H.R. 3548 “Worker, Homeownership, and Business Assistance Act of 2009” Potential Problems with the Act

H.R. 3548 “Worker, Homeownership, and Business Assistance Act of 2009”

The “The Worker, Homeownership, and Business Assistance Act of 2009” has some strong economic pluses and some possible technical errors built into the Act. The Act as the title suggests will cover Unemployment Extension, Homeownership stimulation, Additional Military extensions for Homeownership Purchases, changes to the 5-year Carryback of Operating Losses, delay in worldwide allocation of interest, Penalties on S Corp for non-timely filing, Paid Preparers e-filing requirement, FUTA surtax, and increasing estimated payments amounts for Corporations.

Dramatic potential changes to the tax code are from section 13. 5-Year Carryback of Operating Losses.

Section 13(e)(4)(B) any application under section 641(a) of such Code with respect to such loss shall be treated as timely filed if filed before such due date.

The wording “filed before such due date” seems potentially to be awkward. If the requirement is to have this be filed before the due date then in reality the due date would be the day before the due date of the required filing. This wording should rather be stating “filed on or before such due date”. Yes the due date is in reality a specific minute of time which would be minute of the day of but I would have to read this like it actually reads and seeing the date and the work before would require a filing of the previous date so the return could be timely.

Another section which is questionable is in Section 17. Certain tax return preparers required to file returns electronically.

Section 17 (a)(3)(A). In general.- The Secretary shall require than any individual income tax return prepared by a tax return preparer be filed on magnetic media if-

Here in the above section you probably read the sentence and thought that I misspelled the word “than” which is not the case. This when reading the sentence looks like the word should read; “that” of which I have brought up to the attention of Congressman Reichert’s office and they did fax this also to Congressman McDermott’s office.

The above seem to be policy changes or grammatical changes. Another change which I see but I am questioning is the bill is silent as to the number of inclusions in a Purchase and Sale Agreement of Potential Properties which could be purchased. With Section 1031 exchanges the maximum number of properties which can be traded to is three. With 45 days to designate and three properties maximum in the Purchase and Sale Agreement to other properties and 180 days to close the Purchase this does make sense for a 1031 exchange policy. With business or investment property the utility value is in the tax-deferred exchange to other like-kind properties and the functionality of the property nor the utility value of the property may not be the end purpose. If trading a rental house for an apartment this makes sense. But trading from a rental house to a strip of farming land may not make sense except in the case of potentially missing the 1031 exchange dates. A farmer could constructive continue farming which another 1031 exchange for the property is completed. But to meet the deadline and the three year requirement a strict move from one property to another is mandatory. Where I really see the bill exploding on individuals is in the arena of being locked in to a specific property without the luxury of default on terms. Default on terms can come from the seller and the buyers side, real property line disputes, assessments, fires, casualty damages, earthquakes, real estate agent/broker disputes, permit delinquencies both present and past, non-timely completion of current construction new home developments and occupancy permits, mortgage bankers turn-downs, inspection refusals, and the list goes on and on. The bill does not leave the taxpayer an out based upon the “May 1, 2011” signing of the Purchase and Sale Agreement. This is further complicated by the closing due date of by “July 1, 2011”.

 

I can see from both of these due dates real estate brokers and agents will be required to sign two, three, four or five different Purchase and Sale Agreements with option to drop out by the Purchasers near the end of the dates in the Act. Will this treatment artificially inflate prices on the real estate market. I would say it definitely will and then after the due date the prices will drop. This is indeed a dangerous macro-economic phenomenon to put a country in and the mechanism for correcting this situation needs to be updated before any potential catastrophes’ happen due to this “Act”.

Frustration on the part of the taxpayer or at least who is self filing may come when mathematical errors are assessed for not providing the additional forms which are also being required with the current new “Act”. See Section 12. Provisions to enhance the Administration of the First-Time Homebuyer Tax Credit.

Section 12(d) (i-iii). Particularly focusing on (iii) the taxpayer fails to attach to the return the form described in section 36(d)(4). This should be the HUD document or similar document for indication of a real estate closing. A delay in supplying this document will further frustrate the taxpayer and potentially cause undue hardship on RAL (Refund Anticipation Loan) providers who could potentially be waiting too long for their reimbursements. This could also cause a restriction in the advance refund check from RAL Bank providers by their non-inclusion of refunds or discounting of the refund portion based upon the First-time Homebuyers Credit credit amount.

Other provisions of the Act may be noticed by others but these are the critical differences which I am seeing at the present time. Both taxpayers and tax preparers and software development preparers should try to address these issues while researching, talking about or programming for this next tax year.

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3 Responses to H.R. 3548 “Worker, Homeownership, and Business Assistance Act of 2009” Potential Problems with the Act

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