Legislative Alert March 26, 2013
Contact: mrha@massrha.com
Massachusetts Rental Housing Association
www.massrha.com

Very Important!
Governor Patrick is proposing the Elimination of Massachusetts Housing-Related Tax Credits. He has included the elimination of these very important tax credits in his budget. Property owners are concerned for many important reasons. You should be aware of this attempt to affect your livelihood.

CAPITAL GAINS EXCLUSION ON HOME SALES

• Owning a home is one of the best ways to build long-term wealth, providing both equity accumulation and tax benefits over time. Homeownership can serve as an investment for the future for individuals and families in the Commonwealth. The capital gains exclusion for the sale of a principal residence helps people build their wealth through homeownership.
• The current Massachusetts law mirrors federal law and allow couples who file a joint tax return to exclude from taxation up to $500,000 of any gain in their home’s value. Single taxpayers (filers) can exclude gains of up to $250,000. This exclusion has had the very positive effect of enabling many people-especially seniors and those who may need to move for employment related reasons- decide to sell their home based upon their current housing needs without fear of an equity-destroying capital gains tax.
• Based on the current long term capital gain rate of 5.25%, a married couple could face a tax bill up to $26,250 while a single tax payer would face a $13,125 tax bill in order to sell a home if this tax exclusion is repealed.
• Repealing the capital gains exclusion would strip homeowners of equity and, according to research by the National Association of REALTORS® would cause home prices to decline further by an additional four to seven percent. At a time when the middle class is under increasing economic pressures, the capital gains exclusion should remain in place.
• Nationally, housing accounts for more than 15 percent of the U.S. Gross Domestic Product – that’s $2 trillion. It is a key driver in our state and national economy. Home sales in this country generate more than 2.5 million private-sector jobs in an average year. For every two homes sold, a job is created. We need to make sure that any changes to current programs or incentives do not jeopardize a housing and economic recovery. 
• Repeal of this tax benefit would severely harm our economy and hurt homeowners and the housing market in particular. The benefits of homeownership are clear:
  • Homeownership strengthens communities and neighborhoods;
    
  • Homeowners are more likely to be involved and engaged in local issues; this engagement helps prevent crime, improve childhood education and support neighborhood upkeep;
    
  • Owning a home has long-standing government support in the Commonwealth and across the nation, and;
    
  • Homeownership benefits individuals and families, and is integral to our nation’s economy 

LEAD PAINT TAX CREDIT

• This credit is intended to promote a lead-safe environment for children throughout the Commonwealth. It can alleviate a homeowner’s cost of de-leading a property and encourages lead-safe homes and rental units. In fact, the tax credit is likely the most important tool available for providing meaningful incentives to property owners to bring their units into compliance with the lead law. Children from birth to age six are at the greatest risk of lead poisoning due to the fact that their neurological systems are developing. Lead exposure can cause hyperactivity, aggressive behavior, learning disabilities, lowered IQ, speech delay, and hearing impairment 
• The tax credit encourages the significant number of landlords who allow their properties to remain vacant due to the fact that they cannot afford to de-lead in order to bring the properties up to code and back on the market. While no hard data is available, estimates of the number of these “shadow apartments” in many of our urban areas are in the thousands. As we continue our slow, yet steady, recovery in our housing market, this proposed provision, if passed into law, would do nothing to help bring more lead- safe housing units back to the market. 
• Although much progress has been made since the Massachusetts lead law went into effect in 1971, the fact remains that, according to the US Census Bureau, of the 2.8 million houses in Massachusetts, 1.7 million (or approximately 60%) were built before 1970. This means that there are likely thousands of property owners that may still take advantage of the tax credit. The tax credit is designed to encourage greater protection of our environment and children. Repeal will undoubtedly have a real, and negative, impact to both. 

SEPTIC SYSTEM REPAIR/ REPLACEMENT TAX CREDIT

• This tax credit alleviates some of the financial burden of replacing or repairing a failed septic system. This is particularly true for those low- and middle-income residents who are struggling to meet their financial obligations in the current economy. First-time home buyers would also be greatly impacted if they could no longer rely on this credit, a credit that in many cases allows homeownership to become a reality.
• In addition to the monetary incentive to taxpayers, the tax credit also encourages safe environmental practices by incentivizing upgrades and repairs; repairs that if not addressed, could have significant negative impacts on our environment
• If repair or replacement of a system is required, as if often the case, homeowners or buyers can face very high costs to bring a system into compliance. Prior to the transfer of property (with certain limited exceptions), Massachusetts law requires that a septic system be inspected by a trained inspector. The current law affords Massachusetts taxpayers a 40% credit towards the cost of upgrades to their septic system with a maximum credit totaling $6,000. The largest tax credit that may be taken in any year is $1,500