The Worker, Homeownership, and Business Assistance Act of 2009

On November 6, 2009, President Obama signed into law the Worker, Homeownership, and Business Assistance Act of 2009 (the "Act"). The Act provides up to an additional 14 weeks in benefits to unemployed individuals. An extra 6 weeks of benefits is available to individuals in states with unemployment levels over 8.5 percent. The legislation also includes the following provisions:

First-time homebuyer credit

The Act extends and modifies the first-time homebuyer tax credit. Specifically, the Act:

• Extends the first-time homebuyer credit to principal residences purchased before May 1, 2010. The credit is extended to principal residences purchased before July 1, 2010 if a written binding contract is entered into prior to May 1, 2010.
• Increases the income limits that apply to the credit. For the purchase of a principal residence after November 6, 2009 the credit is reduced if modified adjusted gross income (MAGI) exceeds $125,000 ($225,000 if married filing a joint return) and is completely eliminated if MAGI reaches $145,000 ($245,000 if married filing a joint return).
• Establishes a new limitation: effective for purchases made after November 6, 2009, the first-time homebuyer credit is not available if the purchase price of a principal residence exceeds $800,000.
• Expands eligibility (purchases made after November 6, 2009) by allowing some existing homeowners to qualify for the credit when they purchase a new principal residence. Specifically, an individual (and, if married, the individual's spouse) who has maintained the same principal residence for at least five consecutive years in the eight-year period ending on the date that a subsequent principal residence is purchased, will be considered a first-time homebuyer for purposes of the credit. In such a case, the maximum amount of the credit is $6,500 ($3,250 for a married individual filing separately).

For purposes of the credit, in the case of a purchase of a principal residence after December 31, 2008, a taxpayer may elect to treat the purchase as if it were made on December 31 of the calendar year preceding the purchase for purposes of claiming the credit on the prior year's tax return. This means qualifying purchases in 2009 can be treated as if they were made on December 31, 2008, and qualifying purchases in 2010 can be treated as if they were made on December 31, 2009.

The Act also imposes additional new limitations on purchases made after November 6, 2009:

• No credit is allowed unless the taxpayer is 18 years of age as of the date of purchase. A taxpayer who is married is treated as meeting the age requirement if the taxpayer or the taxpayer's spouse meets the age requirement.
• The definition of purchase excludes property acquired from a person related to the person acquiring such property or the spouse of the person acquiring the property, if married.
• No credit is allowed to any taxpayer if the taxpayer is a dependent of another taxpayer.

For tax years ending after November 6, 2009, no credit is allowed unless the taxpayer attaches to the relevant tax return a properly executed copy of the settlement statement used to complete the purchase.

The Act also includes special provisions for members of the uniformed services and others who receive government orders for qualified official extended duty service. These provisions include extended time to claim the credit.

Five-year carryback of net operating losses

The American Recovery and Reinvestment Act of 2009 allowed eligible small businesses to elect to extend the general two-year net operating loss (NOL) carryback period for 2008 net operating losses to three, four, or five years. An eligible small business was defined as a taxpayer meeting a maximum $15,000,000 gross receipts test. The provision applied to an eligible taxpayer's NOL for any taxable year ending in 2008, or if elected by the taxpayer, the NOL for any taxable year beginning in 2008. However, the election was allowed only with respect to one taxable year.

The Worker, Homeownership, and Business Assistance Act of 2009 provides for an election similar in nature to the NOL carryback provision in the American Recovery and Reinvestment Act:

• Businesses may elect to extend the general two-year NOL carryback period to three, four, or five years. The election is not limited to businesses that meet a specified gross receipts test.
• The election can be used for an NOL for a taxable year beginning or ending in either 2008 or 2009. The election can be used for only one year, however.
• Under the terms of the election, NOLs carried back five years would be able to offset up to 50 percent of the taxable income from the fifth year, but could offset all of the income from the other carryback years.
• Eligible small businesses that elected to carry back 2008 net operating losses under the provisions of the American Recovery and Reinvestment Act of 2009 can still elect to carry back a 2009 NOL under the provisions of this Act.

The Act specifically excludes certain taxpayers. For example, a business in which the Federal government acquired an equity interest pursuant to the Emergency Economic Stabilization Act of 2008 is not eligible for the election.

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Market Week: November 16, 2009

The Markets

After rising 500 points over six days and hitting a level not seen since the day after last year's vice presidential debate, the Dow slipped a bit but still managed to stay above 10,000. The S&P 500 once again bumped its head against the 1100 mark, but couldn't quite break through.

Market/Index	2008 Close	Prior Week	As of 11/13/09	Week Change	YTD Change
DJIA	8776.39	10023.42	10270.47	2.46%	17.02%
NASDAQ	1577.03	2112.44	2167.88	2.62%	37.47%
S&P 500	903.25	1069.30	1093.48	2.26%	21.06%
Russell 2000	499.45	580.35	586.28	1.02%	17.39%
Global Dow	1526.21	1903.30	1950.46	2.48%	27.80%
Fed. Funds	.25%	.25%	.25%	0 bps	0 bps
10-year Treasuries	2.24%	3.50%	3.43%	-7 bps	119 bps

Last Week's Headlines

• An October Federal Reserve Board survey of bank lending officers showed that overall, credit continues to tighten for both small businesses and households. Approximately 45% of the banks surveyed reported making fewer commercial and industrial loans. And roughly half said that between now and February, they expect to reduce credit limits, raise required minimum credit scores, and/or increase annual fees for prime borrowers (for nonprime borrowers, the percentage planning such steps was even higher).
• U.S. exports rose 2.9% in September, but imports rose twice as much. The U.S. trade deficit, now $36.5 billion, is 18.2% higher than in August, and the trade deficit with China alone is at a year-long high.
• In other deficit-related news, President Obama and Treasury Secretary Geithner both worked overtime to try to reassure Asian nations that the U.S. recognizes the global need for a strong dollar and will work to reduce the trade deficit as the economy begins to recover.
• The European Union's economy followed that of the U.S. in growing during the third quarter. The 0.4% growth was the first positive figure since the first quarter of 2008.
• The Reuters/University of Michigan survey of consumer confidence hit its lowest level in three months, dropping from 70.6 in October to 66. And unfortunately, respondents' expectations for their prospects a year from now weren't much better. In October, the consumer expectations reading was 81; in November, it fell to 67--the lowest level since April.

Eye on the Week Ahead

October retail sales may suggest what's in store for the holiday shopping season. Investors will keep a watchful eye on inflation data, and options expirations at week's end could bring volatility.

Key data releases: Retail sales (11/16); wholesale inflation, industrial production (11/17); consumer inflation, housing starts (11/18); leading economic indicators (11/19).

Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

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