Tax “Extender” Bill Stalls in the Senate

Senate Democrats released yet another version of a broad tax extender bill (HR 4213) as they continue to search for a way to get the 60 votes needed to advance the stalled measure. The new version of the “extender” legislation would cost about $118 billion, down from $140 billion. Slightly more than half of the bill’s cost would be offset. The American Jobs and Closing Tax Loopholes Act of 2010 (H.R. 4213) contains the extension of the New Energy Efficient Home Tax Credit, Section 45L. The package contains a one-year extension of a $1,000 tax credit to the manufacturers of an ENERGY STAR HUD code home and a $2,000 tax credit to modular homebuilders. After a cloture vote failed 56-40 on Thursday night, Democratic leaders committed to revise the bill once again and reduce the cost of the bill.

Because of concerns of many moderate Democrats, Senator Baucus made some changes to the portion of the bill that would impose higher taxes on the “carried interest” earned by venture capitalists, real estate investors and private equity fund managers. Under current law, all carried interest is considered a capital gain, which is taxed at a lower rate than is ordinary income. In the Senate bill, 75 percent of carried interest would be considered ordinary income, and 25 percent would be taxed as capital gains. It also includes language that would soften the tax by creating a 50-50 split for carried interest on assets held for at least five years. While MHI strongly supports the extension of the Energy Star tax credit for manufactured and modular housing; we are strongly opposed to the change in the taxation of “carried interest” as the central revenue offset to pay for the bill. If and when the bill passes the Senate, it will head back to the House of Representatives.

MHI members can contact Rae Ann Bevington at rbevington@mfghome.org.

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