House Financial Services Committee Chairman Barney Frank (D-Massachusetts) said this week a final deal on housing legislation (H.R. 3221) would likely not include a provision that would allow companies losing money in 2008 and 2009 to apply those losses against four years of past profits, instead of the two years allowed under current law.

That provision is known as net operating loss carryback and formed the core of the Senate’s housing tax package.  Senate supporters said it would keep companies from collapsing and help battered sectors of the economy.  The final package to be ironed out between House and Senate negotiators is likely to include some form of a tax credit for homebuyers.

The House-passed version of the tax package would establish a refundable tax credit of up to $7,500 for first-time homebuyers that would operate as an interest-free loan.  It would provide an additional standard deduction of up to $350 for individuals and $700 for couples for state and local property taxes in 2008.

Under the Senate version, people who purchased homes in the foreclosure process would receive a $7,000 tax credit, spread over two years.  They would not have to repay the money.  It also includes an additional standard deduction for state and local property taxes.

The fate of the housing package now rests on talks between the House and Senate and committee chairs have said they’d like to complete a deal before the July 4th Congressional Recess.  HAI will continue to provide updates on the housing legislation as developments occur on Capitol Hill.