The lame-duck session also will have to deal with a slew of other real-estate-related issues, including write-offs for mortgage insurance premiums, tax benefits for homeowners who install energy-saving improvements, tax credits for builders of energy-efficient houses and extension of current relief for middle-income taxpayers from the alternative minimum tax (AMT).
While President Obama, Republican challenger Mitt Romney and most members of Congress have been campaigning, staffs of key House and Senate tax and finance committees — along with hordes of lobbyists — have been working out game plans for the lame-duck session. One key question: Could the Family and Business Tax Cut Certainty Act of 2012 — which passed the Senate Finance Committee in August and includes mortgage forgiveness relief and other housing-related tax extensions along with AMT relief, research and development tax credits and dozens of other targeted tax benefits — be treated as a stand-alone bill? If not, there’s a strong risk of its getting caught up in the much larger partisan fights over spending, the federal debt ceiling and the whole fiscal cliff issue.
Senate Democrats reportedly were prepared to bring the bill to the floor for a vote before the election recess, but it never happened. Now the fate of the legislation appears to be up in the air, and House leaders may come up with a version of their own.
Here’s a quick overview of some of what’s at stake for homeowners:
●Mortgage debt tax relief. Besides the Senate Finance Committee’s bill awaiting action in that chamber, there are at least four that have been introduced in the House that would extend the forgiveness law. Rep. Jim McDermott (D-Wash.) is sponsoring a bill that would extend the relief through 2015. Rep. Charles Rangel (D-N.Y.) wants to extend it through 2014. Both are members of the tax-writing Ways and Means Committee. Rep. Dan Lungren (R-Calif.) is pushing for a three-year extension, and Rep. Tom Reed (R-N.Y.) favors a one-year extension, through 2013.
The fact that there is significant bipartisan support for an extension in the House greatly increases the odds that mortgage-forgiveness tax relief in some form will pass before the end of the session. One housing lobbyist gives it a 60 percent chance of eventual passage, even better if post-election lame ducks and victors find ways to compromise on the bigger issues. The main obstacle to extension: revenue cost to the federal government. Congressional tax experts estimate that even a simple one-year extension would cost the Treasury $1.3 billion over 10 years. (Congressional rules require that all revenue estimates be made over 10-year period, even if the change in the tax code is authorized for fewer years.)
●Mortgage insurance premium deductions. Under tax code provisions that expired last December, buyers and refinancers who pay either private or government mortgage insurance premiums could write them off, subject to household income limitations. The Senate Finance Committee bill would reauthorize these deductions retroactive to Jan. 1, 2012, and extend them through the end of 2013. Since this would cost the government an estimated $1.3 billion over 10 years and has not attracted as intensive a lobbying effort as mortgage-debt forgiveness, it may be more vulnerable.
●Energy-efficiency improvements to homes. The Senate Finance Committee-passed bill would extend for two years — through 2013 — tax credits for installation of energy-conserving windows, doors and other improvements. The bill would also extend credits available to builders of energy-efficient homes. These have a reasonable shot at extension, given strong support from home builders and product manufacturers.
Bottom line: On tax-system support for financially distressed households, energy conservation and other issues, the November elections are important in the long run, but the decisions made during the lame-duck session will be crucial and have immediate impact on thousands of homeowners.
Ken Harney’s e-mail address is email@example.com.