On November 6, President Barack Obama signed the Worker, Homeownership, and Business Assistance Act of 2009 (H.R. 3548), which extends the $8,000 first-time home buyer tax credit, provides an additional first-time buyer tax credit, and extends the period that businesses can apply tax deductions against to offset net operating losses in 2008 and 2009.
Businesses that lost money in 2008 and 2009 now can carry those losses back by as many as five years.
The net operating loss carryback allows builders of all sizes to continue to pay off debt, pay worker wages, and stay in business until the economy and new-construction markets improve. Although large home building companies are likely to receive the largest refunds, smaller companies without large cash reserves or access to credit to get their companies through the recession may, in fact, benefit the most overall.
“We can’t underestimate the benefit this is to the small- and medium-sized builders,” says National Association of Home Builders (NAHB) economist Robert Dietz, Ph.D. Being able to carryback 2008 and 2009 losses five years could be the only thing keeping small builders afloat. The NAHB has been an active advocate for the extended net operating loss carryback period.
Several of the previous carryback law’s penalties were kept out of the new version, in particular those involving the alternative minimum tax (AMT) that is typically paid by small businesses organized as corporations, LLCs, sole proprietorships, and partnerships. “It was important to NAHB to ensure that the AMT limitation on net operating loss carrybacks was suspended on the extended carryback law,” Dietz says. The new law waives AMT for some carryback years, he notes.
While there are no negative consequences to the extended net operating loss carryback provisions, Dietz recommends that builders consult a tax professional before filing for any refunds for help in understanding how the tax law works and their best options for applying the carrybacks. NAHB estimates that extending the net operating loss carryback period will generate more than 53,000 jobs in construction and related industries and help keep nearly 8,000 related companies in business.
Read more on the “Worker, Homeownership, and Business Assistance Act of 2009” at BUILDER.com and in The Wall Street Journal (log-in may be required).
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