On Friday, November 6, President Obama signed into law The Worker, Home Ownership, and Business Assistance Act of 2009. This act passed Congress with near-unanimous support (98-0 in the Senate and 403-12 in the House).  The primary thrust of this legislation was to extend unemployment insurance benefits.  It granted an additional 20 weeks to workers in states hardest hit by unemployment, and 14 weeks to all others.  The cutoff between these levels of benefits is a state unemployment rate of 8.5% or more.  In September (the most recent month available), the Bureau of Labor Statistics unemployment rates for our tri-state area were:  New York 8.9%; New Jersey 9.8%; and Connecticut 8.4%.

In addition to this provision, the legislation included several important tax changes as follows:

NET OPERATING LOSSES:  Earlier law allowed small businesses to carry back losses incurred in 2008 up to five years, and receive refunds of tax paid in those years (the normal carryback period is only two years).  The new law extends this five-year benefit to 2009 losses as well, and expands it to include all businesses (not just small ones).  You may choose the year in which the carryback will provide the most benefit and carry those losses back two to five years, with some limitations.  Small businesses (based on a $15-million rolling-average gross receipts test) may carry back losses incurred in both 2008 and 2009 up to five years.  Larger businesses may choose only one of these years for the longer carrybacks.  The law also allows NOLs to offset the full amount of alternative minimum taxable income in the carryback year (usually only 90% may be offset) and bars companies receiving TARP assistance from claiming the extended carryback.

HOMEBUYER CREDIT:  Existing law allows an $8,000 credit to persons purchasing a home, provided they have not owned a home in the prior three years and meet certain income requirements.  This law was scheduled to expire on November 30, 2009.  The new law extends this deadline to April 30, 2010.  A new provision allows a reduced credit of $6,500 to existing homeowners under certain circumstances.  The new law also increases the income levels above which the credit phases out, to $225,000 on joint returns and $125,000 on all others (previously $150,000 and $75,000).  The credit is not available if the home being purchased costs more than $800,000.  The new law also contains a provision which allows the credit to be taken if the closing takes place by June 30, 2010, as long as the contract is signed by April 30.  The law also allows the credit to be claimed on 2009 returns even for homes purchased in 2010.  Finally, there are several anti-fraud provisions, such as a minimum age of 18 to claim the credit; no credit allowed to dependents or related parties; and a requirement to attach the settlement statement to the tax return claiming the credit.