Tax News

CCH (cch.taxgroup.com) reports:

The Senate on December 14 approved legislation offering tax relief to homeowners caught in the sub-prime mortgage crisis. The bill was approved as an amendment to the Mortgage Forgiveness Debt Relief Bill of 2007 (HR 3648) and creates a three-year exception for debt forgiveness on home loans. When debt is forgiven on a home loan, the homeowner usually must count the amount forgiven as income and pay taxes on it. The measure also extends a provision allowing homeowners to deduct mortgage insurance payments from their taxable income.
"Homeowners who are already in trouble on the mortgage certainly can't afford a big hit from the tax man too," said Senate Finance Committee Chairman Max Baucus, D-Mont., in a prepared statement. "This mortgage tax bill will help to ease the burdens of homeowners who are hurting today," he added.
In addition to tax relief for debt forgiveness and mortgage insurance payments, the bill includes: tax relief for volunteer firefighters and emergency medical technicians; protection of tax relief for homeowners after the death of a spouse; and flexibility to help co-op tenant/owners deduct real estate taxes and mortgage insurance. The bill is fully offset by increased penalties for failure to file S corporation or partnership returns and new requirements corporate estimated tax payments. It is now necessary for the House to pass the updated legislation and send it to the president for signature.
Farm Bill Passes
Also on December 14, the Senate approved a comprehensive farm bill (the Farm, Nutrition, and Bioenergy Bill of 2007, HR 2419) that includes a tax title providing for codification of the economic substance doctrine as a means to offset most of the $17 billion-plus price tag. The final vote was 79-14. Codification of the economic substance doctrine raises about $10 billion over ten years as a revenue offset and would apply to transactions entered into after the date of enactment. The measure would convert a number of conservation payment programs into fully offset tax credit programs and offer additional incentives for rural economic development and energy-related tax relief to aid agricultural producers. In addition, it would create a disaster assistance trust fund and convert payment programs to tax credits in order to free up previously obligated spending funds for the Senate Agriculture Committee. The measure needs full approval by the House before President Bush can sign it into law.
By Jeff Carlson, CCH News Staff
SFC Release: Senate Passes Mortgage Tax Relief For Families In Crisis
Baucus Amendment to Mortgage Forgiveness Debt Relief Act of 2007, HR 3648
JCT Very Preliminary Estimated Revenue Effects of a Possible Amendment to HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007
SFC Release: Baucus Wins on Agriculture Tax Package as Senate Approves Comprehensive Farm Bill