Senate Housing Stimulus Bill Stalls Due to Energy Spat; Post-Recess Action Expected

The mood in the Senate quickly turned from hopeful to sour the week of June 23 as bipartisan legislation to provide tax and spending incentives to address the ailing housing market hit a roadblock due to disagreements over a proposed energy tax extenders amendment. Although Senate leaders had initially hoped to get the bill passed before adjourning for the upcoming Independence Day recess, it now looks as though further action will be delayed until lawmakers return to Capitol Hill the week of July 7.

The rift centers around an $8.3 billion amendment, authored by Sens. John Ensign, R-Nev., and Maria Cantwell, D-Wash., that would extend certain temporary tax incentives to promote clean energy production and improve energy efficiency. The same amendment was tacked on to an earlier housing bill passed by the Senate in April but was stripped out when the House considered the legislation. Ensign had hoped to offer the amendment and have it added back to the current housing stimulus bill. (For coverage of the prior Senate housing bill, see Tax News & Views, Vol. 9, No. 17, Apr. 10, 2008.)

Senate Majority Leader Harry Reid, D-Nev., however, refused to let Ensign offer the amendment, arguing that energy incentives are not relevant to the bill and that the amendment would violate congressional pay-as-you-go rules because it is not paid for with revenue offsets. As a result, Ensign, in an attempt to secure a vote on the energy package, used procedural tactics to hold up further consideration of the legislation and to prevent other senators from offering their own amendments.

The House and Senate housing bills propose a new refundable credit for first-time homebuyers, a temporary standard property tax deduction for nonitemizers, modifications to the low-income housing credit, liberalized mortgage bond rules, and reforms related to real estate investment trusts. The Senate bill also would extend certain Gulf Opportunity Zone incentives and allow taxpayers who are in a loss position or subject to the alternative minimum tax (AMT) to monetize a portion of their unused AMT or research credits to the extent that they invest in assets that qualify for bonus depreciation.

The Senate bill would be paid for in part with provisions to require information reporting on payment card and third-party network transactions, deny exclusion of gain on the sale of a principal residence allocated to periods of nonqualified use, and increase penalties for failure to file various tax returns and information returns. Revenue raisers in the House bill include mandatory broker reporting for securities sales and a delay in the effective date of the worldwide interest allocation election.

— Kathy Loden
    Tax Policy Group
    Deloitte Tax LLP

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