Washington Update - 10/30/2009 (Plain Text Version)

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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.

Higher Conforming Loan Limits Extended Through 2010

In a victory for NAHB, the House and Senate on Oct. 29 approved a Continuing Resolution (CR) to fund the government through Dec. 18, 2009 that includes a provision that will extend the loan limits for mortgages insured by the Federal Housing Administration and those purchased by Fannie Mae and Freddie Mac through the end of next year. The loan limits will continue to be capped at $729,750 in high-cost markets. Those caps were due to expire on Dec. 31 if Congress had not taken action.

The current CR expires at midnight tonight (Oct. 30), making an extension a must-do item for Congress. President Obama is expected to sign the measure by the end of the day. The CR extension will provide Congress the time it needs to complete all of the outstanding fiscal 2010 appropriations bills.

On a related note, the joint statement issued this week by Treasury Secretary Geithner and HUD Secretary Donovan on the extension of the home buyer tax credit (see story above) also called on Congress to extend the expiration period for the higher conforming loan limits and to identify a financing source for the Housing Trust Fund.

Earlier in the week, NAHB, along with the National Association of Realtors and Mortgage Bankers Association, sent a letter to House and Senate leaders urging Congress to act soon to extend the current higher loan limits for Fannie Mae, Freddie Mac and the FHA that are due to expire at year-end. The letter noted that borrowers have unnecessarily been denied financing because of uncertainty about expiring loan limits and consumers cannot lock in current interest rates beyond 60 days for loans over $625,500.

For more information, contact Scott Meyer at ext. 8144. [return to top]

Senate and House Advance Health Care Proposals

On Oct. 26, Senate Majority Leader Harry Reid (D-Nev.) announced that he would include a government-run public insurance option in a health care plan that was sent to the Congressional Budget Office (CBO) to ascertain its long-term costs and whether it would be budget neutral. The public option plan is based on the Senate Finance Committee's model of a “federal public exchange” where states will be given the authority to “opt out” of participation.

It is expected that Senate Democratic leaders will make a number of changes to the bill once it returns from CBO in order to gain the 60 votes necessary to defeat a filibuster and move to a floor debate. Sen. Joe Lieberman (I-Conn.), who caucuses with the Democrats, has already committed to supporting a filibuster of the bill in its current form. Furthermore, Sen. Olympia Snowe (R-Maine), the only Republican to have voted in favor of the health care reform bill approved by the Senate Finance Committee, has indicated she will not support legislation that includes a public option, leaving Republicans united in their opposition. Additionally, several moderate Democrats have not committed to support the legislation either. Therefore, it is anticipated that changes will be made on the public option and other areas before the measure clears the Senate.

Meanwhile, the House of Representatives on Oct. 29 unveiled its health care legislation, America’s Affordable Health Choices Act (AAHCA). The Congressional Budget Office estimates it will reduce the federal deficit over the next 10 years and will cover over 96 percent of Americans at a cost of $1.055 trillion. It offers a public option, repeals anti-trust exemptions for insurers, and contains a requirement for all individuals to carry health insurance. The House will move on the legislation as next week.

NAHB continues to closely monitor the situation in both chambers. For more information, on the House and Senate health plans, contact Carlos Gutierrez at ext. 8242. [return to top]