Home Builders Never Say Never for NOL Extension
Jobs data dominate the headlines and buffet the pre-holiday markets. The numbers look grim, and grow grimmer.
Here’s a Calculated Risk summary on the latest Bureau of Labor Statistics jobs report:
For the current recession, employment peaked in December 2007, and this recession was a slow starter (in terms of job losses and declines in GDP).
However job losses have really picked up over the last 9 months (4.4 million jobs lost, red line cliff diving on the graph), and the current recession is now the 2nd worst recession since WWII in percentage terms – and also in terms of the unemployment rate (only early ’80s recession was worse).
Elected officials–assuming they’re opting for re-election–want to take job creation or at least job preservation wins back to their constituents this Fall. As home building companies drop like flies, and there aren’t enough people buying houses right now to keep them in business (as employers), the NOL Carryback has emerged Hyrda-headed as a measure that could offer liquidity as a cash tide-over to keep some businesses in business.
The Senate and House are each working on legislation that would change tax laws to allow companies to carry their losses back, and apply them to taxes paid on profits up to five years ago.
Here’s the Senate version of the NOL Tax Carryback Act, introduced in Senate on April 2, by Olympia Snowe (R-Maine) and Max Baucus (D-Mont).
As she introduced the bill, Senator Snowe said:
Click to access Finance Committee lineup.
“While the recently enacted economic stimulus bill included a modest NOL carryback provision to assist smaller firms, this legislation will help any company that has losses from 2008 or 2009 carry back those losses to offset taxes paid in the previous five years when they were profitable. This will go a long way in helping to keep more workers on payroll and stabilize overall operations.”
Senator Baucus heads up the Senate Finance Committee, and he and Senator Snowe have gotten traction enough in the Senate with 28 co-sponsors to make passage highly likely. Identical legislation in the form of H.R. 2452 has been introduced by Representative Richard Neal, (R-Mass.), and so far, 58 House co-sponsors have signed on in support. Which means there’s a summer worth of work to do if there’s hope for an NOL extension to win the day sometime this Fall.
Leading the charge on the latest NOL push for the home building sector is Ken Gear, executive director of a coalition of home building companies called Homes for America Alliance.
Per an article in Floor Daily:
The new entity, the Homes for America Alliance, includes about 75 big and small builders. It will focus on passing a net operating loss (NOL) measure that was included in the House and Senate stimulus packages earlier this year but was removed in conference.
An NOL extension got this close to passage in February 2009, but never made it into the reconciliation bill handed over by Congress to President Obama as the 2009 stimulus program. Why?
Long story short, leadership at the NAHB felt that changing the NOL rules would unfairly advantage the largest, mostly public builders over smaller, rank-and-file players in residential construction. NAHB chief Jerry Howard appealed in the 11th hour to Rep. Nancy Pelosi, speaker of the House, and, lo and behold, the NOL was declawed so that only businesses whose sales are $15 million a year or less could avail of the extension. That revenue constraint cuts out a lot of home building businesses.
To debrief on what’s past in the relationship between big builders and the National Association of Home Builders on NOL, have a look at previous posts here.
Most everybody’s moved on since then. Now, we’ve got a new “coalition”–the Homes for America Alliance–that is working on lobbying Congress for NOL independent of the NAHB. The NAHB has agreed to support the bill this time, right through the vote expected sometime in the Fall.
A testy relationship–between big builders and the broader NAHB leadership, which has to try to represent small to medium size companies as well as national enterprises–is getting its test with NOL this Fall.
The initiative that seems to unite real estate companies large and small is (R-Georgia) Senator Johnny Isakson’s S. 1230, which would extend the current home buyer tax credit into 2010, expand it to include all home buyers (not just first-time buyers) of primary residences, and increase the actual credit to $15,000.
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