Congress Approves Fiscal Cliff Legislation, Including Extension of Tax Credit for Energy Star Manufactured and Modular Homes
On January 1st, Congress approved legislation (H.R. 8) that effectively averts the “fiscal cliff” by extending a number of expiring tax provisions. The President is fully expected to sign the measure in to law.
A significant victory for the factory-built housing industry is the inclusion of provisions extending the New Energy Efficient Home Credit (I.R.C. 45L) through December 31, 2013. The Credit, which had expired at the end of 2011, provides builders of Energy Star-qualified manufactured homes with a tax credit of $1,000 (per home) and builders of modular homes with a credit of $2,000 (per home).
During the 112th Congress, MHI had worked closely with members of the Senate Finance Committee and House Ways and Means Committee to preserve and extend—and if possible enhance—the tax credit. Over the summer, extension of the program was in doubt when it became embroiled in a larger attempt to eliminate tax credit programs for sources of renewable energy.
Upon passage of the measure, MHI President and CEO Richard Jennison stated that “MHI is very grateful that Congress and the Administration recognize the importance in ensuring that energy-efficient Energy Star manufactured and modular homes remain affordable for millions of low- and moderate-income families across the nation. Extension of this vital tax credit guarantees that manufactured and modular homes can remain on the cutting-edge of energy efficiency without sacrificing their affordability.” Jennison added that, “as part of MHI’s 2013 policy priorities, we will continue to seek avenues to increase and enhance resources available to builders of energy-efficient manufactured and modular homes.”
The legislation (aka, The American Tax Payer Relief Act of 2012), extends a number of expiring Bush-era tax provisions and allows tax rates to rise (from 35 percent to 39.6 percent) on individuals earning over $400,000 and married couples earning over $450,000. The bill would essentially freeze tax rates on those earning under $250,000. Passage of the bill prevents an even larger tax increase across all income classes, which would have come about with the expiration of the 2001 and 2003 Bush tax cuts.
Included in the measure is a tax exemption on inherited estates. Estates worth $5 million ($10 million for married couples) are exempt from estate taxes. The inflation adjustment will guarantee that the exemption will grow to $15 million for couples by the end of the decade.
The bill also delays, for two months until March 27th, automatic spending cuts that were mandated as part of the 2011 Budget Control Act (P.L. 112-25). The cuts, which would have gone into effect January 1, 2013, required roughly $1.2 trillion in discretionary spending cuts over ten years.
The measure’s survivability, which passed overwhelmingly in the Senate (89-8), was in doubt in the House of Representatives, which saw a majority of Republican members vote against the bill. Ultimately, enough House Republicans voted with Democrats (257-167) to move the legislation to the President’s desk for final approval.
Republican opposition to the measure stemmed from increases in tax rates as well as a lack of cuts to both entitlement and discretionary spending.
