Congress Poised to Act on Home Buyer Tax Credit, NOLs
Thanks to the hard work of NAHB, our grassroots and our allies in the Senate, our ongoing campaign to extend and expand the home buyer tax credit and expand the Net Operating Loss (NOL) carryback provision of the tax code moved a big step closer to fruition this week.
Just days ago, the Senate began its consideration of legislation to extend unemployment insurance benefits for jobless Americans. Proposals on the home buyer tax credit and NOLs were included in the legislation due to the bipartisan efforts of Senate Finance Committee Chairman Max Baucus (D-Mont.) and Senators Johnny Isakson (R-Ga.), Chris Dodd (D-Conn.), Olympia Snowe (R-Maine), Lamar Alexander (R-Tenn.) and Joe Lieberman (I-Conn.), and Senate Leaders Harry Reid (D-Nev.) and Mitch McConnell (R-Ky.).
The situation is still somewhat fluid, and obviously, this is not a done deal yet. Meanwhile, here is what we know is in the specific housing proposals that are expected to be part of the final bill:
Home Buyer Tax Credit Provisions
- The $8,000 tax credit would be extended until April 30th for first-time home buyers;
- A new $6,500 tax credit would be created for move-up buyers for the same period;
- Both categories of buyers would have until June 30th to close on the home after signing a contract prior to the April 30 deadline;
- Both categories of home buyers would have new, higher income limits of $125,000 for individuals and $225,000 for couples;
- Move-up buyers must have been residing in their primary residence for five consecutive years out of the last eight in order to qualify for the credit; and
- Homes over the purchase price of $800,000 do not qualify.
NOL Carryback
- Five year carryback for NOLs in either 2008 OR 2009, not both;
- Years 1-4 allow for 100 percent use of NOLs; year 5 is limited to 50 percent of a company’s taxable income in that year;
- There would be no size limitation for the company or other cap on revenues;
- Unused NOLs in year 5 are still eligible for the 20 year carry forward;
- Small businesses (less than $15 million in gross receipts) would be able to claim a five-year carryback for 2008 losses (under ARRA) and for 2009 losses according to the proposal; and
- There would be no limitation for NOLs claimed against AMT tax liability in carryback years.
Senate action on the legislation had been stalled because of unrelated procedural issues. The Senate is now scheduled to hold a procedural vote on the bill on Nov. 2. It is expected that the Senate will vote to approve the entire package before the end of next week and send it to the House for its approval immediately thereafter. With any luck, a bill should be on the President’s desk for his expected signature by the end of next week.
In another encouraging development, the Obama Administration, through a joint statement issued by Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan, on Oct. 29 said: “We welcome efforts taken by Congress to extend the first-time home buyer tax credit for a limited period. This credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide.”
Keeping Pressure on Lawmakers to Act
With partisan politics earlier this week threatening to derail the Senate deal to extend and expand the home buyer tax credit, NAHB President and CEO Jerry Howard on Oct. 28 issued a press statement calling on Congress to “stop playing politics with Americans’ lives and act now” on the tax credit. He delivered a similar message in an interview with the Philadelphia Inquirer and in a report on NPR’s Marketplace Howard said, “Not extending this is economic suicide. I think we'll go right back into a double dip housing recession, and the recovery will stall itself out.”
At the same time, NAHB sent out a Legislative Alert to the grassroots letting them know that a legislative compromise that would advance the home buyer tax credit and net operating loss carryback relief to be attached to “must-pass” legislation extending unemployment insurance is being jeopardized due to partisan wrangling on unrelated issues.
The Alert urges our members to call their senators at 1-866-924-6242 (NAHB) and tell the Senate leadership to “stop playing partisan games and pass the home buyer tax credit extension and NOL expansion now.” Builders were also urged to call Majority Leader Harry Reid (D-Nev.) at 202-224-5556 or 202-224-3542 and Minority Leader Mitch McConnell (R-Ky.) at 202-224-3135 or 202-224-2541 and tell them to allow the unemployment insurance bill to advance with the home buyer tax credit and NOL provisions.
For more information on the ongoing grassroots effort to extend and expand the tax credit, contact Nick Gentile at 1-800-368-5242, ext. 8542. For more information on legislative developments on Capitol Hill, contact Greg Brown, ext. 8421.
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