Reporting from Washington -
Will Congress extend the wildly popular $8,000 home buyer tax credit beyond its Dec. 1 expiration date?
That’s a question generating huge pressure on Capitol Hill from would-be buyers who haven’t found the right house as well as from realty agents, builders, lenders and squads of lobbyists working on their behalf.
But here’s the first hint of an answer: On Sept. 17, the leadership of Congress’ primary tax legislative committee introduced a tax credit bill that’s likely to zip through the House and move to the Senate rapidly. Charles B. Rangel (D-N.Y.), chairman of the House Ways and Means Committee, sponsored the bipartisan Service Members Home Ownership Tax Act (H.R. 3590), which would extend the credit for another 12 months for thousands of military, Foreign Service and intelligence agency personnel who’ve been posted abroad during 2009.
Rangel’s bill, with 29 cosponsors, would keep the credit alive through Nov. 30, 2010, for service members who had at least 90 days of overseas duty assignments during 2009 and who otherwise meet the eligibility requirements.
The bill would also prohibit the IRS from “recapturing” the $8,000 credit when service members are forced to sell or rent out their houses because they are ordered to deploy to a different duty station, overseas or inside the country.
Under the regular rules of the program, buyers who obtain the credit must use their houses as a principal residence for 36 months or repay the credit to the IRS.
As a result of the 36-month rule, many military and diplomatic employees have been hesitant to buy a house and claim the credit or are worried that their absence from the country could force them to repay the money.
For example, the spouse of a Foreign Service officer posted to the Philippines this summer for a two-year assignment wrote to Rep. Earl Blumenauer (D-Ore.) to alert him to a flaw in the tax credit program. The Oregon couple bought their first home earlier this year, encouraged by affordable prices and the $8,000 credit. But having now been posted abroad, they cannot claim to occupy the house as their principal residence. Under current rules, they face recapture of the full credit.
Blumenauer, who is a member of the Ways and Means Committee, said “it is absurd that thousands of Americans serving our country, away from friends and family, must choose between their service work and homeownership.” He wrote corrective legislative language that was incorporated into Rangel’s tax bill.
Though nothing is guaranteed on Capitol Hill, legislation eliminating tax penalties on the military during wartime looks like a good bet for early passage in both houses. Equally significant: It now appears likely that there will be an $8,000 tax credit available a year from now — at least for some purchasers. Which raises the question: Why not leave it in place for all first-time buyers?