Unemployment Benefits, Homebuyer Credit & Net Operating Losses (NOLs)

Well, they've finally done it. But wait; it's on hold.

Legislation that would extend unemployment benefits and extend and expand a tax credit for first-time homebuyers remained stalled in the Senate Thursday in a partisan stalemate over other amendments. The bill (HR.3548), as passed by the House, would allow unemployed individuals in all 50 states to draw an extra 14 weeks of benefits, with six more weeks available to those in states with a jobless rate exceeding 8.5 percent.

The Senate is poised to add language to extend the $8,000 credit for first-time homebuyers who enter sales contracts by April 30, 2010, and close within 60 days. Individuals would be able to claim the credit for purchases in 2010 on their 2009 tax returns, which would mean they could get the money relatively quickly. The measure would also add a $6,500 credit for some existing homeowners, as long as they have lived in their homes for five consecutive years. The income cap for qualifying would be raised to $125,000 for individuals and $225,000 for married couples, up from $75,000 and $150,000, respectively. Homes sold for more than $800,000 would not be eligible for the credit.

Additionally, the Senate is expected to add a provision that would allow money-losing companies to offset current losses against up to five years of past profits. Both tax provisions are expected to be offset by a multi-year delay in the effective date of a law (PL 108-357) that gives multinational corporations more flexibility in how they handle their interest expense as well as by a provision increasing penalties for taxpayers failing to file timely partnership and S corporation returns (as we go to press, we don’t know the details on the penalties).

The House leadership has signaled they would act on and likely support a bill including all the provisions when provided by the Senate. No one can predict when the final version of the bill will be put forth but anticipate it will be sooner (likely next week) than later due to the nearing expiration dates of both jobless benefits and the homebuyer credit.

Owen S. Arnoff, Enrolled Agent
Admitted to Practice Before the Internal Revenue Service
http://www.betterbusinessventures.com
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