Legislation Would Give
Builders a Big Break
by Michael Corkery
From The Wall Street Journal Online
April 04, 2008
Among the likely winners in the housing package making its way through the Senate are the nation's home builders.
A bipartisan provision unveiled Wednesday by Senate leaders would allow companies, including builders, to apply current losses to taxes paid four years ago, instead of the current two-year carry-back. That would help builders in particular because they can apply losses against the big profits they earned during the housing boom.
The carry-back is being proposed as part of a broad legislative package aimed at the housing market. The provision is expected to cost $6.1 billion over 10 years, making it the most expensive tax-relief measure proposed for the housing plan.
By comparison, proposed tax credits for home buyers to purchase properties in foreclosure are expected to cost the Treasury $1.6 billion. The carry-back also could help other industries, such as banks and financial-services firms, which may be able to apply the measure to their losses in 2008 and 2009.
The carry-back provision has been one of several core issues for builders, who have complained that Congress hasn't been doing enough to help the housing market.
In February, the political action committee of the 235,000-member National Association of Home Builders cut off donations to congressional candidates.
The home builders had lobbied that the carry-back and other measures to help the housing market be included in the economic-stimulus plan, but many of those measures, including the carry-back, weren't included. The builders' association insisted its decision to cut off campaign money wasn't tied to any specific legislation.
One critic of the carry-back, the Laborers' International Union of North America, said home builders, many of which relied on subprime mortgages to fuel their profits, don't deserve the carry-back.
"We are going to reward home builders who, in many instances, have led to this mortgage crisis," said the union's general president, Terry O'Sullivan.
Builders said the tax benefit would help prevent companies from rushing to sell land at big discounts in order to apply losses to profits from two years ago. They said the fire sales are helping drive down property values and contributing to foreclosures.
On Monday, one of the nation's largest builders, Centex Corp., said it had sold 8,500 house sites for 30% of their book value. The loss allowed the company to reap a $294 million tax refund.
The builders' group said the carry-back also could prevent small builders from going out of business.
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