Home Buyers Rushing to Meet Sales Tax

Some home buyers who rushed to sign sales contracts to meet an April deadline for an up to $8,000 tax credit, may not get their money after all. Deadline to claim a federal tax credit as banks and title companies deal with a crush of closings.

Home buyers hoping to get the tax credit have until June 30 to close their deals. But the U.S. Senate failed to pass a bill that contained an amendment that would have extended that deadline to Sept. 30. The real-estate industry stepped up calls for an extension of the closing deadline in recent weeks amid concerns that some buyers might miss the deadline after a last-minute home-buying rush led to bottlenecks at banks, appraisal firms and title insurers. The Post-Standard last week said they have clients who won’t close before the deadline.

The American Recovery and Reinvestment Act of 2009 offered first-time home buyers an $8,000 credit for purchases made before Dec. 1, 2009. Then Congress passed a second law, the Worker, Home-ownership and Business Assistance Act of 2009, which extended the deadline to April 30 and added a $6,500 credit for repeat home buyers. Buyers had to close their deal by June 30. But a Senate bill that included the extension failed to secure enough votes last week and has been shelved.

The National Association of Realtor said that as many as 180,000 contracts that were signed by April 30 might miss the June 30 closing deadline. But it is unclear how many of those sales won't happen as a result of missing the tax credit.

New York’s Sales Tax on clothes to Close Budget

New York's leaders are studying the sales tax on clothing and other taxes and fees to balance a budget they are still drawing up, after failing to meet an April 1 deadline according to the Associated Press.

Two state officials said one of the so-called "revenue raisers" under discussion would increase the state's 4 percent sales tax on clothing. One of the officials said the proposal includes three or four tax-free clothes shopping periods each year, including before school begins in the fall and at the December holidays. Purchases of footwear and clothing under $110 are currently exempt. The officials spoke on the condition of anonymity because of the sensitivity of the talks.

Democratic Gov. David Paterson told reporters two specific taxing ideas increases in the rate on online reservations and rental cars weren't under discussion, but when asked if a clothing sales tax proposal was being discussed he said he wouldn't comment on ideas "piece by piece."

Legislative leaders will soon brief rank-and-file lawmakers on details of the talks. Lawmakers would be forced then to accept Paterson's budget provisions as part of an emergency spending bill or shut down government. The budget so far includes raising the cigarette tax to the highest in the nation. In addition, Paterson's proposal to cap all local property taxes among the nations highest appears unlikely at this point.

Cigarette Tax Hike in New York is good for Public Health

Cigarette taxes in New York would jump by $1.60 a pack under a tentative deal reached between Gov. David A. Paterson and legislative leaders, which would give New York the nation’s highest state cigarette taxes.

The average price in New York City, which imposes its own cigarette taxes, will be even higher, nearly $11 a pack. Those who prefer other tobacco products will also be forced to pay significantly more. The tax on smokeless tobacco will more than double, to $2 an ounce from 96 cents an ounce, starting on Aug. 1. And the wholesale tax on cigars, dips and other kinds of tobacco will rise to 75 percent from 46 percent.

The legislation will also include a plan to begin collecting taxes on cigarettes sold off the reservation by Indian tribes in New York, an issue that has provoked confrontations between State Police officers and protesting tribe members in years past.

The proposal would generate $440 million in revenue this year, helping close a state budget gap estimated at over $9 billion. But it is unclear whether there are enough votes to approve the plan in the State Senate, where Republicans have threatened to vote against any emergency budget bill that includes tax increases and some Democrats oppose efforts to collect taxes on cigarettes sold by the tribes.

“I think it’s wonderful,” said Peter Slocum, an official with the American Cancer Society. “Increased cigarette taxes have been one of the major successful public health interventions in the last decade in driving smoking rates to record lows in New York City and a lot of other parts of the country, too.”

Oil and Gas Industry Debated on Tax Break

The oil and gas industry measure by Senator Bernie Sanders, a Vermont independent, failed to muster even a simple 51-vote majority, although 60 votes were needed to pass it.

It was offered as an amendment to a bill that would extend unemployment insurance for hundreds of thousands of jobless workers whose benefits ran out last month and also renew a set of popular business tax breaks. The bill faces a key procedural vote on Wednesday, but it appears doubtful that Democratic leaders will be able to muster the 60 votes needed to advance the bill to a final vote.

Only 35 senators backed the Sanders' amendment as a number of Democrats joined the Republican opposition to defeat it. Sanders argued that big oil companies making billions in profits do not deserve the tax breaks at a time when the nation is facing record budget deficits and rising debt.

"With a record-breaking $13 trillion national debt and an unsustainable federal deficit, the last thing we should be doing is giving tax breaks to oil and gas companies that have been making enormous profits," Sanders said.

Opponents argued that removing the breaks for oil and gas drilling would hurt small producers as well as big oil companies. Meanwhile, the Senate passed a measure offered by Democratic Senator Al Franken that would establish a homeowner’s advocate office to help people having problems getting mortgages adjusted in the Home Affordable Modification Program.

The tax extenders bill would add about $80 billion to the deficit over 10 years, according to the Congressional Budget Office. The bill's $126 billion in spending would be offset in part by the increase in taxes on investment fund managers. The so-called carried interest proposal would have fund managers pay the ordinary income tax rate of 35 percent on a majority of earnings from managing investors' money. They now pay a 15 percent capital gains tax rate on those earnings.

The Senate bill would tax 65 percent of fund managers' income at the higher rate. A tougher version passed by the House of Representatives would tax 75 percent at ordinary income rates.

Bottle Tax Proposed by Baltimore City Council

It's mind-blowing that City Council is talking about taxing the energy used by Baltimore's dwindling base of manufacturers as an alternative to the "bottle tax" of 4 cents a drink. Baltimore had 13,000 factory jobs in April the least ever recorded since the Labor Department began keeping track. That's down from 27,000 in 2000 and 43,000 in 1990.

The Baltimore City Council has endorsed more than $43 million in new or higher taxes on items including income and telephone lines, largely adopting a wrenching budget-balancing plan laid out by Mayor Stephanie Rawlings-Blake.

The tax of 4 cents per container, exempting milk and fruit juice bottles, was proposed by Mayor Stephanie Rawlings-Blake in April as a way to help raise $50 million in new tax revenue to help eliminate a looming deficit and avoid city layoffs and cuts to fire and police operations. It is estimated to bring in $11.4 million in new revenues annually.

A deposit on bottles would make a lot more sense, though it wouldn't achieve the purpose of the tax, which is to raise revenues for the city. Instead, a deposit would raise revenues for citizens and nonprofits while augmenting the efforts already being made to recycle glass and plastic.

Extended Holiday tax Massachusetts

Massachusetts lawmakers appear to be preparing for an extended holiday from the sales tax holiday.

With marginal improvements seen in state revenue and questions over whether a badly-needed influx of federal Medicaid funds will come through, the Legislature isn’t in any rush to approve a sales tax holiday bill this year.

This is around the time of the year when store managers in Massachusetts start wondering if they’re going to need to get ready for a sales tax holiday weekend in August. There are usually some necessary preparations, if even just to make sure the store is properly staffed for the throngs of shoppers that will (hopefully) show up.

The Legislature and Gov. Deval L. Patrick should consider calls to hold a tax holiday in August but only if revenues stabilize and the state can justify forfeiting as much as $15 million in taxes. But the Retailers Association of Massachusetts thinks conditions are more favorable this time around for the popular holiday. The trade group revived its annual June ritual of asking its membership to call lawmakers and urge them to approve a tax holiday. The group wants the Legislature to set aside Saturday, Aug. 14, and Sunday, Aug. 15, for the sales-tax-free event.

Last August, retail sales fall an average of 30 percent below August 2008 for Retailers’ Association of Massachusetts members, following five years of growth for the month, said the group’s president, Jon Hurst.

Baltimore City Council proposed new energy tax

A City Council committee approved more than $15 million in new taxes and announced a deal with hospitals and universities that will net the city another $20 million over the next six years.

But the taxation and finance committee delayed action on a proposal to apply the city's energy tax to industrial businesses, over what its chairwoman, Councilwoman Helen Holton, described as "a technical issue."

During a session devoted to finding new revenue to narrow the city's $121 million budget gap before the end of the fiscal year on June 30, Holton announced that city officials had reached an agreement with hospitals and universities on a payment in lieu of taxes, or PILOT, that would take the place of a proposed $350 annual fee for beds.

Under the terms of the deal, which was signed by the presidents of the Maryland Hospital Association and the Maryland Independent College and University Association, the nonprofits would pay the city $5.4 million for the first two years and smaller payments in the next four.

According to a copy obtained by The Baltimore Sun, the deal would protect hospitals and universities from increases to telecommunications and energy tax rates over the six-year period, although they would experience rate increases this year. The committee voted to increase hotel room taxes, parking rates, an excise tax on billboards and the energy tax for residents, nonprofits and nonindustrial businesses.

The same cannot be said of the major new tax proposal City Council President Bernard C. "Jack" Young has put on the table this week to replace most of the revenue from the beverage tax. Ms. Rawlings-Blake proposed increasing energy tax rates for residential, commercial and nonprofit users. Mr. Young is proposing adding industrial users to the mix on the grounds that it's only fair that they, too, shoulder some of the burden.

But because of the vastly greater amount of energy used by industry, such an increase would not be equitable. Consider this: Increasing the rate for all commercial and residential customers by 15 percent and increasing the rates for nonprofits by more than 50 percent would raise about $8.2 million; adding industrial users would, by itself, raise $9.1 million a year. That's a big burden spread among a small number of firms.

New Jersey Film and Television Tax Credit Program

Film producers, production workers, union organizers and even a TV actress put a touch of drama into a state Senate Budget Committee hearing in Secaucus, denouncing Governor Christie’s plan to suspend a film and television tax credit program in New Jersey.

Representatives from "Mercy" and "Law and Order: Special Victims Unit" urged Republican Gov. Chris Christie to reconsider ending the 20 percent tax credit the state has offered since 2006 to lure movie and TV production companies to the state. Both TV series are filmed largely in New Jersey.

The program provides $10 million a year in tax credits for television and film productions. Companies that spend 60 percent of their production budget in New Jersey are eligible for a tax credit of up to 20 percent of that expenditure.

Supporters say the economic activity generated by film and television companies attracted by the program brings in far more in taxes than is spent on the credits. But Christie’s office released a statement saying the state’s budget shortfall was so dire that “cuts had to be made and priorities considered in closing a $10.9 billion budget gap.”

The interest in New Jersey has a lot to do with the money the film and television industry spend to market and promote New Jersey based shows.

Oil Refining Industry Federal Tax

A key oil-refining industry organization is opposing a provision in a Senate bill that would quintuple a federal tax specifically used by agencies to clean up oil spills because it would increase fuel costs for consumers. Senate Democrats brought up a measure that would couple a fivefold increase in the tax oil companies pay into a spill fund with help for the jobless, doctors, and cash-starved states.

The National Petrochemical and Refiners Association sent a letter to Senators Harry Reid (D., Nev.) and Mitch McConnell (R., Ky.) opposing a provision that would increase the Oil Spill Liability Trust Fund tax from 8 cents a gallon of crude oil to 41 cents a gallon. The bill passed by the U.S. House of Representatives on May 28 had increased the tax to 34 cents a gallon, which NPRA didn't oppose.

NPRA didn't oppose the tax 34-cent tax increase passed by the U.S. House of Representatives on May 28 to ensure that the fund was adequately financed to respond to future oil spills, said Charles Drevna, president of the refining-industry organization. This provision was passed as part of a broader jobs bill that extended unemployment benefits and various tax incentives.

Even with those levies on investment fund managers, oil companies, and some international businesses, among others the measure would add about $80 billion to the deficit over the next decade.

Debate on Medical Device Manufacturers Tax

Medical device manufacturers are bristling over a key provision in the nation’s new health care law which they say forces them to shoulder an unfair cost of expanded insurance coverage.

The companies say a 2.3 percent excise tax on medical devices like heart defibrillators and surgical tools for hospitals, health centers and ambulance services will cost them an estimated $20 billion in new taxes over the next decade. And they say that will force them to lay off workers and curb the research and development of new medical tools.

The tax, which doesn’t kick in until 2013, has also pitted the state’s two senators against each other. “Many small to midsize medical device companies will owe more to the federal government in taxes than they make in profits," said Mark Leahy of the Medical Device Manufacturers Association. It could have been worse: the initial proposed tax was $40 billion.

Sen. John Kerry, a Democrat, who helped arrange meetings between medical device companies and Democrats leaders in Congress to convince them to cut in half the original proposed tax hike, maintained there would be a benefit for the companies. He explained about the expanded marketplace for 32 million people who are going to buy the products.

The tax, which doesn't kick in until 2013, has touched a nerve in Massachusetts, the state that provided the blueprint for the health care law. Massachusetts is also a hub for medical device companies, with more than 200 firms calling the state home. It has also pitted its senators against one another.

California has the highest number of medical device workers with more than 72,400 followed by Massachusetts with nearly 22,000, Florida with nearly 20,000 and Minnesota with more than 18,000, according to industry estimates. Other states with significant medical device hubs include: New Jersey, Pennsylvania, New York, Texas and Ohio.

When the negotiations started it was going to be $40 billion and our industry negotiated it down to $20 billion.

G20 Implementation of Global Bank Tax

Canada may have scored a win at the G20 with the decision to let countries decide for themselves about whether to implement a bank tax, but there’s plenty more to fight over, opposition critics say. The G20 finance ministers agreed in Korea over the weekend not to designate a global bank tax, the funds from which would have been used for future bank bailouts.

They are pushing for stricter regulations, something the Canadian government and opposition parties’ support, but won't have a proposal ready until the November summit. Liberal finance critic John McCallum says the devil will be in the details, predicting debates over how much capital banks will require holding. The higher the capital ratios forced on the banks, the more secure the system is, but the fewer banks will be able to lend money in the short run.

So there will be a big debate about how high those capital requirements should be and also on how long they should allow the banks to implement them. Canada opposes the bank tax and deployed cabinet ministers around the world to lobby against it. Prime Minister Stephen Harper also discussed it in his meetings last week with British Prime Minister David Cameron and French Prime Minister Francois Fillon, who both support the tax.

The Tories argued having a safety net would let the banks make risky investments, knowing there was money available to bail them out. NDP finance critic Thomas Mulcair says he wants to see the government discussing a financial transaction tax with the G20, an idea supported by international development groups who want the world's richest countries to impose a 0.05% tax on financial transactions to fund humanitarian aid.

“Those countries with serious fiscal challenges need to accelerate the pace of consolidation. We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions,” the G20 said in a communiqué issued after the talks.

Attempts to introduce the global bank levy to fund future bailouts were ditched after opposition from Japan, Canada and Brazil, whose banks needed no public aid during the crisis. But the group said the financial sector should make a “substantial” contribution toward the cost of any rescue.

Los Angeles County Homeowners Tax Reductions

About 405,000 homeowners in Los Angeles County can expect to see lower property taxes later this year, the county assessor said Wednesday.

Those most likely to receive property tax reductions purchased their homes or condominiums after July 1, 2003, Assessor Robert Quon said, just as the housing market bubble began to inflate.

In some cases, however, tax reductions were made for some homes purchased earlier than 2003, including in Compton, East Los Angeles, Van Nuys, Paramount and Pomona. In hard-hit Lancaster and Palmdale, those who purchased homes as early as the 1980s may see tax cuts.

The average reduction for single-family homes is about $1,800; for condo owners, it is $1,500. About 290,000 houses and 115,000 condos qualified for the reduction. In Lancaster and Palmdale, which have seen a severe drop in property values, those who purchased homes as far back as the 1980s may see tax reductions.

The reduction in property taxes may be significant. For single-family homes, the average reduction in property taxes is about $1,800; the average savings for condo owners is $1,500. The reductions will be seen on property tax bills later this year.

New Hampshire Senate are Voted for LLC Tax

The New Hampshire Senate swallowed hard, but voted for a reasonable compensation bill that keeps the so-called "LLC tax" in place, at least for now. Only Sen. Jack Barnes, R-Raymond, voted against the bill in protest, but the rest of the Senate agreed to it, leaving the fate of the LLC tax repeal to budget deliberations in special session.

Repeal of the LLC tax did not make it into HB 1607 which deals with reasonable compensation that the House and Senate are voted. The whole debate over extending the interest and dividends tax to limited liability company distributions (more commonly known as the "LLC tax") focused attention on the reasonable compensation issue, but House members say the two are unrelated.

The New Hampshire House and Senate have passed legislation setting the amount state business owners are allowed to deduct for themselves as earnings, before they are taxed on profits. The bill sets $50,000 as a so-called "safe harbor" as reasonable compensation business owners can pay themselves without justifying it to state revenue officials.

The Department of Revenue Administration has been increasingly questioning such deductions, and the $50,000 threshold will lessen the fear among business owners, though most business groups think the figure is too low especially the $50,000 limit is per entity, as opposed to each individual in a business ownership. The compromise passed the Senate, 23-1. The House approved it with no debate and a loud "no," but the chair ruled that the motion passed.

Here are some other measures approved by lawmakers that will become law, unless prohibited by Gov. John Lynch:

• Under SB 408, trade groups and chambers of commerce would be able to form alliances to purchase health insurance for members. As a last-minute addition to the bill, the Insurance Department was told not to prevent leasing companies from using a group rate that would include many of its clients to buy insurance.
• Under SB 480, those who wish to appeal environmental board decisions would be able to only go to court over interpretation of the law, and not on matters of fact.
• Under HB 491, all things being equal, the state would give local vendors preference in bidding (with Department of Transportation contractors exempted), and those contractors that violated law in the last two years would be barred from bidding.
• Under HB 1168, a person would no longer be denied unemployed benefits for gross misconduct involving dishonesty but instead for a theft of more than $500, and only if that theft was connected to his or her work.
• Under HB 1239, developers would receive a timely permit from the state Department of Environmental Services, or their permits will be approved automatically (stricter conditions than contained in an earlier version that gave developers their money back.) Under HB 1380, developers also wouldn't have to pay for duplicate review from local planning board.
• Under HB 1267, municipalities would be able to force hawkers and peddlers to submit to criminal background checks in order to obtain a license.
• Under HB 1461, municipalities would be able to regulate sellers' display of martial arts weapons, with an eye of protecting marketing to children.
• Under SB 411, those with permits for large groundwater withdrawals would have to comply with local regulations.
• Under SB 420, insurers offering prescription drug benefits would be required to allow participants to use non-mail order pharmacies.
• Under SB 181, the Department of Safety, not the Liquor Commission, would be in charge of liquor licensing, enforcement and education. Licensing and education would start in July, but the enforcement switch wouldn’t take place until July 2011.