WASHINGTON - Thrift executives and lobbyists are girding for a fight over the tax treatment of "points" paid by mortgage borrowers.

A proposal in a subcommittee of the House Ways and Means Committee would reverse a more liberal Treasury department rule on how mortgage lenders are taxed on income from mortgage points.

The proposal would hit thrifts and other institutions that hold loans in portfolios hardest.

Mortgage points are fees charged by the lender to make the loan. One point is equal to $ 1,000 on a loan of $ 1 00,000.

The Internal Revenue Service taxes mortgage lenders on that income immediately if borrowers pay the point fee themselves. If the fee is financed and borrowers pay the points in installments, the points are taxed over the life of the loan.

In practice, lenders say, it is difficult to tell the two a art.

Last December, the Treasury department put out a proposed rule that would tax all point income like interest income - over the life of the loan. Mortgage lenders, particularly those that hold loans in portfolio, welcomed the rule.

A Treasury department official said the rule is slated to become final in the next couple of months.

But next Wednesday, a subcommittee of the House Ways and Means Committee will consider a proposal that would effectively reverse the Treasury department's more liberal policy. It would codify current IRS practice by requiring lenders to pay tax on point income when it is received.

That would revive the controversy in the field, thrift executives say, on whether points are financed or paid for, and when a lender can rightly be said to have received point income.

"Agents have argued for a case-by-case examination" to see whether a lender is getting points at origination or later, said Michael J. Palko, senior vice-president of Great Western Financial Corp. in Chatsworth, Calif. "That is a clumsy, difficult way to look at the transaction," he said.

S&Ls Most Affected

Thrifts that hold their loans in portfolio would be hit hardest by the proposal, said Jim O'Connor, tax counsel of the Savings and Community Bankers of America.

"For somebody that's only going to hold loans for a month or two [such as mortgage bankers], for the most part there will be no impact," Mr. O'Connor said. That's because mortgage bankers retain point income when they sell the loan to the secondary market. They are taxed on it in that year, and are not affected by the controversy over when lenders actually earn point income.

Curiously, the congressional proposal has two versions: one is targeted solely at thrifts; the other would affect all mortgage lenders. The chance of either proposal becoming a bill are still unclear.

"I don't think anything will come of it," said Mr. O'Connor.

"They [would] overrule a carefully considered Treasury position. It goes against the economics of the transaction ... and it's just unfair," he said.

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