Senate Proposes Tax Package To Prop Up US Housing Market

by Mike Godfrey, Tax-News.com, Washington

23 June 2008

Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa) announced on Wednesday that they intend to offer tax measures as part of a larger amendment to a housing bill, including tax credits and incentives for property owners and first-time homebuyers.

The Baucus-Grassley tax measures, offered in cooperation with the Senate Banking Committee and which total approximately USD14bn over 10 years, would: create an additional standard deduction for property taxes for homeowners who do not itemize their federal taxes; provide an USD8,000 refundable, repayable tax credit that will help first time home buyers to purchase homes and reduce the existing stock of unoccupied housing; and increase funding for mortgage revenue bonds, which will help homeowners and buyers obtain affordable loans.

Also included is a provision to increase the amount of Federal low-income housing tax credits (LIHTC) available.

“These tax provisions represent creative, timely, and bipartisan solutions for the millions of Americans hit hard by this economic downturn. In April when I introduced and helped move these measures through the Senate, I said there is no magic fix to this crisis. We need to roll up our sleeves and work together to get this done,” noted Baucus.

“These are practical measures to help refinance subprime loans, reduce the number of vacant homes on the market and help millions of Americans put roofs over their heads. I’m proud to say that we worked across the aisle and across the Capitol to craft this bill, and I hope that my colleagues will come together again to vote yes and do what’s right for our economy and for millions of American families.”

“These tax initiatives are designed to complement the provisions in the housing bill to help Americans who are losing their homes in foreclosures,” Grassley observed.

“The tax provisions work to bring stability to the housing marketplace for every homeowner by reducing the number of homes that are for sale and unoccupied. This package would help increase the availability of affordable rental housing for lower-income Americans and encourage first time home purchases. The legislation also would provide immediately available tax-related assistance for taxpayers who’ve lost homes in natural disasters, including the floods and tornadoes in Iowa during the last month.”

Key provisions designed to offset costs of tax relief in the bill include a proposal to require banks to provide information returns to the Internal Revenue Service (IRS) and to merchants reporting their annual credit card sales, a provision that would require a homeowner to pay taxes on gains made from the sale of a second home to reflect the portion of time the home was used as a vacation or rental property, and enhancements to IRS penalties on companies and individuals that fail to correctly report or neglect to timely file certain tax documents required by the IRS.

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