Fraternal Advantage - April 2008

NFCA Legislative Update

Paygo and the 501(c)(8) Exemption
 
The Housing Assistance Act was considered April 9, by the House Committee on Ways and Means, and no mention of using the fraternal exemption as a paygo was suggested.  Most of the provisions are narrowly targeted to the housing market, and include a first time homebuyer credit, an additional standard deduction for real property taxes (for taxpayers who otherwise claim the standard deduction), and a package of provisions to assist low income housing including provisions relating to tax-exempt bond authority in the housing area.

The House bill differs from a proposal now pending in the Senate in two key respects.  First, the House bill is focused on consumers and does not contain major corporate economic stimulus provisions.  The Senate bill, by contrast, contains a five-year carryback of net operating losses for tax years 2008 and 2009, or as an alternative, the authority to accelerate Alternative Minimum Tax (AMT) and research credits instead of taking either the recently enacted bonus depreciation allowance or the NOL carrybacks for five years.  The House is fully offset in cost (approximately $11 billion) by using broker basis reporting ($8 billion) and a one-year delay in worldwide interest allocation ($3 billion).
 
On April 8, the White House indicated that it was opposed to the Senate bill and has indicated prior opposition to the offsets used in the House proposal.
 
Both Senate Finance Committee Chairman Max Baucus (D-Montana) and House Ways and Means Committee Chair Charles Rangel (D-New York) are expected to introduce their extender proposals soon.  The Senate version is expected to be for two years with a likely cost of $50 billion.  Both are expected to be fully offset, an indication that at least at the outset of the tax debate, fiscal conservatives will demand that the paygo rules be respected.
 
However, the use of offsets and expected opposition to them by the Administration could delay enactment of the extenders until late 2008, possibly into a Lame Duck session.  None of these bills include the AMT patch that is expected to cost almost $70 billion this year.



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