Bulletin Board Magazine 2018 Volume 1

The Bui lder Connection VOLUME 1 | 2018 Bulletin Board

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What It’s Like to Work for Millennials

What is ERISA?

Highlights of Tax Cuts and Jobs Act

NJBA Moving Towards Consistency

Economic Forecast Meeting

SHORE BUILDERS Association of Central NJ, Inc.

Covering Monmouth, Ocean, Mercer, & Middlesex Counties

XXXXX President’s Report

C ontents 01 President's Report by Michael J. Kokes VOLUME 1 | 2018

EDITORIAL CONSULTANT Flair Marketing Group - Stephanie Shaffery

PRESIDENT'S Message by Michael J. Kokes - SBACNJ

DESIGNER Flair Marketing Group

have lobbying arms that deal with how the legislative process affects our industry. Without our local and state Political Action Committees (PACs), which are supported by our members, we would not be a viable industry in this state. I encourage you to check out our local and/or state legal and legislative committees and become involved. “Now, more than ever, you need to join!” I agree, but the truth is, a trade organization needs to be strong 365 days a year, year in year out. Our association is only as strong as our membership. When membership is high, our strength in numbers can accomplish many initiatives, from community outreach to legal and legislative victories. If you look at any industry, the most burdensome regulations or cumbersome rules were placed on those industries at a time of weakness. During the Atlantic Builders Convention we will once again have our NJBA Business Center. It is where we will have, among other items, recruitment efforts, enhanced by target specific marketing tools and discipline specific talking points, all designed for non-members. I encourage you to donate an hour of your time and sign up to man the booth so that you can share your membership experience with new potential members, I will be there. Click here to sign up. “Membership is the answer!” Not just any membership, but a cohesive legion of members, all focused on addressing the issues and believing in the mission. But is this really possible? Can everyone really be focused on fighting the same issues? Does every issue really mean something to every member?

My guess is not, but that’s the challenge for the officers, is to try and get everyone, in some capacity, focused on something. Sticking with the military theme, not everyone has to be on the front line fighting the fight, but there is a need for members to help support, in any way they can. By joining committees, our members can focus on areas of interest to them, whether it be sales and marketing, membership, legal and legislative, or other committee. By joining a committee you will optimize your membership by meeting other industry professionals, working side by side to solve problems, building programs, or creating events and reaching out to our local communities. Click here to learn more about the committees at Shore Builders Association. These are just a few of the ways we can address strengthening our membership in order to dig in and fight to protect our industry. By ensuring the association provides value to each member we will continue to strengthen our industry. Whether it is the first check for initial membership or subsequent renewals, we need to make sure the association offers programs and initiatives to make that member say, “writing this check is worth every cent.” I will continue to focus on membership, 'and have challenged the officers, board, and membership committee to present a plan to address increasing and retaining membership in Shore Builders Association of Central New Jersey. I look forward to sharing their ideas and strategies to accomplish this mission. I also encourage you to participate in any capacity by sending in your ideas or joining the membership committee to help us “dig in” to strengthen and protect our association.

03 Welcome New Members 2017 06 Archer Attorneys at Law Spotlight 08 Why Attend the ABC? by Diane Nicolo-Pocino 09 What It’s Like toWork for Millennials by Gina McNamara 11 Three Steps To MaximizeYour Membership in 2018 by Tom McGrath, Chair and Kim Manicone 14 What Is ERISA? by Stosh Gepp & Matt Matey 18 Moving Toward Consistency by Meryl A. G. Gonchar, 21 Highlights Of Tax Cuts And Jobs Act by Edward P. Rigby 27 Legal/Legislative by Michael J. Gross, Esq. and Steven M. Dalton, Esq 30 It’s Not All Fun & Games For theYoung Professionals Committee this Year by Chris Cowan 33 NAHB’s IBS Recap 35 ProfessionalWomen in Building by Georgette Kyriacou 45 FAME Awards Recap by Marge Karahuta & Stephanie Shaffery 47 Economic Forecast Meeting Recap

OFFICERS President – Michael J. Kokes

First Vice President – Christopher Amato

Michael J. Kokes President - SBACNJ

Vice President of Associates – Thomas McGrath

Treasurer – James Pittenger

T

Secretary – Kim Manicone

his issue of Bulletin Board Magazine is dedicated to the theme of “digging in to protect our industry”. As I sit here writing this article, I am thinking about what this means to our members, and industry as a whole. What are the issues we face, and what does it take to overcome those issues? I keep coming back to the same thought: Membership. Engaged, dedicated members who find value in our association. What are they hearing? What are they thinking? Here are some of the key phrases I hear over and over and how our association works to overcome the issues we face. “We are under attack!” This is a pretty common phrase spoken by many trade organizations, and while it is pretty colorful language, it does have a basis of truth to it. While maybe not physically under attack, our industry faces opposition every day from legal and legislative issues, to materials, labor and cost challenges. All of these are dependent upon third parties, like our legislators, and how they view the building industry. Negative action on any of these issues can add to our construction costs which ultimately are passed down to the consumer, affecting homebuyer affordability in New Jersey. Our local association, as well as NJBA

Immediate Past President – Thomas Bovino

SBACNJ STAFF Executive Officer – Gina McNamara Office Manager – Chris Boyle

The Bulletin Board magazine is published quarterly and is distributed to the membership and others. eMagazine by member company Flair Marketing Group stephanie@flairmg.com Unless otherwise noted Photography by member company: All is Sharp Photography Howell, New Jersey Photos can be viewed and ordered online at allissharp.com

62 Continuous years of publication to our members

THE BUILDER CONNECTION

Interested in Joining SBACNJ?

CLICK HERE As a Builder

CLICK HERE As an Associate

CLICK HERE As a Remodeler

190 Oberlin Avenue North Lakewood, NJ 08701 | P. (732) 364-2828 F. (732) 905-2577

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WELCOME New Members 2018 We would like to take this opportunity to welcome the following new members and thank their sponsor.

XXXX Article by XXXX

Sandler Training Scott Bliss PO Box 4052 Brick, NJ 08723 (732) 948-2266

PF Valente Associates Douglas Valente 1119 State Highway 77 Building 2, Suite A Bridgeton, NJ 08302 (856) 459-2016 Sponsor: Jennifer Boyle Ferguson Enterprises

Fulton Bank of NJ Ilene Jacobs 2 Ryan Road Marlboro, NJ 07746 (732) 610-0260 Sponsor: Jack Klugman Accurate Builders & Developers

Sponsor: Michael J. Kokes The Kokes Organization Alpha Funding Solutions Pat Szymanski 29 Union Avenue Lakehurst, NJ 08733 (732) 657-2014 Sponsor: Michael Skea Amboy Bank Ward Wight Sotheby’s Richard Wight 206 East Main Street Manasquan, NJ 08736 (732) 223-2266 Sponsor: Michael Skea Amboy Bank Shore Hills Painting Jacqueline Brown 1525 Prospect Street, Suite 6 Lakewood, NJ 08701 (732) 886-0400 Sponsor: Michael J. Kokes The Kokes Organization

Atlantic Realty Development William Hayes 90 Woodbridge Center Drive Woodbridge, NJ 07095 (732) 750-1111 Green Field Construction Group Russell Lewis 333 W. 39th Street, 11th Floor New York, NY 10018 (646) 862-1190 Sponsor: Stephanie Shaffery Flair Marketing Group Hawkeye Developers Kenneth Jobson 1862 Oak Tree Road Iselin, NJ (732) 906-9229 Sponsor: Lenny Drew Sendelsky Lenguy Construction

S H O R E B U I L D E R S A s s o c i a t i o n o f C e n t r a l N J , I n c .

Be sure to save the dates for these important upcoming programs: Click here for Shore Builders Events

S A V E THE DAT E S !

April 11–12, 2018 Atlantic Builders Convention Location: Atlantic City

May 9, 2018 General Membership Meeting – 6pm Location: Blackman Showroom, Lakewood

June 18, 2018 Annual Golf Outing -1:15pm Shotgun Start Location: Jumping Brook Country Club, Neptune

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Tax, Trusts & Estates

Banking & Finance

REAL ESTATE

Litigation

Environmental

Construction Law

Corporate

Healthcare

Nonprofit

PERSONAL INJURY

Bankruptcy Labor & Employment

LAND USE

Archer is a full-service, regional law firm of more than 185 attorneys with a network of eight offices and a well-earned reputation for providing high-quality, results-driven legal services in a broad range of disciplines and industries. Our attorneys have been meeting the needs of Fortune 100 companies, small to medium-sized businesses and individuals throughout the region and beyond for more than 85 years.

RED BANK, NJ HACKENSACK, NJ PRINCETON, NJ FLEMINGTON, NJ HADDONFIELD, NJ PHILADELPHIA, PA WILMINGTON, DE NEWYORK, NY archerlaw.com | 732.268.8000

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Why Attend the ABC?

XXXX Article by XXXX

Why Attend the ABC? by Diane Nicolo-Pocino

H

osted by the New Jersey Builders Association (NJBA) – the Atlantic Builders Convention (ABC) is the largest regional builder trade show in the Northeast. With state of the art products, innovative services and educational programs, ABC inspires attendees with countless ideas to aid in the success

of their business. It is also an excellent forum for networking and deal-making with peers in the industry. Over 6000 decision-makers including builders, contractors and remodelers from NJ, NY, PA, DC, DE, CT, MD, VA and numerous other states will come together under one roof.

Diane Nicolo-Pocino

X

XXXXXXX

Here are 5 reasons why you should attend too!

1. Educational opportunities. No matter how experienced you are, there is always an opportunity to learn something at ABC. ABC offers over 20 breakout sessions where industry professionals can earn educational credits in the following disciplines: AIA – Architects, AICP CM - Professional Planners, CE – Realtors, CLE – Attorneys, and CPC – Engineers. Click here to view our list of educational program offerings. 2. Networking with peers. The ABC is a great opportunity to network on and off the exhibit floor. Be sure to stop by the Member Lounge to relax, meet new friends, catch up with old contacts or grab a cup of coffee. 3. Encounter new vendors and suppliers. Discovering innovative products and services for your business is necessary to stay competitive.

4. This year, ABC is welcoming over 40 NEW vendors showcasing building products. Also new this year, don’t miss hand’s-on demonstrations in the workshop area. Check out our ABC Exhibitor List. 5. Get Noticed & Position yourself as an expert. When you are active in your industry, you can develop a reputation as an expert to your peers and your clients. Clients feel good about doing business with a familiar face. Don’t be the best-kept secret…get out there and get to ABC! 6. Have fun. All work and no play? Well, that’s no fun. With events from dawn till dusk (and beyond) you can’t be bored at ABC. View our schedule of events here.

Atlantic Builders Convention – the Conference & Expo Where Building Begins

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Executive Officer’s Corner

WHAT IT’S LIKE toWork for Millennials by Gina McNamara

I t has been estimated that within the next 10 years 75% of the work force will be comprised of Millennials. A survey by Harris Interactive ® on behalf of careerbuilder.com finds that 69% of workers 55 years and older report to younger bosses. For the record I am NOT 55 years old, however here I am in a situation where three of my five 2018 Officers hit that Millennial mark. There are numerous stereotypes surrounding Millennials. They have been labeled selfish and entitled, thought of as unwilling to work hard and only interested in money. These characteristics may be true about some, but it is unfair to judge an entire generation. The truth is Millennials are part of one of the most competitive job markets while many are burdened with large student debts. What I have come to realize is they work very hard, just in a different way than you a and I may understand. “My Millennials” are like kids in a candy store when it comes to all things techy. Social media, virtual meetings, online and mobile tools... my head is spinning! If you need someone to teach you what a giphy is or how to share one on the Slack app, because of my Millennial leadership team, I’m your girl! I want to be a part of bringing Shore Builders Association of Central New Jersey to the next generation of membership, as well encourage future leadership. Millennials have a keen understanding of the importance of image and their personal brand. I look forward

to bringing that knowledge to the Association and learn new ways to brand our organization and reinvent ourselves for success and sustainability in the future. I don’t know about all of you, and I may be crazy, but I’m excited! As much as we will learn from them, I know that along with the rest of the Officers and Board of Directors, we have a lot to offer as well. Millennials cannot underestimate the importance of history and experience. Together, I can’t wait to watch what will be accomplished. “ 'My Millennials' are like kids in a candy store when it comes to all things techy. Social media, virtual meetings, online and mobile tools… ”

Gina McNamara Shore Builders Association of Central NJ, Executive Officer

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Membership Committee

Step Three: Education

Shine Brighter Than Your Competition

In addition to networking and relationship building, the value of membership is in education. Being a member provides multiple opportunities at the local, state (NJBA) and national (NAHB) levels, for industry education. The annual Atlantic Builders Convention is held each year in the early spring. This year it will be April 11th & 12th. By attending convention, you will be able to sit in on educational seminars, walk the show floor, and learn about industry challenges that may affect your business. In addition, there are plenty of networking events and opportunities to strengthen your newly formed relationships with other members. As in past years, Shore Builders is asking for volunteers to donate an hour of their time at the NJBA membership booth. It is a great way to meet prospective members and engage them on the importance of becoming a member. You can sign up here. In addition to the convention at the state level, you also have access to the National Association of Home Builders (NAHB) educational programs to earn industry designations and certifications, which can help solidify your knowledge and professionalism with other members. Keep in mind that it takes time to establish relationships, earn a reputation for reliability and quality, and earn the trust needed for other members to do business with you. We know from our own experience, if you get involved you will be noticed. It’s not always who YOU know, but WHO knows you. Our members refer business to other members all the time, so if your current connections may not require your products or services, they are sure to know someone who does! Stay with it, make friends, and reap the rewards of maximizing your membership! You Can Go the Distance!

THREE STEPS to MaximizeYour Membership in 2018 by Tom McGrath, Chair and Kim Manicone,Vice Chair

Tom McGrath, Chair

W

ith a combined 48 years of membership in Shore Builders Association, we have a lot of advice for potential or new members on how to make the most of membership. Taking the step to join the association is just the start. There are three major steps you can take to maximize your membership, right out of the gate. If your goal for joining is to network with other members, establish long-lasting relationships within the association, and demonstrate your ability to provide goods and services, then you need to keep reading! After your membership is approved, your plan should be to join a committee. This will enable you to meet other members, learn about different initiatives of the association, and work side by side with other members on planning programs, events, and community outreach initiatives. When you join a committee you immediately have a least 10 people that you will get to know. This will give you some confidence when you go to step two, below. Once you’re on the committee, be sure to dedicate your time and attend the committee meetings. By attending the meetings and helping with the committee’s initiatives, you have the opportunity to demonstrate your work ethic, creativity, and reliability to other committee members. This can lead to deeper relationships and future referral business. Step One – Committee Involvement:

There are a variety of committees at Shore Builders to choose from, just click here for a list. Committees are so important that our President, Michael J. Kokes, has asked each Board Director to take a seat on a committee in 2018.

#BeAMarketer

Step Two: Being Present

Let Me Help You: • Reconnect with existing customers and convert more leads • Create and launch powerful eMails • Strategize and leverage your company events and news • Introduce new products and services • Announce offers and promotions

Attend as many General Membership meetings as possible. Networking is the #1 tool in the industry to grow your business. Making connections is critical and being a part of our association gives you countless opportunities to connect with other members on a local level. We support each other and help one another reach our professional goals. If you’ve completed Step One and joined a committee, you can be assured that there will be people in the room you already know! We have a variety of different meetings and events throughout the year. In addition, some of our committees sponsor well-attended happy hours at local venues. The happy hours are a ton of fun, a little more casual, and there’s always lots of mixing and mingling. Being present and becoming a familiar face to other industry members can eventually add to your business bottom line.

Kim Manicone,Vice Chair

“ The achievements of an association are the results of the combined efforts of each association member. ” - Kim Manicone

Stephanie Shaffery flairmg.com 848 . 208 . 2087 stephanie@flairmg.com

Social Media Content Creation Graphic Design E-Mail Marketing Marketing Strategy

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What is ERISA?

WHAT IS ERISA? by Stosh Gepp & Matt Matey

XXXX Article by XXXX

www.mccuecaptains.com 732-842-0444

W

hat is ERISA? It stands for Employee

of the employer, not the insurance carrier. Failure to comply could result in significant fines and penalties, even employee lawsuits. The Department of Labor (DOL) is increasing audits and they know a large percentage of employers are not prepared. The following

that govern health and welfare benefit plans under ERISA. Plan Document - Every employer must have a written plan document in place for each benefits plan offered to employees. The employer must maintain the Plan document and make it readily available for inspection by the DOL at all times.

1. Summary Plan Description (SPD) **This is NOT the same as the Summary of Benefits and Coverage (SBC) provided by the insurance carrier. All participating employees must receive a copy of the SPD within 90 days of enrollment. New plans require distribution within 120 days after the benefit becomes subject to ERISA. 2. Summary of Material Modification (SMM) - Anytime there is a material change to any benefits plan, all participating employees must receive a copy of the SMM within 210 days after the plan year-end in which the change occurred. If there is a reduction in covered services or benefits, an SMM must be provided no later than 60 days after the date of reduction. 3. IRS Form 5500 - You must file a Form 5500 with applicable schedules every plan year if you have 100+ participating employees. The form must be filed within 7 months after the plan year-end. 4. Summary Annual Report (SAR) - Completed by employer and distributed to all participating employees for any plan that files Form 5500 (100+). The SAR must be received within 9 months after the plan year-end, or 2 months after Form 5500 is filed. by specific regulations concerning their health and welfare benefit plans. ERISA's strict guidelines call for employers to submit detailed and time-sensitive documents to the government and plan participants. These requirements are solely the responsibility Retirement Income Security Act and is a federal law that requires employers to abide

breakdown will give you an idea of the disclosure and reporting requirements

5. Medical Loss Ratio (ACA) - Determines if a rebate is a plan asset under the ERISA

According to the DOL, the ERISA compliant SPD is the single most important document an employer must provide their employees. As an employer, you need to be aware of your exposures in order to prepare for a potential audit. Being compliant is not “Optional” ...It's the Law! The McCue Captains Agency specializes in assisting their clients with all aspects of insurance and benefits planning. Compliance plays a major role here. It’s important that your broker partner takes on these responsibilities so you can continue running your business and making it profitable. Matt Matey is a Chartered Benefit Consultant (CBC) at the McCue Captains Agency. Along with Stosh Gepp, he specializes in designing customized insurance programs and employee benefit compliance for all of their clients. They are NOT commodity brokers, instead Matt and Stosh serve as a true extension of their clients’ businesses, building long-term partnerships with them. Sources: U.S. Department of Labor U.S. Department of Labor Audit Process TASC

plan and adds those terms to the plan document/SMM so they can retain a

Bulletin Board | 14 | www.shorebuilders.org all of this, but don't be alarmed. Many employers are out of compliance due to... • Lack of awareness • Insurance carrier documents thought to be compliant • Confusion due to complexity of regulations • Prior limited enforcement prorated portion of the rebate equal to the percent of premium paid by the employer. Each employee must receive a rebate that is proportional to the premium amount paid by that enrollee. 6. ERISA and Healthcare Reform Notices - Annual notices must be provided to eligible employees based upon the status of any new or renewed group health plan. Employer must distribute notices on or prior to the first day of the group health plan effective date. 7. Discrimination Testing - Section 105(h) of the IRS Code requires all self-insured health plans perform discrimination testing. Employers must maintain test results for inspection by IRS/DOL for 8 years. 8. This may be the first you are hearing about

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What is ERISA? Continued

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Moving Toward Consistency

XXXX Article by XXXX

Moving Toward CONSISTENCY by Meryl A. G. Gonchar, Member and Co-Chair, Land Use Practice Group Member NJBA Board of Directors Sills Cummis & Gross P.C.

MOVING TOWARDS CONSISTENCY – AMENDMENTS TO THE MUNICIPAL LAND USE LAW, N.J.S.A. 40:55D-53, BOND REQUIREMENTS During his last day in office, Governor Christie signed into law Assembly Bill 1425/Senate Bill 3233, which implements major reforms to the requirements for performance and other bonds posted in connection with municipal land use approvals under the Municipal Land use Law (N.J.S.A. 40:55D-1 et seq. ("MLUL"). The amendments were intended to bring greater consistency in calculating performance bonds under N.J.S.A. 40:55D-53 and to introduce other modifications to the development process to address practices that resulted in cost and delay and to codify useful practices. Rather than viewing these amendments as either pro-municipality or pro-developer, the amendments should be viewed as an effort to create consistency such that a developer working in multiple municipalities is not faced with disparate bonding requirements in each municipality and has the ability to anticipate its costs relative to guarantees and inspection fees. The amendments make clear that only improvements required to be dedicated, as enumerated in the statute, may be subject to a performance bond requirement and only if required by a duly adopted ordinance. These dedicated improvements include, among other items, streets, curbs, sidewalks, street lighting, street trees, water mains, drainage structures. The dedication requirement may be set forth in an approval, developer's agreement, ordinance or regulation.

Perimeter landscape buffers required by ordinance, approval or developer's agreement also may be required to be bonded as distinguished from other landscaping included in a project, such as parking lot landscaping or foundation plantings. In addition to the clarification regarding the improvements as to which performance bonds may be required, a new guarantee, referred to as the "safety and stabilization guarantee," ("SSG") has been introduced. This new guarantee is, in part, a codification of the restoration bond that land use boards or officials often require to be posted prior to site disturbance but as to which there was no statutory authority. The SSG may be posted separately or as a line item under the performance bond. This guarantee is intended to provide the municipality with a source of funds to protect the public from unsafe or unstable conditions. Funds may be used, for example, to re-seed an area that has been cleared to protect against erosion or to fence or gate an unfinished road or an incomplete detention basin, without requiring the municipality to use municipal funds to do so. The guarantee amount is calculated as a percentage of the bonded improvements. The municipality has recourse to these funds only if all work on the project has stopped for a period of at least sixty (60) consecutive days and a notice is provided which does not result in work recommencing within thirty (30) days following the notice.

The amendments also introduces a "temporary certificate of occupancy guarantee" ("TCOG"). The TCCG must be posted with the municipality, if required by an ordinance adopted by the municipality, at the time a temporary certificate of occupancy is sought. The guarantee is equal to 120% of the cost of only those items which are not completed and completion of which will be required to obtain a permanent certificate of occupancy. When these improvements are completed and the permanent certificate of occupancy is issued, the TCO will be released by the officer or employee authorized by ordinance to do so, without the need for further process. The new law makes changes with regard to maintenance guarantees under N.J.S.A. 40:55D-53.a.(2)., a guarantee which may be required by ordinance and is posted at the time of release of the performance guarantee. The maintenance guarantee continues to be calculated at 15% of the performance guarantee. Maintenance guarantees also may include 15% of the cost of certain components of private storm water management facilities, including basins, inflow and water quality structures within the basin and outflow pipes and structures, even though these items, as private improvements, would not be included in the performance bond amount upon which the 15% maintenance guarantee is calculated. Maintenance guarantees now expire automatically at the end of two years.

Continued ›

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Moving Toward Consistency Continued Finally, the amendments make changes to the inspection fee provisions set forth at N.J.S.A. 40:55D-53.h.

amendments also eliminate the provision that allowed inspections to cease where sufficient funds were not on deposit. While the new law, by its terms, took effect immediately, there are many questions regarding what this means in practice. The new law requires municipalities to adopt an ordinance prior to requiring any of the guarantees. It appears clear that as of the effective date of the amendments, municipalities can only require new performance guarantees calculated upon the cost those improvements specified in the amended act. Since performance guarantees are not among the "general terms and conditions" protected under vesting provisions of the MLUL, the applicability of the new law to any particular project is not affected by the date of Board approval. While replacing existing guarantees may raise practical difficulties, it appear clear that the amount of any existing performance guarantees should be adjusted at the time of any renewal and guarantees for

future phases of a development of a multi- phased project must be calculated under the new law notwithstanding that a different law applied to earlier phases. Particular circumstances may require negotiation with the municipality to reach a workable accommodation that balances the cost differential between guarantees required under the prior law and that under the amendments against the cost of fighting over the proper application of the new law. Further, a municipality arguing against applicability of the amendments to a project approved prior to the effective date of the amendments may be hard pressed to claim a right to require either the SSG or TCOG. Therefore, a cooperative effort by all parties will be required to work through the period of adjustment to the amendments. The views and opinions expressed in this article are those of the author and do not necessarily reflect those of Sills Cummis & Gross P.C.

While inspection fees are still calculated at five (5%) percent of the cost of both the dedicated site improvements that are the subject of the performance guarantee and private site improvements for which no performance guarantee is required, the amendments alter the process for replenishing the inspection escrow. Historically, when the five (5%) percent escrow was depleted, a municipality would simply demand additional funds to replenish the escrow without explanation or justification and work on a project could be stopped until additional funds were deposited. Under the amendments, a municipality will have to send a request to the developer seeking additional funds, signed by the municipal engineer, setting forth the basis for the request including the items or undertakings that require inspection, estimates of the time required and the estimated cost of those inspections. The

Earle Residential / Commercial Proudly supports Shore Builders Association 2016

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Highlights of Tax Cuts and Jobs Act

HIGHLIGHTS of Tax Cuts and Jobs Act by Edward P. Rigby, CPA,The Curchin Group, LLC

in a trade or business are capped at $10,000. Interest on home equity loans are disallowed and interest on mortgages for acquisition indebtedness are limited to mortgage debt up to $750,000 (subject to grandfather rules for mortgages incurred before December 15, 2017). Further, miscellaneous itemized deductions subject to 2% of adjusted gross income (AGI) limitations are repealed. In addition, beginning in 2019, alimony deductions are repealed (and corresponding inclusion in income for the alimony recipient is also repealed). Estate, Gift and Generation Skipping Transfer (GST) Taxes The estate, gift and GST exemption amounts are doubled for estates of decedents dying and gifts made after December 31, 2017 and before January 1, 2026. For 2018, the exemption amount is approximately $11.2 million. The new law retains the prior law concept of basis step up for inherited assets and carryover for gifts. Thus, prior to gifting appreciated assets, a careful analysis should be made of the benefits of obtaining a basis “step up” upon the death of a decedent rather than obtaining a basis carryover from a gift.

in 2018, the AMT exemption amount is increased to $109,400 for married joint filers ($70,300 for all other taxpayers). The phase-out thresholds are increased to $1,000,000 for married joint filers ($500,000 for other filers) (under the phase-out rules, the benefits of the AMT exemption are reduced as alternative minimum taxable income exceeds the phase-out thresholds). Effective for tax years beginning after December 31, 2017, the tax rate for C corporations is reduced from a top rate of 35% to a new rate of 21%. Under prior law, corporations were subject to a graduated tax rate schedule from 15% to a top rate of 35%. Under the new tax law, there is a flat rate of 21% imposed. Special straddle rules apply for fiscal year corporations that begin prior to December 31, 2017 and end in 2018. Thus, a fiscal year corporate taxpayer will calculate their tax using a blended tax rate (based on a calculation that combines the prior law and new law tax rates). The new law increases the deduction percentage under “bonus depreciation” for qualified property (from 40% in 2018 and 30% in 2019 under prior law) to 100% for property acquired and placed in service after September 27, 2017 through 2022. After 2022, the percentage of bonus depreciation is phased down through 2026 (80% for 2023, 60% Corporate Tax Rate Reduction Increased Bonus Depreciation

for 2024, 40% for 2025 and 20% for 2026). The new law allows used property to qualify for bonus depreciation (prior law contained an original use test). Qualified property generally includes tangible property such as machinery and equipment and also includes certain qualified improvement property (i.e.,

Edward P. Rigby, CPA, The Curchin Group, LLC

T

Bulletin Board | 21 | www.shorebuilders.org Thus, the new law nearly doubles the standard deduction amounts beginning in 2018. There is a new 20% deduction available for individual taxpayers with passthrough income from sole proprietorships, partnerships (including LLCs taxed as partnerships), and S corporations. To qualify, the income must be domestic, non-service business income. Also, there is a limitation or cap on the deduction based on wages paid by the passthrough business and capital investment as follows: The deduction is limited to the greater of: (1) 50% of the W-2 wages paid by the passthrough business or (2) 25% of W-2 wages plus 2.5% of the unadjusted basis of depreciable property used in the business. Further, specified service businesses such as accounting, law, healthcare, financial services and brokerage services are not eligible for the deduction (an exception applies for engineering and architectural services allowing such businesses to qualify). income below the following thresholds. Further, the restriction on specified service businesses also does not apply to taxpayers with taxable income below these thresholds. For a married couple filing a joint tax return, the taxable income threshold is $315,000 ($157,500 for other filers). Thus, a married joint filer may claim the deduction regardless of W-2 wages and whether the business is a specified service business if their taxable The limitation or cap based on wages and capital is not applied to taxpayers with taxable

income is below $315,000. The wage and capital limitations and restrictions on service businesses phase-in when taxable income exceeds the $315,000 and $157,500 thresholds. The phase-in ranges are $100,000 for joint filers and $50,000 for other filers. Thus, a married joint filer with taxable income over $415,000 is subject to the wage and capital limitation and must own a non-service business to claim the deduction. Disallowance of Active Passthrough Losses in Excess of $500,000 for Joint Filers ($250,000 for all Others) Pass-through losses (after the application of passive activity loss rules) from active trades or businesses are capped at $500,000 for a married joint filer ($250,000 for all others). Losses in excess of these amounts are carried over as part of the taxpayer’s net operating loss (NOL). To illustrate, assume a married joint filer receives a partnership K-1 with a $1,000,000 loss (the loss is not a passive activity loss). The loss is limited to $500,000 for the current tax year with the excess amount treated as an NOL carryover amount to the subsequent tax year. Repeal and Limitations on Individual Tax Deductions The new law repeals the deduction for personal exemptions beginning in 2018. Deductions for state and local taxes that are not incurred

his article highlights the key individual and business tax law changes contained in the Tax Cuts and Jobs Act (P.L. 115-97) passed by Congress on December 20, 2017 and signed into law by President Trump on December 22, 2017. Among the major tax law changes are reform of individual tax rates, treatment of business income of individual taxpayers, repeal of individual tax deductions, reduction in the corporate tax rate, and increase in deductions for business capital investment. The new law retains seven individual income tax rates (under the new law, the income tax rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%). Under the prior law, for 2017, the top individual income tax rate was 39.6% for taxable income over $470,700 for a married couple filing a joint return ($418,400 for single taxpayers). Beginning in 2018, the top 37% tax rate applies to taxable income over $600,000 for married joint filers ($500,000 for single taxpayers). The new law generally retains the maximum tax rates on long term capital gains and qualified dividends (e.g., the 20% rate applies to married joint filers with taxable income over $479,000). The new law increases the standard deduction for married couples filing a joint return to $24,000 ($12,000 for single taxpayers). Reform of Individual Tax Rates & Increase in Standard Deduction

improvements to interior portions of nonresidential real property).

Increase in Expensing Election Under Code Section 179

The dollar limitation on Section 179 deductions is increased from $500,000 under prior law to $1 million for tax years beginning after December 31, 2017. Section 179 allows a taxpayer to make an election to depreciate the cost of qualified property in the year that the property is placed in service rather than claiming depreciation over the applicable MACRS depreciation life. The Section 179 phase-out is also raised from $2 million to $2.5 million. The phase-out reduces the maximum $1 million deduction when the cost of Section 179 property acquired during the tax year exceeds $2.5 million. Other limitations such as the taxable income limitation and application of the deduction for owners of passthrough entities such as partnerships and S corporations are retained under the new law. Under the new law, certain qualified improvements to real property such as roofs, air conditioning and heating systems, and security systems that are improvements to nonresidential real property qualify for Section 179 expensing.

Alternative Minimum Tax (AMT)

The new law repeals the AMT tax for corporations. Carryovers of AMT tax credits are retained. The AMT is retained for individual taxpayers with increased exemption amounts and phase-out thresholds. Beginning

Bulletin Board | 22 | www.shorebuilders.org

Highlights of Tax Cuts and Jobs Act Continued

Net Operating Losses (NOLs)

Limitation on Deduction of Net Business Interest Expense Net business interest expense deductions are limited under the new law to 30% of adjusted taxable income. Real estate businesses can elect out of the interest expense limitation rule (electing out of the limitation rule requires a longer depreciation life for real property). Small taxpayers meeting the $25 million and under gross receipts test discussed above for small business are exempt from he interest expense limitation rule. Beginning in 2018 (subject to certain grandfather rules), deferred or “like kind exchanges” under Code Section 1031 are limited to exchanges of real property. Prior law allowed deferred exchanges for tangible personal property such as artwork or machinery and equipment used in the taxpayer’s business. The prior law deduction for domestic production activities has been repealed. Further, deductions for business entertainment expenses such as golf and sporting events are disallowed beginning in 2018. Other Business Tax Provisions

Sunset Rules Apply to Individual Tax Reform

Prior law allowed a 2-year carryback of NOLs and a 20-year limitation on NOL carryforwards. For regular tax purposes, a taxpayer’s NOL could be offset against 100% of taxable income. Under the new law, carrybacks of NOLs are repealed. There is an indefinite carryforward of NOLs and the amount of taxable income that can be sheltered by the NOL is limited to 80% of taxable income. Reform and Simplify Small Business Accounting Methods The requirement for C corporations to use the accrual method of accounting was based on a $5 million gross receipts test. Under the new law, the gross receipts test is raised to $25 million. The $25 million gross receipts test is also used for purposes of determining whether a taxpayer is subject to capitalization of inventory costs under Code Section 263A. Further, the small business exception for long- term contracts and required use of percentage of completion method has been raised from $10 million to $25 million.

The individual tax law provisions discussed above such as the reform of individual tax rates, special pass-through deduction for individuals, repeal of individual tax deductions and personal exemptions, increases to the estate, gift and GST exemption amounts and individual AMT changes are subject to a sunset provision for tax years ending after December 21, 2025 Ed Rigby is a tax strategist with The Curchin Group, LLC. If you have any questions regarding the above information, Ed can be reached at (732) 747-0500.

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Legal/Legislative

existence of contamination that may prevent implementation of a water-dependent use; and factually-specific conditions unique to the property that may result in peculiar or exceptional practical difficulties in development of water-dependent use. The Coastal High Hazard Rule was amended to provide a limited allowance for development in V-Zones, applicable primarily to development in densely developed areas such as the Hudson River Waterfront Area and Atlantic City. DEP did not adopt the proposed amendments to its Scenic Resources and High-Rise Structures rules. The proposal called for the two rules to be combined, which would have made some provisions applicable only to High Rise structures, such as the requirement that development be in character with surrounding development heights and residential densities or be in character with municipal comprehensive development patterns, also applicable to non-High Rise structures. Given the volume of comments submitted, including comments questioning DEP’s authority over local zoning and land use issues, the amendments were not adopted. However, DEP cautioned that it will further consider how to address scenic resources issues. The Department also did not adopt proposed rules related to construction of trails, boardwalks and multi-use paths, and instead will convene a separate stakeholder process. Amendments to the Flood Hazard Rules were adopted that will facilitate certain residential redevelopment in inland fluvial flood hazard areas. Under the prior rules, sites developed with multi-residence buildings (building serving 3 or more units) had to be served by an existing or new roadway elevated one-foot above the applicable flood hazard design flood elevation (DFE). Under the amended rule, an exception exists for redevelopment of sites with multi-residences if it is not feasible to construct an access roadway that meets the elevation

requirement. All multi-residence buildings in fluvial flood hazard areas that are not a part of redevelopment must have at least one roadway one foot above DFE. Additionally, whether redevelopment or new development, the proposed roadway or parking area serving a multi-residence building in a fluvial flood hazard area cannot be more that 1-foot below DFE. The Department references emergency vehicle access as justification for this limitation. FreshwaterWetland Rules DEP adopted amendments to its Freshwater Wetland rules effective December 18, 2017. Various technical issues were addressed in the amendments, though the overall nature and framework of DEP’s wetland regulatory program remains unchanged. A positive change was adopted involving transition area averaging plan conditions. DEP applied its prior rules to require the recording of a conservation restriction applicable to all wetland and transition area on a site as a condition of a TAW averaging plan approval. Under the amended regulations, only the transition area compensation area of an averaging plan approval must be deed restricted; though DEP has discretion to require broader restriction on a case-by-case basis. Additionally, DEP adopted amendments to remove the 0.5 acre limit on combination of General Permit 6 for isolated wetlands and other wetland GP’s.

distinct from any related but separate process of condemnation. Accordingly, the municipality was not required under the LRHL to make a judgment as to the future exercise of power of eminent domain. Additionally, the Court was satisfied that there was sufficient evidence in the record to support the redevelopment area designation. Designation of a parcel as a redevelopment area is often a politically-charged process. This case solidifies that assertions of speculative future development plans will not negate a duly implemented redevelopment area designation. Additionally, the LRHL does not require local boards to opine upon the exercise of eminent domain in determining whether a property is an area in need of redevelopment. DEP recently adopted amendments to rules implementing several of its Land Use permitting programs. Builders, developers and land owners should consult with their environmental professionals to assess what impact the adopted rule changes may have on planned development. Coastal Zone Management Rules This rule proposal was adopted and became effective January 16, 2018. The amendments addressed substantive provisions of the Coastal Zone Management Rules. Limited provisions of the Freshwater Wetland and Flood Hazard rules were also revised. Of note, the Filled Water’s Edge Rule was amended as proposed to allow applicants to demonstrate that water dependent use is not feasible at certain sites enabling DEP to authorize non-water dependent development. Feasibility factors include the length of water frontage on the site; corresponding area of upland to support water dependent use; the presence of special areas between the upland and navigable water that may preclude approval of a water dependent development; compatibility of surrounding development; the DEP RULE PROPOSALS

Legal/ Legislative by Michael J. Gross, Esq. and Steven M. Dalton, Esq. Michael J. Gross is a Partner & Chair, and Mr. Dalton is a Partner of Giordano, Halleran & Ciesla, P.C.

REDEVELOPMENT AREA DESIGNATION

On appeal from the trial court’s decision affirming the redevelopment designation, the Appellate Division noted the significant discretion existing under the law with respect to municipal decisions regarding redevelopment designations. “So long as the blight determination is supported by substantial evidence in the record, a Court is bound to affirm that determination.” The court’s review is not, however, a rubber stamp. Here, the court rejected plaintiff ’s arguments regarding defects in the process followed by the municipality in designating the property as a redevelopment area. The requirements of the LRHL intended to protect property owner interests were adhered to by the municipality. The LRHL does not require municipalities to permit cross-examination of witnesses at public hearings concerning redevelopment designations. Additionally, the council did not abuse its discretion in deciding not to permit plaintiff to present testimony from an architect regarding potential future plans for development of the property. It was appropriate for the Council to limit the plaintiff ’s testimony to the presentation of fact regarding current property conditions and the issue of whether the property met the criteria for a blight designation. The Court also rejected procedural arguments regarding the question of whether the Planning Board had sufficient knowledge that its determination of whether the property was an area in need of redevelopment had implications regarding potential condemnation. The Court noted that the determination of whether a property is an area in need of redevelopment is

Michael J. Gross

Bulletin Board | 27 | www.shorebuilders.org refusal to purchase the plaintiff ’s property. The Council accepted the Planning Board’s recommendation for redevelopment designation over the objection of plaintiff in 2014. Tradewinds Marina, Inc. v.Toms River The Appellate Division in an unpublished decision, affirmed the designation of a marina parcel as an area in need of redevelopment. Tradewinds Marina, Inc. (“Tradewinds”) owned the subject property located in Toms River and challenged the redevelopment designation made pursuant to the Local Redevelopment and Housing Law (“LRHL”). The property, historically a marina, was significantly damaged during Superstorm Sandy. The property fell into disrepair and certain vessels were abandoned resulting in environmental conditions that led to administrative penalty actions instituted by DEP and NJDOT. DEP’s administrative action was resolved. Riverfront Property Associates, LLC was designated as a conditional redeveloper for a redevelopment study area investigation implemented by the municipality that included the property. The study concluded that the property met the criteria for designation as an area in need of redevelopment under the LRHL. The redevelopment area designation was approved following applicable procedures. The property owner opposed the designation, asserting that a conflict of interest existed with respect to the designated redeveloper, who had an interest in an entity that had a right of first

Steve Dalton

Docs #3101170-v1

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