Despite the fact that an extension of the net operating loss (NOL) carry-back provision has been dropped from the latest version of the housing stimulus package currently making its way through Congress, recent reports indicate there may still be a glimmer of hope for the provision once considered to be a “critical component” of recovery for home building and the economy at large.
According to Tom Crawford, CEO of c2 group, an independent lobbyist hired by 16 large public and private home builders to help gain support for NOL, members of both the House and Senate have expressed a continued interest in looking at the tax benefit as a viable tool necessary to provide a stabilizing effect on not just housing, but on many distressed industries struggling in today’s economy.
According to Crawford, support among the Democrats comes from Sen. Max Baucus (D-Mont.), Sen. Kent Conrad (D-N.D.), Sen. Debbie Stabenow (D-Mich.), Sen. Ken Salazar (D-Colo.), and Sen. Patty Murray (D-Wash.). On the Republican side, Sen. Gordon Smith (R-Ore.), Sen. John Ensign (R-Nev.) and Sen. Mel Martinez (R-Fla.) all remain supportive of the tax policy extension.
“Given that level of bipartisanship, no one can say that this issue is dead,” said Crawford. “Congress has made a great start to address the housing crisis by focusing on the tax credit. Once that is resolved, we have to continue to look for relief at every opportunity.”
This is in spite of the fact the official support for the provision was denounced last month in a letter from the home building industry’s official lobbying arm, the National Association of Home Builders (NAHB). NOL was included in earlier versions of the stimulus bill before Congress, but the NAHB dropped its support several weeks ago.
Though NOL was effective and uncontroversial after both 9/11 and the S&L crisis, the issue raised the ire of many earlier this year. Despite its benefits to other strained industries like banking, automotive, airline, and building product manufacturers, it was pegged in the mainstream press as a bailout for public home builders. “Any company that has shareholders and is established as a C-corp could potentially benefit [from NOL],” said Albert Pisanelli, corporate tax director of Orleans Homes.
Though the timing and likelihood of its resurrection remains unclear, builders continue to maintain hope that NOL might not be dead.
“Tax policy exists to help the economy when it needs it the most,” said Pisanelli. “This is not a government program that uses government funds. It uses the time value of money. NOL is in the law now, and this is about getting money to people in a time when some say we are in a recessionary period. When better to get that money and impact the economy?”
“In the context of the current housing bill, it’s unlikely though not impossible,” said Crawford. “But the reality is that there are other vehicles coming after this, and members will be looking for relief. NOL is a viable option, and other industries need the relief as well, so they will continue to pursue it.”
Hovnanian Enterprises CEO Ara Hovnanian agrees. “It doesn’t mean it’s dead forever. We’ll work on getting [the tax credit] passed and then go back and pursue the NOL going forward.”
“It’ll depend on what happens as the stimulus moves through, what effect it will have and what the fallout may be,” said Pisanelli. “In politics, you never know when the next opportunity is going to be. There may be another opportunity, so hopefully we’ll get another bite of the apple.”
Lisa Marquis Jackson is a senior editor at Big Builder magazine.