Senators Agree to Extend Homebuyer Tax Credit
Senators agree to extend tax credit for first-time homebuyers, expanding it to repeat buyers
By STEPHEN OHLEMACHER
The Associated Press
WASHINGTON
Senators agreed Wednesday to extend a popular tax credit for first-time
homebuyers and to offer a reduced credit to some repeat buyers.
The tax credit provides up to $8,000 to first-time homebuyers but is
set to expire at the end of November. The Commerce Department said
Wednesday that new home sales fell 3.6 percent in September, and some
industry representatives blamed uncertainty about the tax credit.
Senators agreed to extend the existing tax credit for first-time
homebuyers while offering a reduced credit of up to $6,500 to repeat
buyers who have owned their current homes for at least five years, said
Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid,
D-Nev.
The tax credits would be available to homebuyers who sign sales
agreements by the end of April. They would have until the end of June
to close on their new homes, according to a summary of the legislation
being circulated among lawmakers.
Senators were still negotiating the expansion of a separate tax credit
that lets money-losing businesses get refunds for taxes paid in
previous years, providing them with an immediate source of cash.
Senators in both political parties were hoping to add both tax
provisions to a bill that would give people running out of unemployment
insurance benefits up to 20 more weeks of federal aid. The Senate could
vote on the overall bill as early as Thursday, but lawmakers were still
haggling over several unrelated amendments Wednesday evening.
Popular bills like the one to extend unemployment benefits often
attract amendments that would have a difficult time passing on their
own.
Republicans were demanding that they be given a chance to offer
amendments to restrict federal aid to the beleaguered community
activist group ACORN and on requiring that people receiving
unemployment insurance be processed through E-Verify, an Internet-based
system that employers use to check on the immigration status of new
hires.
Majority Democrats have refused to add the amendments.
If the Senate passes the bill, it would go to the House, which passed a
similar bill extending unemployment benefits last month. House leaders
have also said they support extending the tax credit for homebuyers.
Sen. Chris Dodd, D-Conn., has been negotiating for several weeks with
Sen. Johnny Isakson, R-Ga., to craft an extended tax credit for
homebuyers that would pass the Senate.
Lawmakers didn't release a cost estimate for extending the tax credit,
though similar proposals were projected to cost about $10 billion.
Industry representatives said uncertainty about the tax credit is
hurting new home sales. September's decline was the first since March.
It takes 45 days to 60 days to close on a house, making it unlikely a
sale made today would be consummated by the end of November, said
Lucien Salvant, spokesman for the National Association of Realtors.
"Buyers right now have an incentive to hold off, not knowing whether the credit will be extended," Salvant said.
About 1.4 million first-time homebuyers have qualified for the credit
through August. The National Association of Realtors estimates that
350,000 of them would not have purchased their homes without the credit.
The tax credit for money-losing businesses is a favorite among
Republican lawmakers. Businesses could get tax refunds by using losses
from 2008 and 2009 to offset taxable profits made in the previous five
years. Under current law, they can only offset profits from the
previous two years.
The provision would help a variety of industries, including retailers, manufacturers and home builders, though it's expensive.
"It's clearly a way to put cash in the hands of some major economic
players," said Clint Stretch, a tax policy expert at Deloitte Tax.
A similar proposal that was ultimately dropped from the economic
stimulus package enacted in February would have cost nearly $20 billion
over 10 years. Lawmakers are working to reduce the price tag.
Because people are so strapped for cash, this is a good way to get
refunds when businesses need them for operating expenses, said Rachelle
Bernstein, vice president and tax counsel for the National Retail
Federation.
