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2015: issue 7
Senate Panel Approves NAHB Priorities as Part of Tax Extenders Package $1.80 per square foot for commercial buildings, including multifamily buildings built under the commercial code, that exceed specific energy efficiency minimums.
The Senate Finance Committee today voted 23-3 to renew scores of temporary tax provisions
• Section 163 deduction for mortgage insurance. Allows taxpayers, subject to an income cap, to deduct premiums paid for private mortgage insurance and FHA/RHA/VA insurance premiums. The deduction for mortgage insurance is expected to save home owners more than $1.1 billion per year for tax years 2015 and 2016.
known as tax extenders that expired this year, including all those of interest to the housing community. In general, the
• Bonus depreciation. Extends the 50% bonus depreciation through 2016.
provisions are granted a two-year retroactive renewal through the
• Section 179 expensing. Increases the maximum expensing amount to $500,000 for qualified property on up to $2 million in property placed in service.
end of tax year 2016, dating back to the start of 2015.
From NAHB
Key provisions in the tax extenders package include: • Section 45L tax credit for energy efficient new homes. Provides builders a $2,000 tax credit for exceeding energy standards by 50%. The base energy code is the 2006 International Energy Conservation Code plus supplements. Section 45L is expected to save home builders approximately $380 million annually in taxes for 2015 and 2016 construction activity. • Fixed credit rate for 9% and a few 4% lowincome housing tax credit (LIHTC) projects. The bill will renew the 9% fixed rate for 2015 and 2016 allocations. In a step forward for multifamily developers, it also will now include a fixed 4% LIHTC rate when used to purchase and improve existing properties that are not federally subsidized or financed with tax-exempt bonds.
The 4% fixed rate also requires the property to be placed in service after the date of enactment for credit allocations made before Jan. 1, 2017. • Section 25C tax credit for qualified energy efficiency improvements. This is a 10% tax credit subject to a $500 lifetime cap, with lower caps for certain products like windows, for consumers to install qualified energy efficient upgrades. The extension of 25C will now make eligible all roofing materials meeting the Energy Star guideline and also updates standards for hot water heaters, biomass fuel stoves, oil hot water heaters and doors and windows. Remodelers often leverage 25C tax credits when working with clients. Section 25C is expected to save home owners who remodel almost $700 million annually in taxes for 2015 and 2016 improvements. • Section 179D energy efficient commercial buildings deduction. Provides a deduction up to
CFPB Announces New Lending Rules Set for Oct. 3 The Consumer Financial Protection Bureau (CFPB) announced today that it will be instituting new mortgage lending rules effective Oct. 3. The implementation date was originally scheduled for Aug. 1 and then pushed back to Oct. 1, before being delayed an additional 48 hours due to late paperwork filings. What does this mean for home buyers, home builders and lenders? On Oct. 3, the Good Faith Estimate, the Truth in Lending and HUD-1 Settlement Statements will be replaced by the CFPB’s new integrated disclosure forms, the “Loan Estimate” and the “Closing Disclosure.” The biggest change is that the Closing Disclosure must be provided to the consumer a
full three days prior to closing, and if there are certain changes during that 72-hour period, the closing could be delayed. NAHB, Others Seek Hold Harmless Period NAHB and other industry allies have urged CFPB Director Richard Cordray to provide a holdharmless period for the initial months of the new process so that good-faith efforts to comply with the new disclosure regime do not expose lenders, settlement service providers and others to regulatory penalties and litigation. The American Bankers Association reported
• Mortgage forgiveness tax relief. The provision would eliminate any taxes home owners mightface from banks when renegotiating the terms of a home loan and forgiving a portion of the outstanding mortgage. This would apply only to principal residences and through the 2016 calendar year. Also of note, the measure includes additional reporting requirements for mortgage interest that would allow the IRS to better enforce the existing rules for claiming the mortgage interest deduction. Currently, mortgage lenders report to the IRS the borrower’s mailing address, taxpayer identification number and mortgage interest paid. Under this provision, lenders would be required to include the physical address of the property as well as the mortgage balance. These new rules would allow the IRS to better enforce the $1 million acquisition debt limit, the $100,000 home equity loan limit and the second home rule. The House has not yet moved on renewal of the extenders. Final resolution of the extenders is not expected to occur until later this year.
Cordray stating that his agency would be sensitive to those who are “just trying to get it right” during his appearance before the Senate Banking Committee on July 15. “And so for the first period, which may last many months, the other agencies and ourselves as we work on this, if we see errors, we will point out what they are and how they should be corrected,” said Cordray. “We will not be looking to be punitive to people.” While NAHB appreciates the tone taken by Cordray, NAHB is urging Congress to pass House and Senate bills H.R. 2213 and S. 1711, which would provide a temporary safe harbor from enforcement of the new lending rules through the end of the year. To prepare those in the residential construction field for the impending rule changes, NAHB held a webinar June 24 to explain how to work proactively with lenders and settlement stakeholders to avoid unnecessary delays to home closings. A replay of this webinar will be posted on nahb.org.