MBA, Trade Groups Ask Senate to Leave Capital Gains Rules As Is

The Mortgage Bankers Association and more than a dozen industry trade groups asked the Senate to leave the current ownership qualification period for exclusion on capital gains from sale of a principal residence.

In the Dec. 7 letter to Senate Finance Committee Chairman Orrin Hatch, R-Utah, MBA and others said a proposed change in tax bills under consideration by the House and Senate in the ownership qualification period for exclusion of capital gains of a principal residence to five of the past eight years (from the current two of the past five years) would “disproportionately penalize growing families and discourage labor mobility.”

“We do not believe this is the public policy outcome intended,” the letter said.

Both the House and Senate bills currently in conference lengthen ownership and use requirements of Section 121, which allows for an exclusion from gain of up to $250,000 (if single, $500,000 if married).

“Increasing this holding period would act as a disincentive and tax penalty for many homeowners needing to move up or move down as life events occur,” the letter said. “According to the Joint Committee on Tax, this proposal only generates $800 million over ten years, but it would have a considerable negative effect on millions of Americans across the country.”

As structured, the letter said, this provision “will harm families and disrupt the U.S. residential real estate industry and the well-being of local communities. We would strongly urge retention of the current law on this issue.”

Joining MBA in the letter: the American Land Title Association; America’s Homeowner Alliance; Community Mortgage Lenders of America; Consumer Mortgage Coalition; Habitat for Humanity; Independent Community Bankers of America; Leading Builders of America; National Association of Realtors; RESPRO; and The Realty Alliance.