In this lesson, we focus on avoiding discrimination claims based on religion during the holidays—and all throughout the year.

You don’t have to be a “Grinch” to comply with fair housing law. The key is to celebrate the general festivity of the season without promoting a particular religion or particular religious holiday. That way, you’ll satisfy fair housing concerns by showing that your community welcomes everyone—regardless of anyone’s religious practices or beliefs.

1.         Why is Miner writing an article on taxes?

Good question, because I am not a tax lawyer and (as with all of our articles) this is not legal advice. MHCO has been receiving questions from owners about the new corporate activity tax. The below questions and answers are an attempt to summarize HB 3427 and the possible effect it may have on some owners of manufactured home parks. Each situation is different and it is imperative for every owner to speak with their tax professional on whether and how the new law will be applied to each owner’s individual situation. If you are interested in getting specific advice on your situation, or need a referral to a tax professional, please feel reach out to me.

2.         What is HB 3427?

HB 3427 (“the Act”) was signed into law by Governor Kate Brown on May 16, 2019. It technically became effective on September 29, 2019, but will apply to the 2020 tax year. The Act’s official title is the “Student Success Act”. The first 55 sections of the Act establish various programs to invest in early childhood and K-12 education programs in Oregon. Examples include an “early warning system” for high school graduation, a statewide “youth reengagement” system, and school breakfast and lunch programs, to name a few. 

Section 58 of the Act creates the Corporate Activity Tax (“CAT”), also known as Oregon’s first modified gross receipt tax. The CAT is intended to raise approximately $2 billion per biennium to fund the programs listed in the Act.  Section 56 of the Act slightly reduces personal income tax rates.

3.         What is the CAT?

The CAT, or corporate activity tax, is a tax on gross receipts(or sales) over $1 million by any affected person or business in Oregon. Any person or business with a taxable commercial activity in excess of $1 million will be imposed a tax rate of 0.57% plus $250 on receipts above the first $1 million of taxable commercial activity ($250 +.57% of revenues in excess of $1 million). The first $1 million in gross receipts are exempt from the CAT. In other words, if your park does not make more than $1,000,000 per year in gross revenue (from all sources), you most likely won’t need to worry about it. BUT, check with your tax professional.

4.         What is “commercial activity”? 

Commercial activity is defined as transactions and activity in the regular course of the person’s trade or business, without deduction for expensesincurred by the trade or business (although there does appear to be some qualified deductions (see question #8 below)). 

5.         Does the CAT apply to the gross income (i.e. all the rent, utilities, fees, interest) that I make at my manufactured home park?

Again, it is imperative that you speak with your own tax professional to determine whether the CAT applies to you and what exactly it applies to. The Act specifically refers to receipts from the sale, rental, lease or license of real property to the extent the property is located in Oregon. There are several exemptions of what constitutes “commercial activity”. For example, receipts from the sale, exchange or other disposition of an asset as described in Internal Revenue Code Sections 1221 or 1231; contributions to capital; interest and dividends; sales of motor fuel; distributive income received from a pass-through entity; receipts from the wholesale or retail sale of groceries, are a few of the exemptions.

If you own multiple entities that own multiple parks in Oregon where the total gross receipts exceed $1 million, you will want to talk to your tax and/or legal advisors on whether you are required to aggregate the receipts. If you have one entity that owns several parks, you may want to discuss having separate legal entities for each property. 

 6.        What if I have another property outside of Oregon?

Only Oregon sourced commercial activity is taxed. The Act defines taxable commercial activity as the total amounts realized by the taxpayer arising from transactions and activity in the regular course of taxpayer’s trade or business that is sourcedto Oregon.  Receipts from outside Oregon wouldn’t be considered.

7.        Can I pass on the CAT to others (i.e. my tenants)?

There appears to be no prohibition on passing on the tax through increased pricing (why this is viewed by some as a backdoor sales tax); however, you must always keep other restrictions in mind. For example, you continue to have the ability to raise your rent every year pursuant to the provisions of SB 608, but there is a cap (7% plus CPI). 

8.         Can I take any deductions from “gross receipts”?

Again, talk to your tax professional, but the Act provides a 35% subtraction from taxable commercial activity of “labor costs” (defined as total compensation paid to all employees excluding any compensation paid to any single employee in excess of $500,000) or“Cost inputs” (defined as the cost of goods sold calculated in accordance with IRC Section 471).

9.         Does this replace the existing corporate tax?

No. The CAT is a new business tax and will apply in addition to Oregon’s existing corporate tax.  

10.       Does this apply to income earned in 2019?

No. The CAT will take effect for tax years beginning on or after January 1, 2020. Any person or business generating more than $750,000 of Oregon sourced commercial activity will be required to register with the Oregon Department of Revenue and file an annual return by April 15 of the following year. 

11.       Can I wait until April to pay?

Again, talk to your tax professional, but taxpayers must pay at least 80% of the balance due for any quarter or the DOR may impose penalties, starting at 20%. It is similar to paying estimated income taxes.

Question:  We want to raise rent for our RV tenants because we have not raised the rent in over two years.  We know there are new rules, but what are they?

The Justice Department recently filed a lawsuit alleging that the owners and managers of residential rental housing in Honolulu, Hawaii, refused to rent to families with children, in violation of federal fair housing law. The lawsuit alleges that the three properties are operated as student housing for post-secondary students.

Specifically, the complaint claims that at least since 2015, the defendants discriminated against families with children by: (1) refusing to rent or to negotiate for the rental of the three properties on the basis of familial status; (2) steering prospective renters with children who inquired about housing away from the properties to a separate property management company; and (3) making discouraging and other discriminatory statements to potential renters with children who inquired about housing, including that the housing wasn’t “suitable” or the right “fit” for families with children.

The Legal Aid Society of Hawaii brought this matter to HUD’s attention after conducting testing that, as the complaint alleges, showed discrimination against families with children in connection with the defendants’ properties. The complaint contains allegations of unlawful conduct; the allegations must be proven in federal court.

“Owners and managers of rental housing must ensure their housing is open to families with children,” Assistant Attorney General Eric Dreiband of the Civil Rights Division said in a statement. “The Fair Housing Act requires it, and the Justice Department will continue both to enforce the Act vigorously and to seek relief for families victimized by unlawful discrimination.”

Question:  We have a resident in the park who recently got into a verbal shouting match with another neighbor.  The resident was extremely intoxicated at the time and made threats and gestures that were very inappropriate and provocative.  There are some residents who want us to immediately issue a 24-hour notice.  However, until this incident, the resident has been a good tenant and never caused a problem.  How should we handle this?  This incident seems entirely out of character for this individual.
 

Dalila Molina set her sights on living near Northwest Portland’s high-end Pearl District. The 25-year-old human resources specialist knew she’d have to pay higher rent than in other corners of the city or the suburbs, but she could walk to work and avoid commuting time and costs.

In October, she found a two-bedroom apartment in a 1908 building that doesn’t have everything she wanted, but it’s in the right location and she appreciates the old-fashioned crown molding in the living room, bay windows and a bathroom with a clawfoot tub and hexagon tiles.

“I took my time finding the right place,” said Molina, who would get alerts on her phone when there was a vacancy in her price range in her desired area. “Everything’s so available online but I had to act fast."

Two new studies on Portland rentals show that prices are holding steady, but available units are advertised for only 23 days, while a typical U.S. renter spends about three times that searching for an apartment.

In October, Portland’s rents took a 0.8% dip, but after a decline last December and a seasonal spike in September, year-over-year rents are flat with a 0.4% growth, according to ApartmentList.com, a rental platform with more than 5 million listings across the country.

The average year-over-year rent growth in Oregon and in the U.S. is 1.4%, said Olyvia Ruhlmann of Apartment List.

Currently, median rents in Portland are $1,337 a month for a two-bedroom unit, the least expensive within the metro, followed by Forest Grove ($1,450) and Vancouver, Washington ($1,680).

The highest: Rents have risen in nine of the metro’s largest 10 cities in which Apartment List collects data.

Hillsboro is the most expensive with a two-bedroom median of $2,098 and the fastest year-over-year growth at 3.7%, while Canbyexperienced a 4.5% decline in October, marking a 0.4% drop year-over-year.

The median rents in Portland for a one-bedroom apartment stand at $1,133 in the first year Oregon capped rent increases at 7% a year plus the rate of inflation, which for 2019 amounts to 10.3%. For 2020, rent increases will be capped at 9.9%.

Portland’s median two-bedroom rent is above the national average of $1,191, but is more affordable than Seattle ($1,686), San Francisco($3,120) and Los Angeles ($1,760).

An analysis by real estate database Zillow found three-bedroom units in Portland are in high demand and last just 16 days before they’re rented, while four-bedroom apartments linger for 25 days.

Studio and two-bedroom units are typically listed for rent on Zillow for 22 days while a one bedroom lasts for 24 days.

Since a typical U.S. renter spends about 2.5 months searching for an apartment, “in the time it takes renters to actually find an apartment, it’s possible that the inventory of available units in their area has completely turned over twice,” according to Zillow Group’s 2019 Consumer Housing Trends Report.

Zillow, which offers online applications, leases and rent payment tools, found that in a fast-moving market with stable rents like Portland, a typical renter contacts nearly five landlords or property managers, tours about three units and submits more than three applications.

The owners and managers of a single-family rental home in Idaho recently agreed to pay $15,000 to settle allegations that they violated fair housing law by refusing to rent the large home to a married couple because they have more than four children.

The federal Fair Housing Act makes it unlawful to deny or limit housing because a family has children under the age of 18, make statements that discriminate against families with children, and impose different rules, restrictions, or policies on them.

The settlement resolves a HUD charge, alleging that the homeowners discriminated against a family attempting to lease their 2,600 square foot, four-bedroom rental home because they have seven minor children. Specifically, HUD’s charge alleges that when the couple met with the property manager about renting the home, he told them that the owners had set a limit of four children for the home. The charge also alleges a policy restricting the number of children was written in the rental contract.

“Persons attempting to provide a home for their family should not have their housing options limited because they have children,” Anna María Farías, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity, said in a statement. “Today’s action will hopefully serve as a reminder to all housing providers of the importance of meeting their obligations to comply with the requirements of the Fair Housing Act.”