The economic stimulus bill approved by Congress late Friday is notable both for what's in it and what's left out, various news and association reports indicate.

The National Lumber and Building Material Dealers Association's (NLBMDA) statement today on the bill mixed pleasure and disappointment with a resolution to continue lobbying for housing industry relief. NLBMDA applauded how the American Recovery and Reinvestment Act includes an extension of bonus depreciation and Section 179 direct expensing as well as creates, continues, or expands tax credits for energy efficiency. But it then said: "We are disappointed that Congress did not adopt the more robust $15,000 homebuyer tax credit, limited the application of the net operating loss carryback provision, and rejected an amendment to provide 4% mortgage financing under certain circumstances."

The statement also quoted NLBMDA chairman Paul Hylbert as saying the group "will continue to work with Congress, the Administration, our housing industry allies and our members to achieve an effective housing recovery plan as soon as possible so that we can develop, once again, a robust and vibrant housing market as a critical element of a strong economy."

Based on an analysis by NLBMDA and various press groups, here is what happened to several key housing initiatives. This analysis follows the NLBMDA's ordering of priorities which, notably, starts with measures that failed to pass rather than those that will be signed into law Tuesday by President Obama.

First-Time Homebuyer Tax Credit

The bill extends legislation enacted last year to give first-time homebuyers a refundable tax credit equal to the lesser of $7,500 or 10%. That credit had been set to apply only to purchases before July 1; now it will extend to purchases through Nov. 30. The credit's value phases out above certain income levels. The credit begins to phase out for individual taxpayers with modified adjusted gross income (AGI) over $75,000 and ends with AGI of $95,000; for joint filers, the phaseout starts at $150,000 and is gone at $170,000.

NLBMDA, a number of individual lumberyard operations, and various homebuilding groups that joined to create the "Fix Housing First" coalition had supported a Senate-passed amendment that would have provided a $15,000 tax credit to any purchaser of the principal residence for one year. That idea was removed when a House-Senate conference committee came up with a final version of the bill--in part, observers speculated, because the Republican senator who helped sponsor the amendment, Johnny Isakson of Georgia, eventually voted against the entire stimulus package.

Mortgage Rates

NLBMDA and Fix Housing First both pressed for government expenditures that would have enabled lenders to give mortgages at a below-market 4% rate. The House never considered the idea, and the Senate voted down an amendment by Sen. John Ensign (R-Nev.) providing such support. There is some speculation that the latest bank rescue package being put together by the Treasury Department will address mortgage-related issues.

Net Operating Loss Carryback

In a partial victory for housing interests, the bill permits small businesses to use net operating loss (NOL) provisions to offset up to six years of past gains rather than the current two years. The NOL provision had been sought eagerly by large production builders as well as some large dealers, but the bill limits the extension pretty much to businesses with no more than an average of $15 million in gross receipts during the past three years.

Section 179 Direct Expensing

Section 179 of the federal tax code lets business write off some of their investment in capital assets in the year of purchase rather than depreciating the value of that purchase over several years. The bill extends through 2009 a temporary increase, to $250,000 for property costing up to $800,000, in the maximum amount a taxpayer could expense for taxable year 2008. In 2010, the write-off drops to a maximum of $125,000 for goods that cost no more than $500,000. NLBMDA supported this provision.

Energy Efficiency Tax Credits

The bill triples to 30% through 2010 the credit that homeowners get for buying qualified energy efficient improvements to existing homes. The improvements include insulation, exterior windows, skylights and doors, and certain metal or asphalt roofs. The credit used to top out at $500, of which no more than $200 could come from buying windows. Now there will be an aggregate cap of $1,500 for tax years 2009 and 2010.

Infrastructure Programs

A number of big-dollar programs specified in the bill are likely to involve sales of building products. Those projects, and the dollars allocated to them, include:

  • Repairs and modernization of public housing projects ($4 billion)
  • Housing grants to rehabilitate and improve energy efficiency on Native American housing programs ($510 million)
  • Housing grants for community and economic development projects ($1 billion)
  • Energy efficiency retrogrades to low-income housing, including new insulation, windows and furnaces ($2.25 billion)
  • Funds for communities to buy and rehabilitate foreclosed and vacant properties ($2 billion)
  • Funds for building and rehabilitating low-income housing using green technology ($2.25 billion)

For more details, click here.