Frequently Asked Questions
How does the Federal Housing and Economic Recovery Act of 2008 affect my Louisiana state income tax?
The Federal Housing and Economic Recovery Act of 2008 was designed primarily to address the subprime mortgage crisis. The Act, which was passed by the U.S. Congress on July 24, 2008, and was signed by the President on July 30, 2008, authorizes the Federal Housing Administration to guarantee up to $300 billion in new 30-year fixed rate mortgages for subprime borrowers if lenders write-down principal loan balances to 90 percent of current appraisal value.
In addition to the mortgage crisis provisions, the Act allows taxpayers to amend their 2005 and 2006 federal income tax returns to adjust home casualty losses and related net operating loss carry forwards for Hurricanes Katrina and Rita recovery awards such as Road Home grants that were received in later years. Since federal income tax return amendments to prior year returns could reduce the taxpayer’s federal income tax deduction and therefore result in additional state income tax liabilities, guidelines are needed to ensure the state tax exemption of the hurricane recovery grants.