WASHINGTON (Reuters) - The U.S. Senate on Friday added another business tax break to legislation billed originally as a rescue plan for struggling homeowners.
Lawmakers voted 76-2 to let money-losing corporations accelerate their use of certain accumulated tax credits to make new business investments.
Sen. George Voinovich, a sponsor of the amendment, said it would help companies that are in the red and cannot take advantage of another business tax break approved by Congress earlier this year involving accelerated bonus depreciation.
Giving money-losing companies a tax break will help them create more jobs and that, the Ohio Republican said in a statement, will help people pay their mortgages.
“Without a job and financial security it is extremely difficult to keep paying your mortgage,” Voinovich said.
With the economy near recession, lawmakers are under growing pressure to address rising foreclosures, falling home prices and credit market paralysis.
Demands for action on behalf of homeowners intensified last month after the Federal Reserve engineered a massive bailout of Wall Street investment bank Bear Stearns.
The Senate’s bill is estimated to cost as much as $20 billion, with much of it accounted for by business tax breaks.
If it is adopted next week as expected, it will go next to the House of Representatives, where lawmakers are already asking questions about how to pay for the Senate’s tax breaks.
As the Senate met in a rare Friday session, some senators were trying to offer an amendment dealing with renewable energy tax matters.
Besides the Voinovich measure, the bill includes a $6-billion tax break for home builders and other businesses. The measure would extend a rule letting companies count net operating losses against tax returns from prior profitable years. In place for 2008 and 2009 only, the rule would allow carry-backs for four years instead of the current two years.
Apart from tax breaks, the Senate bill would expand the Federal Housing Administration’s role in the mortgage market by raising the limit on the size of loans the FHA may insure to
The bill also calls for a $7,000 tax credit, spread over two years, for buyers of homes in or near foreclosure, and for issuance of $10 billion more in tax-free revenue bonds to help troubled borrowers refinance their mortgages.
In addition, all home owners who pay property taxes would get a standard deduction of $500 for single filers and $1,000 for joint filers under the bill. At present, only taxpayers who itemize may deduct state and local property taxes.
In addition, the bill would direct $4 billion in federal grant money to communities to buy and fix up foreclosed homes, while devoting $100 million in federal money to debt counseling and requiring more plain-English mortgage paperwork.
Reporting by Kevin Drawbaugh, Editing by Chizu Nomiyama