The Senate could take up its version of the housing and foreclosure assistance bill as early as this afternoon after tax-writers in the chamber reached tentative agreement on a $14.5 billion package of incentives, including a new first-time homebuyers' credit. A spokesman for Senate Majority Leader Reid said floor action today was possible, while Senate Finance Chairman Max Baucus cautioned that "things are still fluid." The measure has not been vetted with the House, however. A spoksesman for House Financial Services Chairman Barney Frank said he would not comment until he saw the bill. The bill's tax portion will run into a hurdle because it does not fully comply with pay/go requirements, said a House aide. According to a draft of the Senate tax title, offsets only total about $12.1 billion, falling nearly $2.4 billion short of full compliance with pay/go. The additions include a $1.3 billion package of Gulf Coast reconstruction tax incentives authored by the Mississippi and Louisiana delegations, added as an amendment to the bill during Senate debate in April on an 84-12 vote. Another $1 billion stems from an amendment successfully offered to that same bill by Sens. Debbie Stabenow, D-Mich., and George Voinovich, R-Ohio, that would allow unprofitable companies to use existing alternative minimum tax or research and development credits to qualify for bonus depreciation incentives. That amendment was approved 76-2.
The provision was left out of the stimulus package in February, despite lobbying from auto manufacturers, steel producers and biotechnology firms. "This would be particularly helpful in spurring investment, production and employment in the domestic auto industry," United Auto Workers legislative director Alan Reuther wrote in a June 9 letter to the House and Senate tax-writing and banking committees. Additional offsets will be needed, and House lawmakers are pressing the Senate to include a modified compliance measure requiring investment brokers to report the cost-basis of securities transactions to the IRS. They could also include a one-year delay of worldwide interest allocation rules, but Senate Republicans oppose that provision. The biggest offset in the bill is $9.8 billion raised from increased reporting of credit-card and other electronic transactions to the IRS, which business groups such as the U.S. Chamber of Commerce and National Federation of Independent Business oppose. "This is the worst of the worst. It's a tax increase on small businesses at exactly the wrong time," said Giovanni Coratolo, who heads the Chamber's small-to-mid-sized business council.
The centerpiece of the existing tax title, at $4.3 billion, is a refundable first-time homebuyers' credit equivalent to an interest-free loan for 10 percent of the cost, up to $8,000. That is up from $7,500 in earlier versions, and it is phased out for taxpayers with adjusted gross incomes of more than $75,000, or $150,000 for couples filing jointly. The National Association of Realtors pushed for the expanded limit.
This article appears in the June 21, 2008 edition of National Journal Daily PM Update.