Wednesday, November 11, 2009

Introduction / Worker, Homeownership, and Business Assistance Act of 2009

Before I launch into my first blog entry, allow me to introduce myself and offer a confession: My name is Andrew Gantman, I'm a tax partner at SingerLewak LLP, and I *love* the field of taxation.

While admittedly "geeky," there's something really gratifying about finding an obscure gem in a case, legislative history, or unusual set of facts that allows a client an unexpected benefit. Or working with an IRS examiner to demonstrate why a client is correctly reporting a particular item in a later tax year.

On that note, let's get started!

While everyone's been obsessing over the 1990-page Health Care bill that just passed the House of Representatives (but faces an uncertain future in the Senate), President Obama on November 6 signed the Worker, Homeownership, and Business Assistance Act of 2009 into law.

A few of the more widely (and currently) applicable provisions are as follows:


Extension (Effective for purchases after November 30, 2009)

Extends the credit available to first-time home buyers providing a refundable federal income tax credit equal to the lesser of $8,000 ($4,000 for a married individual filing separately) or 10% of the purchase price of a qualifying principal residence on or after April 9, 2008, and before December 1, 2009. The credit phases out for individual taxpayers with modified adjusted gross income between $75,000 and $95,000 ($150,000 and $170,000 for joint filers) for the year of purchase, and also contains certain recapture provisions upon later disposition of the residence.

The new law generally extends this credit to apply to a principal residence purchased before May 1, 2010. The credit also applies to the purchase of a principal residence before July 1, 2010 by any taxpayer who enters into a written binding contract before May 1, 2010, to close on the purchase of a principal residence before July 1, 2010.

Modification (Effective for purchases after November 6, 2009)

Allows an individual (and, if married, their spouse) to be treated as first-time home buyer if they have maintained the same principal residence for any five-consecutive year period during the eight-year period ending on the date of the purchase of a subsequent principal residence. The maximum allowable credit for such taxpayers is $6,500 ($3,250 for a married individual filing separately).

In addition:
  • Raises the income limitations to qualify for the credit. The credit phases out for individual taxpayers with modified adjusted gross income between $125,000 and $145,000 ($225,000 and $245,000 for joint filers) for the year of purchase.
  • No credit is allowed for the purchase of any residence if the purchase price exceeds $800,000.
  • The property may not have been acquired from a related person.
  • No credit is allowed to any taxpayer if the taxpayer is a dependent of another taxpayer or is under 18 years of age as of the date of purchase. A married taxpayer is treated as meeting the age requirement if the taxpayer or the taxpayer's spouse meets the age requirement.
  • No credit is allowed unless the taxpayer attaches to the relevant tax return a properly executed copy of the settlement statement used to complete the purchase.

FIVE-YEAR CARRYBACK OF OPERATING LOSSES ("NOLs") - Effective for NOLs arising in taxable years ending after December 31, 2007 and beginning before January 1, 2010

Expands and enhances the availability of NOL carrybacks to a larger number of taxpayers.

More specifically:
  • Five-year NOL carryback now allowed to taxpayers outside the scope of that previously allowed (i.e., not only to small businesses meeting the $15 million gross receipts test).
  • Five-year NOL carryback now applies to either 2008 or 2009 NOLs (but not both).
  • Suspends the 90% limitation on the use of alternative minimum tax NOLs for which an extended carryback period is elected.
  • Taxpayers may irrevocably elect to have the NOL carry back 3, 4, or 5 years. However, under the new rules, the use of such carryback is limited to 50% of the taxable income of the 5th preceding year (if the taxpayer elects to carry it back 5 years), with the remainder being carried forward to subsequent years.
  • Taxpayers who elected to waive their carrybacks prior to the enactment of this provision may generally revoke that election.
  • This provision is generally unavailable to TARP recipients.

FEDERAL UNEMPLOYMENT TAX ACT "FUTA" EXTENSION - Effective for wages paid after December 31, 2009

Extends the 6.2% FUTA rate applicable to wages paid through December 31, 2010. The rate imposed on employers was previously scheduled to fall to 6.0% for wages paid after December 31, 2009.

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