WASHINGTON - The House Ways and Means Committee yesterday easily passed a housing bill sponsored by chairman Charles Rangel, D-N.Y., which contains several tax-exempt bond provisions, while the Senate was moving slowly toward the possible passage of a housing bill last night.
The Rangel bill, HR 5720, which is broader than the bill pending in the Senate and has the strong support of affordable housing advocates, faced little or no scrutiny as it was approved by a vote of 35-5.
Meanwhile, Senate leaders kept pushing back a vote on their housing bill to see if they could make changes to gain some support from the Bush administration, after the members voted to limit debate on the measure Tuesday by an overwhelming margin. An White House spokesman had said the administration was unhappy with the bill.
Despite the House bill's successful passage, Rangel emphasized in his introduction that the measure alone cannot solve the subprime mortgage crisis that has driven the country's economic downturn, but rather can serve as a one of many valuable tools that can help turn things around.
"Nothing we're going to do today will resolve this fiscal crisis we're in," he said. "But everything we're doing today can help contribute to solving it."
Rangel's bill, like the Senate's, would temporarily increase by $10 billion the amount of tax-exempt mortgage revenue bonds available to state and local housing finance agencies under the private-activity bond cap. The bonds could be used, not only to finance loans for first-time homeowners, but also to refinance subprime mortgages and to help finance rental housing developments. The $10 billion would become available in 2008, and would have to be used by the end of 2010.
Both bills also would exempt mortgage revenue bonds from the alternative minimum tax to make them more attractive to investors. But while the Senate exemption would only apply to bonds issued under the cap expansion, Rangel's bill would permanently relieve MRBs from the AMT, a move that has had strong backing from affordable housing advocates.
Only Rangel's bill would permit the Federal Home Loan Banks to guarantee all tax-exempt bonds. Under current tax law, only housing bonds are able to obtain a guarantee from a federal agency. With nearly all major bond insurers facing financial problems, many hope FHLBs will be able to step in and provide credit enhancement.
Rangel's bill also differs from the one in the Senate in that it contains offsets to cover all its costs, which would adhere to the Democrats pay-go rules. The Joint Tax Committee estimates the bill would cost a total of $11 billion over 10 years, with the volume cap increase accounting for $1.4 billion of that amount, the repeal of the AMT for MRBs $1.8 billion, and the FHLB guarantees $124 million.
Those costs, among others contained in the bill, would be offset by three revenue raising proposals. The most significant of these proposals would require brokers to report the purchase price, as well as the sale price, of publicly traded stocks and mutual funds. The move, which was proposed by the Bush administration and aims to ensure that investors are correctly reporting their taxable gains, would generate $8.1 billion over 10 years.
The other two provisions - one that would delay by one year and limit to 10% the implementation of a worldwide interest allocation, and another that would modify the timing of corporate estimated tax payments - would bring in another $3 billion.
Cost offsets have proven problematic in the past. Senate members stripped its pending housing bill of any revenue raisers, and a proposed one-year AMT patch that would have been offset was derailed last year by Republican lawmakers who threatened a filibuster.
At press time, numerous amendments had been proposed for the Senate bill. Sen. John Ensign, R-Nev., was expected to offer an amendment that would extend the $1.2 billion clean renewable energy bond program through 2009 as well as provide an additional $400 million of CREBs that would be allocated in thirds to each of three groups: state, local, or tribal governments, public power providers, and electric cooperatives. CREBs are taxable bonds that provide holders with income tax credits in lieu of tax-exempt bond interest payments.
Housing sources indicated that Rangel's bill will likely be combined with a bill being crafted by House Financial Services chairman Barney Frank, D-Mass., which includes 10 billion in community development block grant funds that could be used by localities with the highest foreclosure rates to purchase and refurbish foreclosed homes. CDBG provides grants to state and local governments to fund economic development projects and can be used in projects financed by municipal bonds. A similar bill pending in the Senate includes only $4 billion for CDBG.
If the House and Senate each pass housing bills, a conference committee would be named to consolidate them into a single bill that would be sent to Bush for his signature.
Meanwhile, the House Ways and Means Committee yesterday also voted 24 to 17 to approve HR 5719, the Taxpayer Assistance and Simplification Act of 2008.
That bill contains a provision that would delay by one year the implementation of a 2005 law that requires state and local governments to withhold 3% of any payments made for property or services to ensure the appropriate taxes are collected. Government groups, such as the Government Finance Officers Association, vehemently opposed the proposed withholding requirement, calling it an unfunded mandate imposed by the federal government. The committee rejected an amendment to repeal the requirement altogether.
While still hoping for a repeal, Susan Gaffney, director of GFOA's federal liasion center, said the delay is encouraging. "While we are pushing for and support legislation to repeal the entire provision, a one year delay is a promising step forward," she said.