Senate Passes Housing Stimulus Proposal; Includes Four-Year NOL Carryback and Renewable Energy Tax Package
After a full week of deliberation, the Senate April 10 voted 84-12 to approve a $14.8 billion bipartisan compromise bill (H.R. 3221) that includes an extended net operating loss (NOL) carryback provision for the business community and tax incentives and spending measures to aid struggling homeowners and prop up the housing market.
Several amendments were tacked onto the bill, including a $6 billion package of provisions to extend several expired or expiring energy tax incentives for one year. The compromise package does not include revenue offsets.
Senate passage of the bill comes on the heels of House Ways and Means Committee action on their own fully offset $10.9 billion housing stimulus tax package (H.R. 5720) on April 9. (For prior coverage, see Tax News & Views, Vol. 9, No. 16, Apr. 9, 2008.) The Ways and Means Committee bill is expected to be combined with a Financial Services Committee mortgage and housing rescue proposal to be considered in the coming weeks.
Extended NOL Carryback
The Senate bill provides some $11 billion in various tax breaks over 10 years, including an extension of the NOL carryback to four years (from two years) for NOLs arising in tax years ending in 2008 and 2009. This provision would provide $25.5 billion in short-term stimulus (for 2008-2010) and a net $6.1 billion over 10 years.
The bill provides that taxpayers may elect to take the extended NOL carryback or the increased expensing deduction and the 50 percent bonus depreciation deduction enacted in February as part of the Economic Stimulus Act of 2008. In contrast, the House Ways and Means proposal does not include an NOL provision.
The Senate approved an amendment offered by Sen. George Voinovich, R-Ohio, that would allow loss companies to accelerate their accumulated alternative minimum tax (AMT) and research and experimentation tax credits in lieu of taking bonus depreciation.
Housing Tax Provisions
Tax relief provisions targeted to homeowners include:
- A deduction of up to $1,000 for property taxes for property owners who do not itemize (10-year cost: $1.5 billion);
- A $10 billion increase in the cap on mortgage revenue bonds so housing finance agencies can refinance subprime mortgages (10-year cost: $1.7 billion); and
- A nonrefundable $7,000 tax credit over two years for homebuyers who purchase as their primary residence a qualified home in or near foreclosure (10-year cost: $1.7 billion).
Energy Tax Extenders Amendment Adopted
An amendment offered by Senate Finance Committee members Maria Cantwell, D-Wash., and John Ensign, R-Nev., was added to the bill by a vote of 88-8. The amendment, which extends certain temporary tax incentives to promote clean energy production and improve energy efficiency, mirrored the Clean Energy Tax Stimulus Act of 2008 offered by the two senators late last week.
Major provisions would address the following credits and incentives:
- Renewable Energy Production Tax Credit (Section 45) – The bill would extend the placed in service date for qualifying renewable energy production facilities for one year (through December 31, 2009). It also would redefine small irrigation power to include marine and hydrokinetic energy, and enable the credit to help reduce the cost of renewable electricity that is ultimately sold to utility customers when the utility itself is also a part owner of the renewable facility.
- Energy-Efficient Commercial Buildings Deduction – The bill would extend the deduction to property placed in service through December 31, 2009, increase the maximum deduction to $2.25 per square foot, and allow a partial deduction of 75 cents per square foot for building subsystems.
- Solar Energy and Fuel Cell Investment Tax Credit – The bill would enable taxpayers to claim the 30 percent business credit for the purchase of fuel cell power plants and solar energy property and the 10 percent credit for stationary microturbines, through December 31, 2016. In addition, the bill would repeal the $500 per 0.5 kilowatt of capacity cap for qualified fuel cell power plant property, and allow electric utilities to claim the credit.
- Residential Energy-Efficient Property Credit – The bill would extend the credit for residential solar property for one year (through December 31, 2009) and repeal the $2,000 credit cap for qualified solar electric property. It also would allow the tax credit to offset AMT liability.
- Clean Renewable Energy Bond (CREB) Authorization – The bill would authorize an additional $400 million of CREBs that may be issued and extend the authority to issue such bonds through December 31, 2009. In addition, the bill would allocate 1/3 of the additional bonds for qualifying projects of state/local/tribal governments, 1/3 for qualifying projects of public power providers, and 1/3 for qualifying projects of electric cooperatives.
- Special Rule to Implement Federal Energy Regulatory Commission Restructuring Policy – The bill would extend through December 31, 2009, the present-law deferral provision that enables qualified electric utilities to recognize gain from certain transmission transactions over an eight-year period.
- Credit for Energy-Efficient Improvements to Existing Homes – The bill would extend the credit for one year (through December 31, 2009), and specify that certain pellet stoves are included as qualified energy-efficient building property.
- Credit for Energy-Efficient New Homes – The bill would extend the energy-efficient new homes credit for two years (through December 31, 2010), and permit an eligible contractor to claim the credit on a home built for personal use as a residence.
- Energy-Efficient Appliance Credit – The bill would extend the credit to appliances produced in 2008, 2009, and 2010, and update the qualifying efficiency standards in accordance with the Energy Independence and Security Act of 2007.
More than a dozen minor amendments were also added to the bill.
— Kathy Loden & Brendan Mahoney
Tax Policy Group
Deloitte Tax LLP