Taxes Provoke Rift at NAHB

Posted March 13, 2009 at 6:29pm

Updated: March 15, 7:51 P.M.

A bitter dispute over a tax code provision has ignited a long-standing rift between the chief executive officers of the biggest homebuilders and the National Association of Home Builders, with a group of builders considering leaving the trade organization if its longtime president, Jerry Howard, does not step down.

Members of the High Production Home Builders Council, a group of the 17 largest homebuilders in the country, have been unhappy with the NAHB’s leadership and lobbying over the past year, according to several lobbyists and leaders of state homebuilders associations.

The big builders, led by Centex Corp. CEO Tim Eller, have been holding conference calls in recent weeks to figure out whether their relationship with the NAHB, one of the most powerful trade associations in the country, can be repaired.

Senior officers of the NAHB and a handful of the largest builder CEOs are meeting Monday in Chicago to try to hash out their differences, according to several sources familiar with the meeting.

“It’s unfortunate that a disagreement arose between our larger builders, most of which are public, and some of the smaller builders over one issue,— said Joseph Perkins, president of the Home Builders Association of Northern California.

NAHB spokesman Paul Lopez declined to comment about internal membership issues.

The dispute stems from a provision that the struggling big builders wanted in the economic stimulus bill. The measure would have expanded to five years the time period that companies could use to offset revenue losses against profits.

Companies can usually only carry back tax losses for two years under current law.

The provision would have allowed big builders, many which are facing bankruptcy, to write off billions of dollars in losses.

Some small builders objected to the measure, saying it could encourage big builders to dump property for artificially low prices to generate a loss for tax purposes, which in turn would further depress the market.

The net operating loss measure was part of the House and Senate stimulus packages, but was ultimately removed in conference.

While the NAHB was supportive of the provision, it did not actively lobby for its inclusion.

But more than a dozen CEOs of the high-production homebuilders decided to invest in their own lobbying push on the issue.

KB Home, Toll Brothers Inc., Pulte Homes Inc. and Centex, among others, hired the C2 Group’s Tom Crawford in March 2008 to push for its inclusion.

Pulte Homes and K. Hovnanian Cos. also registered their own in-house lobbying efforts last year, spending $700,000 and $30,000, respectively, according to Senate lobbying disclosure reports.

The division between small and large builders over the NOL tax provision was made public in a letter that the NAHB president sent to Speaker Nancy Pelosi (D-Calif.) on Feb. 11, the day the $787 billion stimulus bill was in conference committee.

Howard, who joined the NAHB in 1998 as tax counsel, sided with the small builders, writing that the NOL provision in the House and Senate bill would create tax incentives “whereby the opportunistic, well capitalized home building companies would be able to unload their excess inventory of land onto the market at fire-sale prices solely for a tax benefit.—

A firestorm of criticism followed among big and small builders because no members were consulted before Howard sent the letter to Pelosi, according to several people familiar with the trade association.

But NAHB spokesman Lopez said Howard was within his purview.

“NAHB senior staff are authorized to send letters to Congress and the Administration, given the time sensitivity in which policymakers operate,— Lopez wrote in an e-mail.

Still, the letter became so radioactive that several members have called for Howard and his government relations team to be replaced.

Howard, who has led the trade group since 2001, had an annual salary of $1.2 million in 2006, according to the NAHB’s Internal Revenue Service tax form.

The trade group’s annual revenue was $112 million that year.

NAHB Board Chairman Joe Robson, a Tulsa, Okla.-based builder, met with Centex’s Eller, who is the HPHBC chairman, in late February to try to smooth over differences in the organization.

After the meeting, Robson wrote a three-page letter on March 2 to Eller responding to issues that they discussed at the meeting. The letter, which was sent out to the more than 200,000 NAHB members, created even more consternation among the big builders.

In the letter, a copy of which was obtained by Roll Call, Robson defended Howard and the NAHB’s lobbying effort on the stimulus bill.

“I am fully aware of your displeasure with the outcome of the Stimulus Bill as well as the actions of Jerry Howard and some of his top staff,— Robson wrote. “I, along with the rest of the NAHB leadership, am in full support of the actions taken by Jerry Howard and his lobbying team.

“They followed NAHB’s policy of trying to represent the entire Housing Industry,— he added.

Robson also attached a chronology of the NAHB’s engagement on the NOL issue written by Bill Kilmer, executive vice president for advocacy.

The chronology detailed the NAHB’s take on the lobbying effort, calling into question the big builders’ lobbying effort. It noted that the C2 Group “blatantly plagiarizes [an] NAHB analysis paper— and that more generally lobbyists for the big builders “resist NAHB efforts to craft the broadest NOL language for the home building industry.—

Robson further questioned the actions of K. Hovnanian CEO Ara Hovnanian and Lennar Corp. CEO Stuart Miller.

Hovnanian appeared on Fox Business News and CNBC, and Miller met with the National Association of Realtors about joining the Fix Housing First Coalition.

Miller “did not follow trade association protocol of not interfering in each other’s business and created a credibility and relations problem for NAHB leadership and staff with the NAR,— Robson wrote.

C2 Group’s Crawford disputes NAHB’s allegation that his firm plagiarized the trade group’s lobbying materials.

“Their talking points were distributed as part of the broader industry effort,— Crawford said. “We were also told explicitly not to use NAHB’s name or letterhead with anything we did.—

NAHB lobbyists also attended the meetings, where the lobbying materials were presented to lawmakers and staff, Crawford said.

“At no time did C2 Group seek attribution for those materials,— Crawford said. “It’s highly inappropriate for them to develop talking points in defense of their current activities with respect to the NOL and difficulties with their members.—

Housing lobbyists say this is just the most recent issue that has landed Howard in hot water with the NAHB members.

In February 2008, the biggest homebuilders were not aware of the NAHB’s decision to temporarily cut off its political contributions to federal candidates.

The NAHB’s BUILD Political Action Committee Board of Trustees, which does not include any of the HPHBC members, approved the freeze, which was designed to call attention to the association’s frustration with what it thought was a meager response from Congress to assist in the housing crisis.

The NAHB restarted its PAC last May. It doled out $2.48 million in the 2008 election cycle, according to the Center for Responsive Politics.

Still, Howard has support among many of the members, despite his opposition to the NOL tax provision.

“That provision was very, very important, and our builders from small to large all agreed that the best interest of the industry would have been well-served by the inclusion of that provision,— Perkins said of high-priced housing markets like California.

Nonetheless, Perkins says his state association continues to support the NAHB.

“We are not a monolithic group, but as an overall group, we are onboard and singing from the same hymnal,— he said.