TAX NEWS - 2010

Reid files cloture on bill with unemployment benefits, homebuyer tax credit

The road to pass a unemployment benefits extension took another twist on Tuesday night.

Senate Majority Leader Harry Reid (D-Nev.) filed cloture on a bill that would provide a $33.9 billion six-month extension of unemployment benefits and a three-month extension for homebuyers to take advantage of a federal tax credit.

The Senate and House also will have to reconcile their tax offsets for the credit.

With the Senate probably about two votes short of the 60 needed to pass an unemployment benefits extension on its own, the bipartisan homebuyer tax credit could attract the needed Republican votes.

But it means the Senate measure would need to pass the bill and get it to the House before leaving town later this week for the July 4 recess. The House would likely have the votes to pass the Senate's combined measure.

The House is expected to pass a stand-alone unemployment benefits extension on Wednesday. The chamber passed the homebuyer tax credit extension earlier Tuesday.

Homebuyers who qualified for the credit would have until September 30 — instead of June 30 — to close on their purchases. The tax credit, which required buyers to sign a contract on a home by April 30, provides homebuyers with a tax write-off of as much as $8,000.

The legislation costs $140 million. The House offsets would raise $9 million in revenue while the Senate's would raise $6 million over 10 years through three pay-fors, two that are the same.

The Senate and House have included two identical offsets -- disclosure of prisoner return information to state prisons that would bring in $6 million through 2020; and another $95 million that would be collected over the next decade with an change to the travel promotion act, according to the Joint Committee on Taxation.

Those House has a $48 million offset are an application of a bad checks penalty to electronic payments while the Senate  rescinds $94 million from non-Recovery Act Defense Department unobligated balances that will expire September 30. The provision is estimated to save $45 million over 10 years, according to the Senate Finance Committee.

The National Realtors Association has pushed for the extension because up to 180,000 homebuyers are in jeopardy of losing the tax credit without an extension.

The legislation also would crack down on fraud identified in a recent report by the Treasury Inspector General for Tax Administration.