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CLINTON HOUSING/REAL ESTATE TAX PACKAGE SHOULD BE ENACTED, NAR TESTIFIES

 WASHINGTON, March 23 /PRNewswire/ -- The Clinton administration has proposed a useful, well-balanced housing and real estate tax package that should be enacted quickly. That was the message expressed today by the National Association of Realtors (NAR) in testimony before the U.S. House Ways and Means Committee.
 "The Clinton plan corrects some imbalances that exist in the present system, but it does not undermine justifiable reforms that were enacted in the 1980s," Robert H. Elrod, NAR president-elect said in a statement before the committee today.
 "The package, when enacted, will not create opportunities for abusive tax shelters and does not carry the potential for reigniting the go-go market that lead to overbuilding and see-through buildings," he said.
 Elrod, a realtor from Orlando, Fla., told committee members that while President Clinton's plan for real estate "needs a few refinements," it would help to stabilize property values and help to mitigate the harsh impact current federal tax policy has had on real estate markets. Among the NAR-endorsed tax provisions in the Clinton plan are reforms to the passive loss tax law, permanent extensions of key affordable housing programs and removal of barriers for pension fund investments in real estate.
 Elrod expressed support for Clinton's proposal to change the current passive loss tax laws allowing all individuals who spend at least 50 percent of their time in the real estate business to deduct rental property losses against real estate business income.
 However, he recommended an enhancement to the Clinton proposal on debt restructuring, which is contained in H.R. 749, the Real Estate Stability and Recovery Amendments Act of 1993. This provision would grant some relief to property owners who are unable to support their existing properties and who face the loss of those properties.
 Regarding the Clinton administration's proposal to permanently extend the low-income housing tax credit, mortgage revenue bond and mortgage credit certificate programs, Elrod said: "We wish to join the chorus of support. ... Making the programs permanent removes uncertainty from the states that ably administer these programs, and assures that funds and programs will be available for families of low and moderate income who seek decent, reasonably priced homes."
 In the interest of paying for some of the improvements to real estate taxation, Elrod said the association is supporting Clinton's real estate depreciation provisions. Although the president's proposal to extend depreciable lives for real estate is onerous to commercial developers who attempt to amortize the costs of tenant or leasehold improvements, "we accept the changes ... with the understanding that they are the means of paying for the president's proposals to improve real estate taxation." Elrod urged Chairman Dan Rostenkowski (D-Ill.), and the committee to work with NAR to craft a solution to the problem that would fit within Congress' revenue restraints."
 The Orlando realtor praised the Clinton administration's proposals to attract pension capital to real estate markets. He noted that these proposals mirror recommendations made by Congress and the Bush administration last year.
 However, Elrod said the "fine print" in Clinton's plan reveals a key missing ingredient regarding Real Estate Investment Trusts (REITS). Changes proposed last year in H.R. 4210 and H.R. 11, would have modified the so-called "five or fewer" rule for REITS. These modifications should be included in the Clinton plan, he said.
 Currently, a U.S. pension fund that invests in a REIT is treated as one investor. That makes it difficult for a U.S. pension to invest in a REIT, because the large block of capital held by the fund could cause the REIT to violate the rule prohibiting five or fewer investors from holding more than half of a REIT's outstanding stock. Oddly, a foreign pension is not treated as a single investor; each beneficiary is counted separately. Therefore, a foreign pension can more easily place a large block of capital in a REIT without violating the "five or fewer" rule.
 Elrod also discussed capital gains provisions in his testimony, and he reiterated NAR's opposition to direct and indirect attacks on the mortgage interest deduction.
 "While we expressed our displeasure with the cap that was imposed on mortgage interest in 1987, we nonetheless deeply appreciate Chairman Rostenkowski's leadership in holding the line on that cap," Elrod said. He noted that NAR opposed the so-called "Pease limitations," in 1990, which limited itemized deductions, including those for mortgage interest and state and local taxes. "We find this kind of backdoor rate increase particularly odious," he said.
 "Similarly, our grass roots rallied in just the last two weeks to oppose the Senate Budget Committee's attempt to ... limit itemized deductions," Elrod continued. He urged the committee to follow the lead of the president and leave mortgage interest deductibility alone so the housing industry can continue to lead the nation's economic recovery.
 The National Association of Realtors, "The Voice for Real Estate," is the nation's largest trade association, representing nearly 750,000 members involved in all aspects of the real estate industry.
 -0- 3/23/93
 /CONTACT: Trisha Morris, 202-383-7560, or Liz Duncan, 202-383-1043, both of the National Association of Realtors/


CO: National Association of Realtors ST: District of Columbia IN: SU: EXE

MH -- DC026 -- 8729 03/23/93 14:13 EST
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Date:Mar 23, 1993
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