Homeownership Tax Credit Included in 2005 Budget Proposal - 2/23/2004 - Insurance Lawyers Taxes

Homeownership Tax Credit Included in 2005 Budget Proposal

A top NAHB legislative priority, the measure would provide developers and investors with a tax credit of up to 50% of the cost of constructing a new home or rehabilitating an existing property in distressed areas.

At NAHB’s request, Senators Gordon Smith (R-OR), Rick Santorum (R-PA), Debbie Stabenow (D-MI) and John Kerry (D-MA) — the lead sponsors of HOTC bills S. 198 and S. 875 — sent a joint letter on Feb. 12 to Senate Finance Committee Chairman Charles Grassley (R-IA) and Ranking Member Max Baucus (D-MT) urging the committee leaders to support the tax credit initiative in the current session of Congress.

The four Senators stated that there are 43 Senate cosponsors for either or both of the bills, and that the HOTC is supported by a majority of the members of the Senate Finance Committee, the panel with jurisdiction over tax legislation. The sponsors also noted that the tax credit is expected to create 50,000 homes annually in economically distressed areas.

In the House, homeownership tax credit legislation H.R. 839 has 250 cosponsors, or 57% of the chamber’s 435 members.

The Administration’s $2.4 trillion budget would increase defense spending by 7% and homeland security funding by 10%, and hold the rest of the nation’s discretionary spending growth at 0.5%.

Despite the tight fiscal situation and the spending limits the President is seeking in domestic programs, the Department of Housing and Urban Development did receive a slight increase in funding for FY 2005 — to $31.2 billion from the current year’s $30 billion.

The budget covers a number of NAHB’s priorities. While many programs are allocated funding similar to last year’s levels, a number of programs are slated for drastic cuts. The President’s budget proposal:

• Increases HOME funding by $75 million over the FY 2004 level, bringing the FY 2005 budget to $2.085 billion. Within that amount is a $200 million set-aside for the President’s Downpayment Assistance Initiative, and $2 million for the PATH program, which is being moved into the HOME program from the Policy, Development and Research fund.
• Provides $4.618 billion for the Community Development Block Grant program, of which $4.331 billion is for formula grants.
• Eliminates the Community Development Block Grant Section 108 Loan Guarantee program.
• Eliminates the HOPE VI program.
• Proposes converting the Section 8 voucher program to a state-run block grant called the “Flexible Voucher Program,” which would be administered by local public housing authorities and state housing finance agencies that are already running voucher programs. This program would be funded at $18.465 billion.
• Provides no funding for the Brownfields Redevelopment program.
• Provides no funding for the Rural Housing and Economic Development program.
• Increases the Job Corps program funding by $20 million to $1.57 billion.
• Cuts Section 502 Direct loan program authority to $1.1 billion, a $366 million decrease from the 2004 level.
• Funds the Section 515 Rural Rental Housing Direct Loan program at $60 million, all of which would be used for repairs or rehabilitation of existing Section 515 units.

NAHB continues to analyze the President’s budget package, and will be working with congressional appropriators as they craft the FY 2005 spending bills. Already, several lawmakers have voiced displeasure with the President’s budget, kicking off what could be another long, difficult road to complete work on the annual spending bills.