July 26,2008

Baucus Tax Measures Win Passage In Housing Bill

Responsible tax package bolsters housing market with increased financing for homebuyers, property tax deduction for America’s homeowners, funding for low-income housing development

Washington, DC – Senate Finance Committee Chairman Max Baucus (D-Mont.) today won Senate passage, by a vote of 72-13, of a package of tax measures in the housing bill, H.R. 3221. The bill, which is on its way to the President’s desk for signature into law, was developed in cooperation with the Senate Banking Committee and includes important tax measures for property owners and first-time homebuyers. The tax package, totals approximately $15 billion over 10 years and would create an additional standard deduction for property taxes for homeowners who do not itemize their federal taxes, provide an $7,500 refundable, repayable tax credit that will help first time home buyers purchase homes and reduce the existing stock of unoccupied housing, and increase funding for mortgage revenue bonds, which will help homeowners and buyers obtain affordable loans. Also included is a provision to increase the amount of Federal low-income housing tax credits (LIHTC).

“This is an enormous win for millions of American families facing foreclosure and for our housing sector at the core of this economic downturn. It took ingenuity and great cooperation, and today I’m pleased to say that we passed a bill that will bring property tax relief to tens of millions of homeowners, help refinance subprime loans, and reduce the number of vacant homes on the market,” Baucus said. “I’ve been working to get this done since April and I’ll say now what I said then – these are targeted, practical measures and they’re what’s right for our economy and for working American families.”

Provisions to offset the cost of this important tax relief include a condition that banks provide information returns reporting annual credit card sales to the IRS and to merchants, a provision that requires homeowners to pay taxes on gains made from the sale of a second home to reflect the portion of time the home was used as a vacation or rental property, and a delay in implementation of worldwide allocation of interest, a tax benefit for businesses slated to take effect next year.

The House of Representatives made five changes to the tax package from the original Senate version, including:

  • The additional standard deduction for real property taxes provision is modified to allow taxpayers to claim the additional standard deduction if they reside in a locality that increased property tax rates in 2008.
  • A technical change was made related to the Economic Stimulus Act of 2008 (see Section VI below).
  • The provisions to increase information return penalties; to increase penalty for failure to file S corporation returns; to increase penalty for failure to file partnership returns; and to increase the minimum penalty for failure to file are no longer in the bill.
  • A provision to delay implementation of worldwide allocation of interest has been added as a revenue raiser.
  • The maximum allowance for the first-time home buyer credit is now $7,500.

A complete summary of the tax provisions can be found in the printer-friendly version of this release.