WASHINGTON - President Bush has signed into law the $300 billion omnibus housing bill, which will provide state housing finance agencies with an additional $11 billion in private-activity bonds to refinance subprime mortgages as well as provide loans to first-time homebuyers and permanently exempt all housing bonds from the alternative minimum tax.
Bush signed the bill early yesterday morning in a significant departure from his initial threat to veto the measure. Originally, the administration said the bill contained provisions, such as $4 billion in community development block grant funds, that aided private lenders instead of struggling homeowners, the intended target of the legislation.
However, after lawmakers included administration proposals that would temporarily provide a federal financial back-stop for mortgage giants Fannie Mae and Freddie Mac in the legislation, Bush abandoned his veto threat and announced he would support the bill.
CDBG provides grants to state and local governments to fund economic development projects and can be used in projects financed by municipal bonds.
Meanwhile, the third and fourth times weren't a charm for Senate Democrats, who yesterday and the day before again failed to muster the votes necessary to clear a procedural hurdle on legislation that would extend dozens of expired and expiring tax breaks, patch the alternative minimum tax, and implement tax incentives for alternative energy.
Senate Republicans have consistently blocked the "extenders" legislation, arguing that extensions of current tax policy should not be offset with revenue-raising tax hikes elsewhere proposed by Democrats. With these most recent setbacks, it is expected that the legislation will not be taken up again until the fall, when Congress returns from its August recess.
The bill, which was introduced by Senate Finance Committee chairman Max Baucus, D-Mont., also contains a one-year "patch" of the AMT without revenue-raising offsets. While the House's chief taxwriter, House Ways and Means Committee chairman Charles Rangel, D-N.Y., is pushing his own one-year AMT patch with offsets, it is widely expected that any patch to the tax this year will not contain offsets.
The AMT, which applies to interest earned on private-activity bonds and some governmental and 501(c)(3) bonds, was created to prevent high-income households eligible for multiple tax breaks from paying little or no taxes. However, the AMT is not indexed to inflation, so more taxpayers become subject to it each year.