Treasury Secretary Tim Geithner and Housing and Urban Development Secretary Shaun Donovan have called on Congress to extend the First-Time Homebuyers Tax Credit past its Dec. 1 expiration date, while putting in place strong anti-fraud measures.
The First-Time Homebuyers Tax Credit has helped shore up housing sales since it was approved as part of the stimulus package in February. It provides a refundable tax credit of up to $8,000 for first-time homeowners, but it has also been criticized for providing an expensive taxpayer-funded credit for people who might have bought homes without it.
In addition, the IRS and the Treasury Departments Inspector General for Tax Administration found evidence of widespread fraud in claims for the credit, including apparent claims by four-year-old children (see Audit Finds $636M in Bogus Homebuyer Credits). However, housing, real estate and construction industry representatives have been pressing for an extension and expansion of the credit.
The staff of Senate Majority Leader Harry Reid, D-Nev., said Wednesday that Senate leaders had agreed on a deal to extend the $8,000 tax credit for first-time home buyers, with a reduced credit of $6,500 for repeat home buyers. The credits would be available for individuals earning up to $125,000 or $250,000 for couples, up from $75,000 for individuals and $150,000 for couples under the current version of the law, according to the Associated Press. The tax credits would be available for home sales that are under contract by April 30, 2010, and closed by June 30.
The administration is asking Congress to extend the credit for a limited period and to include effective measures to combat tax fraud, including setting a minimum age for home purchases and requiring documentary proof of the purchase in order to receive the credit.
Geithner and Donovan also called for two other key housing measures aimed at shoring up the residential market. The administration wants a one-year extension of the current home mortgage loan limits for the Federal Housing Administration, Fannie Mae and Freddie Mac.
Another recommendation would provide more secure funding for the Housing Trust Fund. The presidents budget had requested $1 billion for the fund, and the administration said it would work with Congress to find ways to offset that level of financing in the budget.
These three measures will help support our efforts to stabilize the housing market by providing support for the recovery in housing prices, keeping mortgage rates low, and helping people who can afford their homes to avoid foreclosure, said Geithner in a statement.
Sen. Johnny Isakson, R-Ga., has introduced legislation for extending the credit, and the extension has received support from Senate Banking Committee Chairman Christopher Dodd, D-Conn. Rep. John Lewis, D-Ga., who chairs a subcommittee that held a hearing earlier this month on fraudulent claims for the credit, has also introduced legislation to identify and block dubious claims for the credit and require taxpayers to provide documents with their tax returns to prove they had legitimately claimed the credit.