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No. 14-20039
In the United States Court of Appeals for the Fifth Circuit
STEVEN F. HOTZE, M.D., AND BRAIDWOOD MANAGEMENT, INC.,
Plaintiffs-Appellants,
v.
KATHLEEN SEBELIUS, U.S. SECRETARY OF HEALTH & HUMAN
SERVICES, AND JACOB J. LEW, U.S. SECRETARY OF THE TREASURY, IN
THEIR OFFICIAL CAPACITIES,
Defendants-Appellees.
ON APPEAL FROM U.S. DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION,
CIVIL NO. 4:13-CV-01318, HON. NANCY F. ATLAS
ADDENDUM TO AMICI CURIAE BRIEF OF SENATORS
JOHN CORNYN AND TED CRUZ, CONGRESSMAN PETE
SESSIONS, ET AL. (ADDITIONAL AMICI CURIAE ON INSIDE
COVER) IN SUPPORT OF APPELLANTS AND REVERSAL
Lawrence J. Joseph, D.C. Bar #464777
1250 Connecticut Ave, NW, Suite 200
Washington, DC 20036
Tel: 202-669-5135
Fax: 202-318-2254
Email: [email protected]
Counsel for Amici Curiae
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No. 14-20039
In the United States Court of Appeals for the Fifth Circuit
ADDITIONAL AMICI CURIAE:
U.S. REPS. ROBERT ADERHOLT, JOE BARTON, KERRY
BENTIVOLIO, CHARLES W. BOUSTANY, JR., KEVIN
BRADY, PAUL BROUN, VERN BUCHANAN, JOHN CARTER,
STEVE CHABOT, TOM COLE, K. MICHAEL CONAWAY,
PAUL COOK, KEVIN CRAMER, JOHN CULBERSON, JEFF
DUNCAN, BLAKE FARENTHOLD, JOHN FLEMING, BILL
FLORES, SCOTT GARRETT, BOB GIBBS, LOUIE
GOHMERT, TREY GOWDY, MORGAN GRIFFITH, RALPH
M HALL, RICHARD HUDSON, TIM HUELSKAMP, LYNN
JENKINS, BILL JOHNSON, SAM JOHNSON, WALTER
JONES, STEVE KING, JACK KINGSTON, JOHN KLINE,
DOUG LAMALFA, LEONARD LANCE, JAMES LANKFORD,
MICHAEL T. MCCAUL, PATRICK T. MCHENRY, MARK
MEADOWS, JEFF MILLER, MICK MULVANEY, RANDY
NEUGEBAUER, RICHARD NUGENT, PETE OLSON,
ROBERT PITTENGER, BILL POSEY, SCOTT RIGELL, PHIL
ROE, KEITH ROTHFUS, MATT SALMON, STEVE SCALISE,
MIKE SIMPSON, LAMAR SMITH, STEVE STOCKMAN, LEE
TERRY, MAC THORNBERRY, RANDY WEBER, DANIEL
WEBSTER, LYNN A. WESTMORELAND, ROGER
WILLIAMS, JOE WILSON, ROBERT J. WITTMAN, ROBERT
WOODALL, TED YOHO, AND DON YOUNGIN SUPPORT OF
APPELLANTS AND REVERSAL
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ADDENDUM TABLE OF CONTENTS
Federal Legislators Participating as Amici................................................................. 1
Sen. John Cornyn ............................................................................................. 1
Sen. Ted Cruz .................................................................................................. 1
Rep. Pete Sessions ........................................................................................... 1
Rep. Robert Aderholt ....................................................................................... 1
Rep. Joe Barton ................................................................................................ 2
Rep. Kerry Bentivolio...................................................................................... 2
Rep. Charles W. Boustany, Jr. ......................................................................... 2
Rep. Kevin Brady ............................................................................................ 2
Rep. Paul Broun ............................................................................................... 2
Rep. Vern Buchanan ........................................................................................ 2
Rep. John Carter .............................................................................................. 2
Rep. Steve Chabot ........................................................................................... 3
Rep. Tom Cole ................................................................................................. 3
Rep. K. Michael Conaway ............................................................................... 3
Rep. Paul Cook ................................................................................................ 3
Rep. Kevin Cramer .......................................................................................... 3
Rep. John Culberson ........................................................................................ 3
Rep. Jeff Duncan ............................................................................................. 3
Rep. Blake Farenthold ..................................................................................... 4
Rep. John Fleming ........................................................................................... 4
Rep. Bill Flores ................................................................................................ 4
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Rep. Scott Garrett ............................................................................................ 4
Rep. Bob Gibbs ................................................................................................ 4
Rep. Louie Gohmert ........................................................................................ 4
Rep. Trey Gowdy............................................................................................. 5
Rep. Morgan Griffith ....................................................................................... 5
Rep. Ralph M Hall ........................................................................................... 5
Rep. Richard Hudson ....................................................................................... 5
Rep. Tim Huelskamp ....................................................................................... 5
Rep. Lynn Jenkins ........................................................................................... 5
Rep. Bill Johnson ............................................................................................. 6
Rep. Sam Johnson ............................................................................................ 6
Rep. Walter Jones ............................................................................................ 6
Rep. Steve King ............................................................................................... 6
Rep. Jack Kingston .......................................................................................... 6
Rep. John Kline ............................................................................................... 6
Rep. Doug LaMalfa ......................................................................................... 6
Rep. Leonard Lance ......................................................................................... 7
Rep. James Lankford ....................................................................................... 7
Rep. Michael T. McCaul ................................................................................. 7
Rep. Patrick T. McHenry ................................................................................. 7
Rep. Mark Meadows........................................................................................ 7
Rep. Jeff Miller ................................................................................................ 7
Rep. Mick Mulvaney ....................................................................................... 8
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Rep. Randy Neugebauer .................................................................................. 8
Rep. Richard Nugent ....................................................................................... 8
Rep. Pete Olson ............................................................................................... 8
Rep. Robert Pittenger....................................................................................... 8
Rep. Bill Posey ................................................................................................ 8
Rep. Scott Rigell .............................................................................................. 9
Rep. Phil Roe ................................................................................................... 9
Rep. Keith Rothfus .......................................................................................... 9
Rep. Matt Salmon ............................................................................................ 9
Rep. Steve Scalise ............................................................................................ 9
Rep. Mike Simpson ......................................................................................... 9
Rep. Lamar Smith ............................................................................................ 9
Rep. Steve Stockman ..................................................................................... 10
Rep. Lee Terry ............................................................................................... 10
Rep. Mac Thornberry..................................................................................... 10
Rep. Randy Weber ......................................................................................... 10
Rep. Daniel Webster ...................................................................................... 10
Rep. Lynn A. Westmoreland ......................................................................... 10
Rep. Roger Williams ..................................................................................... 10
Rep. Joe Wilson ............................................................................................. 11
Rep. Robert J. Wittman ................................................................................. 11
Rep. Robert Woodall ..................................................................................... 11
Rep. Ted Yoho ............................................................................................... 11
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Rep. Don Young ............................................................................................ 11
S. Rep. No. 42-146 (1872) ....................................................................................... 12
Joint Committee on Taxation, Technical Explanation of H.R. 3590,
the “Service Members Home Ownership Tax Act of 2009”
Scheduled for Consideration by the House of Representatives
on October 7, 2009 (Oct. 6, 2009) (JCX-39-09) .......................................... 18
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FEDERAL LEGISLATORS PARTICIPATING AS AMICI
Sen. John Cornyn
Senator Cornyn is the Senate Republican Whip and serves on the Committee
on Finance and the Committee on the Judiciary. Prior to his election as a Senator
representing Texas, Sen. Cornyn served Texas as a district judge, a member of the
Texas Supreme Court, and as Texas Attorney General.
Sen. Ted Cruz
Senator Cruz is the Ranking Member of the Senate Judiciary Subcommittee
on the Constitution, Civil Rights and Human Rights and serves on the Committee
on Commerce, Science, and Transportation; the Committee on Armed Services;
the Committee on the Judiciary; the Special Committee on Aging; and the
Committee on Rules and Administration. Prior to his election as a Senator
representing Texas, Sen. Cruz served as the Solicitor General of Texas.
Rep. Pete Sessions
Congressman Sessions chairs the House Rules Committee and co-chairs the
Congressional Down Syndrome Caucus. He represents the 32nd Congressional
District of Texas.
Rep. Robert Aderholt
Congressman Aderholt serves on the House Appropriations Committee. He
represents the 4th District of Alabama.
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Rep. Joe Barton
Congressman Barton serves on the House Energy and Commerce
Committee. He represents the 6th District of Texas.
Rep. Kerry Bentivolio
Congressman Bentivolio serves on the House Oversight and Government
and Small Business Committees. He represents the 11th District of Michigan.
Rep. Charles W. Boustany, Jr.
Congressman Boustany serves on the House Ways and Means Committee.
He represents the 3rd District of Louisiana.
Rep. Kevin Brady
Congressman Brady serves on the House Joint Taxation and Ways and
Means Committees. He represents the 8th District of Texas.
Rep. Paul Broun
Congressman Broun serves on the House Homeland Security, Natural
Resources, Science, Space, and Technology Committees. He represents the 10th
District of Georgia.
Rep. Vern Buchanan
Congressman Buchanan serves on the House Ways and Means Committee.
He represents the 16th District of Florida.
Rep. John Carter
Congressman Carter serves on the House Appropriations Committee. He
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represents the 31st District of Texas.
Rep. Steve Chabot
Congressman Chabot serves on the House Foreign Affairs, Small Business,
and Judiciary Committees. He represents the 1st District of Ohio.
Rep. Tom Cole
Congressman Cole serves on the House Appropriations, Joint Library,
Rules, and Budget Committees. He represents the 4th District of Oklahoma.
Rep. K. Michael Conaway
Congressman Conaway serves on the House Agriculture, Armed Services,
Ethics, and Intelligence Committees. He represents the 11th District of Texas.
Rep. Paul Cook
Congressman Cook serves on the House Armed Services, Foreign Affairs,
and Veterans' Affairs Committees. He represents the 8th District of California.
Rep. Kevin Cramer
Congressman Cramer serves on the House Natural Resources and Science,
Space, and Technology Committees. He represents the District of North Dakota.
Rep. John Culberson
Congressman Culberson serves on the House Appropriations Committee. He
represents the 7th District of Texas.
Rep. Jeff Duncan
Congressman Duncan serves on the House Foreign Affairs, Homeland
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Security, and Natural Resources Committees. He represents the 3rd District of
South Carolina.
Rep. Blake Farenthold
Congressman Farenthold serves on the House Oversight and Government,
Judiciary, and Transportation Committees. He represents the 27th District of
Texas.
Rep. John Fleming
Congressman Fleming serves on the House Armed Services and Natural
Resources Committees. He represents the 4th District of Louisiana.
Rep. Bill Flores
Congressman Flores serves on the House Natural Resources, the Budget,
and Veterans' Affairs Committees. He represents the 17th District of Texas.
Rep. Scott Garrett
Congressman Garrett serves on the House Financial Services and Budget
Committees. He represents the 5th District of New Jersey.
Rep. Bob Gibbs
Congressman Gibbs serves on the House Agriculture and Transportation
Committees. He represents the 7th District of Ohio.
Rep. Louie Gohmert
Congressman Gohmert serves on the House Natural Resources and Judiciary
Committees. He represents the 1st District of Texas.
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Rep. Trey Gowdy
Congressman Gowdy serves on the House Education and the Workforce,
Ethics, Oversight and Government, and Judiciary Committees. He represents the
4th District of South Carolina.
Rep. Morgan Griffith
Congressman Griffith serves on the House Energy and Commerce
Committee. He represents the 9th District of Virginia.
Rep. Ralph M Hall
Congressman Hall serves on the House Energy and Commerce and Science,
Space, and Technology Committees. He represents the 4th District of Texas.
Rep. Richard Hudson
Congressman Hudson serves on the House Agriculture, Education and the
Workforce, Homeland Security Committees. He represents the 8th District of
North Carolina.
Rep. Tim Huelskamp
Congressman Huelskamp serves on the House Small Business and Veterans'
Affairs Committees. He represents the 1st District of Kansas.
Rep. Lynn Jenkins
Congresswoman Jenkins serves on the House Ways and Means Committee.
She represents the 2nd District of Kansas.
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Rep. Bill Johnson
Congressman Johnson serves on the House Energy and Commerce and
Science, Space, and Technology Committees. He represents the 6th District of
Ohio.
Rep. Sam Johnson
Congressman Johnson serves on the House Joint Taxation and Ways and
Means Committees. He represents the 3rd District of Texas.
Rep. Walter Jones
Congressman Jones serves on the House Armed Services Committee. He
represents the 3rd District of North Carolina.
Rep. Steve King
Congressman King serves on the House Agriculture, Small Business, and
Judiciary Committees. He represents the 4th District of Iowa.
Rep. Jack Kingston
Congressman Kingston serves on the House Appropriations Committee. He
represents the 1st District of Georgia.
Rep. John Kline
Congressman Kline serves on the House Armed Services and Education and
the Workforce Committees. He represents the 2nd District of Minnesota.
Rep. Doug LaMalfa
Congressman LaMalfa serves on the House Agriculture and Natural
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Resources Committees. He represents the 1st District of California.
Rep. Leonard Lance
Congressman Lance serves on the House Energy and Commerce
Committees. He represents the 7th District of New Jersey.
Rep. James Lankford
Congressman Lankford serves on the House Oversight and Government and
Budget Committees. He represents the 5th District of Oklahoma.
Rep. Michael T. McCaul
Congressman McCaul serves on the House Foreign Affairs, Homeland
Security, and Science, Space, and Technology Committees. He represents the 10th
District of Texas.
Rep. Patrick T. McHenry
Congressman McHenry serves on the House Financial Services and
Oversight and Government Committees. He represents the 10th District of North
Carolina.
Rep. Mark Meadows
Congressman Meadows serves on the House Foreign Affairs, Oversight and
Government, and Transportation Committees. He represents the 11th District of
North Carolina.
Rep. Jeff Miller
Congressman Miller serves on the House Armed Services and Intelligence,
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and Veterans' Affairs Committees. He represents the 1st District of Florida.
Rep. Mick Mulvaney
Congressman Mulvaney serves on the House Financial Services and Small
Business Committees. He represents the 5th District of South Carolina.
Rep. Randy Neugebauer
Congressman Neugebauer serves on the House Agriculture, Financial
Services, Science, Space, and Technology Committees. He represents the 19th
District of Texas.
Rep. Richard Nugent
Congressman Nugent serves on the House Armed Services, House
Administration, and Rules Committees. He represents the 11th District of Florida.
Rep. Pete Olson
Congressman Olson serves on the House Energy and Commerce Committee.
He represents the 22nd District of Texas.
Rep. Robert Pittenger
Congressman Pittenger serves on the House Financial Services Committee.
He represents the 9th District of North Carolina.
Rep. Bill Posey
Congressman Posey serves on the House Financial Services and Science,
Space, and Technology Committees. He represents the 8th District of Florida.
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Rep. Scott Rigell
Congressman Rigell serves on the House Armed Services and Budget
Committees. He represents the 2nd District of Virginia.
Rep. Phil Roe
Congressman Roe serves on the House Education and the Workforce and
Veterans' Affairs Committees. He represents the 1st District of Tennessee.
Rep. Keith Rothfus
Congressman Rothfus serves on the House Financial Services Committee.
He represents the 12th District of Pennsylvania.
Rep. Matt Salmon
Congressman Salmon serves on the House Education and the Workforce and
Foreign Affairs Committees. He represents the 5th District of Arizona.
Rep. Steve Scalise
Congressman Scalise serves on the House Energy and Commerce
Committee. He represents the 1st District of Louisiana.
Rep. Mike Simpson
Congressman Simpson serves on the House Appropriations Committee. He
represents the 2nd District of Idaho.
Rep. Lamar Smith
Congressman Smith serves on the House Homeland Security, Science,
Space, and Technology, and Judiciary Committees. He represents the 21st District
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of Texas.
Rep. Steve Stockman
Congressman Stockman serves on the House Foreign Affairs and Science,
Space, and Technology Committees. He represents the 36th District of Texas.
Rep. Lee Terry
Congressman Terry serves on the House Energy and Commerce Committee.
He represents the 2nd District of Nebraska.
Rep. Mac Thornberry
Congressman Thornberry serves on the House Armed Services and
Intelligence Committees. He represents the 13th District of Texas.
Rep. Randy Weber
Congressman Weber serves on the House Foreign Affairs and Science,
Space, and Technology Committees. He represents the 14th District of Texas.
Rep. Daniel Webster
Congressman Webster serves on the House Rules and Transportation
Committees. He represents the 10th District of Florida.
Rep. Lynn A. Westmoreland
Congressman Westmoreland serves on the House Financial Services and
Intelligence Committees. He represents the 3rd District of Georgia.
Rep. Roger Williams
Congressman Williams serves on the House Transportation and Budget
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Committees. He represents the 25th District of Texas.
Rep. Joe Wilson
Congressman Wilson serves on the House Armed Services, Education and
the Workforce, and Foreign Affairs Committees. He represents the 2nd District of
South Carolina.
Rep. Robert J. Wittman
Congressman Wittman serves on the House Armed Services and Natural
Resources Committees. He represents the 1st District of Virginia.
Rep. Robert Woodall
Congressman Woodall serves on the House Oversight and Government,
Rules, and Budget Committees. He represents the 7th District of Georgia.
Rep. Ted Yoho
Congressman Yoho serves on the House Agriculture and Foreign Affairs
Committees. He represents the 3rd District of Florida.
Rep. Don Young
Congressman Young serves on the House Natural Resources and
Transportation Committees. He represents the District of Alaska.
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TECHNICAL EXPLANATION OF H.R. 3590, THE
“SERVICE MEMBERS HOME OWNERSHIP TAX ACT OF 2009”
SCHEDULED FOR CONSIDERATION BY THE
HOUSE OF REPRESENTATIVES ON OCTOBER 7, 2009
Prepared by the Staff
of the
JOINT COMMITTEE ON TAXATION
October 6, 2009
JCX-39-09
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CONTENTS
Page
INTRODUCTION .......................................................................................................................... 1
A. Waiver of Recapture of First-Time Homebuyer Credit for Individuals on Qualified
Official Extended Duty; Extension of Credit for Individuals on Qualified Official
Extended Duty Outside the United States (secs. 1 and 2 of the bill and sec. 36 of the
Code) ................................................................................................................................... 2
B. Exclusion from Gross Income of Qualified Military Base Realignment and Closure
Fringe (sec. 3 of the bill and sec. 132 of the Code) ............................................................ 5
C. Modification of Penalty for Failure to File Partnership or S Corporation Returns
(sec. 4 of the bill and secs. 6698 and 6699 of the Code) .................................................... 7
D. Time for Payment of Corporate Estimated Taxes (sec. 5 of the bill and sec. 6655
of the Code)......................................................................................................................... 9
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INTRODUCTION
This document,1 prepared by the staff of the Joint Committee on Taxation, provides a
technical explanation of H.R. 3590, the Service Members Home Ownership Tax Act of 2009.
1
This document may be cited as follows: Joint Committee on Taxation, Technical Explanation of H.R.
3590, the “Service Members Home Ownership Tax Act of 2009” Scheduled for Consideration by the House of
Representatives on October 7, 2009 (JCX-39-09), October 6, 2009. This document can also be found on our
website at www.jct.gov.
1
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A. Waiver of Recapture of First-Time Homebuyer Credit for Individuals on Qualified
Official Extended Duty; Extension of Credit for Individuals on
Qualified Official Extended Duty Outside the United States
(secs. 1 and 2 of the bill and sec. 36 of the Code)
Present Law
In general
An individual who is a first-time homebuyer is allowed a refundable tax credit equal to
the lesser of $8,000 ($4,000 for a married individual filing separately) or 10 percent of the
purchase price of a principal residence. The credit is allowed for qualifying home purchases on
or after April 9, 2008, and before December 1, 2009.2
The credit phases out for individual taxpayers with modified adjusted gross income
between $75,000 and $95,000 ($150,000 and $170,000 for joint filers) for the year of purchase.
An individual is considered a first-time homebuyer if the individual had no ownership
interest in a principal residence in the United States during the 3-year period prior to the
purchase of the home.
An election is provided to treat a residence purchased after December 31, 2008, and
before December 1, 2009, as purchased on December 31, 2008, so that the credit may be claimed
on the 2008 income tax return.
Recapture
For homes purchased on or before December 31, 2008, the credit is recaptured ratably
over fifteen years with no interest charge beginning in the second taxable year after the taxable
year in which the home is purchased. For example, if an individual purchases a home in 2008,
recapture commences with the 2010 tax return. If the individual sells the home (or the home
ceases to be used as the principal residence of the individual or the individual’s spouse) prior to
complete recapture of the credit, the amount of any credit not previously recaptured is due on the
tax return for the year in which the home is sold (or ceases to be used as the principal
residence).3 However, in the case of a sale to an unrelated person, the amount recaptured may
not exceed the amount of gain from the sale of the residence. For this purpose, gain is
determined by reducing the basis of the residence by the amount of the credit to the extent not
previously recaptured. No amount is recaptured after the death of an individual. In the case of
an involuntary conversion of the home, recapture is not accelerated if a new principal residence
is acquired within a two-year period. In the case of a transfer of the residence to a spouse or to a
2
For purchases before January 1, 2009, the dollar limits are $7,500 ($3,750 for a married individual filing
separately).
3
If the individual sells the home (or the home ceases to be used as the principal residence of the individual
and the individual’s spouse) in the same taxable year the home is purchased, no credit is allowed.
2
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former spouse incident to divorce, the transferee spouse (and not the transferor spouse) will be
responsible for any future recapture.
For homes purchased after December 31, 2008 and before December 1, 2009 the credit is
recaptured only if the taxpayer disposes of the home (or the home otherwise ceases to be the
principal residence of the taxpayer) within 36 months from the date of purchase.
Explanation of Provision
Waiver of recapture for individuals on qualified extended duty
In the case of a disposition of principal residence by an individual (or a cessation of use
of the residence that otherwise would cause recapture) after December 31, 2008, in connection
with Government orders received by the individual (or the individual's spouse) for qualified
official extended duty, no recapture applies by reason of the disposition of the residence,4 and
any 15-year recapture with respect to a home acquired before January 1, 2009, ceases to apply in
the taxable year the disposition occurs.
Qualified official extended duty means service on official extended duty as a member of
the uniformed services, a member of the Foreign Service of the United States, or an employee of
the intelligence community.
Qualified official extended duty is any period of extended duty while serving at a place of
duty at least 50 miles away from the taxpayer’s principal residence or under orders compelling
residence in government furnished quarters. Extended duty is defined as any period of duty
pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite
period.
The uniformed services include: (1) the Armed Forces (the Army, Navy, Air Force,
Marine Corps, and Coast Guard); (2) the commissioned corps of the National Oceanic and
Atmospheric Administration; and (3) the commissioned corps of the Public Health Service.
The term “member of the Foreign Service of the United States” has the same meaning as
under the exclusion of gain on the sale of certain principal residences.5
The term “employee of the intelligence community” means an employee of the Office of
the Director of National Intelligence, the Central Intelligence Agency, the National Security
Agency, the Defense Intelligence Agency, the National Geospatial-Intelligence Agency, or the
National Reconnaissance Office. The term also includes employment with: (1) any other office
within the Department of Defense for the collection of specialized national intelligence through
reconnaissance programs; (2) any of the intelligence elements of the Army, the Navy, the Air
Force, the Marine Corps, the Federal Bureau of Investigation, the Department of the Treasury,
4
If the individual sells the home (or the home ceases to be used as the principal residence of the individual
and the individual’s spouse) in connection with such orders in the same taxable year the home is purchased, the
credit is allowable.
5
Sec. 121.
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the Department of Energy, and the Coast Guard; (3) the Bureau of Intelligence and Research of
the Department of State; and (4) the elements of the Department of Homeland Security
concerned with the analyses of foreign intelligence information.
Extension of the first-time homebuyer credit for individuals on qualified official extended
duty outside of the United States
In the case of any individual (and the individual's spouse) who serves on qualified official
extended duty service outside of the United States for at least 90 days in calendar year 2009 the
expiration date of the first-time homebuyer credit is extended for one year, through November
30, 2010. An individual purchasing a home after December 31, 2009, and before July 1, 2010,
may elect to treat the residence as purchased on December 31, 2009, in order to claim the credit
on the 2009 income tax return.
Effective Date
The waiver of recapture provision applies to dispositions and cessations after December
31, 2008.
The extension of the first-time homebuyer credit applies to residences purchased after
November 30, 2009 and before December 1, 2010.
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B. Exclusion from Gross Income of Qualified Military Base
Realignment and Closure Fringe
(sec. 3 of the bill and sec. 132 of the Code)
Present Law
Homeowners Assistance Program payment
The Department of Defense Homeowners Assistance Program (“HAP”) provides
payments to certain employees and members of the Armed Forces to offset the adverse effects on
housing values that result from a military base realignment or closure.
In general, under HAP, eligible individuals receive either: (1) a cash payment as
compensation for losses that may be or have been sustained in a private sale, in an amount not to
exceed the difference between (a) 95 percent of the fair market value of their property prior to
public announcement of intention to close all or part of the military base or installation and (b)
the fair market value of such property at the time of the sale; or (2) as the purchase price for their
property, an amount not to exceed 90 percent of the prior fair market value as determined by the
Secretary of Defense, or the amount of the outstanding mortgages.
The American Recovery and Reinvestment Act of 20096 expands the HAP in various
ways. It amends the Demonstration Cities and Metropolitan Development Act of 19667 to allow,
under the HAP under such Act, the Secretary of Defense to provide assistance or reimbursement
for certain losses in the sale of family dwellings by members of the Armed Forces living on or
near a military installation in situations where: (1) there was a base closure or realignment; (2)
the property was purchased before July 1, 2006, and sold between that date and September 30,
2012; (3) the property is the owner's primary residence; and (4) the owner has not previously
received benefits under the HAP. Further, it authorizes similar HAP assistance or
reimbursement with respect to: (1) wounded members and wounded civilian Department of
Defense and Coast Guard employees (and their spouses); and (2) members permanently
reassigned from an area at or near a military installation to a new duty station more than 50 miles
away (with similar purchase and sale date, residence, and no-previous-benefit requirements as
above). It allows the Secretary to provide compensation for losses from home sales by such
individuals to ensure the realization of at least 90 percent (in some cases, 95 percent) of the premortgage-crisis assessed value of such property.
Tax treatment
Present law generally excludes from gross income amounts received under the HAP (as
in effect on November 11, 2003).8 Amounts received under the program also are not considered
6
Pub. L. No. 111-5
7
Pub. L. No. 89-754, 42 U.S.C. 3374
8
Sec. 132(n).
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wages for FICA tax purposes (including Medicare). The excludable amount is limited to the
reduction in the fair market value of property.
Explanation of Provision
The bill expands the exclusion to HAP payments authorized under the American
Recovery and Reinvestment Act of 2009.
Effective Date
The provision is effective for payments made after February 17, 2009 (the date of
enactment of the American Recovery and Reinvestment Act of 2009).
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C. Modification of Penalty for Failure to File Partnership or S Corporation Returns
(sec. 4 of the bill and secs. 6698 and 6699 of the Code)
Present Law
Both partnerships and S corporations are generally treated as pass-through entities that do
not incur an income tax at the entity level. Income earned by a partnership, whether distributed
or not, is taxed to the partners. Distributions from the partnership generally are tax-free. The
items of income, gain, loss, deduction or credit of a partnership generally are taken into account
by a partner as allocated under the terms of the partnership agreement. If the agreement does not
provide for an allocation, or the agreed allocation does not have substantial economic effect, then
the items are to be allocated in accordance with the partners’ interests in the partnership. To
prevent double taxation of these items, a partner’s basis in its interest is increased by its share of
partnership income (including tax-exempt income), and is decreased by its share of any losses
(including nondeductible losses). An S corporation generally is not subject to corporate-level
income tax on its items of income and loss. Instead, the S corporation passes through its items of
income and loss to its shareholders. The shareholders take into account separately their shares of
these items on their individual income tax returns.
Under present law, both partnerships and S corporations are required to file tax returns
for each taxable year.9 The partnership’s tax return is required to include the names and
addresses of the individuals who would be entitled to share in the taxable income if distributed
and the amount of the distributive share of each individual. The S corporation’s tax return is
required to include the following: the names and addresses of all persons owning stock in the
corporation at any time during the taxable year; the number of shares of stock owned by each
shareholder at all times during the taxable year; the amount of money and other property
distributed by the corporation during the taxable year to each shareholder and the date of such
distribution; each shareholder’s pro rata share of each item of the corporation for the taxable
year; and such other information as the Secretary may require.
In addition to applicable criminal penalties, present law imposes assessable civil penalties
for both the failure to file a partnership return and the failure to file an S corporation return.10
Each of these penalties is currently $89 times the number of shareholders or partners for each
month (or fraction of a month) that the failure continues, up to a maximum of 12 months for
returns required to be filed after December 31, 2008.
Explanation of Provision
Under the provision, the base amount on which the penalties for failure to file a
partnership and for failure to file an S corporation are computed is increased to $110 per partner
or shareholder.
9
Secs. 6031 and 6037, respectively.
10
Secs. 6698 and 6699, respectively.
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Effective Date
The provision applies to returns for taxable years beginning after December 31, 2009.
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D. Time for Payment of Corporate Estimated Taxes
(sec. 5 of the bill and sec. 6655 of the Code)
Present Law
In general, corporations are required to make quarterly estimated tax payments of their
income tax liability.11 For a corporation whose taxable year is a calendar year, these estimated
tax payments must be made by April 15, June 15, September 15, and December 15. In the case
of a corporation with assets of at least $1 billion (determined as of the end of the preceding tax
year), payments due in July, August, and September, 2014, shall be increased to 100.25 percent
of the payment otherwise due and the next required payment shall be reduced accordingly.12
Explanation of Provision
The provision increases the required payment of estimated tax otherwise due in July,
August or September, 2014, by 0.5 percentage points.
Effective Date
The provision is effective on the date of the enactment of this Act.
11
Sec. 6655.
12
Pub. L. No. 111-42, Sec. 202(b)(1).
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