As 2009 rolls in, the MAR will continue to meet with new and veteran legislators on both sides of the aisle to craft sound policies affecting the real estate industry. As in 2008, it will be essential to ensure that the REALTOR® community is protected this year as well. The 2008 legislative successes below provide the framework for another prosperous year, and will aide in promoting the REALTOR® industry in Michigan.
Gross Receipts Legislation
Agency Responsibility Act
Mortgage Loan Industry Licensing
One of the biggest legislative accomplishments in 2008 was the passage of the gross receipts legislation. House Bill 5924, passed both the House and Senate and is on the Governor’s desk for her signature. You may recall that one of the MAR’s top priorities of 2008 was the continued revision of the Michigan Business Tax (MBT) to protect against any harmful deviation in tax policy regarding Brokers and Salespersons. When the MBT was drafted last year, it was the intention of the Michigan Legislature to maintain consistent tax policy regarding the calculation of gross receipts for Brokers. This entailed the exclusion of commission payments received by brokers on behalf of their agents in compliance with Michigan real estate law. However, due to an interpretation by the Treasury Department, it became apparent that legislation was necessary to protect Brokers and Salespersons from unfair tax treatment.
MAR worked with legislators and other entities to both clarify the original legislative intent regarding this issue and to educate interested parties on the unique regulatory framework that real estate licensees must adhere to under the Redbook. The bill as passed cements the original legislative intent of the MBT regarding commission payments by brokers to agents by allowing for the inclusion of the commissions as a gross receipt and then a tax deduction for the Broker reflecting the payments that pass through to the agent. Through codification, the tax treatment of brokers and salespersons will be clearly presented and any unfavorable future interpretation by Treasury less likely. Since this legislation adds a new component to the tax filing of Broker, MAR highly recommends conferring with your CPA or tax preparer to better understand the implications of this legislation on your tax liability.
The passage of this bill is a major victory for the real estate industry. The MAR applauds both the House and Senate for taking action on this bill before the doors on the 2008 legislative year closed.
In addition, the Agency Responsibility Act was signed into law earlier in 2008. The passage of the legislation, now Public Act 90 and 91 of 2008, is a huge accomplishment for the MAR, and its success was years in the making.
The ARA legislation is a product of a MAR Public Policy Task Force assigned with the task to provide a framework for consumer protection to all individuals entering into an exclusive agency relationship. As a regulated industry, there is an expectation from consumers that laws have been established to protect them from brokers that would take advantage of them. The ARA model clearly defines those basic duties and services owed under an exclusive agency agreement and provides for a uniform state wide disclosure form when the consumer and broker choose to waive any of those services. The implementation date for a revised agency disclosure form as well as the check-off waiver was July 1, 2008. The MAR has already started the process to update the forms. The MAR Public Policy team met with legislative leaders on both sides of the aisle, stressing the importance of the passage of the bills in order to promote homeownership, while keeping industry standards high. For more information on the Agency Responsibility Act, please CLICK HERE.
New Public Acts to strengthen the regulation of the mortgage loan industry in Michigan. This bipartisan, bicameral legislative package, now Public Acts 59-71 of 2008, provides licensing and education requirements, along with mandatory background checks for mortgage loan officers in Michigan. It also allows the Office of Financial and Insurance Services (OFIS) to keep better track of individuals within the industry as they may move around. Given increased real estate fraud and foreclosures in this state, these bills are a big step forward in addressing the root of these problems. This legislative package represents a compromise from many facets of the real estate community, including banks, credit unions and mortgage brokers. The passage of the loan officer licensing legislation is a positive step in halting mortgage fraud, while keeping industry standards high.
As we look ahead, many of the MAR policy goals continue to relate to the Michigan Business Tax (MBT) and its 22% surcharge. It is our continued hope that both the House and Senate resume their work toward the goal of eliminating the burdensome surcharge. In addition, the Commercial Broker Lien legislation, which would create a statutory lien on commercial real property for the non-payment of commissions, will again be introduced during the 2009 legislative session. Although many of our commercial industry concerns were legislatively addressed and made significant headway last year, outside political posturing along with the pressures of lame duck session prevented them from being enacted into law. The MAR will continue to seek property tax relief through sound public policy, along with protecting association members, homebuyers, and sellers from the grips of foreclosures along with combating mortgage fraud. For continued updates on these issues, along with news relating to the real estate industry, please check out the MAR website at http://www.mirealtors.com/