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HBAI Newsletter 5.3.18 Copy

May 03, 2018 by Melisa Cox
Categories: HBAI Newsletter

2018 Iowa Legislative Session Successful for Iowa Home Builders

As this recap is written, the 2018 Iowa Legislative Session has yet to conclude. Even though the per diem ran out April 17, they continue to meet at their own expense and plans are underway for a first week in May conclusion. Overall the session was fairly productive, having been successful in getting many of our key initiatives through. Our HBA of Iowa Legislative Committee took positions on 86 different bills and most of them, whether we opposed or favored them, were to the benefit of Iowa home builders.

Key topics included a couple of beneficial mechanics’ lien changes, multiple workforce development and skilled trades initiatives, association health plan opportunities (multiple employer welfare arrangements MEWAs), safety bills, pro-competition components, workers’ comp fraud prevention, and sales tax benefits. We monitored a number of additional bills that were of interest.

Unfortunately one of our bills did not move forward – something that should be part of a good business practice rather than something that needs to be legislated. It was a “right to repair” bill. Basically it would have required a property owner to notify the builder about an issue prior to taking it to litigation. There have been a number of very ugly class action lawsuits in other states where the builder never knew there was a problem until the delivery of a multi-million dollar lawsuit. No opportunity provided to even make appropriate repairs. Hopefully we can bring it back to the table during the next session – quite a few states have already passed such laws.

Tax Reform is still on the table – the Senate already passed its own version of giant tax reforms, but the House has its own plan. Quite a few of the budget components have advanced as well – Republicans claiming huge financial victories and Democrats crying foul on budgetary cuts. It will be an interesting final week.

It was another great session for coalition building as well. Since our members have many of the same needs as other construction associations, real estate professionals, and skilled trade’s needs – it only makes sense that we band together with a united front. With our member’s livelihoods potentially affected by good or bad legislation, we have the responsibility to work diligently on helping to craft favorable bills, promote affordable housing and eliminate as many of those pitfalls and unnecessary regulatory burdens to help foster the American dream of home ownership.

Business Interest Deduction – You’re Potentially Still Good

The business interest deduction has been a staple of the tax code for over a century and a key tool for the home building industry: Debt is a critical financing tool, and access to equity markets is challenging for the majority of home builders. The new tax law places limitations on the business interest deduction and the treatment of business interest expenses. The good news: An exception was made for real estate businesses.

The result is that if these businesses like the way the business interest deduction previously functioned, they may keep the deduction in full. If they would rather abide by the broad limitation on deductibility, they may opt out of this exception. The decision is particularly important because it locks a taxpayer indefinitely into whatever treatment they choose and comes with tradeoffs regarding the new depreciation rules.

The bottom line is that if your business typically spends less than $1 million on capital expenditures, you are already getting the benefit of expensing. Generally speaking, this means you can decide to keep the full business interest deduction without actually facing a tradeoff with more generous depreciation rules. While deciding what option is best, business owners should keep in mind that real property (i.e. structures) must be depreciated using the Alternative Depreciation Schedule. For residential rental property, this means depreciating the cost over 30 years (3.33% per year) rather than 27.5 years (3.64% per year).

And here is some more good news: there’s a brand-new Tax Reform Tookit post on Eye on Housing that talks about the changes to the business interest deduction and common scenarios for builders in more detail. Read it here.

Code Hearings Highly Successful

Nine days of hearings on proposed amendments to many of the International Code Council’s (ICC) building codes governing the construction of single- and multifamily homes have resulted in a series of victories for safe and affordable housing.

NAHB Construction, Codes and Standards volunteers and staff attended the ICC board of directors meetings and testified at the Committee Action Hearings in Columbus, Ohio, April 15-23. Their arguments against the changes were quite persuasive: All 10 of the proposed changes that the association deemed most critical to home builders, developers and their customers were ultimately rejected by committee members.

Construction, Codes and Standards Committee Chair David Sowders said the results are a testament to being well prepared. “These NAHB volunteers and staff who testified on these proposals provided well thought out, reasoned arguments that rely on a strong understanding of building science,” Sowders said. “They’re hard work is helping to ensure families are not priced out of their homes.”

It’s also another indication of the “maturing” of building codes, he said. What was at one time a patchwork of competing codes – or no building code at all – 20 years ago, is now a much stronger, consensus-based document that produces notably better construction. While tweaking the code to reflect technological advances will continue, “major changes aren’t as necessary as they used to be. New homes are safer. They are energy efficient. They work. They’re resilient,” Sowders said.

Building officials, industry representatives and other advocates can submit comments on the results of the hearings until July 16. The comments may suggest modifications to the original proposals based on the testimony from the hearings or present additional arguments for or against their passage. Final votes will take place in October.

Free Amazon Business Account for NAHB Members

As a member, you can access Amazon Business by signing up for a free business account. Amazon Business offers a variety of features and benefits, including free shipping on eligible orders over $25. Amazon Business helps members gain access to multi-user accounts, business-friendly payment options, business pricing on more than five million products, and much more.

 

New Regional Field Rep Matt Milroy

We were really sad with the departure of our NAHB Regional Field Representative Alexandra Martindale, but super happy for her as she now is working in Kentucky to bring students into the trades – one of our main missions here in Iowa too.  So our new rep was just named this past week – Matt Milroy officially started in his new role as the NAHB Regional Field Representative for Region C.

Matt will be living in, and working out of Chicago.  Together, he and Ashley Wucher will continue to support local and state affiliated associations by directly engaging with staff and members to understand their needs and to connect them to resources and services that help strengthen membership, their organizations and the overall federation.

New 400 Acre Lake Near Grinnell – Want in?

There are a number of people that have been working on a 400 acre lake development for many years near Grinnell in Poweshiek County – Sapphire Lake at Prairie Greens. Vince Johnson is looking to our members to see if anyone is interested in being a part of the residential development. It’s a pretty interesting project, check out the drawing here.

They just finished securing the options on over 2,000 contiguous acres to allow the project to move forward, which will allow for them to aggressively pursue investment in the project and gauge preliminary interest from builders as well.  Here is a video that provides a brief introduction to the lake project and if it’s of interest, contact Mr. Johnson. There is a very large amount of TIF money available for this project. Based upon current conceptuals and rooftops the TIF would equate to around $67 million as estimated by Piper Jeffrey. This is a one of a kind project for the state of Iowa.

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