| Sponsor | Rep. McDermott, Jim |
| Committee | Ways and Means |
| Date | November 6, 2009 (111th Congress, 1st Session) |
| Staff Contact | Andy Koenig |
The Senate Amendment to H.R. 3548 is being considered on the floor under a suspension of the rules, requiring a two-thirds majority vote for passage on Thursday, November 5, 2009. The bill was introduced by Rep. Jim McDermott (D-WA) on September 10, 2009. The bill was passed in the House on a suspension of the rules by a vote of 331-83 on September 22, 2009. On November 4, 2009, an amended version of the bill was passed in the Senate by a vote of 98-0.
H.R. 3548 extends Unemployment Insurance (UI) benefits for an additional 14 weeks for all States and provides an additional six week extension for States with total unemployment rates above 8.5 percent, giving those States a total of 20 additional weeks. The bill would also extend an existing 0.2 percent Federal Unemployment Tax Act (FUTA) surtax through the first six months of calendar year 2011 to fund the UI extension. H.R. 3548 would also extend and modify the first-time homebuyer tax credit at a cost of $10.8 billion over ten years and increase the carryback period of net operating losses (NOL) for all businesses at a cost of $10.4 billion, paid for mainly by a $20.1 billion delay in implementation of worldwide interest allocation. A full summary of the legislation can be found below:
Unemployment Extension: The bill provides an additional 14 weeks of UI benefits for all States and an additional 6 weeks of UI for states over 8.5 percent unemployment. This means that in high unemployment states, individuals could receive up to roughly 86 weeks of federal unemployment benefits. A summary of the details of the extension follows below:
• Amends the American Recovery and Reinvestment Act ("stimulus") to clarify that the additional $25 per week in UI benefits should not affect eligibility for the purposes of Supplemental Nutrition Assistance Program (food stamps) benefits.
• Amends the "stimulus" to add domestic violence and sexual assault to the list of compelling family reasons which cause an individual to believe continued employment would jeopardize their safety.
• Extends the 0.2 percent federal unemployment surtax for 18 additional months. The surtax currently expires at the end of December, 2009.
• Extends the eligibility window to qualify for extended benefits under the Railroad Unemployment Insurance Act for up to one additional year, to December 31, 2010.
• Provides $175 million for the extended benefits and $807,000 for administrative costs for the Railroad Unemployment Insurance Act.
Homebuyer Tax Credit: H.R. 3548 extends the $8,000 tax credit for first-time homebuyers for five months, from November 30, 2009 to May 1, 2010. In addition, the bill provides a $6,500 tax credit for homebuyers that are not first time buyers, but have owned a primary residence at least five consecutive years in the last eight years. According to the Joint Committee on Taxation (JTC), the provision will reduce revenus by $10.8 billion over ten years.
The bill would cap the eligibility for the credit on homes that cost $800,000 or more and raises the current income limit from $75,000, or $150,000 in the case of a joint return, to $125,000 or $225,000. H.R. 3548 waives provisions to recapture the credit for military, intelligence, and Foreign Service personnel who are on qualified official duty and extends the tax credit for an additional year for those on qualified extended duty overseas for 90 days or more since 2008.
Five-Year Carryback of Net Operating Losses: H.R. 3548 extends the net operating loss (NOL) carryback period from two years to five years for 2008 or 2009 for all firms. A NOL is defined as the amount by which a company or taxpayer's business deductions are greater than its gross income in a given year. Under the legislation, NOLs that are carried back by businesses to the fifth taxable year would be limited to 50 percent of the taxpayer's taxable income and TARP recipients would excluded from the provision. According to JCT, the provision would reduce revenues by $10.4 billion over ten years. The "stimulus" provided a five year NOL carry back provision for businesses with receipts less than $15 million. H.R. 3548 would provide the same carry back for all firms.
Delay of Worldwide Interest Allocation: The bill delays the application of worldwide interest allocation provisions, first enacted into law but never implemented in 2004, through 2018. The change, if not delayed, would allow certain U.S.-based multinational firms with interest expenses to change the way such expenses were apportioned between domestic and foreign source income for purposes of computing their foreign tax credit to more accurately reflect how firms account for interest expenses. Delaying the change would require theses firms to continue to pay higher U.S. taxes. Some Members may be concerned that, in addition to increasing taxes on businesses during a recession, further extension of these provisions would create undue uncertainty for many firms in an uncertain enough economic climate. This implementation date was already delayed by two years in 2008. According to the JCT, this provision, which is being used as an offset, would raise revenues by $20.1 billion over ten years.
Exclusion of Income for Base Realignment and Closure: Expands the amount that military personnel who lose home value because of a military base closure are allowed to exclude from gross income for tax purposes at a cost of $243 million over ten years.
Failure to File Partnership Return: Increases the penalty for failure to file a partnership or S corporation return by $106, from $89 to $195. According to the JCT, this provision increases revenues by $642 million over ten years.
Electronic Filing Requirement: Requires tax return preparers who file ten or more returns for others in a year to electronically file clients' tax returns. According to the JCT, this provision has a "negligible revenue effect."
Corporate Estimated Payments: Raises the estimated quarterly tax payments for certain corporations by 33 percentage points, from 0.25 percent to 33.25 percent, in 2014 and reduces the tax by the same amount in 2015. This would impose a prepayment burden on certain corporations by requiring payments to be made in 2014 and relieved in 2015. This provision, which raises $18.3 billion in the first five years and costs the same in the second five years, is included to satisfy Pay-As-You-Go (PAYGO) requirements. According to the JCT, the provision is revenue neutral over ten years. However, since the bill is being considered under a suspension of the rules, PAYGO compliance is not required.
The legislation offsets the $2.4 billion cost of UI benefits by extending FUTA taxes in 2010 and 2011. According to CBO, the bill would result in a net deficit reduction of $158 million over ten years.
According to the JCT, the net effect of the tax raises and decreases contained in the bill would result in a total cost of $121 million over ten years.