Unfinished Business in Washington
By now, probably everyone reading this article has heard of what's called the "lame duck" Congressional session which was expected after the national election. The biggest concern is what's labeled a "fiscal cliff" along with the calamity that comes with it "taxmageddon."
The spending portion of this fiscal cliff is essentially a succession of mandatory cuts on spending positioned to go into effect as a portion of the deal made in August 2011 to increase the debt ceiling. If Congress could come together and agree to spending cuts, an estimated $110 billion would automatically be cut in equal sums from defense along with non-defense discretionary expenditures. This cut would then repeat itself during a time frame of 10-years, yielding in excess of $1 trillion in total savings. The fear is that these spending cuts will impair economic development, especially when combined with enormous tax increases.
"Taxmageddon" is the conclusion of all the tax rate cuts from the Bush era on child credits,, income, capital gains, dividends along with a few of the Obama era, notably the 2-point reduction of the payroll tax. It also includes various "tax extenders" tax reductions that have been with us for a while although have never become permanent. The AMT (Alternative Minimum Tax solution for middle class taxpayer is one of the most universally known extender The fix essentially nip in the bud middle class taxpayers becoming caught up n the age old AMT. It is not clear whether the Administration and Congress will tackle every tax item mentioned above. As a matter of fact, it is not too likely, given the proposals coming from either side of the aisle. Therefore if Congress does not address these expiring cuts during this lame duck session, massive tax increases will come about, which experts have projected to be in excess of $500 billion during a single year.
Although these are major questions that must be handled, there are numerous smaller issues also. One is the "mortgage cancellation." Once a borrower who is upside down on their mortgage sells their home and the difference in the debt amount is forgiven, this discrepancy is nevertheless regarded as income. This results in people who were being requested to pay income tax on money they never received. The National Association of Realtors (NAR) headed up an effort to speak to this and in 2007 acquired legislation that provided respite through the end of December 31, 2012. The legislation in essence eliminated this ghost income from being taxed. While many borrowers have taken advantage, there are numerous others still in difficulty and will most likely need this break. That is the very reason NAR has been hard at work to ensure that Congress extends these mortgage cancellation provisions after years end.
One other issue is that USDA’s eligibility requirements for rural housing mortgages are expiring. It had been feared that in excess of 900 communities throughout the nation would lose admittance to these programs for rural housing in October because of implementation of the 2010 Census data to these programs. Although the Rural Development Office put off implementation of these provisions until the end of March 27, 2013, The National Association of Realtors is committed in working with Congress during this lame duck session, also all through the early part of next year, to speak to this issue.
Finally, the House approved H.R. 2446, "The Home Warranty Clarification Act, of RESPA" during the summer. Now it is waiting for action by the Senate. If the Senate doesn't act upon this prior to the end of 2012 the entire process will need to be started all over again for the next Congress. NAR is acting with the Senate and industry partners to pass this legislation prior to the end of 2012.
There will most likely be many additional issues upon the table during this lame duck congress, as well going into the first part of 2013, like H.R. 4323, "The Consumer Mortgage Choice Act," that takes care of discrimination of affiliates within the Qualified Mortgage regulation (also due prior the end of 2012). In fact, numerous Dodd-Frank rules are in place to be finalized before January 21, 2013 while several may need legislative action to handle issues. It is important that everyone stays engaged on into 2013 while being ready to be heard with regulatory agencies and Members of Congress on these key matters.