Mortgage bankers will press to keep the Senate's exemption of PMSRs and some House language on passive losses during the coming negotiations in Congress over the Clinton deficit-cutting package.
The Senate version provides for a 14-year write-off of all identifiable intangibles except PMSRs and certain movies and videos, which would get a nine-year write-off.
For all other identifiable intangibles, not only would the 14-year rule apply but the Senate version also would only allows write-offs of up to 75% of the value of the assets to be depreciated. Taxpayers could apply the new law to intangibles acquired after July 25, 1991, but use of the new treatment would be mandatory after the general effective date of the law.
The House version would provide more relief from passive loss rules than the Senate version. But to make up for this provision, the House bill would extend the recovery period for nonresidential real estate to 39 years while the Senate bill sets a 38-year depreciation period. Current law sets a 31-1/2-year amortization period.
The intangibles debate isn't the only issue for mortgage bankers and secondary market interests that will come before Congress in the days ahead. In the House Banking Committee, Rep. Paul Kanjorski, D-Pa., will press for consideration of a bill he filed July 1 creating a secondary market for small-business, commercial and community development loans.
Kanjorski's bill calls for the secretary of the Treasury to certify "secondary market facilitating organizations" that would receive waivers from a variety of statutes and thus could develop a secondary market. Securities houses likely will applaud the idea, but banks can be expected to fight it.
As that battle develops, the fight over taxes will capture the headlines once Congress gets back to work starting July 12.
Both the House and the Senate are expected to appoint relatively large contingents to the conference committee that will try to resolve differences between the two bills.
But the three key players in the conference are expected to be Rep. Dan Rostenkowski, D-Ill., chairman of the House Ways and Means Committee, and in the Senate, Majority Leader George J. Mitchell, D-Maine, and Finance Committee Chairman Daniel Patrick Moynihan, D-N.Y.
Both Rostenkowski and Moynihan are quite familiar with the amortization issues. It was Moynihan directly who inserted the carve-out for PMSR in the Senate legislation, accepting thrift industry arguments that the higher amortization period for PMSR would have the effect of increasing the cost of residential housing.
Ironically, the industry appeared to agree to the lengthier amortization period as a means of winning the uniform 14-year standard for amortization of identifiable intangibles because the cost of preparing the documentation to justify shorter amortization periods eats up the savings.
But both versions of the legislation provide incentives for pension funds to invest in real estate.
The Senate also deletes a provision contained in the House bill that eases the tax bite for owners of troubled real estate whose loans have been restructured. The insured lending industry is seen as pushing for this provision as a means of reducing the huge portfolio of nonperforming loans, especially office buildings and apartment dwellings, currently carried on its books.