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Q4 2020 Washington Report

Dec. 22, 2020

The Appraisal Institute’s Washington Report and State News quarterly e-newsletter summarizes AI’s recent federal and state legislative, regulatory and related activities in representing the interests of Designated Members, Candidates for Designation, Practicing Affiliates and Affiliates.

  1. Appraisal Institute ‘AI Answers’ Free Webinar Series Available Online 
  2. How the New Administration, Senate and House May Affect Housing Still Unclear
  3. Legislation Would Protect Against Eminent Domain for Gas Pipeline Construction
  4. New Treasury, IRS Regulations Define Real Property for 1031 Exchanges
  5. CMS Rule Includes Guidance on Healthcare Valuations
  6. Appraisal Institute and TAF Collaborate on Fair and Affordable Housing Symposium
  7. Expected ‘Blue Wave’ Replaced by ‘Red Ripple’ in November State Government Elections
  8. Real Estate Ballot Measures See Mixed Results in November Elections
  9. South Dakota Enacts Administrative Rules for Appraisers Performing Evaluations
  10. Texas Attorney General Provides Guidance on Evaluations

AI ANSWERS                                                                                

AI Answers is a series of free webinars produced by the Appraisal Institute that address multiple issues affecting the valuation profession, including legislative and regulatory actions, current economic developments and alternative valuation services in commercial real estate. Each episode averages about an hour and is available on AI’s YouTube channel.     
ON THE HILL                                                                                
Election Day turned into election week, ending with Joe Biden receiving 80 million votes and exceeding the 270-vote Electoral College threshold to make him president-elect. He will be sworn in as the 46th president of the United States on Jan. 20.
Control of the Senate is still unclear because Georgia faces two runoff elections on Jan. 5. Democrats will need to flip both seats to take the majority; Vice President-elect Harris would serve as the tiebreaker in a 50-50 Senate. Democrats retained control of the House, although with a slimmer majority than they have now.
If Republicans hold onto a majority in the Senate, it is hard to imagine any substantial legislative measures passing during the lame duck session, aside from a potential $900 million coronavirus relief package. As of Dec. 23, the package includes rent and mortgage forgiveness or forbearance relief measures, and extends relief to accounting requirements, including Current Expected Credit Losses and Troubled Debt Restructuring requirements. The Appraisal Institute’s Washington office believes all other major legislative items will be punted into 2021. 
Where cabinet picks are concerned, a 50-50 Senate or even a 51-49 Republican majority Senate will have a moderating effect on Biden’s cabinet choices. He recently announced former Federal Reserve Board Chair Janet Yellin as secretary of the Treasury, and Rep. Marcia Fudge, D-Ohio, as secretary of the Department of Housing and Urban Development. Fudge is seen as a strong ally of House Financial Services Committee Chair Maxine Waters, D-Calif., and will work closely with the committee on housing issues.
More information is available in AI Answers: Election Edition
Sen. Ron Wyden, D-Ore., on Sept. 23 introduced S. 4673, the Reaffirming Property Rights Through Natural Gas Act Modernization Act, which would make it harder for gas pipeline companies to use eminent domain against landowners who do not want their property usurped for that purpose. Wyden said the legislation is in response to increased use of eminent domain for pipeline development and the “failure of the Federal Energy Regulatory Commission to protect landowners’ rights.” 
The legislation includes a provision requiring all property to be appraised in accordance with uniform appraisal standards before an offer of just compensation is extended. Additionally, the landowner’s representative will have the opportunity to accompany the appraiser during the inspection. 

IN THE AGENCIES                                                                       

The Treasury Department and the IRS in December issued final regulations relating to section 1031 like-kind exchanges that apply to valuation professionals. The regulations address the definition of real property and the receipt of personal property incidental to real property received in a like-kind exchange.
The regulations define real property as land and generally anything permanently built on, or attached to, the land, as well as property characterized as real property under state or local laws. Additionally, certain intangible property, such as leaseholds or easements, qualify as real property. 
The Centers for Medicare & Medicaid Services on Dec. 2 issued a final rule to update and clarify the regulations used to establish the Medicare physician self-referral statute. The changes, which take effect Jan. 19, should make it easier for hospitals and physicians to comply with the statute in the era of value-based care. The rule is important to appraisers because it includes guidance on how they should determine if the compensation paid to physicians is at fair market value. 
The Appraisal Institute and The Appraisal Foundation on Dec. 9-10 co-hosted the virtual valuation symposium “Promoting Trust for Fair and Affordable Housing.” 
The symposium consisted of four sessions (three are available online) during which real estate appraisers heard from leaders in the valuation and mortgage lending professions and from academia as they discussed the latest research on fair and affordable housing; innovations in appraising; and potential legislative, regulatory and financing solutions intended to promote community and economic development. 
Appraisal Institute President Jefferson L. Sherman, MAI, AI-GRS, said in his opening remarks, “I want to acknowledge the important work that appraisers do. We are one of just a few professions whose work is so closely associated with the American dream of homeownership and economic opportunity for so many in our communities. And it is those same neighbors who count on us to do everything we can to ensure our profession is free from potential bias or discrimination.” 
During his opening marks, The Appraisal Foundation President Dave Bunton said, “Much like in the 1980s following the Savings and Loan Crisis, when appraisers came together to find solutions and create a common set of uniform standards and qualification criteria, the profession is now tackling a different crisis amid allegations of discriminatory practices. Once again, the issues our profession faces have the attention of members of Congress and the in-coming administration. It is time for appraisers to come together to look at the issue and develop meaningful solutions.”

IN THE STATES                                                            

The expected “blue wave” of Democrat wins didn’t materialize in gubernatorial and state legislative elections held Nov. 3, replaced instead by a “red ripple.” 
There were 11 governor’s races on the ballot, and Republicans picked up one seat, in Montana, where Rep. Greg Gianforte defeated sitting Lt. Gov. Mike Cooney. Incumbent Democrat governors in Delaware, North Carolina and Washington were re-elected, as were Republican governors in Indiana, Missouri, North Dakota, New Hampshire, Vermont, and West Virginia. Utah Gov. Robert Herbert retired, and his seat was filled by Republican Lt. Gov. Spencer Cox. Republicans will hold 27 governorships, while the Democrats will hold 23.
The same “red ripple” ran through state legislative elections, where races were held for 86 of the 99 state legislative chambers. This year saw the fewest changes in party control of state legislative chambers since 1944. Prior to Nov. 3, Republicans controlled 60 state legislative chambers, and now they will control 62. The only significant change to the party makeup was in New Hampshire, where Republicans took control of both the Senate and the House.
Leading up to the elections, Republicans had full legislative control (upper and lower chamber) in 30 states, while Democrats had full control in 19. Control was split in Minnesota, with Democrats controlling the House and Republicans controlling the Senate. Republicans fully controlled state governments (governor, upper and lower chambers) in 22 states, Democrats controlled 15 states and 13 were divided.
Moving into 2021, Republicans will fully control state legislatures in 31 states, Democrats will control 18 and Minnesota remains split. Republicans won a state government “trifecta” (governor and full legislative control) in New Hampshire and Montana. 
Importantly, at least 10 real estate appraisers were re-elected to seats in their respective state legislatures. 
Forty-four states had measures on the ballot this November, and of the total 129 measures, seven directly related to real property and are of importance to real estate appraisers:
  • California Proposition 15 failed. It would have amended the state constitution to require most commercial and industrial properties to be taxed on their market value as opposed to their purchase price, which is how they are currently taxed — and will remain taxed. The legislation had provisions to limit tax amounts and annual adjustments. 
  • California Proposition 21 failed. It would have amended state law to allow local governments to establish rent control on residential properties more than 15 years old. 
  • Colorado Amendment B passed. It amends the state constitution by repealing the Gallagher Amendment that was used to set tax assessment rates for both residential and non-residential properties.
  • Florida Amendment 5 passed. It extends from two years to three years the time in which a person may transfer certain property tax saving benefits, known as “Save Our Homes" benefits, to a new homestead property. 
  • Louisiana Amendment 5 failed. It would have authorized an exemption from ad valorem property taxes for certain properties when an owner enters into a cooperative endeavor agreement with a taxing authority to make payments to that authority instead of paying property taxes. 
  • Louisiana Amendment 6 passed. It takes effect in 2026 and will increase from $50,000 to $100,000 the income threshold required to qualify for the special assessment level for residential property receiving the homestead exemption. 
  • Nebraska Amendment 2 passed. It increases the repayment period for tax-increment financing from 15 years to 20 years for areas where more than one-half of properties are designated as extremely blighted.
New administrative rules took effect Dec. 14 in South Dakota regarding when and how an appraiser licensed in the state may perform an evaluation for a federally regulated financial institution, and what items must be included in every evaluation. 
The rules state that an appraiser may only perform an evaluation for a federally regulated financial institution for real estate-related financial transactions that fall below the federally established thresholds requiring an appraisal. An appraiser performing an evaluation must comply with the Interagency Appraisal and Evaluation Guidelines, as well as the Ethics, Competency and Recordkeeping Rules of the Uniform Standards of Professional Appraisal Practice. 
On Nov. 19, Texas Attorney General Ken Paxton issued an opinion (Opinion No. KP-0342) regarding the authority of the Texas Appraiser Licensing and Certification Board to exempt licensed or certified appraisers from the statutory requirement to comply with the Uniform Standards of Professional Appraisal Practice when performing a property “evaluation” that’s allowed under the federal Interagency Appraisal and Evaluation Guidelines.
Paxton found that:
“Section 1103.405 of the Occupations Code governing real estate appraisals requires a person who is certified, licensed or registered under chapter 1103 to follow the Uniform Standards of Professional Appraisal Practice. Under Texas law, an administrative agency rule must be consistent with its statutory authority. A rule exempting an appraiser licensed under chapter 1103 from complying with the Uniform Standards when performing an evaluation as allowed under the federal Interagency Appraisal and Evaluation Guidelines would conflict with section 1103.405, insofar as an evaluation constitutes an appraisal under that chapter. A court would likely conclude the Texas Appraiser Licensing and Certification Board may not adopt such a rule.”
However, Paxton’s opinion failed to address whether an evaluation is an appraisal pursuant to Texas law. The opinion states, “Whether a person conducts an ‘evaluation’ or ‘appraisal’ for purposes of chapter 1103 requires consideration of fact issues outside the scope of an attorney general opinion.” 
It is likely the state legislature will take up this topic during its 2021 session. 

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The Appraisal Institute's Washington office wants to know if AI professionals have relationships with critical policymakers, or are aware of a burgeoning issue of opportunity or concern. Please contact any member of the AI Government Relations Committee or Washington office staff with more information.    












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