Leasehold Improvements Renewal

Under current law, the cost of making improvements to leased space may be recovered over 15 years, according to the National Association of REALTORS®. This rule will expire as of January 1, 2010, however, unless Congress acts to extend it. If Congress were to fail to extend it, the cost recovery period would revert to 39 years, with the improvements being treated as part of the cost of the underlying real property.

The House of Representatives has passed HR 4213, a bill that extends this and dozens of other expiring provisions on a mostly party-line vote of 241 - 186. The bill is "paid for" by changing the tax treatment of real estate partnership carried interests from capital gains rates (currently 15%) to ordinary income treatment (as high as 39.6%). It is not known when or if the Senate will take up HR 4213 before the new year.

Deduction for Brownfields Clean-up Due to Expire

Under current law, the costs incurred in cleaning up certain types of environmental contamination are deductible in the year they are incurred, according to the National Association of REALTORS®. That rule is due to expire as of January 1, 2010. The House of Representatives has extended this provision for an additional year (along with dozens of other expiring rules) in HR 4213. This bill passed December 9 on a largely party-line vote of 241 - 186. It is not known when or if the Senate will take up this bill.

Treasury Department Announces Program to Streamline Short Sales

On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA). HAFA is component of the Home Affordable Modification Program (HAMP). NAR has been urging the Obama Administration to take action to address the many problems with short sales.

HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure of a loan eligible for modification under the HAMP program. HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions in the coming weeks. Program features include: pre-approving sales terms before listing the property, prohibiting servicers from requiring reductions in real estate commissions that do not exceed 6 percent, paying incentives, releasing borrowers from future liability for the unpaid portion of the first mortgage debt, and imposing deadlines at each stage.

The program does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements. The program sunsets on December 31, 2012.

More information here.