CCH Tax Briefing:
Worker, HomeoWnersHip, and
Business assistance act of 2009
November 5, 2009
New Law Statistics: congress extends/ expands
✔ Extended NOL Homebuyer credit and noL
carryback for all
businesses carryback; adds offsets
✔ Homebuyer credit wo popular but temporary tax bridge the gap between slow win-
through April 30 incentives have been given a new ter sales and what is hoped will
✔ Modified long-time lease on life as part of legislation be a more robust spring market.
homeowners credit extending unemployment compensation
benefits. The Worker, Homeownership, To pay for all this, the new law
✔ Mandatory e-filing and Business Assistance Act of 2009 requires electronic filing of individual
✔ Military base (H.R. 3548) has been approved by returns by all but the smallest return
closure exclusion Congress and is on its way to the White preparers, delays implementation of
House for President Obama’s expected worldwide interest allocation, increases
✔ Delay in worldwide signature. The Senate approved H.R. the penalties for failing to file partner-
interest allocation 3548 by a 98 to 0 vote on November 4, ship and S corporation returns, and
✔ $21 billion in tax cuts followed by House passage, 403 to 12, accelerates estimated tax payments for
on November 5. certain large corporations.
✔ $21 billion in revenue The first-time homebuyer credit
raisers and expanded five-year net operating The new law also ex-
loss (NOL) carryback, both originally tends unemployment
scheduled to expire this year, have benefits by up to 14 weeks (with
been extended and enhanced into six additional weeks for individu-
2010. Many homebuyers who are not als in states with high unemploy-
Inside first-timers will now be eligible for a ment). However, it does not extend
First-Time tax credit up to $6,500, with first-time the existing temporary exclusion
homebuyers qualifying for a maximum from gross income of the first
Homebuyer Credit ............... 1
$8,000 credit through at least April 30, $2,400 of unemployment benefits
NOL Carryback .................... 3 2010. Similarly, nearly all businesses received in 2009. The extended
will be able to take advantage of ex- unemployment benefits are paid
Military Exclusion ................ 4 panded NOL carryback treatment for for by keeping the FUTA surtax.
either 2008 or 2009 NOLs. The new
Electronic Filing ................... 5
law also excludes from income qualified
military base closure payments. FIrsT-TIme
Penalties ............................. 5
Corporate Estimated Tax .... 5 The availability of quick
refunds from 2008 and When originally enacted, the first-time
FUTA Surtax......................... 5
2009 NOL five-year carrybacks homebuyer credit reached 10 percent
Worldwide Interest .............. 5 will mean a huge boost to busi- of the purchase price of a qualified resi-
nesses trying to survive the short dence (for a maximum credit of $7,500)
term. The housing industry also and was repayable in equal installments
hopes that the homebuyer credit over 15 years. Congress subsequently
will continue home sale traffic and raised the credit to a maximum to
November 5, 2009
ceases to be the taxpayer’s principal of purchase of a principal residence. ment of additional tax without
residence. Exceptions, such as death, Additionally, the new law extends the using deficiency procedures.
continue to apply. first-time homebuyer credit for indi-
viduals on qualified official extended Earlier this year, the IRS
Purchase price. For the first time, duty outside the U.S. to purchases made cautioned that additional
Congress set a ceiling on eligibility for before May 1, 2011 (or July 1, 2011, for documentation requirements could
the credit based on the purchase price taxpayers with binding contracts). slow processing of the credit.
of the principal residence. No credit is
allowed if the purchase price of the prin- Uniformed services include NoL CArryBACK
cipal residence exceeds $800,000. the U.S. Armed Forces
(Army, Navy, Air Force, Marines, and The American Recovery and Reinvest-
The $800,000 cap ap- Coast Guard) as well as commis- ment Act of 2009 (2009 Recovery Act)
plies to purchases im- sioned corps of the U.S. Public Health allowed eligible small businesses (with
mediately after the president signs Service and the National Oceanic and average gross receipts of $15 million or
the new law and, therefore, may Atmospheric Administration. less) to elect to carry back net operating
apply to purchases prior to No- losses (NOLs) from 2008 for three, four
vember 30, 2009, as well as during Oversight. To curb abuses of the first- or five years rather than the standard two
the new, extended time period. time homebuyer credit, the new law gives years. The new law provides a similar
the IRS math error authority to disallow election to all U.S. businesses of every
The $800,000 is a cliff the credit during processing. The new law size to carry back NOLs up to five years
amount, with no gradual also expressly excludes dependents and but with a 50-percent income limit on
phase out of the credit provided for related parties from claiming the credit. NOL offsets in the fifth year.
higher amounts. The $800,000 cap Additionally, the taxpayer (or his or her The new, expanded election is
is also applied nationwide, with no spouse) must be at least 18 as of the date available for NOLs incurred in either
adjustment for regional factors. of the purchase to be eligible. All taxpay- 2008 or 2009, but not for both years.
ers must attach a copy of their settlement However, an eligible small business
Servicemembers agreement to their return. that elected under the 2009 Recovery
The new law waives the credit recapture Act to carryback 2008 NOLs may
rules for members of the U.S. uni- Math error authority, make the election for an additional
formed services, Foreign Service, and which is retroactive to year, enabling the qualified small busi-
intelligence community who are called April 9, 2008, allows the IRS to ness to carry back NOLs from both
to duty before 36 months after the date access and send a notice of assess- 2008 and 2009 for up to five years.
HOMEBUYER CREDIT Purchases after Purchases after
date of enactment 11/30/09
$6,500 for long-time ✔
$125K/$225K AGI limit ✔
$800K purchase price limit ✔
Extension of credit ✔
NOL CARRYBACK Tax yrs ending after Tax yrs beginning/ending
12/31/07 in 2009
2008/2009 five-year carryback ✔
Small business additional 2009 ✔
C C H T A X B r I e F I N G
November 5, 2009
ments to offset the decline in real estate Earlier this year, the duce their subsequent estimated tax
values. These payments are excluded Treasury Inspector Gen- payments in 2014 by the increase.
from the recipient’s gross income. The eral for Tax Administration (TIG-
2009 Recovery Act expanded HAP to TA) reported that mandatory e- fil-
cover, among other things, recent base ing by preparers would increase FuTA surTAX
realignment and closure actions as well e-filing by nearly 27 percent. The
as members of the U.S. armed forces IRS received 156.3 million indi- The 0.20 percent FUTA (unemployment)
who are relocated during the current real vidual returns in 2008. Approxi- surtax, first enacted in 1976, was most
estate slowdown. The new law expands mately 58 percent were filed recently extended in the Emergency Eco-
the exclusion from income to cover HAP electronically. nomic Stabilization Act of 2008 through
payments under the 2009 Recovery Act. year-end 2009. The new law extends the
FUTA surtax through June 30, 2011. The
The provision is effec- PeNALTIes total FUTA tax on employers, therefore,
tive for all HAP pay- continues to be 6.2 percent.
ments made after February 17, Effective for returns for tax years begin-
2009, the effective date of the 2009 ning after December 31, 2009, the new WorLdWIde INTeresT
Recovery Act. law increases the penalties for failure to
file a partnership or S corporation return. Under the American Jobs Creation Act of
The penalty for failure to file a partner- 2004, a worldwide affiliated group may
eLeCTroNIC FILING ship return increases from $89 to $195. make a one-time election to determine
Similarly, the penalty for failure to file the foreign source taxable income of the
The new law significantly expands the an S corporation return increases from group by allocating and apportioning
universe of e-filing by requiring indi- $89 to $195. The combined increases the domestic members’ interest expense
vidual returns prepared by paid return are expected to raise approximately $1.2 on a worldwide basis, as if all members
preparers to be filed electronically with billion over 10 years. of the group were a single corporation.
limited exceptions. The e-file requirement However, subsequent legislation delayed
applies to any return of tax imposed by the effective date of this provision until
subtitle A on individuals, estates or trusts tax years beginning after December 31,
filed after December 31, 2010. esTImATed TAX 2010. The new law delays the provision
even further: until tax years beginning
The new law excludes Congress passed the Corporate Estimated after December 31, 2017. This measure
preparers who prepare or Tax Shift Act of 2009 (Shift Act) in July, is expected to raise approximately $20
reasonably expect to prepare fewer which revoked provisions of the Tax billion over 10 years.
than 10 individual income tax re- Increase Prevention and Reconciliation
turns from mandatory e-filing. Act of 2005 (TIPRA) with regard to cor- The revenue raisers in
porate estimated tax payments. The Shift the new law had all been
The bill maintains the Act increased estimated tax payments for expected, many having appeared
current rule that re- corporations in the $1 billion-plus class in bills introduced as early as
quires corporations and tax-ex- to 100.25 percent for estimated payments several years ago. The delay in
empt organizations with assets of due in July, August, or September of worldwide interest allocation,
$10 million or more and that file 2014. The new law increases the required however, had been used as a “pay-
at least 250 returns during a cal- corporate estimated tax payments factor for” in the blended House health
endar year, including income tax, for large corporations for payments due care reform bill. House Democrats
information, excise tax, and em- in July, August and September 2014 by have already indicated they intend
ployment tax returns, to e-file 33 percentage points. to repeal the worldwide interest
their Form 1120 and 1120S in- application provision entirely as
come tax returns and Form 990 The Shift Act allows well as provide for new curbs on
information returns. large corporations to re- the biofuel tax credit.
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