Worldwide ERC® monitors thousands of legislative and regulatory developments every year that have the potential to impact the employee mobility industry. Below are a few highlights of specific initiatives or accomplishments (in alphabetical order):
Here are a few examples of Worldwide ERC®’s effective work in action:
Examples of Worldwide ERC®’s Effective Action:
Worldwide ERC® monitors thousands of legislative and regulatory developments a year that have the potential to impact the employee mobility industry. Below are a few highlights of specific initiatives or accomplishments (in alphabetical order):
Connecticut Transfer Tax Relief
- Connecticut's HB 6667, "An Act Concerning Real Estate Conveyance Tax Treatment of Employee Relocations," was introduced on behalf of the industry to remedy an unintended transfer tax consequence when two deeds are used in the sale of relocation properties.
- Worldwide ERC® joined with members in supporting the legislation, and testified twice before the Connecticut legislature before the bill became law in 2004, thus saving members considerable transfer taxes on relocation sales.
Environmental and Disclosure Guidance
- Worldwide ERC® was a primary group to work with the Environmental Protection Agency (EPA) staff to combat a previously-favored regulatory approach to radon. We helped persuade the EPA not to regulate radon in residences, saving Worldwide ERC® members substantial costs and potential liability.
- Our issue papers and Tax & Legal MasterSource entries provide guidance to members dealing with items such as synthetic stucco, mold, and other environmental situations as they relate to the relocation transaction.
Fee Splitting, Rebates and Other Incentives: Laws and Regulations in the United States and Its Territories
- Made available through the combined expertise of the Worldwide ERC® and the Association of Real Estate License Law Officials (ARELLO).
- Located in the Tax & Legal MasterSource, covers all 50 U.S. states, the District of Columbia, Puerto Rico and the Virgin Islands.
- Provides a quick "at a glance" view of the status of rebates and commission sharing, as well as detailed background information and, where appropriate, cites specific legislation/regulation/rules.
Government-wide Relocation Advisory Board (GRAB)
Participation by Worldwide ERC® and members in GRAB's research led to important findings and recommendations about replacing Direct Reimbursement (DR) programs with alternative relocation assistance programs.
The "win" for the government/government employees:
- Realistic estimates are that the government will save in excess of $100 million annually by emulating private sector models for managing homesale programs; and such programs will help eliminate unnecessary delays in access to employee's equity.
- Government employees will be more productive, will be settled into new locations more rapidly and experience less personal financial hardship.
- Government employees will have more access to nationwide mortgage programs.
The "win" for the relocation industry:
Prior to the GRAB recommendations, the relocation industry managed approximately 6,000 homesale programs annually for the Executive Branch of the government. Access to another estimated 12,000 moves, currently handled as Direct Reimbursement programs, will be possible through the recommendation to look to Amended Sale, BVO, and Appraised Value transactions.
- Policy changes to drive amended type programs will facilitate the proper collection of referral fees.
- Nationwide mortgage program utilization should increase dramatically.
Homebuyer Tax Credit
Worldwide ERC® ‘s support of the Homebuyer Tax Credit Extension, along with major stakeholders (the Mortgage Bankers Association, NAR and other housing trade organizations) expanded the call to extend the credit deadline and offer credit to a new class of buyer.
Home Purchase: Defending Tax-protected Programs and Rev. Rul. 2005-74
Tax-protected employee home purchase programs have been a cornerstone of the relocation industry business model since the publication of Rev. Rul. 72-339 in 1972. Worldwide ERC® repeatedly took action to preserve that model, leading up to the long-sought official IRS Rev. Rul. 2005-74 decision. Actions include:
- Creating the "11 Key Elements and Procedures of an Amended Value Option" in response to IRS confusion as to whether the amended value program should be considered taxable.
- Intervening several times at the IRS National Office to convince IRS to continue to treat amended value programs as nontaxable, leading ultimately to a favorable IRS Rev. Rul. 2005-74, which Worldwide ERC® continues to analyze and work to defend in light of ongoing employment tax audits of home purchase programs.
Homesale Exclusion: Preferential Tax Treatment
The Worldwide ERC® is a principal defender of and advocate for preferential tax treatment for sales of principal residences; working over many years to preserve and improve the "rollover" provisions of the prior law.
- Served as a principal advocate for the homesale exclusion of section 121 that replaced rollovers in 1997. Worldwide ERC® advocacy for that provision, and its support with statistics and analysis, was key to its passage.
Moving Expenses: Preserving and Improving Deductions
Worldwide ERC® has acted repeatedly to preserve or improve the deduction for moving expenses, which is extremely important to members.
- In the 1990s, Worldwide ERC® defeated attempts by some in Congress to increase the required distance to 200 miles and impose caps on deductible expenses.
- Successful in restoring the deduction as "above the line," creating an exclusion mechanism that has saved members a great deal of time and money, and in effect created a stable moving expense provision in the tax code that has been considered "off limits" by Congressional revenue raisers.
Oklahoma Licensing Implications
In 1998, the Oklahoma Real Estate Commission ruled that relocation management companies needed to be licensed within the state and were thereby subject to regulation by the Commission. This would have had serious implications by requiring licensing of employees of relocation management companies, corporations with in-house programs, and employees of real estate companies who worked in the relocation department, but did not perform what was (to that point) considered brokerage activity.
- Worldwide ERC® worked with the Commission to establish permitted activities so that licensing was unnecessary, protecting members' time and resources.
Qui Tam: Florida Lawsuit
Perhaps the most significant and successful state outreach in recent years was Worldwide ERC®’s intervention in the Florida Qui Tam litigation against the industry's largest relocation company members, which demanded hundreds of millions of dollars in fines and penalties.
- Approached both the Florida legislature and tax authority with the industry's position
- Successful achieved legislation and regulations that diffused the lawsuit and saved the companies that were parties to the first suit, as well as the whole industry, considerable resources in legal fees and potential damages, while protecting the rest of the industry from future liability.
Real Estate Referral Fees
Worldwide ERC® has worked to promote the proper placement/disclosure of and communication about real estate referral. Since 1998, the Worldwide ERC® has addressed referral fee challenges through:
- Proactive communications to prevent "after-the-fact" referral fee requests, including a formal Policy Statement on the Collection of Real Estate Referral Fees and handouts for transferees and real estate licensees.
- Development and ongoing management of The Interchange, a confidential online complaint resolution mechanism, available to anyone at no charge.
Section 402 of the Sarbanes-Oxley Accounting Reform and Corporate Accountability Act prevents publicly-traded companies from directly or indirectly making personal loans to executive officers. The seemingly simple language of Section 402 turned out to be very complex, as it is a criminal statute with high visibility and unclear how comprehensively regulators and courts would interpret it. The key to a safe and successful move of an executive officer is communication, starting with the corporate relocation director and corporate staff.
- Worldwide ERC® prepared and made available a checklist for employers to aid Worldwide ERC® members in compliance and communication, and continues to advise members on the developing regulations spawned by the Act.
Texas Relocation Addendum
Myriad relocation addenda used by relocation management companies and employers throughout Texas complicated transactions and concerned regulators with the legalities of contracts being presented and explained to consumers by real estate agents, without benefit of legal guidance. In the fall of 2004, Worldwide ERC® initiatives helped create the Worldwide ERC® Texas Association of REALTORS® (TAR) Texas Relocation Addendum. Some of the key issues identified, addressed and/or resolved through those efforts were:
- the significant potential for real estate licensees to tread into the area of unauthorized practice of law
- the demand for real estate licensees to have at least a working knowledge/familiarity with numerous different forms and their impact on the transaction/consumer
- the potential need for the addition of outside legal counsel to review the contracts, adding expense, time, and, quite possibly, introducing a party to the transaction unfamiliar with relocation forms/processes.
The development of this cooperative addendum is a perfect example of Worldwide ERC®’s work: bringing all impacted parties together in a non-competitive way to arrive at a solution. All relocation management companies and corporations with in-house programs are now encouraged to use this addendum when needed with the TAR sales contract, which is promulgated by the Texas Real Estate Commission. Its uniformity serves to alleviate many challenges our industry has encountered there, and helps us avoid potential legal action.
Worldwide ERC® networks and educates workforce mobility professionals and HR innovators.