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Worker, Homeownership and Business Assistance Act of 2009

Volume 2009 / Issue 17

November 13, 2009 

On November 6, 2009, President Obama signed into law the “Worker, Homeownership and Business Assistance Act of 2009”. The law contains a number of tax changes that impact individuals and businesses. Some of the more notable changes are briefly summarized below:
  
Five-Year Carryback of NOLs Extended 
  • Prior law enabled certain small businesses to carryback their 2008 NOLs to the previous five-years instead of only the previous two years. For this purpose, a small business was generally defined as a business having less than $15 million of gross receipts. 
  • The new law expands the application of the five-year carryback period to include most taxpayers (not just small businesses) and includes NOLs generated in 2008 or 2009.
  • NOL carrybacks to the fifth preceding year are limited to 50% of the taxable income for that year.
  • In addition, the 90% limitation on the amount of Alternative Minimum Taxable Income that can be offset with AMT NOL is removed for the extended carryback period.
  • These benefits are generally not available to companies that received federal assistance under the various relief provisions that were enacted in the wake of the recent economic downturn.  
Federal Unemployment Tax Increase Extended 
  • The Federal Unemployment Tax rate, currently 6.2%, was scheduled to revert to the old rate of 6% at the end of 2009. The Act extends the 6.2% rate through June 2011.

Homebuyer Credit Extended and Expanded 

  • The $8,000 first-time homebuyer credit which was scheduled to expire on November 30, 2009, is extended to apply to purchases before May 1, 2010. The extension includes purchases before July 1, 2010 if a written binding contract is entered into before May 1, 2010.
  • Prior law provided for a phase-out of the credit when modified adjusted gross income exceeded $75,000 ($150,000 for joint filers) and complete phase-out, if over $95,000 ($170,000 for joint filers). The new law increases the phase-out thresholds and thus makes the credit available to more higher income taxpayers. The new phase-out thresholds are $125,000 to $145,000 for single filers and $225,000 to $245,000 for joint filers.
  • A new credit has been added to stimulate sales for existing homeowners.  If you have owned and used the same residence for any five consecutive years during an eight year period ending on the date of purchase, you can claim a credit of $6,500. The same phase-out rules apply as above with respect to higher income taxpayers.
  • The homebuyer credits are eliminated entirely for home purchases over $800,000.
  • A host of anti-abuse provisions were added to address some of the more well publicized abuses of this program: 
o   The taxpayer purchasing the home must be over 18 years of age at the date of purchase.
o   The taxpayer purchasing the home can’t be claimed as a dependent by another taxpayer
o   The “settlement statement” must be attached to the tax return filed for the year in which the credit is claimed
o   Purchases from related parties are no longer eligible
 
 
This summary is intended to provide a general understanding and awareness of these law changes. We would be pleased to assist in helping you address their application to your specific circumstances.