WASHINGTON, D.C. – A provision coauthored by U.S. Rep. Ron Lewis (KY-02) and U.S. Rep. Ron Andrews (D-NJ) to relieve tax obligations on those who sell homes that have lost equity and have been forgiven a potion of outstanding mortgage debt was approved during a House Ways and Means Committee markup Wednesday morning. The measure, introduced in April as the Mortgage Cancellation Relief Act, was incorporated into H.R. 3648, a larger bipartisan committee bill.

 

“I have heard concerns from homeowners about the serious situation in the mortgage market,” said Lewis. “Declining prices have led some families to sell their homes for less than they paid for them.”

 

            Under current law, only two categories of individuals pay taxes when selling their principal residence: those who have been able to realize a capital gain of more than $250,000 ($500,000 on a joint return) and those who lose the equity in their home and are forced to pay tax if the lender forgives some portion of the mortgage debt. 

 

“It is unfair to tax people on phantom income, particularly when they have had suffered serious economic loss and have less ability to pay the tax,” said Lewis.

 

The Lewis/Andrews proposal would relieve this tax burden. The measure states that no tax will be collected when a lender forgives part of the mortgage on the sale or disposition of a principal residence. 

 

“I appreciate Congressman Lewis’ work to address long-term issues in the mortgage market affecting American homeowners," said Ways and Means Committee Ranking Member Jim McCrery (R-LA).

 

“I am pleased the Committee joined together to unanimously pass this critical legislation and I look forward to bringing this measure before the full House,” said Ways and Means Committee Chairman Charles B. Rangel (D-NY). 

 

President Bush announced his support for the proposal during an August 31st Rose Garden news conference discussing homeownership financing.

 

“The House has Rob Andrews of New Jersey and Ron Lewis of Kentucky introducing legislation that is a positive step toward changing the tax code so people aren't penalized when they refinance their homes,” said Bush “…We look forward to working with them to pass common-sense legislation to help us address this issue.”

 

            House leaders anticipate that H.R. 3648 will be scheduled for debate before the entire U.S. House of Representatives within the next several weeks.

 

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