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Home Buyer Tax Credit, New NOL Rules Signed Into Law
In a major victory for NAHB that will boost the fledgling housing recovery and help struggling business owners nationwide, Congress last week approved legislation that will extend the first-time home buyer tax credit beyond its Nov. 30 deadline and expand it to a wider group of home buyers. The bill also provides relief to cash-strapped home builders by providing broader tax benefits for businesses with net operating losses (NOLs).
The legislation, which was signed into law by President Obama on Nov. 6, will extend the $8,000 credit for first-time home buyers for sales contracts entered into by April 30, 2010 and closed on by June 30. It has been expanded to include a new $6,500 credit for owners of existing homes who are purchasing a new principal residence. Existing home owners can claim the $6,500 tax credit if they have been residing in their principal residence for five consecutive years out of the last eight.
In more good news, the income eligibility limits to claim the full credit amount for both groups of home buyers have been raised from $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return to $125,000 for individuals and $225,000 for married couples.
NAHB’s consumer-oriented Web site, www.FederalHousingTaxCredit.com, provides complete details on the enhanced home buyer tax credit.
NAHB has launched a set of resources at www.nahb.org/taxcreditresources to help association members understand and promote the new tax credit.
For NOLs, the new law will allow all businesses — regardless of size — with operating losses in 2008 or 2009, not both, to claim refunds on taxes paid up to five years ago. Businesses can offset 100% of taxable income with NOLs carried back in years one through four and offset 50% of income in year five. 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 under the new law. The new net operating loss rules will throw a lifeline to struggling businesses, allowing them to continue making payrolls, paying business loans and otherwise keep their doors open until the economic recovery takes hold.
Lawmakers Signal Last Action on Home Buyer Tax Credit
Even as Congress neared completion last week on legislation to extend and enhance the home buyer tax credit, proponents of the tax credit made it perfectly clear that the extension would have a limited shelf life and not be extended again when it expires next year.
Sen. Johnny Isakson (R-Ga.), a long-time champion of the home buyer tax credit, said: "This is the last extension of the home buyer tax credit. 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, Finance Committee Chairman Max Baucus (D-Mont.) said 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 of 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.”
On Nov. 5, the House approved the legislation by a vote of 403 to 12, less than 24 hours after it sailed through the Senate by a unanimous 98 to 0 vote. Prior to the congressional votes, NAHB sent letters to leaders in each chamber designating passage as a “key vote” due to its importance to the housing industry. In addition, NAHB issued a Legislative Alert earlier last week urging association 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.
Federation-Wide Effort Leads to Success
Immediately following congressional passage, NAHB Chairman Joe Robson sent a memo to the entire federation citing the importance of this legislation to the housing industry and how NAHB was instrumental in helping to get the bill passed. The communiqué was also delivered to the Executive Officers via the PRx Exchange. Additionally, NAHB issued a press release applauding Congress on extending and enhancing the home buyer tax credit.
“This legislation is the result of months of determined effort by the entire NAHB federation,” said Robson, who noted that the association’s grassroots membership first banded together this summer in a “Revive Housing, Restore America” campaign calling on Congress to focus on housing in order to create jobs and provide the impetus for a full-scaled economic recovery.
The home buyer tax credit and NOL provisions were the two legislative priorities in that campaign. The NAHB leadership continues to work with Congress and various organizations in Washington to urge regulators to adopt policies that will restore the flow of credit builders need to finish projects in the pipeline and begin new ones and end faulty appraisals.
Robson said that NAHB has been “working tirelessly” to build upon the small gains the industry has seen in the marketplace in recent months and has been in continuous contact with the House and Senate.
“During key stages of the campaign, we activated our grassroots network to meet with their lawmakers when they were in their home districts and to visit them on Capitol Hill,” he said. “We have inundated congressional offices with e-mails and phone calls urging senators and representatives from both parties to extend and expand the home buyer tax credit to create jobs, spur home sales, reduce foreclosures, stabilize home values and push housing and the economy to higher ground.”
Robson noted that NAHB had joined with the National Association of Realtors® and Mortgage Bankers Association in the past few months to help get the vital housing legislation across the finish line.
For more information on the legislation, e-mail Greg Brown at NAHB, or call him at 800-368-5242 x8421.
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