By Bruce Alpert
WASHINGTON — Mortgage help for homeowners nationwide and tax relief for some Louisiana Road Home recipients sailed through the House on Wednesday after President Bush lifted his veto threat.
The tax relief in the giant housing rescue bill is expected to win Senate approval this week and be signed into law soon.
The bill includes $300 billion to provide more affordable mortgages to troubled homeowners, nearly $4 billion in grants to help communities fix up foreclosed properties and a $7,500 tax credit for first-time home buyers.
White House spokeswoman Dana Perino said the president believes the bill is too important, given the housing crisis, to trigger a lengthy veto fight. The legislation is designed to help 400,000 homeowners facing foreclosure and prevent financially struggling mortgage giants Fannie Mae and Freddie Mac from collapsing.
“It is excellent news for Louisiana and the Gulf Coast,” said Sen. Mary Landrieu, D-La., who said the White House announcement means that about $1.3 billion in tax relief will flow to Louisiana.
Landrieu first proposed the Road Home tax fix in January 2007. The measure would allow taxpayers who took a casualty loss deduction for hurricane damage in 2005 and subsequently received a Road Home grant to amend their 2005 returns to eliminate the deduction. They would pay the resulting higher tax without interest or penalties. For many taxpayers that will result in significantly smaller tax liabilities than keeping the deduction and paying taxes on the Road Home grants.
The Internal Revenue Service wouldn’t say Wednesday how quickly it could set up a process for taxpayers to amend their returns to take advantage of the anticipated new law.
“IRS does not comment on pending legislation,” a spokesman said. “Much like other legislation, once the housing bill has been signed into law we will implement it as soon as we possibly can.”
Metairie CPA Gerard H. Schreiber Jr. said the IRS has known about the legislation for months and should be able to implement it pretty quickly.
Not every taxpayer will benefit from the change. Some, depending on their situation, may do better holding on to their 2005 tax deduction, Schreiber said.
“You (have) got to do the calculations,” he said.
In a disappointment to Louisiana lawmakers, the bill doesn’t preserve a provision, originally passed by the House, that would have set aside a $500 million affordable housing program almost entirely for the New Orleans region, with smaller amounts of money going to communities in Mississippi, Alabama and Texas.
The bill reflects a change made by Senate sponsors to make the pool of money available nationwide, which significantly reduces the impact locally.
“This is a huge loss in the bill,” said Rep. William Jefferson, D-New Orleans, who added that Senate sponsors believed that the assistance should be made available nationwide.
The housing bill includes a $3.9 billion local grant program that would allow local governments to purchase and renovate foreclosed homes. Landrieu’s office estimated that the provision could generate $95 million for Louisiana.
Louisiana lawmakers expressed relief that the Road Home tax relief finally appeared headed for enactment.
“Treating Road Home grants as taxable income is completely backward and goes against the whole purpose of a recovery program,” said Rep. Charlie Melancon, D-Napoleonville.
Sen. David Vitter, R-La., applauded the Road Home provision, but continued to raise questions about the housing rescue provisions.
“This housing bill is really an unprecedented taxpayer bailout of some very bad actors in the financial industry,” Vitter said. “It’s a $25 billion bailout of companies whose CEOs made $12 million and $20 million the same year their stock prices fell by almost 50 percent.”
The bill also extends the date by which construction must begin for companies to take advantage of accelerated depreciation allowances for building projects in hurricane-devastated communities. Louisiana officials said the original deadline, part of the original GO Zone legislation, was unrealistic.