swatting back each one, with the strong support of the National Association of REALTORS®.  This year, it seized an opportunity to shift from a defensive to an offensive strategy.  Its attempt to amend the state constitution to ban a sales tax on services is ambitious, and possibly unprecedented in the nation, but by appealing to the general public, first to get the referendum on the ballot, and then for votes in its favor, its Missourians for Fair Taxation coalition is finding strength in numbers.

This is not the first time that Missouri REALTORS® has led a charge to amend the state constitution.  It formed the Missourians for Fair Taxation coalition six years ago, to oppose a threatened transfer tax initiative; the Missouri constitution now prohibits such a tax.  That was seen as a largely real estate issue, explains Sebree, but the current referendum on the November 8 ballot banning a sales tax on services is everyone’s issue, he says, and the Missouri REALTORS® are feeling a groundswell of support for their effort to amend the state constitution for a second time.

“The general public may not have strong feelings about a tax on real estate services,” says Sebree, “but in this service-oriented economy, they definitely get it when you talk to them about how a tax on services will increase what they have to pay for daycare, and haircuts and car repair.”  The Taxpayer Protection Amendment, as the ballot initiative is called, opposes what would effectively be a ‘birth-to-death’ tax, he says.  The scope of services that might be affected is reflected in the Missourians for Fair Taxation coalition, itself, which began as a handful of real estate industry organizations, and now comprises twenty-four professional service groups, including those representing the state’s optometrists, broadcasters, cattlemen, interior designers, grocers and funeral directors.

With major backing from NAR and Missouri REALTORS®’ own state-level advocacy fund, the coalition is in the midst of an energetic campaign it hopes will make the Taxpayer Protection Amendment a legal reality.  In its first phase, the campaign was focused on polling and planning.  During phase two, the coalition secured tens of thousands of voter signatures in order to get its amendment on the ballot.  Gearing up toward Election Day, in addition to launching a barrage of paid radio, television and print ads, the cause has garnered an abundance of free media coverage thanks to the rallies held by Missouri’s 34 local REALTOR® Associations.  According to Sebree, social media has also been buzzing: “REALTORS® are naturals at using technology to get the word out; factor in NAR’s incredible resources for targeting likely voters, and that makes for some powerful communication.”  

The outcome is too soon to call, says Sebree, “but we have incredibly positive momentum at this point.  In any event, I’m happy to state for the record that we never could have gotten this far without the great team at NAR, and the support of the REALTOR® Party.”  Julienne Uhlich, NAR’s Campaign Services Manager, points out that the Missouri REALTORS® are pioneering a course that has national relevance.  “As states seek new or increased sources of revenue, the imposition of a tax on services is something that could become an issue for all REALTORS®.  Missouri’s pro-active effort to make it a constitutional impossibility, if successful, will be a great model.  It will not have been cheap nor easy, but this is the kind of action that could save lots of repeated defensive campaigns down the road.”

To learn more about how Missouri REALTORS® are taking the national lead on prohibiting sales tax on services by pursuing an amendment to the state constitution, contact CEO John Sebree at john@morealtor.com or 573-445-8400.

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