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# Legislative Bulletin.............................................March 27, 2007

**Contents:**

> **H.R. 1562 ---** Katrina Housing Tax Relief Act **(as amended)**

H.R. 1562---Katrina Housing Tax Relief Act---*as amended* (*Rangel,
D-NY*)

**[Order of Business]{.underline}**: The bill is scheduled to be
considered on Tuesday, March 27^th^, under a motion to suspend the rules
and pass the bill, [as amended]{.underline}. **[NOTE]{.underline}**:
because of conservative concerns on this legislation, the bill has been
amended prior to its consideration on the House floor later today. The
primary negotiators for such changes, Rep. Sam Johnson (R-TX) and Rep.
Tom Reynolds (R-NY), are happy with the changes and are now urging a yes
vote on the legislation.

**Changes from the committee-reported version of the bill summarized in
this morning's RSC Legislative Bulletin are indicated in red-bold
below.**

**[Summary]{.underline}**: H.R. 1562 would extend and expand certain tax
laws applicable to the areas affected by Hurricane Katrina, which were
enacted in the Gulf Opportunity Zone Act of 2005. H.R. 1562 would also
raise revenue by changing the "collection due process procedures" for
employment taxes*.* Highlights of the bill are as follows:

-   Extends the special low-income housing credit rules that were
    implemented for the areas devastated by Hurricanes Katrina, Rita,
    and Wilma in 2005. The cap on low-income housing credits had been
    increased for the hurricane-affected states for 2006 through 2008.
    H.R. 1562 would extend the higher cap for two years (through the end
    of 2010). The bill would extend to the end of December 2010 the time
    by which the housing must be completed to still qualify for the
    credit (and the usual requirement that 10% of expected costs be
    expended in the first year would be waived for projects in 2006,
    2007, and 2008). And the bill would extend the Gulf Opportunity
    Zone's designation as a "difficult to develop area" through the end
    of 2010 (which has implications for increasing the amount of credits
    available for investors in projects in the area).

-   Allows the proceeds of Mortgage Revenue Bonds to be used to
    refinance an existing mortgage if repairs or reconstruction costs
    total at least 25% of the owner's adjusted basis in the property.
    (Generally, current law does not allow the proceeds of Mortgage
    Revenue Bonds to be used to refinance existing mortgages.)

-   Allows low-income (Community Development Block Grant---CDBG) housing
    projects to receive additional categories of federally-subsidized
    loans without facing a reduction in tax credits. (Under current law,
    low-income housing projects which receive certain
    federally-subsidized loans must either accept a lower credit rate or
    make an offsetting reduction in the property's basis).

-   Directs the Comptroller General to report to Congress on the
    practices employed by state and local governments in allocating and
    using tax incentives provided by this bill and the Gulf Opportunity
    Zone Act of 2005.

-   Raises revenue by changing "collection due process procedures" with
    regards to employment tax liabilities. Currently, the IRS is allowed
    to seize a taxpayer's physical property given a federal tax lien
    (for underpayments of employment taxes). Prior to seizing the
    property, however, the IRS has to notify the taxpayer that they have
    a right to a collection due process (CDP) hearing. **[H.R. 1562
    would allow the IRS to seize property without *first* giving the
    taxpayer a CDP hearing---but only for taxpayers who have requested a
    CDP hearing within the prior two years.]{.underline}** **Taxpayers
    who have NOT requested a CDP hearing within the prior two years
    would NOT be subject to the new requirements allowing pre-hearing
    seizures of property.** The IRS would still have to send warning
    notices, and the hearing would still have to be offered---but not
    necessarily before the property seizure. **Taxpayers' right to a CDP
    hearing would be extended from September 30, 2015 to February 29,
    2016.**

-   Increases the corporate estimated tax payments due in the summer of
    FY2012 for corporations with assets of at least \$1 billion. This
    provision does not yield a net tax increase; it merely requires a
    higher quarterly payment of corporate estimated taxes in the summer
    of 2012, and a correspondingly lowered estimated payment thereafter.
    Last year's tax reconciliation bill (Public Law 109-222) included a
    similar tax-payment shift. That is, under current law, the estimated
    payments due in the summer of FY2012 have to be 106.25% of what
    would otherwise be paid (100% = one quarter of the year's estimated
    tax payment due). H.R. 1562 would increase that amount from 106.25%
    to 106.45%, requiring businesses to pay even more of their taxes
    early. (Note: a larger tax shift for these same large corporations
    was included as part of the small business tax bill last
    month---H.R. 976---as well as the supplemental appropriations bill
    this month---H.R. 1591.)

**[Additional Background]{.underline}**: To see the RSC Legislative
Bulletin for the Gulf Opportunity Zone Act of 2005, as it was signed
into law, see this webpage:
<http://www.house.gov/hensarling/rsc/doc/LB_121605_gulfopptax.pdf>.

**[Committee Action]{.underline}**: On March 19, 2007, the bill was
referred to the Ways & Means Committee, which, two days later, marked up
the bill and ordered it reported to the full House by voice vote.

**[Possible Conservative Concerns]{.underline}**: ~~Some conservatives
have expressed concerns about the provision allowing the IRS to seize
property (related to delinquent employment tax payments) *before* the
taxpayer has a chance to present his case at a hearing. Rep. Sam Johnson
(R-TX) and Rep. Tom Reynolds (R-NY) wrote that, "In our view, the
proposed modification to the collection due process ("CDP") procedures
for employment tax liabilities removes an important layer of formal due
process protection by eliminating the guarantee that taxpayers receive a
statutory CDP hearing [before]{.underline} the IRS can issue a levy.  In
our view, this elimination of a guaranteed pre-levy hearing constitutes
an inappropriate and unfair erosion of taxpayer rights, denying
'mom-and-pop' stores along Main Street, USA a formal opportunity to
correct inadvertent errors or bring to light possible IRS mistakes
before any government seizure of their property."~~

Some conservatives may also be concerned at the inclusion, once again,
of a provision shifting corporate estimated tax payments, forcing some
corporations to pay more of their tax burden earlier, and masking the
true revenue increase in the 5-year window for the PAYGO rule.

[]{.mark}

**[Administration Position]{.underline}**: A Statement of Administration
Policy (SAP) was not available at press time.

**[Cost to Taxpayers]{.underline}**: The Joint Committee on Taxation
estimates that the bill, as reported from committee, would reduce
revenues by \$1 million in FY2007, increase revenues by ~~\$43~~
**\$34** million over the FY2008-FY2012 period, and increase revenues by
\$5 million over the FY2008-FY2017 period. CBO estimates that the bill
would authorize less than \$500,000 for a study.

**[Does the Bill Expand the Size and Scope of the Federal
Government?]{.underline}**: The bill would allow the federal seizure of
private property in certain cases, without first allowing the taxpayer
to present his case at a certain type of hearing, **but only in cases of
repeated requests for such hearings.**

**[Does the Bill Contain Any New State-Government, Local-Government, or
Private-Sector Mandates?]{.underline}**: No.

**[Does the Bill Comply with House Rules Regarding Earmarks/Limited Tax
Benefits/Limited Tariff Benefits?]{.underline}**: Although an
earmarks/revenue benefits statement required under House Rule XXI,
Clause 9(a) was not available at press time, and there's no accompanying
committee report, the earmarks rule (House Rule XXI, Clause 9(a)) does
not apply, by definition, to legislation considered under suspension of
the rules.

**[Constitutional Authority]{.underline}**: House Report 110-66 is still
not available.

**[RSC Staff Contact]{.underline}**: Paul S. Teller,
<paul.teller@mail.house.gov>, (202) 226-9718