AHLSTARZ Tax and Accounting Service -- Numbers, Simplified.

The Senate on October 27 easily overcame a procedural hurdle by an 87-to-13 margin that clears the way for lawmakers to take up the Unemployment Compensation Extension Bill of 2009 (HR 3548) extending unemployment benefits and several tax-related amendments. Senate Majority Leader Harry Reid, D-Nev., was forced to call for a vote to take up the measure after Republicans repeatedly blocked attempts to approve the House-passed unemployment benefits extension by unanimous consent.

Reid and Senate Finance Committee Chairman Max Baucus, D-Mont., now plan to offer an amendment to the legislation extending the first-time homebuyer tax credit through 2010 and expand the net operating loss (NOL) carryback period from two years to four years.

Baucus and Reid are said to be considering further sweetening the measure by extending the NOL carryback period to five years and eliminating a 20-percent permanent reduction or "haircut," that was originally levied on immediate cash refunds for unprofitable businesses on taxes paid over the last four years to compensate for net operating losses (NOLs) suffered in either 2008 or 2009. In addition, the two lawmakers are considering placing a 50-percent limit on taxable income in year five that can be carried forward.

The new developments emerged as Democratic leaders, frustrated in their unsuccessful attempts to move the House bill unchanged through a unanimous consent agreement, began to forge a counter-amendment to the one that Sens. Johnny Isakson, R-Ga., and Christopher J. Dodd, D-Conn., insisted on including. The Isakson-Dodd amendment calls for extending the $8,000-homebuyer tax credit for seven months, expanding it to all homebuyer and doubling the income phase-out threshold to $150,00 for individuals and $300,00 for couples. The lawmakers proposed paying for the estimated $16.7-billion measure with unused stimulus funds.

Baucus and Reid responded with a somewhat less generous proposal that would extend the credit for one year but retains the first-time homebuyer requirement and limits the full $8,000 credit to homes purchased before April 1, 2010. After that, the credit would continue to decrease every three months, bottoming out at $2,000 for homes purchased before January 1, 2011.

The Reid-Baucus proposal also incorporates provisions from the Service Members Home Ownership Tax Bill of 2009 (HR 3590), which was passed by the House on October 8 (TAXDAY, 2009/10/09, C.1). Under that measure, the first-time homebuyer tax credit would be available to members of the uniformed services, Foreign Service and intelligence employees who are required to relocate before the end of the three-year holding period required for property. Eligible service members would not have to repay the $8,000 first-time homebuyer credit if they are called up for duty overseas and forced to sell their homes within three years of purchase.

The Senate unemployment extension substitute amendment, unlike the House bill, would provide 14 additional weeks of benefits to unemployed people in all states who exhaust their benefits. It would also give six additional weeks of benefits to unemployed people who exhaust their benefits in states with 8.5-percent unemployment or more. The total cost of the package is $2.4 billion and would be paid for with an extension of the Federal Unemployment Tax (FUTA), until June 30, 2011.

Democrats propose paying for their approximately $16-billion homebuyer tax credit amendment with a six-year delay of new interest expensing rules for multinational corporations. The White House issued a written statement in support of the underlying bill, but made no mention of the tax amendments.

Floor Statement of Senator Max Baucus (D-Mont.) Regarding Unemployment Insurance

Statement of Administration Policy on HR 3548 --Unemployment Compensation Extension Act of 2009