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Clients and Friends:
There have been some recent developments that I wanted to share with you, regarding an extension of the home buyer credit, and the current status of the health care reform bill working it's way through Congress. Contact us with any questions.
Bob
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HOUSE PASSES HEALTHCARE REFORM BILL
Will the Senate follow?
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A narrow victory for the President in one branch of Congress. The Affordable Health Care for America Act (H.R. 3962) passed 220-215 in the House of Representatives on the night of November 7, with 39 Democrats voting no and a lone Republican (Rep. Anh Cao of Louisiana) voting yes.1 While President Obama lauded passage of the House version of the bill as "historic" and "courageous", it is still questionable whether any consensus reform bill will land on the President's desk by the end of 2009.
A tough fight ahead in another. Right now, the Democratic caucus has the 60 votes needed in the Senate to get past a Republican filibuster. However, Sen. Joseph Lieberman (I-Connecticut) says he will readily break away and join the Republican filibuster if the Senate version of the bill includes a public option. Senate Majority Leader Harry Reid (D-NV) says it will.
"The House bill is dead on arrival in the Senate," in the opinion of Sen. Lindsey Graham (R-SC). In early November, Sen. Reid hinted that the Senate may take until 2010 to resolve the debate over the public option.
What the House approved. H.R. 3692 includes the public option in its effort to revamp and extend health care to more Americans. Under the bill, most Americans would need to have insurance coverage; subsidies would help the poor insure themselves. Medicaid would expand: for example, individuals with incomes of $16,245 or less and a family of four earning $33,075 or less would qualify. About 15 million more Americans would be eligible for Medicaid coverage. Big businesses would have to provide health insurance to their workers; small businesses would get federal subsidies to help them absorb the cost.
H.R. 3692 would create a new nationwide insurance market with private insurers competing with the federal government (the private insurers would be selling coverage that meets federally required benefit levels).3 Insurance companies have decried the public option, saying there is no way they could compete with Uncle Sam.
A key concession. Before H.R. 3692 was approved in the house, a controversial amendment to the bill was passed 238-194. Introduced by Rep. Bart Stupak (D-MI), Rep. Brad Ellsworth (D-IN) and other Democrats, the amendment would prohibit the use of federal monies for abortion services if the planned health reforms become law, except in cases of rape, incest or if the mother's life is in danger.
Pro-choice voices are outraged, arguing that the amendment would virtually prohibit private insurance companies entering the new system to offer abortion coverage to women. Rep. Anthony Weiner (D-NY) pointed out to MSNBC that even if someone wants to purchase an insurance policy covering abortion after the proposed reforms, few if any private insurers might offer one. Rev. Patrick J. Mahoney, Director of the Christian Defense Coalition, hailed the amendment "the beginning of the end for Roe v. Wade."
Little publicized, but notable. One of the provisions of the just-passed House bill would change the IRS treatment of healthcare benefits for same-sex couples. Essentially, these benefits are treated as taxable income today; if the health care reforms envisioned and approved by the House were to become law, those benefits would be provided to gay and lesbian couples tax-free. Rep. Jim McDermott (D-WA) proposed this change to "correct a longstanding injustice, end a blatant inequity in the tax code, and help make health care coverage more affordable for more Americans." In another unpublicized wrinkle, anyone who owns or operates 20 or more vending machines would have to provide nutritional labels on said machines, and any chain restaurant with more than 20 locations in America would have to provide menu calorie counts.
Progress, or a morass? The House bill certainly faced stiff opposition, and many Capitol Hill watchers are wondering if the legislation will make it through the Senate. A consensus version of the bill might not emerge for weeks or months.
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EXTENDED HOMEBUYER CREDITS & JOBLESS BENEFITS
New federal actions aid the real estate sector and the unemployed.
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After unanimous passage in the Senate and a 403-12 passage in the House of Representatives, President Obama signed H.R. 3548 into law on November 6. The bill extends and expands a key tax credit for homebuyers while also offering more help for those out of work.
The $8,000 credit for "first-time" homebuyers continues. This tax break is now extended until May 1, 2010. If you have never owned a home or haven't owned a home in the previous three years, you are considered a "first-time" buyer and therefore eligible for the credit (it is a credit of up to $8,000, by the way). You must sign your purchase agreement before May 1, 2010 and close the transaction before July 1, 2010 to qualify for this tax break.
The $6,500 tax break for move-up buyers. Okay, maybe you aren't a "first-time" buyer. You may still qualify for this new real estate credit. Have you lived in your current home for more than five consecutive years? You may be eligible for a credit of up to $6,500 if you move out of that home and buy another. Again, you have to sign your purchase agreement before May 1 and close before July 1 to get the tax break.
Worth noting: BusinessWeek.comcontacted Sen. Chris Dodd's office (the Connecticut lawmaker chairs the Senate Banking Committee) and received word that move-up buyers can qualify for this $6,500 credit even if they have signed a purchase contract prior to November 6, provided the purchase closes before July 1.
Does everyone qualify for these credits? Not quite. They phase out for individuals with adjusted gross incomes of more than $125,000 a year and couples with AGI of more than $225,000 a year. (The old phase-outs respectively kicked in at $75,000 and $150,000. These higher phase-outs mean that the credit can now help an additional segment of the housing market.)
You can't buy a vacation home and claim one of these credits - they only apply to principal residences. In fact, the home you buy has to have a sale price of $800,000 or lower.
What will this do for the economy? "Every economist will tell you we have to steady the housing market before the economy will turn around," Sen. Dodd expressed on November 5. "We can't afford to let this tax credit expire now." Respected Moodys.com economist Mark Zandi agrees, saying that "from a macroeconomic perspective, nothing is more important than stabilizing housing values." Zandi thinks that the $8,000 credit has led to 400,000 additional home sales in 2009. On the other hand, Dean Baker, the co-director of the Center for Economic and Policy and Research, questions why the extension is necessary: "For the most part, you're just giving people money for something they would have done otherwise." The Joint Committee on Taxation estimates that extending these credits into 2010 will cost $10.8 billion across the next decade.
An extension of unemployment benefits. H.R. 3548 - sponsored by Rep. James McDermott (D-WA) - additionally extends state jobless benefits by up to 20 weeks. This will happen as a result of another extension - an extension of the federal unemployment tax on employers until June 30, 2011.
If you are one of nearly two million Americans whose jobless benefits are set to run out at the end of 2009, this extension will help you. Your benefits will last at least another 14 weeks into the new year - in fact, they will last for another 20 weeks if you live in a state where the unemployment rate exceeds 8.5%. Have your unemployment checks already stopped? You may reapply for benefits.
A chance for companies to convert losses into cash. What? Really? Yes. There is one provision of the new legislation that many have overlooked: it widens the window of time on the net-operating loss carryback. It lets all businesses apply losses from either 2009 or 2008 to any five years prior to 2008. So business owners, by virtue of the new legislation, have the potential for an IRS refund on the taxes they paid for the five years prior to 2008. There are two asterisks here. One, refunds for taxes in the fifth year of the carry back shrink by 50%. Two, any business that received TARP funds can't take advantage of this tax break.
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