The United States Senate on Thursday voted to approve a package of measures
providing tax relief for homeowners, homebuyers and builders, in an attempt to
soften the blow of a flagging housing market on an already troubled economy.
Included in the bill, which passed the Senate by 84 votes to 12, are USD10.9bn in tax provisions authored by Senate Finance Committee Chairman Max
Baucus (D - Mon.) and Ranking member Chuck Grassley (R - Iowa), which would create
an additional standard deduction for property taxes for homeowners who do not
itemize their federal taxes, and increase funding for mortgage revenue bonds
in order to help homeowners and buyers obtain affordable loans.
Also included is a substantial credit for buyers of foreclosed homes that will
help stabilize local housing markets and property values, and a provision to
allow companies losing money – and facing employee layoffs – to
write off current losses and bolster struggling
operations.
“There is no magic solution to this housing crisis," observed Baucus, continuing:
"This is just plain responsible policy to deal with a lot of irresponsible actions
that led to serious trouble for so many Americans and for our economy. To respond
to this crisis, Senator Grassley and I crafted provisions that support American
families and American workers who deserve to keep their homes and their jobs."
"This bill amounts to real money for American families through tax relief or
continued paychecks from companies that use this tax relief to survive,"
he added.
Grassley explained that: “Tax relief helps encourage home ownership, and addressing
the housing problem can help the economy overall. It’s appropriate to
use the tax code to help people buy homes and to help the many businesses that
are tied to the housing industry recover from losses. Those businesses create
jobs. The economy should benefit from this shot in the arm.”
Other provisions added on the floor or through negotiation include:
- A provision increasing the overall allocation to mortgage revenue bonds
by an additional USD933mn, setting the additional authority aside to
ensure that low-population states receive a fair share.
- A provision to modernize the tax rules for real estate investment trusts
(REITs), to provide them with flexibility to reflect recent changes in real
estate markets.
- A measure that allows victims of Hurricanes Katrina and Rita to adjust
casualty loss deductions taken in addition to grant payments to cover uninsured
losses caused by the hurricanes.
- An allowance for businesses unable to benefit from bonus depreciation due
to extended periods in a loss position to receive refunds of AMT and R&D
credits when they make investments.
- Extensions of tax incentives for renewable energy. Baucus and Grassley
intend to complete a larger package of extensions of expiring tax provisions,
including energy incentives, in the coming weeks, with provisions to offset
costs.
Original provisions of the Finance Committee leaders’ tax relief package are as
follows:
Standard Property Tax Deduction
To make tax relief available to all American homeowners, Baucus and Grassley
will provide an additional standard deduction for the 28.3 million non-itemizers
who pay property taxes – USD500 for single filers and USD1,000 for joint filers.
Present law allows only those who itemize deductions on their Federal tax returns
to deduct state and local property taxes from their income. Baucus first proposed
the non-itemizer real property tax deduction in 2006, and the Senate included
the proposal in the Fiscal Year 2009 budget.
Mortgage Revenue Bonds
To provide for refinancing of subprime loans, mortgages for first-time homebuyers
and multifamily rental housing. Baucus and Grassley included in their proposal
USD10bn of Federal tax-exempt private activity bond authority first approved
by the Finance Committee in January as part of an economic stimulus package.
The measure also exempts interest earned on the bonds from the alternative minimum
tax. The amendment providing additional bond authority for low population states
brings the total of the bill’s mortgage revenue bond authority to USD10.9bn.
Extension of Net Operating Loss Carryback (NOL)
To aid homebuilders and other businesses hit hardest by the economic slump,
Baucus and Grassley would extend a law allowing corporations to apply excess
net operating losses to tax returns from prior profitable years and receive
any applicable refunds. For 2008 and 2009 losses, the provision would extend
the “net operating loss (NOL) carryback” to four years (back to
2004 and 2005, respectively) from the two years currently in law.
Measures to
prevent companies from abusing the intent of the provision are also included.
Tax Credit for Purchase of Homes in Foreclosure
To encourage the purchase of homes already in foreclosure and of homes on
which foreclosure has been filed, Baucus and Grassley create a USD7,000 tax credit
for buyers of such homes, to be claimed over two years. Homes in foreclosure
bring down the value of property nearby. Encouraging the purchase of more homes
in foreclosure will restore property values for all homeowners.
Similar provisions
have been proposed and championed on both sides of the aisle by Senators Johnny
Isakson (R-Ga.), Debbie Stabenow (D-Mich.), and Ben Cardin (D-Md.).
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