Baucus Hails House Passage of Help for Jobless Americans, Tax Relief for Businesses, Homebuyers and Military Families
Long awaited Legislation Heads to President’s Desk for Signature into Law
Washington, DC – Senate Finance Committee Chairman Max Baucus (D?Mont.) hailed House passage today of a Baucus Reid substitute amendment, the Worker, Homeownership and Business Assistance Actof 2009, to extend unemployment insurance benefits to out of work Americans in all 50 states by an additional 14 weeks. The legislation also extends benefits to struggling jobless Americans for six additional weeks in states with unemployment levels over eight and a half percent.
Today’s House approval follows Senate passage last night by a resounding 98-0 vote. The legislation, cosponsoredby a bipartisan group of 32 senators, rescues nearly two million unemployed workers set toexhaust current emergency benefits by December 31, 2009. Senator Baucus has been a leader infighting for the protection of workers, businesses and families during the economic recession.
Tax relief in the bill includes extension of the $8,000 first time homebuyer credit through April 30, 2010,allowing homebuyers under a binding contract an additional 60 days to close after that date. An additional homebuyer credit provides $6,500 to new buyers who have lived in their current residence for five years or more. The net operating loss carryback (NOL) provision is expanded to allow U.S. companies of every to carry back losses incurred in either 2008 or 2009 against income earned inany of the five prior years. Additionally, there is a provision to make payments under the Military Homeowner Assistance Program (HAP) tax exempt for military personnel.
“American families and workers want to get back to work; they want to revive this economy. Today they can be confident that Congress did its part and did it in a fiscally responsible way,” said Baucus.“Not only will this bill provide critical help to the unemployed, it offers military families and prospective homebuyers substantial tax relief proven to reinvigorate and strengthen the housing market. The NOL carryback provision will benefit businesses both large and small by allowing them to offset their losses so they can continue to maintain and create jobs and fight through this recession.Today’s vote is an example of the type of unified, creative action America needs right now to get through this recession and get folks working again.”
The legislation also makes improvements to a provision in the American Recovery and Reinvestment Act to allow families receiving the Supplemental Nutrition Assistance Program (SNAP), or food stamps, to remain eligible while receiving an additional $25 per week in unemployment insurance benefits. Additionally, the bill would update the Unemployment Insurance Modernization provision in theAmerican Recovery and Reinvestment Act to allow victims of sexual assault who have left their job to beeligible for benefits under the “compelling family reasons” clause.
Provisions in the bill to extend emergency unemployment compensation are fully offset by an extension of the Federal Unemployment Tax through December 31, 2011. The homebuyer tax credit and NOL provisions are paid for by a delay in implementation of worldwide allocation of interest and an increase the penalties on companies that fail to file a partnership or S corporation federal tax return.
A summary of the bill follows here:
Senate Substitute to Emergency Unemployment Compensation Extension Act, H.R. 3548 Worker, Homeownership and Business Assistance Act of 2009
November 5, 2009
Emergency Unemployment Benefits Extension
This proposal would extend unemployment insurance by up to 14 additional weeks for jobless workers and extend benefits for six additional weeks for workers in states with unemployment levels over 8.5 percent.
Additionally, the proposal would:
• Ensure that the additional $25 per week in unemployment insurance benefits provided by the Recovery Act do not count against a family's eligibility for the Supplemental NutritionalAssistance Program, formerly known as food stamps;
• Update the Unemployment Insurance Modernization provisions in the Recovery Act to providethat victims of sexual assault who have left their jobs have a "compelling family reason" for benefits; and
• Specify that railroad workers who face expiring unemployment benefits will be eligible for the extension of benefits.
• Allow states to temporarily pay tier three benefits before tier two benefits in order to avoid payment delay and to ease implementation of Emergency Unemployment Compensation benefits. Tier two and tier three benefits must be exhausted before an individual may qualify for tier four benefits.
This proposal is estimated to cost $2.4 billion over 10 years.Offset ? This proposal is fully offset by an extension of the Federal Unemployment Tax Act (FUTA) untilJune 30, 2011.
Business and Homebuyer Assistance
Homebuyer credit- Under current law, the First Time Homebuyer Tax Credit is a refundable tax credit available to an individual buying a principal residence for the first time. The credit phases out for individuals with income between $75,000 and $95,000 and for joint filers with income between$150,000 and $170,000. For purchases made on or after January 1, 2009 and before December 1, 2009 the tax credit is equal to the lesser of $8,000 or 10 percent of the purchase price of the residence.
Individuals must repay the credit only if the principal residence is disposed of within 36 months of purchase. For purchases made on or after April 9, 2008 and before January 1, 2009, the tax credit is equal to the lesser of $7,500 or 10 percent of the purchase price of the residence. Individuals purchasing homes in 2008 are also required to repay the credit over 15 years. This proposal wouldextend the availability of a homebuyer credit to homes under a binding contract before April 30, 2010,allowing 60 days to close.
The other modifications are as follows:
1) The credit is phased out for individuals with income above $125,000 and for joint filers with income about $225,000.
2) An $8,000 credit is available to all first time homebuyers.
3) A $6,500 credit is available to homebuyers who have been in their current residence for the last five years or more.
4) The credit is available only for the purchase of principal residences with a purchase price of $800,000 or less.
5) The proposal incorporates Senator McCaskill’s proposal in the Service Members Home Ownership Tax Act of 2009 to eliminate the recapture requirement for military personnel, including members of the Foreign Service and intelligence community, forced to sell as a result of an official extended duty of service and to allow military personnel serving outside the United States for at least 90 days in 2009 or 2010 one additional year to qualify for the credit.
6) The proposal includes anti-fraud language.
7) The proposal also includes math error authority for the IRS.This proposal is estimated to cost $10.8 billion over 10 years.
Five-Year Carryback of Net Operating Losses- Under current law, net operating losses may generally be carried back for two years. In the American Recovery and Reinvestment Act of 2009, the net operating loss carryback period was extended from two to five years for tax years beginning in or ending in 2008 for small businesses with gross receipts of $15 million or less. This proposal would allow all businesses to carryback net operating losses for up to five years for losses incurred either in 2008 or 2009, but not both (at the election of the taxpayer). Businesses would be able to offset 50 percent of the available income from the fifth year and 100 percent of all income in the remaining four carryback years. Small businesses who have already elected to carry back 2008 under the American Recovery and Reinvestment Act may also elect to carry back losses from 2009. This proposal is estimated to cost $10.4 billion over 10 years.
Military Homeowner Assistance Program (HAP) Under current law, military personnel who sell a home that has declined in value as a result of a base closure can receive a HAP payment to adjust for the decline. These payments are tax exempt. In the 2009 stimulus bill, the HAP program was expanded tomilitary personnel selling their home as a result of a permanent reassignment and other purposes. Payments received as a result of the 2009 stimulus bill expansion are not tax exempt. The proposal makes all HAP payments tax exempt. This proposal is estimated to cost $243 million over 10 years.
Delay implementation of worldwide allocation of interest? In 2004, Congress provided tax payers with an election to take advantage of a rule for allocating interest expense between United States sources and foreign sources for purposes of determining a taxpayer’s foreign tax credit limitation. Although enacted in 2004, this election was not available to taxpayers until taxable years beginning after 2008.Last year, the phase?in of this rule was delayed for two years (for taxable years beginning after 2010).This proposal would delay the phase in of this rule for an additional seven years (for taxable years beginning after 2017). This proposal is estimated to raise $20 billion over 10 years.
Increases the penalty for failure to file a partnership or S corporation return? The bill would increase the penalties for failure to file a partnership return or an S corporation return. For taxable years beginning after 2010, the base penalty will be increased by $106 (from $89 to $195). This provision is estimated to raise $1.2 billion over 10 years.
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