COLUMN ONE : Winning Strategy on Taxes : Real estate interests prevail as Washington seeks to stimulate the economy. Hefty political contributions appear to have helped them garner some favorite tax breaks.

When President Bush was casting around late last year for proposals to stimulate the sluggish economy, he held a private session at the White House with top real estate executives and lobbyists who pleaded forcefully for aid to their depressed industry.

The Dec. 2 meeting in the Roosevelt Room, which some participants thought would amount to no more than a 10-minute photo opportunity with the President, instead lasted 45 minutes. Bush asked question after question, and lent a sympathetic ear to the replies.

Several weeks later, in his State of the Union speech, Bush proposed several tax breaks intended to spur housing construction and allow developers to write off many of the huge losses they suffered when the 1980s boom in commercial real estate went bust.

Congressional Democrats not only embraced Bush’s proposals, they expanded them, raising the likelihood that new incentives worth billions of dollars to real estate interests will be a central element of any tax legislation adopted this year.

Seldom do tax proposals as costly to the Treasury as these catch fire so quickly in Washington. And some critics argue that the ideas would not have gained such widespread support if home builders, brokers, agents and developers had not showered Bush and key members of Congress with millions of dollars of campaign contributions in recent years.

Many economists believe passage of carefully targeted real estate incentives, such as Bush’s proposal to extend a temporary $5,000 tax credit to first-time home buyers, would be one of the most effective strategies for spurring an economic recovery. They say these proposals are attracting support based on their merits, not on political pull.

Even so, real estate interests have been more aggressive than most industry groups in making contributions to politicians and in lobbying the government for economic benefits. And one result has been a high degree of access to Washington policy-makers.

Since 1989, political action committees representing real estate interests have contributed more than $11.2 million to members of Congress and to Democratic and Republican party organizations, according to a Times computer-assisted study of contribution records.

Besides these PAC donations, individuals who identified themselves as being in businesses related to real estate contributed in excess of $5.2 million to Democratic and Republican congressional candidates and party organizations during the 1989-90 election cycle.

In addition, several leading real estate developers, including Irvine Co. Chairman Donald Bren of Newport Beach, currently serve on the national finance committee for Bush’s reelection campaign. And real estate industry executives accounted for one-fourth of the members of the Republican Party’s “Team 100,” each of whom contributed at least $100,000 to assist in Bush’s 1988 presidential campaign.

In the House, two lawmakers who sponsored a measure containing real estate tax breaks, Reps. Bill Thomas (R-Bakersfield) and Michael A. Andrews (D-Tex.), each have received more than $50,000 in real estate PAC contributions since 1987. In the Senate, early proponents of industry tax relief include Sen. Hank Brown (R-Colo.), whose 1990 reelection effort received more than $270,000 in direct and indirect contributions from real estate interests.

Fred Wertheimer, president of Common Cause, predicted that big campaign contributions from real estate investors are likely to win them at least some of the tax breaks they are seeking.

“Whether it’s next month or next year, the real estate developers, builders and others in that industry are going to get at least some of what they want,” said Wertheimer. “And the reason it’s going to happen is because of these $100,000 contributions and PAC contributions.”

For their part, real estate officials insist there is no connection between their contributions and the tax breaks now under consideration. Irvine Co. spokesman Larry Thomas dismissed Wertheimer’s criticism as “a cheap little smear.”

Likewise, Steven A. Weschler, president of the National Realty Committee, a lobbying group representing developers, scoffed at suggestions that Bush and members of Congress are supporting tax breaks for the industry as a result of campaign contributions. “What I see are policy-makers with integrity trying to do their job,” he said.

Yet even many industry lobbyists acknowledge that the campaign contributions and political involvement of real estate executives have given them access that helped them persuade Bush and members of Congress that the economy would benefit from the legislation they are seeking.

In recent months, as the debate over taxes has moved from the White House to Capitol Hill, lawmakers have been inundated with calls and letters from real estate agents. Legislation sought by the industry quickly gained 329 co-sponsors in the House and 44 in the Senate.

“I think they (real estate lobbyists) are very effective, they are numerous, and they can put on a strong grass-roots effort,” observed Sen. Lloyd Bentsen, (D-Tex.), chairman of the tax-writing Senate Finance Committee.

“They are everywhere,” sighed one senior Bush Administration official, a sentiment echoed by envious lobbyists representing competing interest groups.

Separate tax-relief packages drafted by the White House, the House Ways and Means Committee and the Senate Finance Committee contain a number of real estate tax incentives. They include the $5,000 home-buyers credit, penalty-free withdrawals from individual retirement accounts for first home purchases, incentives for pension plans to invest in real estate, temporary mortgage revenue bonds and credit certificates to spur development and tax credits for construction of low-income housing.

But the main objective of the aggressive lobbying effort is a provision that would liberalize the tax rules governing “passive losses,” or losses suffered by investors on empty office buildings, bankrupt shopping centers and other real estate investments that generate more expenses and deductions than income. All three tax measures contain similar versions of the passive-loss proposal.

Critics argue that before passage of the 1986 tax reform act, such losses were used by the wealthy as shelters to protect income from other sources, and contributed to the overbuilding of the early 1980s.

“The Democrats and Republicans looked around and saw that there was a recession and that people were hurting, and that the people in most trouble and who needed help the most were developers like Donald Trump,” said Robert McIntyre, director of Citizens for Tax Justice, a tax research group that is a leading critic of the legislation.

But the real estate industry contends that the 1986 law went too far in cutting back the ability of investors to deduct such losses, and the new legislation would simply correct a mistake that Congress made in drafting the reform act.

“When people hear the words passive loss they think tax shelter, but that is not the case,” Weschler said. “People in this business are currently suffering a disadvantage.”

Anticipating that their proposals would be controversial, real estate officials began laying the groundwork for their legislative campaign shortly after enactment of the 1986 legislation. They mobilized the resources of lobbying organizations representing every sector of the industry, including home builders, real estate brokers, big developers and investors.

“We as an industry have made a conscious effort to work together for the past two years,” said Jonathan Kempner, president of the National Multi Housing Council.

As part of their effort to get the attention of the policy-makers, they became increasingly active in financing the campaigns of both Republicans and Democrats.

Over the past three years, the National Assn. of Realtors contributed more PAC money to congressional candidates than any other political action committee in any industry. Prior to the 1990 election, the Realtors’ PAC gave a total of $3 million to more than 500 candidates. So far in the 1992 election cycle, it has given more than $480,000 to congressional candidates. The Times analysis did not include figures for earlier election cycles.

Likewise, BUILD PAC, which represents the National Assn. of Homebuilders, gave a total of $1.4 million to federal candidates in 1990 and has already given more than $448,000 toward the 1992 race.

But the political reach of the real estate industry involves more than just PAC contributions. In fact, many of the most generous individual givers to Democratic and Republican organizations and candidates are men and women in the real estate business.

Bren, for example, has given more than $315,000 to the Republican National Committee since 1988, most of it in “soft-money” contributions not subject to federal restrictions. He also has contributed the maximum of $2,000 to Bush’s current campaign.

Other big developers who, along with their families, have supported Bush and the Republican National Committee with large contributions since 1988 are George Argyros of Costa Mesa, $203,650; James Baldwin of Irvine, $147,100; Alec Courtelis of Miami, $189,818; Trammel Crow of Dallas, $309,119; William Lloyd Davis of Santa Monica, $210,540; David Murdock of Los Angeles, $187,000; Jeffery Silverman of New York and his wife, Joy, $248,000; Alex G. Spanos of Stockton, $163,000; A. Alfred Taubman of Bloomfield Hills, Mich., $144,750, and Trump, $139,500.

Bren, Courtelis, Crow, Joy Silverman, Spanos and Murdock serve as co-chairmen or vice chairmen of Bush’s national finance committee. And Davis, Argyros, developer William Lyon and Spanos are among those who sponsored a huge fund-raising dinner for Bush in Los Angeles recently.

In addition, individuals involved in real estate investment gave at least $556,670 to the National Republican Senatorial Committee, $173,250 to the Democratic Senatorial Campaign Committee, $54,650 to the Republican Congressional Campaign Committee and $28,450 to the Democratic Congressional Campaign Committee in the 1990 election.

Of the eight members of Congress who received the most money from real estate interests in the 1990 election, six have sponsored legislation to liberalize passive-loss tax provisions. Besides Brown, they are Sen. Robert C. Smith (R-N.H.), who received $217,938 from real estate interests; Sen. Larry E. Craig (R-Ida.), $162,813; Rep. Peter Hoagland (D-Neb.), $147,679, and Rep. Ileana Ros-Lehtinen (R-Fla.), $153,828.

In addition to the direct contributions they received, all six lawmakers also benefited from “independent” expenditures made on their behalf by the National Assn. of Realtors. During the 1990 election, the Realtors’ PAC spent $1,099,585--more than any other PAC--to finance television ads and mailings on behalf of congressional candidates. Such expenditures are not restricted by law as long as they are not coordinated by the candidates who benefit from them.

For Brown, the Realtors’ group spent $186,589 to mail a four-page color brochure to constituents touting the candidate’s support for the environment and property rights. An ad produced by the Realtors’ PAC on Craig’s behalf showed a real estate agent walking through an empty house and talking about the senator.

Both Brown and Craig, through spokesman David Fish, said these efforts by the Realtors’ PAC did not influence their decision to sponsor passive-loss legislation. In fact, Brown, in an interview, would not even acknowledge that he had co-sponsored the legislation, although his aides later admitted that his name had appeared on a passive-loss bill authored by Sen. David L. Boren (D-Okla.).

The real estate industry’s effort to woo members of Congress has proved so successful that other industries seeking tax breaks are envious. One Administration official confided: “We keep getting complaints from other groups saying: ‘Why did real estate get so much?’ ”

Indeed, while Democrats and Republicans are bitterly split on other key policy issues in the tax legislation, they are on common ground when it comes to aiding real estate. “It certainly is true that we are the primary focus of the tax legislation,” said Linda Gould, a lobbyist for the National Assn. of Realtors.

In their December session with Bush, the real estate officials focused on two issues: their desire for a change in the passive-loss rules, and regulatory problems contributing to the “credit crunch” that has made new bank loans hard to obtain. They also hammered at these issues in meetings with Treasury Secretary Nicholas F. Brady and other Administration officials.

Even before Bush decided to lend his support, the industry had lined up scores of congressional sponsors for passive-loss legislation. Thomas and Andrews took the lead in the House; Boren pushed for it in the Senate.

With more than 300 co-sponsors lined up last fall, including a majority of the members of the tax-writing Ways and Means Committee, Andrews was able to tell Chairman Dan Rostenkowski (D-Ill.) that any tax bill the panel crafted would have to include a break for real estate.

“His message was all along that the bill had to have passive loss,” said Tom Morgan, tax counsel to Andrews. “Not only was there widespread support, but it was deep.”

The overwhelming support for real estate tax breaks, by both liberals and conservatives, became apparent in a recent Senate Finance Committee vote on one version of the tax package.

Sen. Bill Bradley, (D-N.J.) a critic of tax shelters and one of the architects of the 1986 reform bill, proposed an amendment that would have eliminated the passive-loss provision and other real estate tax measures in order to provide a tax refund for poor families with children. His amendment was defeated 18 to 2.

“I wanted to draw the contrast between the general interest and special interests,” Bradley said in an interview. “The contrast between helping the poorest 25% of the children in America versus the real estate and other special interest guys.”

Scrambling to meet Bush’s March 20 deadline for action on his tax package, the House and Senate already have passed their own bills. Since Bush has vowed to veto either Democratic measure because they call for a tax hike on the affluent to pay for middle-class tax relief, most observers doubt that the White House and Congress will be able to agree on a major tax bill in the midst of an election year.

Still, officials in both Congress and the Administration say they believe a more modest tax bill will be enacted sometime this year and that it will contain at least some of what the real estate industry wants.

“To my mind, the real estate people are working so hard based on the idea that there may be another vehicle out there later, and they want to be in position for that,” said Bryce Harlow, a tax lobbyist for Timmons & Co., a Washington lobbying firm.

Times researcher Murielle Gamache contributed to this story.

The Flow of Real Estate Money

A detailed review of contribution records shows that real estate interests have been more aggressive than most industry groups in making contributions to politicians and in lobbying the government for economic benefits. One result is a high degree of access to Washington policy-makers.

The Givers

Real estate industry political action committees and their contributions to federal candidates from 1989 through 1991:

Political Action Committees Democrats Republicans Total National Assn. of Realtors* $2,335,420 $2,339,117 $ 4,674,537 American Bankers Assn.** $1,027,721 $ 809,309 $ 1,837,030 National Assn. of Home Builders $ 882,700 $ 923,582 $ 1,806,282 Associated General Contractors $ 199,149 $ 619,794 $ 818,943 of America International Council of $ 109,750 $ 181,850 $ 291,600 Shopping Centers Mortgage Bankers Assn. of America $ 132,275 $ 134,225 $ 266,500 National Electrical $ 24,000 $ 241,000 $ 265,000 Contractors Assn. Associated Builders and Contractors $ 16,000 $ 186,163 $ 202,163 Century 21 Real Estate $ 76,350 $ 64,050 $ 140,400 National Realty Committee $ 52,300 $ 26,350 $ 78,650 National Multi-Housing Council $ 34,370 $ 28,900 $ 63,270 Trammell Crow Partners $ 17,500 $ 7,900 $ 25,400 JMB Realty Corp. $ 21,750 $ 2,500 $ 24,250 National Apartment Assn. $ 6,000 $ 14,800 $ 20,800 National Assn. of Industrial $ 8,000 $ 5,650 $ 13,650 and Office Parks TOTAL: $4,943,285 $5,585,190 $10,528,475

* Support by the National Assn. of Realtors includes $348,106 spent on behalf of three Democratic candidates and $751,479 spent on behalf of six Republican candidates in 1990.

** Support by the American Bankers Assn. includes $3,000 spent on behalf of one Republican candidate in 1990.

The Recipients

Federal candidates who received the most contributions from real estate industry political action committees (PACs) during the 1989-1990 election cycle.

PAC PAC Spending on Total Individual Contri- Behalf of PAC Contri- butions Candidate Support butions Sen. Hank Brown $60,500 $186,589 $247,089 $24,400 (R-Colo.) Sen. J. Bennett $35,850 $158,811 $194,661 $23,950 Johnston (D-La.) Sen. Robert C. $50,500 $141,774 $192,274 $25,664 Smith (R-N.H.) Sen. Larry Craig $49,600 $109,363 $158,963 $ 3,850 (R-Ida.) Ex-Rep. John $19,400 $141,447 $160,847 $ 750 Buechner (R-Mo.) Rep. Ileana Ros- $47,220 $ 66,946 $114,166 $39,662 Lehtinen (R-Fla.) Rep. Peter $50,700 $ 95,779 $146,479 $ 1,200 Hoagland (D-Neb.) Dan Heath (R-Ind.)* $ 8,500 $105,360 $113,860 $ 3,250 Rep. Ben Jones $17,000 $ 93,516 $110,516 $ 5,600 (D-Ga.)

Total Real Estate Industry Support Sen. Hank Brown $271,489 (R-Colo.) Sen. J. Bennett $218,611 Johnston (D-La.) Sen. Robert C. $217,938 Smith (R-N.H.) Sen. Larry Craig $162,813 (R-Ida.) Ex-Rep. John $161,597 Buechner (R-Mo.) Rep. Ileana Ros- $153,828 Lehtinen (R-Fla.) Rep. Peter $147,679 Hoagland (D-Neb.) Dan Heath (R-Ind.)* $117,110 Rep. Ben Jones $116,116 (D-Ga.)

* Unsuccessful candidate in 1989 special congressional election.

Source: Los Angeles Times computer analysis of Federal Election Commission records.