H.R. 5790House110th Congress (2007-2009)In Committee

Universal Homeowner Tax Cut Act of 2008

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HouseIntro Referral Latest Action

Referred to the House Committee on Ways and Means.

Ways and Means Committee

April 15, 2008

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HouseIntro Referral

Introduced in House

April 15, 2008

HouseIntro Referral

Referred to the House Committee on Ways and Means.

Ways and Means Committee

April 15, 2008

Floor Debate

1 member

What members said about H.R. 5790 on the floor

1 Democrat

Rep. Bill FosterD-IL-14 · May 21, 2008

Madam Speaker, I am submitting this statement to record my strong and enthusiastic support for H.R. 5720, the Housing Assistance Act of 2008. As everyone knows we are facing a foreclosure crisis the…

Madam Speaker, I am submitting this statement to record my strong and enthusiastic support for H.R. 5720, the Housing Assistance Act of 2008.

As everyone knows we are facing a foreclosure crisis the likes of which have not been witnessed since the Great Depression. According to RealtyTrac, a site that tracks foreclosure data, there were a total of a little over 2.2 million foreclosure filings--default notices, auction sale notices and bank repossessions last year, up an astronomical 75 percent from the previous year. In addition, more than 1 percent of all U.S. households were in some stage of foreclosure last year.

My home State of Illinois has not been immune to the crisis. Again, according to the latest statistics from RealtyTrac, there were almost 91,000 foreclosure filings last year, an increase of over 25 percent from 2006 and an increase of over 94 percent from 2005.

This common-sense legislation has many provisions designed to spur the sagging real estate market. First and foremost, this bill would provide first-time home buyers with assistance in making a down payment on a home by providing these individuals with a refundable tax credit that is equivalent to an interest-free loan equal to 10 percent of the purchase price of their home, up to $7,500.

Moreover, the bill helps struggling taxpayers. Specifically, the bill would provide home owners who claim the standard deduction with an additional standard deduction for State and local real property taxes. The maximum amount that may be claimed under this provision is $350, $700 for joint filers.

I have introduced a similar proposal H.R. 5790, the Universal Homeowner Tax Cut Act of 2008. This bill would allow taxpayers who do not itemize a deduction for State and local real property taxes. I fully support providing these hard-working Americans tax relief and I hope some version of real property tax relief is enacted this year.

In addition to these core provisions, the bill contains other provisions regarding mortgage revenue bonds and tax simplification designed to spur homeownership.

This bill, in conjunction with a slew of bills that the House passed last week designed to stem the foreclosure crisis and restore the housing markets, will help us weather these turbulent economic times.

I support this bill and hope Congress will expeditiously send it to the President for his signature.

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Introduced in HouseIssued April 15, 2008

110th CONGRESS

2d Session

H. R. 5790

IN THE HOUSE OF REPRESENTATIVES

April 15, 2008

Mr. Foster introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to allow the deduction for State and local real property taxes whether or not the taxpayer itemizes other deductions, and for other purposes.

Short title

This Act may be cited as the Universal Homeowner Tax Cut Act of 2008.

Deduction for State and local real property taxes allowed whether or not taxpayer itemizes other deductions

101.

Deduction for State and local real property taxes allowed whether or not taxpayer itemizes other deductions

(a)

In general

Subsection (a) of section 62 of the Internal Revenue Code of 1986 (defining adjusted gross income) is amended by inserting before the last sentence the following new paragraph:

(22)

State and local real property taxes

At the election of the taxpayer, so much of the deduction allowed by section 164 for State and local real property taxes (within the meaning of section 164) as does not exceed $1,000 ($2,000 in the case of a joint return).

(b)

Effective date

The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2008.

Revenue Provisions

Nonqualified deferred compensation from certain tax indifferent parties

201.

Nonqualified deferred compensation from certain tax indifferent parties

(a)

In general

Subpart B of part II of subchapter E of chapter 1 of the Internal Revenue Code of 1986 (relating to taxable year for which items of gross income included) is amended by inserting after section 457 the following new section:

457A.

Nonqualified deferred compensation from certain tax indifferent parties

(a)

In general

Any compensation which is deferred under a nonqualified deferred compensation plan of a nonqualified entity shall be taken into account for purposes of this chapter when there is no substantial risk of forfeiture of the rights to such compensation.

(b)

Nonqualified entity

For purposes of this section, the term nonqualified entity means—

(1)

any foreign corporation unless substantially all of its income is—

(A)

effectively connected with the conduct of a trade or business in the United States, or

(B)

subject to a comprehensive foreign income tax, and

(2)

any partnership unless substantially all of its income is allocated to persons other than—

(A)

foreign persons with respect to whom such income is not subject to a comprehensive foreign income tax, and

(B)

organizations which are exempt from tax under this title.

(c)

Ascertainability of amounts of compensation

(1)

In general

If the amount of any compensation is not ascertainable at the time that such compensation is otherwise to be taken into account under subsection (a)—

(A)

such amount shall be so taken into account when ascertainable, and

(B)

the tax imposed under this chapter for the taxable year in which such compensation is taken into account under subparagraph (A) shall be increased by the sum of—

(i)

the amount of interest determined under paragraph (2), and

(ii)

an amount equal to 20 percent of the amount of such compensation.

(2)

Interest

For purposes of paragraph (1)(B)(i), the interest determined under this paragraph for any taxable year is the amount of interest at the underpayment rate under section 6621 plus 1 percentage point on the underpayments that would have occurred had the deferred compensation been includible in gross income for the taxable year in which first deferred or, if later, the first taxable year in which such deferred compensation is not subject to a substantial risk of forfeiture.

(d)

Other definitions and special rules

For purposes of this section—

(1)

Substantial risk of forfeiture

(A)

In general

The rights of a person to compensation shall be treated as subject to a substantial risk of forfeiture only if such person’s rights to such compensation are conditioned upon the future performance of substantial services by any individual.

(B)

Exception for compensation based on gain recognized on an investment asset

(i)

In general

To the extent provided in regulations prescribed by the Secretary, if compensation is determined solely by reference to the amount of gain recognized on the disposition of an investment asset, such compensation shall be treated as subject to a substantial risk of forfeiture until the date of such disposition.

(ii)

Investment asset

For purposes of clause (i), the term investment asset means any single asset (other than an investment fund or similar entity)—

(I)

acquired directly by an investment fund or similar entity,

(II)

with respect to which such entity does not (nor does any person related to such entity) participate in the active management of such asset (or if such asset is an interest in an entity, in the active management of the activities of such entity), and

(III)

substantially all of any gain on the disposition of which (other than such deferred compensation) is allocated to investors in such entity.

(iii)

Coordination with special rule for short-term deferrals of compensation

Paragraph (3)(B) shall not apply to any compensation to which clause (i) applies.

(2)

Comprehensive foreign income tax

The term comprehensive foreign income tax means, with respect to any foreign person, the income tax of a foreign country if—

(A)

such person is eligible for the benefits of a comprehensive income tax treaty between such foreign country and the United States, or

(B)

such person demonstrates to the satisfaction of the Secretary that such foreign country has a comprehensive income tax.

Such term shall not include any tax unless such tax includes rules for the deductibility of deferred compensation which are similar to the rules of this title.

(3)

Nonqualified deferred compensation plan

(A)

In general

The term nonqualified deferred compensation plan has the meaning given such term under section 409A(d), except that such term shall include any plan that provides a right to compensation based on the appreciation in value of a specified number of equity units of the service recipient.

(B)

Exception for short-term deferrals

Compensation shall not be treated as deferred for purposes of this section if the service provider receives payment of such compensation not later than 12 months after the end of the taxable year of the service recipient during which the right to the payment of such compensation is no longer subject to a substantial risk of forfeiture.

(4)

Exception for certain compensation with respect to effectively connected income

In the case a foreign corporation with income which is taxable under section 882, this section shall not apply to compensation which, had such compensation had been paid in cash on the date that such compensation ceased to be subject to a substantial risk of forfeiture, would have been deductible by such foreign corporation against such income.

(5)

Application of rules

Rules similar to the rules of paragraphs (5) and (6) of section 409A(d) shall apply.

(e)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations disregarding a substantial risk of forfeiture in cases where necessary to carry out the purposes of this section.

(b)

Conforming amendment

Section 26(b)(2) of such Code is amended by striking and at the end of subparagraph (S), by striking the period at the end of subparagraph (T) and inserting , and, and by adding at the end the following new subparagraph:

(U)

section 457A(c)(1)(B) (relating to ascertainability of amounts of compensation).

(c)

Clerical amendment

The table of sections of subpart B of part II of subchapter E of chapter 1 of such Code is amended by inserting after the item relating to section 457 the following new item:

Sec. 457A. Nonqualified deferred compensation from certain tax indifferent parties.

(d)

Effective date

(1)

In general

Except as otherwise provided in this subsection, the amendments made by this section shall apply to amounts deferred which are attributable to services performed after December 31, 2007.

(2)

Application to existing deferrals

In the case of any amount deferred to which the amendments made by this section do not apply solely by reason of the fact that the amount is attributable to services performed before January 1, 2008, to the extent such amount is not includible in gross income in a taxable year beginning before 2017, such amounts shall be includible in gross income in the later of—

(A)

the last taxable year beginning before 2017, or

(B)

the taxable year in which there is no substantial risk of forfeiture of the rights to such compensation (determined in the same manner as determined for purposes of section 457A of the Internal Revenue Code of 1986, as added by this section).

(3)

Accelerated payments

No later than 60 days after the date of the enactment of this Act, the Secretary shall issue guidance providing a limited period of time during which a nonqualified deferred compensation arrangement attributable to services performed on or before December 31, 2007, may, without violating the requirements of section 409A(a) of the Internal Revenue Code of 1986, be amended to conform the date of distribution to the date the amounts are required to be included in income.

(4)

Certain back-to-back arrangements

If the taxpayer is also a service recipient and maintains one or more nonqualified deferred compensation arrangements for its service providers under which any amount is attributable to services performed on or before December 31, 2007, the guidance issued under paragraph (3) shall permit such arrangements to be amended to conform the dates of distribution under such arrangement to the date amounts are required to be included in the income of such taxpayer under this subsection.

(5)

Accelerated payment not treated as material modification

Any amendment to a nonqualified deferred compensation arrangement made pursuant to paragraph (3) or (4) shall not be treated as a material modification of the arrangement for purposes of section 409A of the Internal Revenue Code of 1986.

Codification of economic substance doctrine

211.

Codification of economic substance doctrine

(a)

In general

Section 7701 of the Internal Revenue Code of 1986 is amended by redesignating subsection (p) as subsection (q) and by inserting after subsection (o) the following new subsection:

(p)

Clarification of economic substance doctrine

(1)

Application of doctrine

In the case of any transaction to which the economic substance doctrine is relevant, such transaction shall be treated as having economic substance only if—

(A)

the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer’s economic position, and

(B)

the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.

(2)

Special rule where taxpayer relies on profit potential

(A)

In general

The potential for profit of a transaction shall be taken into account in determining whether the requirements of subparagraphs (A) and (B) of paragraph (1) are met with respect to the transaction only if the present value of the reasonably expected pre-tax profit from the transaction is substantial in relation to the present value of the expected net tax benefits that would be allowed if the transaction were respected.

(B)

Treatment of fees and foreign taxes

Fees and other transaction expenses and foreign taxes shall be taken into account as expenses in determining pre-tax profit under subparagraph (A).

(3)

State and local tax benefits

For purposes of paragraph (1), any State or local income tax effect which is related to a Federal income tax effect shall be treated in the same manner as a Federal income tax effect.

(4)

Financial accounting benefits

For purposes of paragraph (1)(B), achieving a financial accounting benefit shall not be taken into account as a purpose for entering into a transaction if such transaction results in a Federal income tax benefit.

(5)

Definitions and special rules

For purposes of this subsection—

(A)

Economic substance doctrine

The term economic substance doctrine means the common law doctrine under which tax benefits under subtitle A with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose.

(B)

Exception for personal transactions of individuals

In the case of an individual, paragraph (1) shall apply only to transactions entered into in connection with a trade or business or an activity engaged in for the production of income.

(C)

Other common law doctrines not affected

Except as specifically provided in this subsection, the provisions of this subsection shall not be construed as altering or supplanting any other rule of law, and the requirements of this subsection shall be construed as being in addition to any such other rule of law.

(D)

Determination of application of doctrine not affected

The determination of whether the economic substance doctrine is relevant to a transaction shall be made in the same manner as if this subsection had never been enacted.

(6)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection. Such regulations may include exemptions from the application of this subsection.

(b)

Effective Date

The amendments made by this section shall apply to transactions entered into after the date of the enactment of this Act.

212.

Penalties for underpayments

(a)

Penalty for underpayments attributable to transactions lacking economic substance

(1)

In general

Subsection (b) of section 6662 of the Internal Revenue Code of 1986 is amended by inserting after paragraph (5) the following new paragraph:

(6)

Any disallowance of claimed tax benefits by reason of a transaction lacking economic substance (within the meaning of section 7701(p)) or failing to meet the requirements of any similar rule of law.

(2)

Increased penalty for nondisclosed transactions

Section 6662 of such Code is amended by adding at the end the following new subsection:

(i)

Increase in penalty in case of nondisclosed noneconomic substance transactions

(1)

In general

To the extent that a portion of the underpayment to which this section applies is attributable to one or more nondisclosed noneconomic substance transactions, subsection (a) shall be applied with respect to such portion by substituting 40 percent for 20 percent.

(2)

Nondisclosed noneconomic substance transactions

For purposes of this subsection, the term nondisclosed noneconomic substance transaction means any portion of a transaction described in subsection (b)(6) with respect to which the relevant facts affecting the tax treatment are not adequately disclosed in the return nor in a statement attached to the return.

(3)

Special rule for amended returns

Except as provided in regulations, in no event shall any amendment or supplement to a return of tax be taken into account for purposes of this subsection if the amendment or supplement is filed after the earlier of the date the taxpayer is first contacted by the Secretary regarding the examination of the return or such other date as is specified by the Secretary.

(3)

Conforming amendment

Subparagraph (B) of section 6662A(e)(2) of such Code is amended—

(A)

by striking section 6662(h) and inserting subsection (h) or (i) of section 6662, and

(B)

by striking gross valuation misstatement penalty in the heading and inserting certain increased underpayment penalties.

(b)

Reasonable cause exception not applicable to noneconomic substance transactions, tax shelters, and certain large corporations

Subsection (c) of section 6664 of such Code is amended—

(1)

by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively,

(2)

by striking paragraph (2) in paragraph (4), as so redesignated, and inserting paragraph (3), and

(3)

by inserting after paragraph (1) the following new paragraph:

(2)

Exception for noneconomic substance transactions, tax shelters, and certain large corporations

Paragraph (1) shall not apply—

(A)

to any portion of an underpayment which is attributable to one or more tax shelters (as defined in section 6662(d)(2)(C)) or transactions described in section 6662(b)(6), and

(B)

to any taxpayer if such taxpayer is a specified large corporation (as defined in section 6662(d)(2)(D)(ii)).

(c)

Application of penalty for erroneous claim for refund or credit to noneconomic substance transactions

Section 6676 of such Code is amended by redesignating subsection (c) as subsection (d) and inserting after subsection (b) the following new subsection:

(c)

Noneconomic substance transactions treated as lacking reasonable basis

For purposes of this section, any excessive amount which is attributable to any transaction described in section 6662(b)(6) shall not be treated as having a reasonable basis.

(d)

Special understatement reduction rule for certain large corporations

(1)

In general

Paragraph (2) of section 6662(d) of such Code is amended by adding at the end the following new subparagraph:

(D)

Special reduction rule for certain large corporations

(i)

In general

In the case of any specified large corporation—

(I)

subparagraph (B) shall not apply, and

(II)

the amount of the understatement under subparagraph (A) shall be reduced by that portion of the understatement which is attributable to any item with respect to which the taxpayer has a reasonable belief that the tax treatment of such item by the taxpayer is more likely than not the proper tax treatment of such item.

(ii)

Specified large corporation

(I)

In general

For purposes of this subparagraph, the term specified large corporation means any corporation with gross receipts in excess of $100,000,000 for the taxable year involved.

(II)

Aggregation rule

All persons treated as a single employer under section 52(a) shall be treated as one person for purposes of subclause (I).

(2)

Conforming amendment

Subparagraph (C) of section 6662(d)(2) of such Code is amended by striking Subparagraph (B) and inserting Subparagraphs (B) and (D)(i)(II).

(e)

Effective Date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.