Big Home Builders Launch Solo Lobbying Effort

Fifteen members of the National Home Builders Association’s High Production Home Builders Council — the bruised giants of the residential construction industry, like KB Homes, Toll Brothers, Pulte Homes and Centex Corp — have struck out on their own in pursuit of aid and incentives.

The builders, some of whom are already in bankruptcy, are seeking an expanded tax loss carryback program, which would effectively let them pair their current losses with previous years’ boom profits, resulting in a tax refund.

Representing the builders is the C2 Group, which earned the builders’ business through a referral from one of the builders’ law firms, says C2 Group founding partner Tom Crawford.

Helping the companies’ bottom lines would prevent further erosion in the residential market, Crawford says: “To the extent that we can help them with their cash flow during the economic downturn, they don’t have to liquidate properties to pay overhead,” Crawford says.

But why didn’t the council members work through the NAHB? Partly, Crawford says, the purpose was to highlight the problems unique to big builders: Some small business policies that matter to NAHB members are irrelevant to larger players.

But Crawford also noted that his clients have a different philosophy than the NAHB over the association’s February announcement that it was cutting off Congress from its PAC money until Congress did more to stem the housing market collapse. (That move was deemed unseemly by some observers who thought it implied a direct connection between campaign contributions and a desired policy outcome).

“We don’t believe that NAHB intended to do that, but we’re very conscientious about showing there’s no link between the two,” Crawford says. Given that a previous version of the carryback legislation only failed by one vote, “[w]e’re going to continue to work with the Senate because we think that’s the right thing,” he says.

The group is no way starting a rivalry with the NAHB, he says. “We’re not starting a trade association. We’re very focused on these few issues,” Crawford says, adding that he intends to work closely with the NAHB on his clients issues. A spokesman for the NAHB said the association was aware of the big builders’ solo effort but not directly involved. The fifteen home builders either declined to comment or did not immediately return calls.

Should the group’s initial efforts succeed, Crawford says, it may work on getting permanent income averaging written into law and encourage an incentive for home buying.

Comments

[LJP]

These homebuilders were a large part of the reason the economy is in the tank today. They paid their lobbyists to keep the senators and congressmen happy and to look the other way. Their in-house mortgage companies have done nothing but bite the hand that is feeding them, and causes an inordinate amount of issues. Their efforts to build the most and the fastest has led to a huge number of defective houses that homeowners are fighting to get repaired. The CEOs of these companies, even though they are taking big losses, are getting huge bonuses and raises. These builders need to be investigated by every acronym in existence, and I believe they probably already are. I, for one don't want one penny of my tax money going for these vultures - and that is what they are - preying on unsuspecting people.

[concerned about fraud]

Why would toll brothers need a bail out from the government while they are voting to give themselfs big bonuses even if the company does not do well. this would mean that the government would be bailing them out just to put more money into the higher paid employees.

Why should the tax payors pay for them to receive a bonus.

Some people are losing everything they have, and if our government is going to allow that then they should allow company's to go belly up, just like the citizens of this great country.

The builders could lower there prices, or stop building until the market comes back around, it is there choice to continue to build. You can choose to make something or nothing, and if they choose not to lower their price and make no money that is a choice that they must live with not the tax payors of this country.

And toll brothers states it builds luxury, so why would they need a bail out. they have high end customers, which means they can afford to buy from toll brothers. It could be how tolls contract reads and people are refusing to sign the contract the way it is written.

I do not beleive our government should bail them out. Tthey did not cry when they were making money, should of saved more, and spent wisely as the citizens of this country are being told. They should of known that they would not of been able to afford the mortgage once the rate changed. Builders should of seen what was coming around when they seen their sales slow down.

Toll Brothers missed interest payments but R. Toll took a big bonus. So, the company could not be doing bad. Or he just feels that the government should bail them out and the tax payers should pay for him to taking money the company needs to pay there cost and over head, and their obligations to the banks.

Let them go belly up just like other business have to do when they are not making it. They should not be treated any different then anyone else.

[needles]

Why should there be a bailout for the homebuilders? They do the same thing in every real estate boom/bust cycle. They load up on land and debt in the boom and then declare bankruptcy - or come close to it - once the party is over. One can't even argue that the HBs need to be bailed out to protect the rest of the financial system, like with Bear Stearns.

And the numbers the HBs are trying to get are massive. From another blog (there's also a nice chart on this page).

http://boombustblog.com/content/view/185/34/

From 2002 to 2006 these Builders reported taxable income of $52 billion, based on a 39.3% tax rate, these builders have paid more than $20 billion in taxes during this period. So far these builders are reporting $10.6 billion in pretax losses for 2007. Under current law, they can only claim refunds for taxes paid in 2005 and 2006, $10.7 billion at the 39.3% rate, which means collectively they've run out of carryback losses for future years, including 2008. Each builder's tax position is unique but to the extent they claim refunds they may consider writing down or selling assets to realize the losses. The nation''s largest builder, Lennar has been most aggressive on this front claiming more than $3 billion in losses for 2007 allowing them to claim most of $1.2 billion in taxes they paid in 2005 and 2006.

Based on my calculations, extending the loss carryback period to 5 years would make an additional $10.8 billion available for refunds, not an inconsiderable sum. This analysis only shows the 15 largest builders. These builders account for roughly 33% of the market. Extrapolating these results to the complete universe of builders, extending the carryback period 3 years would yield a tax benefit of nearly $33 billion industry-wide. Putting this in perspective, in 2006, the Treasury Department reported $354 billion in corporate tax receipts. Had the builders won this tax break, the lobbying cost amounts to such a small fraction as to be indistinguishable from 0.