BILL ANALYSIS                                                                                                                                                                                                    

                             JEFF DENHAM, CHAIRMAN

          Bill No:        AB 2087
          Author:         Torres
          Version:        As amended April 19, 2010
          Hearing Date:   June 22, 2010
          Fiscal:         Yes

                                 SUBJECT OF BILL  
          Veterans' Farm and Home Purchase Act: definition: home.  

                                   PROPOSED LAW  
              1.   Add section 143 (k)(7) of the Internal Revenue Code  
               to the definition of "home" under the Farm and Home  
               Purchase Act of the Military and Veterans Code, thus  
               allowing Cal-Vet loan money to be used to purchase  
               multiple unit (duplex, quadplex) homes.

                           EXISTING LAW AND BACKGROUND  
             1.   In 1921, the Legislature authorized the Farm and  
               Home Loan Purchase Program, which is commonly known as  
               the Cal-Vet Home Loan.

             2.   Traditionally this program is funded by getting  
               clearance from the Federal Government to sell bonds  
               without a full tax liability, which are then used to  
               fund low interest home loans to veterans.  

             3.   The intent of the Farm and Home Loan Purchase  
               program was to thank veterans by making it easier for  
               them to purchase a home.  "Home" under this program  
               includes farms and single family dwellings.

             4.   California voters have authorized new funding for  
               this program over 20 times.


             5.   The most recent authorization, SB 1752 (Wyland) of  
               2008, which became Proposition 12, was approved by  
               voters in 2008.

               The latest authorization was needed because for the  
               first time in a generation the Federal Government  
               reauthorized the program for post- Vietnam veterans.

             6.   The new authorization was enough money for roughly  
               3,000 home loans.

             7.   Included in the definition of single family homes  
               for the purposes of the Farm and Home Loan Purchase  
               Program are a duplex or quadplex unit in which a  
               veteran chooses to live.

             8.   Under the present Farm and Home Loan Purchase  
               Program a veteran cannot buy the entire duplex or  
               entire quadplex.

             9.   Internal Revenue Service (IRS) code 143 says "(7)  
               Single-family and owner-occupied residences include  
               certain residences with 2 to 4 units. 
               Except for purposes of subsection (h)(2), the terms  
               'single-family' and 'owner-occupied', when used with  
               respect to residences, include 2, 3, or 4 family  
               residences: (A) one unit of which is occupied by the  
               owner of the units; and (B) which were first occupied  
               at least 5 years before the mortgage is executed.   
               Subparagraph (B) shall not apply to any 2-family  
               residence if the residence is a targeted area  
               residence and the family income of the mortgagor meets  
               the requirement of subsection (f)(3)(B)."

             1.   By adding the IRS's definition of single-family and  
               owner-occupied residences, a veteran would be eligible  
               to purchase an entire duplex, triplex, or quadplex  
               using money from the special bonds authorized by the  
               Federal Government.

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             2.   While a veteran could choose to buy an entire plex  
               for extended family reasons, this change in the law  
               would more likely be used for establishing cooperative  
               housing units, such as those authorized by AB 1330 of  
               2009 (Salas).

             3.   MVC 987.62 prohibits the use of loan money to buy  
               rentals or business properties.  Co-op housing could  
               be considered business properties; so, the author took  
               amendments to the bill to clarify that all residences  
               must be occupied by veterans and their families.

             4.   Committee members may want to ask the department to  
               clarify for the record that MVC 987.62 does not need  
               to be amended and that the bill in its present form  
               does not fall on the wrong side of the disqualifying  
               business section of the code.

                                  PRIOR ACTIONS  

          Assembly Veterans        9-0
          Assembly Appropriations  12-5
          Assembly Floor           74-0

          American Legion, Department of California
          AMVETS-Department of California
          Vietnam Veterans of America, California State Council

          None received

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