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Congress Poised to Act on Home Buyer Tax Credit, NOLs
As the result of the hard work of NAHB’s grassroots members and its allies in the Senate, the association’s ongoing campaign to extend and expand the home buyer tax credit and expand the Net Operating Loss (NOL) carryback tax code provision moved a big step closer to fruition last week.
Proposals on the home buyer tax credit and NOLs were included in Senate legislation to extend unemployment insurance benefits for jobless Americans. The two housing-related provisions were added through the bipartisan efforts of Senate Finance Committee Chairman Max Baucus (D-Mont.) and Sens. 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 remained somewhat fluid as this issue of Nation’s Building News went to press, with the Senate expected to hold a procedural vote on the bill late in the day on Nov. 2.
The Senate is also expected to approve the entire package before the end of this week and immediately send it to the House, opening up the possibility that it will reach the White House for the President’s signature in a matter of days.
Specifics of the housing proposals that are likely to be part of the final bill include:
Home Buyer Tax Credit Provisions
- The $8,000 tax credit would be extended until April 30 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 30 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.
- Homes over the purchase price of $800,000 do not qualify.
NOL Carryback
- There would be a five-year carryback for NOLs in either 2008 or 2009, not both.
- Years one to four allow for 100% use of NOLs; year five is limited to 50% 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 five are still eligible for the 20-year carry forward.
- Small businesses (with less than $15 million in gross receipts) would be able to claim a five-year carryback for 2008 losses (under the American Recovery and Reinvestment Act) and for 2009 losses according to the proposal.
- There would be no limitation for NOLs claimed against Alternative Minimum Tax liability in carryback years.
NAHB estimates that the extended and expanded home buyer tax credit will generate 180,000 additional sales; and create 211,000 jobs; and $9.6 billion in wage income, $7.2 billion in small and corporate business income, $5 billion in federal taxes and $1.9 billion in state and local taxes.
In another encouraging development, the Obama Administration, through a joint statement issued by Treasury Secretary Tim Geithner and Housing and Urban Development 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.”
Even as the bill neared passage, proponents of the home buyer tax credit provision in the Senate made it explicitly clear that the extension would have a limited shelf life and not be extended again when it expires next year.
"This is the last extension of the home buyer tax credit," said Isakson. "Tax credits like this only work by creating the sense of urgency to take advantage of it, and to bring the market back."
On the floor of the Senate, Baucus observed that, "It's important that this tax credit does not become a permanent fixture in the tax code. Our amendment would end the credit on April 30 of next year. This extension would get us through the winter — traditionally the worst season for real estate. Our amendment would jump start the housing market as it enters the summer months in 2010."
Baucus added that the seven-month extension of the tax credit would be "long enough to encourage home buyers to buy homes, but it's short enough to remain fiscally responsible."
Keeping Pressure on Lawmakers to Act
With partisan politics earlier last week threatening to derail Senate efforts to extend and expand the home buyer tax credit, NAHB 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.
Howard delivered a similar message in an interview with the Philadelphia Inquirer and in a report on NPR’s Marketplace. “Not extending this is economic suicide,” he said. “I think we'll go right back into a double-dip housing recession, and the recovery will stall itself out.”
In a Legislative Alert issued on Nov. 2, NAHB urged its members to call their senators and representatives immediately and tell them to support the tax credit and NOL carryback because they will preserve and create jobs, stabilize the housing market and provide critical stimulus to the nation's economy.
NAHB members can send a written message to their members of Congress by visiting www/capitolconnect.com/builderlink. They can also call their legislators toll-free at 866-924-6242 (NAHB).
For more information on the ongoing grassroots effort to extend and expand the tax credit, e-mail Nick Gentile, or call him at 800-368-5242 x8542. For more information on legislative developments on Capitol Hill, contact Greg Brown, x8421.
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