$1.1 billion tax relief amendment to housing bill would eliminate so-called “Road Home Tax,” spur business investment
WASHINGTON – April 11, 2008 – (RealEstateRama) — The United States Senate today overwhelmingly passed a measure by U.S. Senator Mary L. Landrieu, D-La., to lift an onerous tax burden from thousands of Gulf Coast homeowners who received rebuilding grants following Hurricanes Katrina and Rita. The amendment to H.R. 3221, a bill to help relieve the nationwide housing and mortgage crises, was cosponsored by Senators Thad Cochran, R-Miss., David Vitter, R-La., and Roger Wicker, R-Miss.
“When Congress passed the critical funding to make rebuilding grants available to Gulf Coast homeowners, the intent was never for people to face a hefty tax bill on their recovery,” Sen. Landrieu said. “The Senate stepped up in an impressive, bipartisan way today to set this right. We now need the help of our House delegation to make this relief 100 percent secure, but we are a significant step closer to eliminating the ‘Road Home Tax’ once and for all.”
In total, the measure will provide $1.1 billion in tax relief to Gulf Coast homeowners and businesses.
The amendment required 60 votes to overcome another Senator’s objection to its cost. The objection was cast aside by a 74-to-5 vote and the amendment subsequently passed in a voice vote. The underlying housing bill will continue to be debated today and into next week.
Homeowners who took a casualty loss deduction on their 2005 federal tax returns to account for hurricane damage to their homes have been required by the Internal Revenue Service (IRS) to pay income tax on subsequent rebuilding grants. In Louisiana, those grants come through the Road Home program, and can push these affected homeowners into a higher tax bracket. As a result, they may be required to pay a tax far greater than any refund or reduction they received on their 2005 return due to their casualty loss deduction.
The Landrieu amendment would allow homeowners who took the 2005 deduction to amend their 2005 return by repaying whatever savings they received with only one year of interest. Their rebuilding grant income would then be tax-free. If the housing relief bill is signed into law with the Landrieu amendment intact, homeowners are urged to consult a Certified Public Accountant or other tax professional to determine how it will affect their returns.
The amendment also extends the deadline under which businesses are required to begin construction of new ventures in the hurricane-affected areas in order to benefit from Gulf Opportunity Zone (GO Zone) bonus depreciation tax benefits. Currently, only projects that began on December 31, 2007 were eligible for the tax relief. Under the Landrieu amendment, no commencement deadline would exist.
“Businesses and families alike along the Gulf Coast know well that our recovery is far from complete, and the need to encourage fresh investment remains as strong as ever,” Sen. Landrieu said. “This measure, which I was proud to craft with my Republican colleagues from Mississippi, simplifies the GO Zone rules to make it clear: economic recovery is not about when first shovels go into the ground, it’s about when doors can open for business. This tax relief will spur more investment and business construction in the areas that need the economic boost the most.”
Of the $1.1. billion, the GO Zone extension would provide an estimated $308 million in additional benefit to Gulf Coast businesses and residential development. The amendment also includes $65 million in tax benefits to areas affected by the 2007 Kansas tornadoes.