On December 11, the U.S. Environmental Protection Agency (EPA) and the Army proposed a new definition of the Waters of the United States rule (WOTUS). This proposal is the final step in the process to review and revise the controversial rule following President Trump’s 2017 “Restoring the Rule of Law, Federalism, and Economic Growth by Renewing the ‘Waters of the United States’ Rule” Executive Order.
“Our proposal would replace the Obama EPA’s 2015 definition with one that respects the limits of the Clean Water Act and provides states and landowners the certainty they need to manage their natural resources and grow local economies,” said EPA Acting Administrator Andrew Wheeler. “For the first time, we are clearly defining the difference between federally protected waterways and state protected waterways. Our simpler and clearer definition would help landowners understand whether a project on their property will require a federal permit or not, without spending thousands of dollars on engineering and legal professionals.”
RLI Past President Bob Turner, ALC, attended the official signing. “We will finally have clarification of the rules, we will be able to easily determine what is Federal waters and what is not without having to hire engineers, consultants and lawyers to get a determination,” said Turner. “This will allow landowners, farmers, developers, home builders, and conservationist to own, improve, develop, maintain and pass on to future generations with a clear, understandable and implementable definition.” Read more.
It seems like the more news there is, the harder it is to find out the facts. Important news about land legislative issues, such as tariffs and WOTUS, can get lost in a sea of opinion pieces. Let’s take a look at the simple facts surrounding five of the most pressing issues in the land industry.
Waters of the United States (WOTUS) rule
WOTUS is one of the most controversial land legislative issues in the land industry. This law was written to clarify water resource management but sparked a debate about property rights.
“Many (wetlands) are already covered under the Clean Water Act,” said Russell Riggs, RLI’s Government Affairs Liaison for the National Association Of REALTORS® (NAR) and Senior Regulatory Representative for NAR, in an interview with REALTOR® magazine. “This expands it beyond navigable waterways to little streams, ditches, and isolated wetlands that were never really intended to be covered by the Clean Water Act. WOTUS would sweep in thousands of smaller water bodies under the authority of the Environmental Protection Agency and now you’re talking about all kinds of different permitting, regulatory burdens, as well as infringements of property rights.”
Many land organizations, including RLI, opposed the rule and have been avid advocates for its repeal and reform. In response to the land industry, the Trump Administration put the rule under review. At time of publication, WOTUS has been revived in 26 states.
Russell Riggs will be speaking on key land legislative issues at the 2019 National Land Conference in Albuquerque, NM, giving an update on the latest legislation affecting the land real estate industry.
The 2018 Farm Bill
On September 30th, 2018, the 2014 Farm Bill expired. The Farm Bill expired because Congress couldn’t reach an agreement on the many influential land legislative issues that this bill governs, such as:
This bill covers dozens of incredibly important and complex land legislative issues. Changes made to this bill will impact every corner of the land industry. Landowners, investors, and consumers will all be impacted. It’s important that your representatives in D.C. hear what you have to say about the Farm Bill. RLI has a strong voice in D.C., thanks to our member-driven Government Affairs Committee and by keeping members informed on the latest land laws in blog posts, social media, and D.C. Updates.
Update: The Farm Bill Passed
Tariffs are a tax a country puts on a product made abroad. The intention is to motivate Americans to buy local products at a cheaper price. At the time of publication, there is a ten percent tariff adding up to $200 billion on Chinese imports. President Trump is expected to raise tariffs in the future.
In retaliation, China imposed tariffs on American products, including soybeans, pork, milk, fruit, and many other crops. Soybeans, in particular, have struggled. The Chinese tariffs have driven soybeans prices down and some soybean farmers are struggling to pay the bills.
“Farmers see that pain right now,” said American Soybean Association CEO Ryan Findlay in an interview on CNBC. “You have to have the prices to pay the bill — and the prices aren’t there right now.”
During a record production year, many farmers are storing soybeans in the hopes that the trade war will soon end. The long-term impacts, good or bad, are unknown right now.
To help ease the economic stress of the ongoing tariff war, the USDA authorized a $12 billion bailout plan for farmers.
Farmers who met the criteria would receive incremental payments from USDA programs. The first $6 billion was distributed in late August. Additionally, the USDA’s Agricultural Marketing Service (AMS) set up the Food Purchase and Distribution program to buy $1.2 billion in American goods that were impacted by the tariffs.
Endangered Species Act
In an 8-0 vote, the Supreme Court ruled to limit which habitats can be protected under the Endangered Species Act. The central point of the debate was if lands where endangered species weren’t currently living, but might one day, protected under the law.
“Only the ‘habitat’ of the endangered species is eligible for designation as critical habitat,” the chief justice said highlighting how the scope of the law as written now is limited. “Even if an area otherwise meets the statutory definition of unoccupied critical habitat because the secretary finds the area essential for the conservation of the species, [the law] does not authorize the secretary to designate the area as critical habitat unless it is also habitat for the species.”
Staying up to date on land news is tricky, especially when so many key land legislative issues are always being updated or debated. We hope this article offered a no-nonsense look at the current state of several pressing land laws. If you’d like to get more involved with the Advocacy side of RLI, consider applying for our Governmental Affairs Committee and make sure to check back regularly to our DC Updates page for the latest news about the latest legislative issues affecting the land industry. Remember – your voice deserves to be heard in Congress!
About the Author: Laura Barker is a freelance writer based out of California for the REALTORS® Land Institute. She has been with RLI since October 2017.
In an 8-0 ruling, the Supreme Court ruled to limit the broad habitat protections of the Endangered Species Act. A key debating point was how the law could impact the dusky gopher frog, an endangered species in Louisiana. Environmental groups argued that protecting land that could be used as a habitat for the frogs could save the species, while development companies questioned how the land could be “critical” if the frogs did not live there and could not live there without changes to the land there.
“Only the ‘habitat’ of the endangered species is eligible for designation as critical habitat,” the chief justice said highlighting how the scope of the law as written now is limited. He continued “Even if an area otherwise meets the statutory definition of unoccupied critical habitat because the secretary finds the area essential for the conservation of the species, [the law] does not authorize the secretary to designate the area as critical habitat unless it is also habitat for the species.” Read more.
The controversial Waters of the US (WOTUS) Rule is being re-implemented in 26 states after a federal judge’s ruling that the EPA and Army Corps of Engineers improperly suspended it. “U.S. District Judge David Norton in South Carolina agreed with environmental groups that the agencies failed to follow the public-comment requirements of the Administrative Procedures Act in implementing a suspension rule this year that was intended to delay enforcement of the 2015 rule. The APA requires agencies to take public comment on regulatory actions before implementing them,” stated a recent article on AgWeek.
The REALTORS® Land Institute and National Association of REALTORS® support the review of the WOTUS rule as laid out by President Trump’s Executive Order to ensure that both private property rights and clean waterways are protected.
“On December 22, 2017, President Trump signed the “Tax Cuts and Jobs Act”.
All individual provisions of the measure are generally effective after December 31, 2017 for the 2018 tax filing year and expire on December 31, 2025 unless otherwise noted. The provisions do not affect tax filings for 2017 unless noted. To read NAR’s analysis of the bill’s provisions impacting real estate, please go to “The Tax Cuts and Jobs Act – What it Means for Homeowners and Real Estate Professionals.”
NAR will be providing ongoing updates and guidance to members in the coming weeks, as well as working with Congress and the Administration to address additional concerns through future legislation and rule-making. Lawmakers have already signaled a desire to fine tune elements of The Tax Cuts and Jobs Act as well as address additional tax provisions not included in this legislation in 2018, and REALTORS® will need to continue to be engaged in the process.
NAR worked throughout the tax reform process to preserve the existing tax benefits of homeownership and real estate investment, as well to ensure as many real estate professionals as possible would benefit from proposed tax cuts. Many of the changes reflected in the final bill were the result of the engagement of NAR and its members over several years.” – NAR Tax Reform Info
The Treasury/IRS recently released its proposed regulations on the Sec. 199A 20% deduction for pass through businesses.
NAR wrote a letter to Treasury and IRS advocating that a wider range of real estate professionals should be eligible for this deduction. NAR was successful in getting a carve-out for real estate agents and brokers. The proposed guidance from Treasury/IRS has specifically stated that services provided by real estate agents and brokers are not considered “specified service businesses” and can be eligible for the Sec. 199A deduction above and below the income thresholds of $157,500 (single) and $315,000 (married).
NAR has also published additional information, including a Realtor Mag piece and Comm Blog that has been posted on the NAR website. To learn more, there is a series of FAQs on the IRS website that can also be shared.
This is a pretty straightforward deduction for pass through business owners making under the income thresholds. Agents/brokers who are above the income thresholds:
This proposed guidance from Treasury/IRS is good news because real estate brokerages are not considered “specified service businesses” and can be eligible for the Sec. 199A deduction above the income thresholds of $157,500 (single) and $315,000 (married). The calculation will depend on how your business is structured (S-corp, LLC, etc) and the deduction cannot exceed the greater of 1) 50% of the W-2 wages paid by the business, or 2) the sum of 25% of those W-2 wages paid plus 2.5% of the original cost of “qualified property.” This is generally the original cost of the business’s depreciable property during its useful life. This is a very basic explanation and there are other considerations, particularly if you have multiple qualified businesses. Consult your tax advisor to give you guidance on eligibility and how to file for the deduction. NAR will release additional information about the Sec. 199A tax deduction and its impact on real estate professionals once we have done more analysis on the proposed rule.
New Drone News
Drones have been around a while now. We are long past the days when legal battles were being fought over whether a drone could be used for commercial real estate purposes. We now have a system put in place by the Federal Aviation Administration (FAA) that allows for reasonable licensing and operation of drones that seems to be working well. The rules have seen a couple of tweaks since they were first published. And there are numerous cities and municipalities that have enacted more specific and restrictive laws to better manage drone operation and use.
All of that is old news. However, there is no shortage of new… news. Drones continue to be used in more creative and innovative ways. Many start-up companies are conceived with new ideas on how to employ drones more effectively to solve real-world problems, save time or money, and complete ever day tasks more safely and efficiently.
Unless you’re combing the internet daily for the latest on drone development and employment you might not have seen some of the recent stories. I’d like to save you a bit of time and give you a few recent articles for your enjoyment and professional development:
Drones: A Life Saving Technology
Whether in search and rescue, first-responder services, or delivery of critical medical supplies, drones are saving lives. A recent report published by DJI asserts that drones saved 65 lives last year alone.
Drones Spark Software Startup
Drones are sometimes a bother to people on the ground who are not familiar with their operation and impeccable safety record. Researchers at the University of Nebraska-Lincoln and developing software to help ease the bystanders’ discomfort of drones.
Drone Divisions = Innovation
Start-ups aren’t the only companies in the drone game. Well-established companies are exploring new technologies and ways to integrate them. Ford has even established a drone division and is investigating, among other things, lighting technology for drone identification.
Drone Defense Systems Popping Up
Amid concern for bad actors with drones, some are developing anti-drone systems. In Tampa, FL a company called Sierra Nevada is developing a mobile drone defense platform for a U.S. Department of Defense customer.
Drones Save Puppies, Too!
Finally, who doesn’t like a feel-good story about a drone saving a puppy?
The drone story is no longer about when and how we can use them. These days, the story is more like “what will they think of next?” And that question continues to be answered with more and more interesting and creative solutions. I tend to view the current drone world like the early days of the Internet or the introduction of the smartphone. I don’t think we’ve really even scratched the surface of the total drone capability universe. When it comes to drone technology, development, and news, it’s not so much keeping up as it is hanging on for dear life.
This post is part of the 2018 Future Leaders Committee content generation initiative. The initiative is directed at further establishing RLI as “The Voice of Land” in the land real estate industry for land professionals and landowners. For more posts like this, click here.
About the author: Caleb McDow, ALC, is a land specialist and vice president for Crosby & Associates in Winter Haven, FL. He holds a Master of Science in Real Estate (MSRE), the CCIM Designation, and is a licensed private pilot and drone operator. McDow joined RLI in 2014 as a Military Transition Program (MTP) member. He is an active member of RLI, serving on the 2017-2018 RLI Board of Directors and as Chair of the 2018 Future Leaders Committee. He also regularly shares his expertise on real estate issues for various industry blogs.
The RLI Board of Directors recently approved the Governmental Affairs Committee request to participate in a broad industry-based coalition to ensure that prior converted cropland (PCC) exclusions are retained in the revision of WOTUS rules. PCC are areas that were converted from wetland to non-wetlands for the purposes of agricultural commodity prior to December 1985 and should not be subjected to WOTUS rules. RLI is joining the American Farm Bureau Federation, National Cattlemen’s Beef Association, National Corn Growers Association, National Cotton Council, and many others to protect the PCC exclusions.
Efforts to repeal and replace the Waters of the US (WOTUS) rule are now complicated by a recent supreme court decision. In a 9-0 unanimous opinion on January 22, “the Supreme Court found that while it may not be the most efficient use of judicial resources, there was no question in the law about where challenges to the Clean Water Rule belong,” reads an article on the subject by E&E News. The federal government, who argues that the rule should not be interpreted literally but figuratively, is seeing this as setback to their hopes of repealing and replacing the rule at a national level.
The article continues to explain that “The choice of court — district or appeals — is significant because it affects the resources needed to litigate the merits of challenges, sets the statute of limitations for filing lawsuits and helps determine whether actions can be challenged in subsequent civil or criminal proceedings. District courts are also more tilted toward overturning government actions.”
“Congress has made clear that rules like the WOTUS Rule must be reviewed first in federal district courts,” Justice Sonia Sotomayor wrote in the opinion.
The REALTORS® Land Institute and National Association of REALTORS® support the review of the WOTUS rule as laid out by President Trump’s Executive Order last year to ensure that both private property rights and clean waterways are protected.
Read more on this topic here.
As the New Year begins, I wanted to use this edition of “Inside the Beltway” to share some successes that RLI had in 2017.
Of, course these victories would not have been possible without the hard work and active engagement of RLI Members with their members of Congress through phone calls, emails, or in-district meetings. These activities make a difference and these five victories are a testament to their civic participation and perseverance.
Greater Awareness on the Value of 1031
As the battle for tax reform and the possible reform or elimination of 1031s heated up in 2017, RLI members became the trusted source of information for Members of Congress and their staff for data on how 1031s add value to the economy. Turnover in Congress among Members and staff is constant and RLI members did an outstanding job communicating with Congressional offices about how 1031s add value to real estate in their district. While 1031s for real estate are safe as I write this column in November, 2017, it is critical that RLI members continue to reach out to Members of Congress and staff to make sure their voices are heard and 1031s are preserved.
The WOTUS Rule is Rolled Back
The Obama Administration finalized the Clean Water Rule (AKA the Waters of the U.S. Rule) in 2015. Although the WOTUS rule was never implemented, due to a judicial stay, the damage of this rule would have been far-reaching. This vastly overreaching rule would have hindered economic development in rural and urban areas, tied up farmers, ranchers, and others who work the land in rolls and rolls of red tape and bureaucracy, and would have done unfathomable harm to property rights across the country. RLI and a broad coalition of regulated stakeholders were instrumental in raising alarms about the damage this rule could do to the country’s economy. As a result, one of the first Executive Orders President Trump signed began the process for withdrawing this rule and developing a common-sense and workable definition of “Waters of the U.S.”, one that will provide the clarity needed to encourage economic development and protect our critical water resources.
Drones Take to the Sky
The first call I ever received about using drones for real estate was in 2010 from Florida RLI Member Dean Saunders, ALC, who asked me the seemingly innocent question: “Can I use a drone to take pictures of some land I am selling?” At that time, after doing a little digging on the FAA website, I determined the answer was, unfortunately for Dean, “No.” The drone landscape has changed dramatically since then. Because of consumer desire and market need for innovative technology, RLI Members pushed the FAA to allow the use of drones for commercial purposes. FAA regulations, which were finalized in late 2016, were then implemented and enforced in 2017, unleashing a torrent of market creativity. Now, drones are a regular part of the American “airscape” partly because of RLI Members insistence that this technology can be used safely and can be an important part of selling land, thereby adding value to the real estate economy.
Reforms of the ESA Continue
There was good news on Sage Grouse as well as broader reform of the Endangered Species Act (ESA). While the Obama Administration decided to not list the Sage Grouse as endangered, they did withdraw 10 million acres of public land from being used for any economic activity such as mining or timbering, claiming this land was critical habitat for the Sage Grouse. In July, President Trump reversed this withdrawal through executive order.
On the broader issue of ESA reform, Congress has — for the first time in several years — moved forward with several bills that would enhance transparency, accountability of the ESA and improve the cost/benefit analysis during the listing process. More “rifle shot” legislative reforms are on the way.
The Deregulatory Steamroller Continues
According to the Chamber of Commerce, President Trump has issued 29 executive actions to reduce regulatory requirements. In response, executive-branch agencies have issued 100 additional directives that either knock down regulations or begin a process to eliminate or shrink them.
The chamber’s count also lists almost 50 pieces of legislation that have been introduced or begun moving through Congress. And that count doesn’t include perhaps the most aggressive step the Republican Congress has taken: It has pioneered the use of a little-known 1996 law, the Congressional Review Act, which allows lawmakers to repeal executive-branch regulations within 60 days after they are finalized. Using that law, Congress has passed, and Mr. Trump has signed, legislation overturning 14 regulations promulgated by President Obama’s administration in its final days.
While unwinding regulations takes time, these are very consequential actions with huge benefits for the private sector and private development, and I expect these actions to continue.
This article originally appeared in the 2018 Winter Terra Firma Magazine, the official publication of the REALTORS® Land Institute.
About the author: In his position with the National Association of REALTORS®, Russell Riggs serves as the RLI’s Government Affairs Liaison in Washington, D.C., conducting advocacy on a variety of federal issues related to land.