BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1149 (Stone) - Personal income taxes: credit: principal
residence
-----------------------------------------------------------------
| |
| |
| |
-----------------------------------------------------------------
|--------------------------------+--------------------------------|
| | |
|Version: June 15, 2016 |Policy Vote: GOV. & F. 5 - 1 |
| | |
|--------------------------------+--------------------------------|
| | |
|Urgency: No |Mandate: No |
| | |
|--------------------------------+--------------------------------|
| | |
|Hearing Date: August 1, 2016 |Consultant: Robert Ingenito |
| | |
-----------------------------------------------------------------
This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 1149 would enact a first-time homebuyer tax credit.
Fiscal
Impact: The Franchise Tax Board (FTB) estimates that the bill
would result in a General Fund revenue loss of $7.6 million in
2016-17, $13 million in 2017-18, and $13 million in 2018-19.
FTB's implementation costs have yet to be determined.
Background: California law allows various income tax credits, deductions,
and sales and use tax exemptions to provide incentives to
compensate taxpayers that incur certain expenses, such as child
adoption, or to influence behavior, including business practices
and decisions, such as research and development credits. The
Legislature typically enacts such tax incentives to encourage
SB 1149 (Stone) Page 1 of
?
taxpayers to do something that would not occur on the natural.
The Department of Finance (DOF) annually publishes a list of tax
expenditures; according its most recent report, DOF estimates
tax expenditures result in $57 billion in foregone revenue in
2015-16.
Several years ago, the Legislature authorized tax credits for
taxpayers purchasing homes. Taxpayers purchasing a home between
March 1, 2009, and March 1, 2010 that had never been previously
occupied could claim a tax credit equal to the lesser $10,000 or
5 percent of the purchase price (SBx2 15, Ashburn, 2010). SBx2
15 authorized $100 million in tax credits, which FTB allocated
on a first-come, first-served basis. The following year, the
Legislature extended the SBx2 15 credit, with some
modifications, and also allowed a credit for first-time
homebuyers (AB 183, Caballero, 2016). AB 183 authorized $100
million each for new homes and first-time homebuyers, as
defined, which FTB again allocated on a first-come, first-served
basis. FTB fully allocated both credits by August, 2011, and
both expired on December 1, 2014. Taxpayers could claim the
credit under specified requirements, including the following:
Taxpayers could only claim the credit in equal amounts
over the three taxable years commencing with the taxable
year in which he or she purchased the home.
Taxpayers could only claim the credit for one residence.
The credit applied to single-family residences, attached
or unattached, for which the taxpayer was eligible for the
homeowner's exemption from property tax.
To qualify as a first-time homebuyer, the taxpayer or
their spouse must not have had an ownership interest in a
residence for the three-year period before the purchase,
and submits an certification to FTB stating that he or she
is a first-time homebuyer.
The taxpayer must occupy the residence for at least two
years after purchase, or else the credit was cancelled and
SB 1149 (Stone) Page 2 of
?
recaptured,.
Proposed Law:
This bill would enact a tax credit for first-time homebuyers of
homes that have never previously been occupied, similar to SBx2
15 and AB 183. First-time homebuyers, as defined, purchasing a
qualifying residence between January 1, 2017, and January 1,
2020 can claim a credit against the persona income tax equal to
5 percent of the purchase price or $10,000, whichever is less.
Taxpayers must apply the credit in equal amounts over the three
taxable years commencing with the taxable year in which he or
she purchased the home, and are allowed a credit only for the
purchase of one home.
The bill only allows taxpayers to claim the credit for purchases
of attached or detached single-family residences to be their
principal place of residence, that have never been previously
occupied, and for which he or she is eligible for the
homeowners' exemption from property tax. Sellers must provide
buyers with a certification that the home has never previously
been occupied within one week of sale, which the taxpayer must
submit as part of their tax return to FTB to qualify for the
credit. Taxpayers must occupy the residence for two years after
the date of purchase; if not, the credit is cancelled, and the
taxpayer is liable for any credit on previous returns.
The bill would authorize $100 million in credits, and direct FTB
to allocate credits on a first-come, first-served basis upon
receiving the certification. Taxpayers may only claim credits
on timely filed original returns, and cannot claim one if the
seller is related to them, using the Internal Revenue Code's
definition, or if they are listed as a dependent on another
taxpayer's return.
The measure also provides that Section 41 of the Revenue and
Taxation Code does not apply to its credit, and sunsets on
December 1, 2023.
SB 1149 (Stone) Page 3 of
?
Staff
Comments: Based on previous new and first-time homebuyer tax
credit data, it is assumed the $100 million of available credit
would be fully allocated when returns are filed for tax year
2017, the first year available. Taxpayers would be allowed to
claim an estimated $33.3 million dollars in credit in 2017, 2018
and 2019. Based on tax return data for the qualified income
ranges, the estimated average tax liability is under $1,300.
Therefore, it is assumed that 40 percent of the credit would be
used each year, resulting in a $13 million annual revenue loss.
-- END --