The economic stimulus bill headed for President Obama’s desk on Monday contains slightly more lucrative tax credit and net-operating carry-back provisions than originally reported.
Housing lobbies worked behind the scenes late in the week to extend the life of the $8,000 tax credit, which will be effective on or after Jan. 1, 2009, and before Dec. 1, 2009. Earlier versions sunset the provision on Sept. 1, 2009.
Also, the credit will be refundable or claimable regardless of tax liability, according to the National Association of Home Builders (NAHB). And buyers using the tax credit can also participate in the mortgage revenue bond program, and state housing finance agencies can help them at closing by advancing the credit amount as a loan using tax-exempt bond proceeds. On the downside, the government would recapture the credit if the home is resold within three years.
A congressional conference committee dealt housing lobbyists a major disappointment this week when it opted for the House version of the housing tax credit over the Senate version. The Senate had voted to authorize a $15,000 tax credit for all home buyers, not just first-time buyers.
The NAHB also succeeded in liberalizing the use of carrying back losses an additional three years. As initially reported, only businesses doing up to $5 million in average gross receipts would qualify for the tax benefit. The final compromise extends it to businesses with up to $15 million in average gross receipts.
Provisions giving all businesses an additional three years of recapture passed both houses of Congress. However, the provisions fell victim to efforts to bring the total cost of the bill in under $800 billion. The bill being forwarded to Obama will have a price tag of $789 billion.
The final version of the bill passed the House 246 to 183, with no Republican voting in favor. A Senate vote was expected later today.
The final bill includes a short-term financing gap for Low Income Housing Tax Credit projects. States could turn in a portion of their 2009 allocations for cash. And the bill includes a special appropriation of $2 billion in HOME funds.
Here’s a recap of the key elements of the bill.
- $8,000 first-time home buyer, true tax credit (no repayment) for the purchase of a principal residence between Jan. 1 and Dec. 1, 2009. Recaptured if home is sold within three years. Removes the restriction on the use of tax credit proceeds with Housing Finance Agency–issued tax-exempt mortgage revenue bonds.
- Short-term gap financing for Low Income Housing Tax Credit (LIHTC) projects:
- Provision allowing states to turn in portion of 2009 LIHTC allocations for cash
- Special appropriation of $2 billion in HOME funds
- Up to a 10-year deferral of tax from business debt cancelled as part of a repurchase or restructuring
- Five-year carry-back of 2008 net-operating losses for businesses with gross receipts of less than $15 million (three-year average)
- Extension of enhanced bonus depreciation
- Extension of increased small business expensing
- Enhancements to the Section 25C program for energy-efficiency remodeling improvements to existing homes
- One-year patch of the Alternative Minimum Tax
- Increase New Markets Tax Credit allocating authority for 2008 and 2009
- Delays for one year the start of 3% government contractor withholding requirement
- $2 billion for full-year payments to owners of Section 8 project–based rental assistance properties
- $2.25 billion through HOME program and Low Income Housing Tax Credit program to fill financing gaps
- $1 billion for CDBG
- $2 billion for Neighborhood stabilization program
- $1.5 billion for homelessness prevention activities (help with rents, etc)
- $250 million for energy retrofitting and green investments in HUD-assisted projects
- $1 billion for Section 502 direct loans under the Rural Housing Service
- $10.4 billion for Section 502 guaranteed loans under the Rural Housing Service
- $27.5 billion for highway spending
Other Key Provision
- Increases in FHA, Fannie Mae, and Freddie Mac loan limits to 2008 levels