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Q+A-US Senate closes in on homebuyer tax credit vote

Oct 27 (Reuters) - A popular $8,000 tax credit for first-time U.S. homebuyers, which has helped lift the housing market out of its worst slump since the Great Depression, is set to expire on Nov. 30.

Lawmakers in the U.S. Senate are debating whether to extend it, or even expand it, and a vote could come as early as Tuesday. The U.S. House of Representatives, which would also need to approve the measure, has yet to act.

The issue is front and center for financial markets. U.S. stocks sold off and the dollar moved sharply higher on Monday after a misleading media headline said research firm ISI Group had written that the tax credit probably would not be extended when it expires Nov. 30.

Below are some questions and answers on how lawmakers are likely to proceed.

Q: Will the Senate vote to extend the credit?

A: Likely yes, but when and in what form is unclear. The Senate is expected to vote on Tuesday around 6 p.m. (2200 GMT) on whether to take up a bill to extend insurance benefits for unemployed workers.

If Senate Majority Leader Harry Reid can get the 60 votes needed to do that, it would clear the way for further votes and he has said he would offer a tax credit extension as an amendment.

It is not clear when those votes would take place. While it is possible those votes could come later on Tuesday night, they are more likely to be pushed to later this week or next week.

The situation as of Tuesday morning was still fluid.

Q: What would the Senate consider?

A: Reid, a Nevada Democrat, and Senate Finance Committee Chairman Max Baucus, a Montana Democrat, want to offer an amendment that would extend the homebuyer tax credit through the end of next year, while slowly phasing it out. The $8,000 tax credit would fall to $6,000 in April, to $4,000 in July and $2,000 next October. It would end entirely on Dec. 31, 2010.

The Reid-Baucus proposal is a compromise version of a more generous proposal from Georgia Republican Sen. Johnny Isakson and Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, which could also be offered as an amendment.

Isakson, a former real estate agent, wants to extend the $8,000 tax credit through June and expand it to anyone buying a primary residence, not just first-time buyers. His proposal would also raise the income limit of eligible home buyers to $300,000 per family from the current $150,000 limit.

It is possible that as senators continue discussions on how to move forward, other proposals could be considered.

Q: What is the Obama administration’s position?

A: The White House has raised concerns about the cost of expanding the credit. Lawrence Summers, President Barack Obama’s top economic adviser, told Reuters last week that the administration would be open to extending the existing credit but wants to see it remain focused on first-time buyers. For more see [ID:nN21338575].

Simply extending the current tax credit is estimated to cost $1 billion a month. Isakson’s proposal is slated to cost about $16.7 billion through June.

Q: What is the House likely to do?

A: House Speaker Nancy Pelosi appears to be waiting to take her cue from the Senate. Asked about the tax credit earlier this month, the California Democrat said “the question is, would that be just first-time homeowners or would you open it up to other purchasers of homes?”

A House Democratic aide said House leaders would likely adopt whatever language the Senate approves, which would avoid the need for negotiations to reach a compromise. Unlike the Senate, the House has already passed an extension of benefits for unemployment insurance. (Reporting by Corbett B. Daly; Editing by James Dalgleish)

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