Tax Article -Unemployment Insurance Extension Bill

The Senate Unemployment Insurance Extension Bill may carry NOL carryback relief, homebuyer credit extension and other tax changes. As released by Thomson Reuters on October 26, 2009, part of the following bill may increase the NOL carryback period (currently two years for 2009 NOLS) to three or four years in exchange for a 20% reduction. Other interesting changes are detailed in the Thomson RIA's release below:

"On Oct. 27, the Senate is expected to vote on whether to invoke cloture on the motion to proceed to H.R. 3548, the Unemployment Compensation Extension Act of 2009. Senate Majority Leader Harry Reid (D-NV) is expected to offer an amendment to the bill that would significantly expand the scope of the bill to include net operating loss (NOL) carryback relief, an extension of the first-time homebuyer's credit, and other tax changes.

Unemployment insurance extension and FUTA offset. The Senate bill would extend unemployment insurance benefits for up to an additional 14 weeks for unemployed workers in all 50 states. It would also extend benefits for six additional weeks in states with unemployment levels over 8.5%. The extension would be paid for by extending from 2009 through June 30, 2011 the 6.2% tax on employers under the Federal Unemployment Tax Act (FUTA)—namely, the 6% permanent tax rate, plus the temporary 0.2% surtax. In other words, the repeal of the temporary 0.2% surtax, and the scheduled reduction in the FUTA tax to 6%, would be delayed from 2010 until July 1, 2011.

RIA observation: Note that the House–passed version of H.R. 3548 would provide an additional 13 weeks of extended unemployment benefits in states with high unemployment, and extend from 2009 through 2010 the 6.2% tax on employers under the Federal Unemployment Tax Act (FUTA)—namely, the 6% permanent tax rate, plus the temporary 0.2% surtax (see ¶ 1620 ).

Add-ons to the unemployment insurance bill. The Reid amendment would significantly expanded the scope of the Senate's version of H.R. 3548 by adding these measures:

• Amend Code Sec. 172 to provide new carryback relief for 2008 or 2009 NOLs. The NOL for either year could, after a 20% “haircut” or reduction, be carried back 3 or 4 years. The NOL would be available to all taxpayers except Troubled Asset Relief Program (TARP) recipients.
• The application of the Code Sec. 864 worldwide allocation of interest would be delayed until 2017.
• An extension of the refundable Code Sec. 36 first time homebuyer tax credit (FTHTC) through Dec. 31, 2010 (under current law, it only applies for purchases through Nov. 30, 2009). If claimed for a home bought in 2010, a qualifying buyer could elect to treat the purchase as made on Dec. 31, 2009 (and thus claim the credit on the 2009 return). However, the FTHTC, currently up to $8,000 ($4,000 for married taxpayers filing separately) would be scaled back to $6,000 for purchases after Mar. 31, 2010 and before July 1, 2010, $4,000 for purchases after June 30, 2010 and before Oct. 1, 2010, and $2,000 for purchases after Sept. 30, 2010 and before Jan. 1, 2011 (the maximum credit for married taxpayers filing separately would be half the amount for other taxpayers). To combat abuse of the FTHTC (see ¶ 1631 and Weekly Alert ¶ 3 10/29/2009 ), the amendment would include in IRS's mathematical error authority any omission of the FTHTC credit recapture (this would apply for homes bought on or after the enactment date). This authority allows IRS to summarily assess mathematical or clerical errors without conducting an audit.
• A number of FTHTC liberalizations for individuals on qualified official extended duty outside of the U.S. These liberalizations, which are similar to those in H.R. 3590, the “Service Members Home Ownership Tax Act of 2009,” which was passed by the House of Representatives on October 9 (see ¶ 1628 ), would:

... Amend Code Sec. 36(h) to provide those serving on qualified official extended duty service outside of the U.S. for at least 90 days in calendar year 2009 with an additional year past the proposed general FTHTC extension (i.e., until Dec. 31, 2011) to buy a principal residence and be eligible for the FTHTC. Additionally, those buying a home after 2010 but before 2012 under the change would be able to elect to treat the home as bought on Dec. 31, 2010, in order to claim the credit on the 2010 return.

... Waive the FTHTC 36–month recapture period for those on qualified official extended duty.

... Amend Code Sec. 132(n) to ensure that certain payments to military members under the Defense Department's Homeowner's Assistance Program (HAP) are exempt from tax. (This measure appears to be identical to the HAP change in the House-passed H.R. 3590.)"

Source: http://ria.thomsonreuters.com/taxwatch/default.asp

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