Filed in Capitol Hill, Land Development by NAHB Now on April 17, 2018 • New Tax Law May Increase Developers’ Sewer and Water Costs Even after a significant reduction in their corporate tax rate, some utility companies are interpreting a little-known tax change in a way that is forcing developers to pay substantially more for contributions in aid of construction (CIACs). Under the old tax law, some CIACs — such as sewage infrastructure or cash payments made to utilities for extending water lines — were not included in the utility’s gross income. This valuable shelter was established for CIACs in legislation enacted in 1996. The tax reform law enacted last year removed this exception, making these contributions taxable to the utility—if the utility is a privately-owned, for-profit entity. In some states, affected utilities have begun to notify developers that the utility will pass this new tax liability to the builder. In Pennsylvania, for example, some developers have reported that their utility has begun requiring a 40% CIAC surcharge. A utility in South Carolina, meanwhile, is seeking a 31.8% CIAC surcharge. In other states, the utilities are turning to the relevant public utility commission for guidance on how to implement these tax changes. It is likely that the surcharges seen in Pennsylvania and South Carolina will arise in other states. NAHB urges developers who build in an area served by a private, for-profit water utility to closely monitor their state public utility commission. The intent of this tax change was not to impose a new fee on development, but rather to put for-profit utilities on parity with any other business. Unfortunately, some utilities are abusing their market power to pass this charge to the developer—despite the fact that the utility received a net tax cut from the new tax law. NAHB is actively working with affected states and engaged in conversations with Congress to remedy the situation. If left unchecked, this unintended consequence of the new tax law will only put more strain on the housing market and push more and more families further from the dream of homeownership. Drone Use Among Builders Continues its Ascent Filed in Business Management, Economics, Labor, Safety and Health, Land Development by NAHB Now on April 16, 2018 • A recent NAHB survey discovered that the popularity of drones within the housing industry is not only growing — it’s skyrocketing. Two years ago, a similar survey revealed 22% of single-family builders had used a drone for business purposes. That portion has since soared to 46% of builders. The growth comes as no surprise to people like Jim Schaefer, owner of RealReach Marketing and Productions in Tampa, Fla. His company started flying drones about four years ago as an additional marketing tactic to offer his builder/ developer clients. But that “premium” service, which was once a standalone product, has since become a standard feature of his company’s photography package. “When we started, we were just about the only business in Tampa that was [operating drones], mostly because they were so expensive at that time,” Schaefer said. “Now, the prices have come down considerably and there are tons of people out there who are either doing it as a business or amateurs doing it on their own.” But even if everyone is doing it, not everyone is doing it well. Schaefer says many people underestimate how difficult it is to fly a drone, especially when the ultimate goal is to gather professional-quality aerial video footage. Even though he’s been operating drones for the better part of a decade, Schaefer admits it can sometimes be a struggle to get the right shot. And yes, there’s the occasional crash, too. He knows several people who own a drone but who admit they’re too afraid to fly them. Those apprehensions are somewhat justified: Just last week, one of Schaefer’s more expensive drones got into a scuffle with a nearby tree and had to be taken in for some costly repairs. “There’s a lot of risk involved, and it goes well beyond just the potential damage to the drone,” Schaefer said. “It’s not uncommon for drones to fall onto cars or damage other property, which is why we have a large insurance policy. You never know when something like that might happen.” those who aren’t properly licensed to operate one could face heavy fines. . Even if no accidents or injuries occur, a word of caution: The FAA regulates the commercial use of drones, and 14
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