The Official Online Weekly Newspaper of NAHB
The oft-revised Senate tax extenders bill was dealt a serious setback on June 24 when the measure failed to garner the 60 votes needed to move forward, falling on a 57 to 41 vote. After this third attempt to advance the legislation fell short, Senate Majority Leader Harry Reid (D-Nev.) indicated he would pull the extenders bill from further consideration at this time.
While the legislation included several provisions that NAHB supports, ongoing concerns over how to pay for extended unemployment benefits and popular tax breaks witout adding to the federal debt proved too much to overcome.
NAHB will look for other avenues to move its remaining key priorities. With the increased political focus on deficit spending, any future tax bills will prove very difficult to enact.
The bill, H.R. 4213, the American Jobs and Closing Tax Loopholes Act of 2010, would extend an "exchange" provision for the Low Income Housing Tax Credit program allowing state housing finance agencies to trade in a portion of their tax credit allocation for grant dollars to support local affordable housing.
Also included in the latest compromise was a provision NAHB sought to allow disaster low-income housing tax credits to be included in the exchange. (In response to Hurricane Katrina in 2005 and the 2007 floods in the Midwest, Congress allocated additional "disaster" tax credits, but they were not eligible for the exchange when it was created in 2009.)
Other NAHB-supported provisions include extensions of the New Energy Efficient Home Tax Credit (45L Credit) and the National Flood Insurance Program. The bill also would extend the closing date deadline for the home buyer tax credit program to Sept. 30 for homes under contract on or before April 30. This proposed change was adopted by amendment on June 16 and was championed by Reid and Sen. Johnny Isakson (R-Ga.)
Seeking to address the budget concerns of many senators, the Senate leadership cut several billion dollars in spending from the bill, achieving revenue offsets to pay for the entire package except for extension of unemployment benefits for six months.
The original tax extenders package cost $140 billion and added $80 billion to the deficit. Though the bill’s overall cost was reduced to about $109 billion, it would still add $33.3 billion to the deficit. This turned out to be a deal-breaker for Republicans, who insisted that the measure should not add to the burgeoning federal deficit.
In addition to its overall cost, many senators opposed several revenue raisers in the bill that would increase taxes on businesses, including changing the taxation of carried interest, which NAHB also opposed. The Senate proposed taxing carried interest as 75% ordinary income and 25% capital gains, but assets held for five years would be taxed as 50% ordinary income and 50% capital gains.
Many large, influential corporations and business groups that normally strongly support the annual extenders bill, actively opposed this legislation due to a provision to pay for the package that would increase the limitations associated with the use of foreign tax credits.
While the tax extenders themselves enjoy broad support, moving them as a separate bill appears increasingly difficult because of this widespread opposition to the methods chosen to pay for the bill. Senate leaders have been unable to find less controversial ways to provide revenue offsets to make the bill deficit-neutral.
While the Senate plans to take up a small business tax package this week, Reid has stated that no provisions from the extenders bill would migrate to the small business bill. As a result, election year politics have led to a stand-off where neither side is able to come to an agreement on the extenders.
Expecting the Senate to be unable to overcome a filibuster on the larger bill, the House on June 23 passed stand-alone legislation that would extend the National Flood Insurance Program through Sept. 30. The program has been suspended from issuing new policies since May 31 and NAHB supported the efforts of Reps. Maxine Waters (D-Calif.) and Walter Jones (R-N.C.) to advance the House-passed bill (H.R. 5569), which was approved by a voice vote.
With the extenders legislation sidelined for the foreseeable future, the Senate is likely to consider this bill soon.
To read legislation, click here and enter the bill number in the box at the upper center of the page.
For more information, e-mail J.P. Delmore at NAHB, or call him at 800-368-5242 x8412.