The Cooperator headquarters in Midtown Manhattan again played host to a group of real estate industry professionals gathered to discuss their strategies and challenges, trade anecdotes (both the positive and not-so-positive), and meet their colleagues over breakfast. This time, the assembled group was composed of legal professionals specializing in co-op and condominium law and recent changes to the 80/20 rule provided some interesting food for thought.
Attendees included Al Pennisi, a partner with the Queens law firm of Pennisi Daniels & Norelli LLP, and president of the Federation of New York Housing Cooperatives and Condominiums (FNYHC); Greg Carlson of Carlson Property Management and the Federation's executive director; Mona Shyman, management consultant and Federation vice president; Marc S. Bresky, an attorney based in Elmhurst, Queens; Robert Chicco of the Mineola-based law firm of Forchelli Curto Schwartz Mineo Carlino & Cohn LLP; Geoffrey Mazel, an attorney with Hankin Handwerker & Mazel PLLC in Manhattan; Orsid Realty's Neil Davidowitz, a lawyer and property manager; and Phyllis Weisberg of the law firm of Kurzman Karelsen & Frank, LLP in Manhattan.
Big Changes in 80/20
At the top of the roundtable agenda was the so-called "80/20 rule," which for decades has stipulated that co-op buildings must derive fully 80 percent of their annual income directly from shareholders, and no more than 20 percent from other sources (such as retail tenants). Co-ops on the wrong side of 80/20 forfeited valuable tax benefits for shareholders—but now, the rules have changed in favor of co-ops.
Pennisi explained that Internal Revenue Code 216 was amended in December of 2007 changing forever what had been commonly known as the 80/20 rule. For years, the Federation, and its sister organization, the Council of New York Cooperatives and Condominiums (CNYC), and Congressman Charles B. Rangel, D-15, had been trying to change the rule on behalf of the city's cooperatives.
Congressman Rangel, added Pennisi, had promised that if he ever got into a position of power, he would help to amend the rule, and he did. The legislation went through under the radar as an amendment to the Mortgage Forgiveness Debt Relief Act (HR 3648). Following amendments by the Senate, President George W. Bush signed it into law December 20, 2007.