Federal Update

Housing Relief Measures Advance in Washington

While there continues to be general agreement between the White House and Congress that more needs to be done to help struggling homeowners, proposals under consideration include different fixes for getting there.

On April 10, the Senate completed work and sent to the House a foreclosure assistance bill that includes $4 billion in new CDBG funding to state and local governments for the purchase and rehabilitation of foreclosed properties and $150 million in counseling assistance. The bill also includes approximately $11 billion in tax breaks, including a $7,000 tax credit for buyers of foreclosed properties. The bill also would allow state and local governments to sell an additional $10 billion in tax-exempt mortgage bonds to refinance subprime loans.

Another provision in the bill would give homeowners -- who do not itemize their federal tax returns -- a new above-the-line deduction of up to $1,000 to offset their property taxes but would deny the new deduction to any resident of a locality that raises its property tax rate between April 2, 2008, and January 1, 2009. Cities generally opposes this provision because it interferes with state and local governments' ability to manage their revenue streams and has the effect of an unfunded mandate.

On April 9, the House Ways and Means Committee approved a tax package, H.R. 5720, the Housing Assistance Tax Act, that contains measures designed to stabilize the housing market. Like the Senate bill, this bill also includes a tax deduction for homeowners who do not itemize to offset their property taxes (of up to $700). Unlike the Senate bill, the availability of the deduction is not tied to changes in local tax rates. This bill provides a refundable tax credit of up to 10 percent of the purchase price of the home, up to $7,500, for first-time homebuyers. Equivalent to an interest-free loan, the homebuyer would be required to repay the loan over a 15-year period. Finally, like the Senate bill, this bill would allow state and local governments to sell an additional $10 billion in tax-exempt mortgage bonds to refinance subprime loans.

The House Financial Services Committee is developing additional housing-relief legislation that will be marked up April 23 and 24. House Financial Services Chairman Barney Frank (D-MA) has circulated a draft of the legislation, the FHA Housing Stabilization and Housing Retention Act of 2008, and it includes a combination of loans and grants to states for the purpose of purchasing and rehabilitating vacant and abandoned homes.

On April 10, the White House announced another plan to help homeowners. Under the new plan, lenders will be encouraged, but not required, to write down the outstanding principal of loans in order to obtain FHA insurance on refinanced mortgages. The White House estimates that this plan could help an additional 500,000 homeowners at risk of foreclosure.

No Vote Scheduled Yet for Collective Bargaining Legislation

Lobbying for and against the mandatory collective bargaining bill, S. 2123 continues, which has yet to be scheduled for a vote in the Senate. Supporters of the legislation need 60 votes to advance it; opponents need 41 to defeat it. The unofficial count shows that both sides are within one or two votes of holding their position. Cities are seeking a commitment from the White House that the President will veto the bill if it reaches his desk; so far, the President has not indicated his position on the bill. (Note: eLauderhill News believes Lauderhill already complies with this requirement if passed)

Three-percent Withholding Requirement Delay Under Consideration

Cities continues to lobby in support of efforts to repeal or delay implementation of an unfunded mandate that requires federal, state, and local governments, who spend more than $100 million on goods and services, to withhold three percent of all payments to contractors and vendors and to remit those monies to the Internal Revenue Service.

On April 9, the House Ways and Means Committee passed legislation (H.R. 5719) that included a provision to delay implementation of this requirement by one year from 2011 to 2012.

Cell Phone Recordkeeping Rule on the Way Out

According to a little known IRS rule, state and local governments, must maintain records of personal calls made on employer-provided cell phones or Blackberry-type devices to verify business use. The IRS rules on this matter were set in 1989 (when cell phones were not too popular and calls were charged per minute) and have not changed to adjust to the explosion of use or different pricing models.

Recently, the IRS began auditing state and local governments and penalizing them for not keeping detailed logs of personal calls for each cell phone. State and local governments have complained that the rules are cumbersome and costly, and that it is nearly impossible to determine the costs of personal calls made on employer-provider phones.

On April 9, the House Ways and Means Committee passed legislation (H.R. 5719) that would eliminate this requirement. A Senate measure is pending (S. 2668).

Mobile Workforce State Income Tax Bill Not Intended to Harm Cities

As drafted, H.R. 3359, The Mobile Workforce State Income Tax Fairness and Simplification Act, would prohibit state and local governments from taxing the income of non-resident workers who perform duties within their boundaries for 60 days or less. The goal of the legislation is to simplify the administrative burden on employers who are faced with increased responsibility for withholding income taxes for workers who earn income in multiple states.

Over the last several weeks, a coalition that includes the Ohio Municipal League, and the Michigan Municipal League, has collected and shared with the bill sponsor (Rep. Hank Johnson (D-GA)) data regarding the significant negative impact this legislation would have on state and local government revenues.

In a meeting on April 9 with coalition members, Rep. Johnson indicated, among other things, that he did not intend for the bill's provisions to apply to local governments and expressed a willingness to revise the bill language to reflect his intent as the bill moves forward. (Note: Florida has no individual state or local income tax, so it would not apply in Florida)

Fire Protection Standards Survey and Taskforce Bill Introduced

Earlier this week, Rep. Ed Perlmutter (D-CO) introduced HR 5686, the Firefighter Fatality Reduction Act of 2008. If enacted, the legislation would direct the Department of Homeland Security (DHS) to conduct a survey of each career, volunteer, or combination fire department located in the United States to determine whether the department is in compliance with voluntary consensus standards. In addition to the survey, the legislation requires DHS to establish a task force for the purpose of "developing a plan to enhance firefighter safety by increasing compliance with national consensus standards for safe operations, staffing, training, and fitness."

On April 9, meeting with Perlmutter's staff to raise concerns about the potential for the bill to lead to a back door national standard setting process that amounts to a one-size fits all unfunded mandate for local governments. A schedule for considering the bill has not been determined.

Senate Committee Holds Hearing on Clean Water Restoration Act

On April 9, the Senate Environment and Public Works Committee held a hearing on the Clean Water Restoration Act (S. 1870), which is sponsored by Sen. Russ Feingold (D-WI). The bill would amend the Clean Water Act, by changing the term "navigable waters of the U.S." to "waters of the U.S." The bill is a response to two U.S. Supreme Court cases, in 2001 and 2006, which put an end to the practice of broadly interpreting the Clean Water Act and called into question federal authority and jurisdiction over certain waters, including wetlands. The House Transportation and Infrastructure Committee will hold a hearing on companion bill, H.R. 2421 sponsored by Rep. James Oberstar (D-MI) on April 16.