Senate committee clarifies IRS 277.
Senator Moynihan's provision specifies that section 277 of the Internal Revenue Code does not apply to housing cooperatives so that interest income from reasonable reserves maintained by the co-op, as well as the income from laundry and parking facilities, will not be treated as fully taxable.
Instead, this income would be eligible to be offset by housing related expenses incurred by the co-op. For limited equity co-ops, the provision would provide similar treatment for commercial rents as well.
S.2149 was also included in the Tax Fairness and Economic Growth Act of 1992 (H.R. 4210) -- the tax bill passed last March but vetoed by President Bush.
The co-op provisions adopted by the Finance Committee are prospective in application. Action by the full Senate on the legislation is expected soon.
On the House side, a spokesman for Senator Moynihan said, the bill reported out of the Ways & Means Committee gave relief only to limited equity co-ops and "does not apply to market rate co-ops in any way shape or form."
The House language, however, was not go to the conference committee, he said, which was scheduled to act on it this past Monday (8/10).
Mary Ann Rothman, executive director of the Council of New York Cooperatives, called Moynihan a "miracle worker" for protecting the co-op's reserves. While acknowledging the legislation would not be retroactive. Rothman said it should "call a halt" to the IRS audits being conducted around the city.