UPDATE: President Obama signs fix for homebuyer credit
UPDATE: On Friday, July 2, President Barack Obama signed into law the Homebuyer Assistance and Improvement Act of 2010, legislation designed to give homebuyers extra time to get financing and finish paperwork and still qualify for the homebuyer tax credit.
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With Congress headed out for a Fourth of July recess until July 12th, the legislators have quickly passed a pared down bill that focuses on fixing problems with the homebuyer credit, just in the nick of time. The Homebuyer Assistance and Improvement Act of 2010 (HR 5623) passed the House by a vote of 409 to 5, on June 29. The Senate passed it unanimously on June 30, and the bill is now on its way to be signed by President Obama.
- Modification of the Travel Promotion Act of 2009. The original bill included a deadline of 2010 to transfer initial set-up fees for the Department of Homeland Security (DHS) Travel Promotion Board. The new law extends this deadline to 2011. In addition, the Travel Promotion Board has an additional year (from 2011 originally to 2012) to begin to match funds that DHS transfers to the Board. Finally, the original bill included a sunset on the fee collection period of 2014. The new bill extends that sunset to 2015. These changes will raise an estimated $95 million over a ten year period.
- Bad check penalties on checks to the Internal Revenue Service. Currently, taxpayers who give the IRS a check or money order that has insufficient funds to cover it must pay a penalty equal to 2 percent of the amount of the check or money order. If the original amount due is less than $1,250, the penalty is the lesser of $25 or the amount of the original amount due. The new law modifies this practice by extending it to all commercially acceptable forms of payment. In other words, electronic payments made to the IRS that are not actually paid due to insufficient funds will also be subject to these penalties. This change begins with the date of enactment of the new bill and is expected to raise $48 million.
- Fraud surrounding the use of the home buyer credit by prisoners. This is a problem that has gotten much attention in recent days, thanks to a report by the Treasury Inspector General for Tax Administration. That report showed that 4,608 prisoners had filed claims for the homebuyer credit. The IRS failed to stop 1,295 of those claims from being paid, costing taxpayers $9.1 million in erroneous credits. By tightening this money leak, Congress expects to raise $6 million.
- 50% bonus deprecation will be extended through 2010.
- Section 179 depreciation will be raised to $500,000 for 2010 and 2011, with a phase-out threshold of $2 million.
- 100% exclusion of capital gains on small business stock acquired after February 17,2009 and before January 1, 2011.
- The general business credit will be expanded for small businesses, including a five year carryback.
- A reduced 5-year holding period for S corporation property with built-in gains; and
- Relief of penalties for failing to disclose reportable transactions.
- Senate responds to glut of prospective homebuyers seeking tax credits 
- Fraud continues to plague homebuyer program