Senate OKs Gulf Coast tax breaks

The Senate yesterday approved a plan to give tax breaks to Gulf Coast residents rebuilding homes destroyed by Hurricane Katrina.

The measure was added to a broad bill aimed at easing the housing market crisis that some have criticized for doing more to help lenders and home builders than struggling homeowners.

The amendment, which passed by a vote of 74-5, would ensure that residents of Louisiana and Mississippi who receive grants to rebuild homes destroyed during hurricanes Katrina and Rita in 2005 don’t have to pay taxes on them.

Sen. Mary L. Landrieu, the Louisiana Democrat who sponsored the amendment, said it will provide $1.1 billion in tax relief to Gulf Coast homeowners and businesses.

“When Congress passed the critical funding to make rebuilding grants available to Gulf Coast homeowners, the intent was never for people to face a hefty tax bill on their recovery,” Mrs. Landrieu said. “The Senate stepped up in an impressive, bipartisan way today to set this right.”

Senators yesterday also passed a plan to allow struggling companies to use accumulated tax credits to help offset new investments in plants and equipment.

The tax break would help companies nationwide but would particularly benefit the Rust Belt home states of the amendment’s co-sponsors; Sen. George V. Voinovich, Ohio Republican, and Sen. Debbie Stabenow, Michigan Democrat.

The overall housing measure was introduced Wednesday after weeks of partisan bickering on how to ease the slumping housing market. The measure includes $4 billion in grants for local governments to buy foreclosed homes and offers more than $100 million for foreclosure counseling programs.

The initial measure called for giving $25 billion in tax relief to money-losing businesses but just $3 billion to homeowners, the Joint Tax Committee said.

But several amendments have been proposed to help struggling homeowners and home buyers, including a plan by Sen. Benjamin L. Cardin, Maryland Democrat, to give a temporary $7,000 credit to first-time home buyers.

Sens. Bill Nelson, Florida Democrat, and Norm Coleman, Minnesota Republican, also have offered a plan to let homeowners who are late on their mortgage payments withdraw money penalty-free from their retirement accounts to avoid foreclosure.

A final vote on the bill is expected next week.

• This article is based in part on wire service reports.