by Calculated Risk on 4/09/2008 02:20:00 PM

Last month I reported on a home builder selling improved land for 15 cents on the dollar (of builder's total costs). What made the deal work was a tax provision that allowed the home builder to apply the losses to earlier profits (up to two years ago) and receive a nice tax refund.

Many home builders were already in trouble two years ago, and the Senate has proposed legislation to extend the loss carry-back period to four years, as opposed to the current two year period. This would mean the home builders could apply losses this year - like from a land sale - to the huge profits made up to four years ago, at the peak of the bubble, and get a large tax refund.

Now Dow Jones reports that that tax provision is in jeopardy: Builders Fearful As US House Shuns Beneficial Tax Provision

The possibility the U.S. House of Representatives' housing stimulus plan might not include a tax provision that would benefit home builders sent shudders across that industry Tuesday.
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For the sector, the most significant part of the Senate package would allow companies to apply current losses to taxes paid four years ago, instead of the current two-year carry-back. Builders could apply losses against profits from the boom, and some could receive significant tax refunds.
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John Burns, a California-based housing consultant, [said]: "This could be the difference between bankruptcy or not."
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Added Fitch Ratings' Robert Curran: "This would help keep, potentially, some builders afloat."