BILL ANALYSIS
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THIRD READING
Bill No: AB 183
Author: Caballero (D), et al
Amended: 3/18/10 in Senate
Vote: 21
PRIOR VOTES NOT RELEVANT
SUBJECT : Housing tax credit
SOURCE : Author
DIGEST : This bill authorizes a $10,000 income tax credit
(or five percent of the purchase price if that amount is
lower) for taxpayers purchasing qualified homes between May
1, 2010 and December 31, 2010, or any taxpayer who
purchases a qualified home on and after December 31, 2010,
and before August 1, 2011, pursuant to an enforceable
contract executed on or before December 31, 2010.
Qualified homes must be the principle residence of the
taxpayer to be eligible for the tax credit. This bill
allocates $100 million in credits for the taxpayers
purchasing previously unoccupied homes and $100 million in
credits for first-time homebuyers purchasing existing
homes.
ANALYSIS : In 2009, the Legislature passed and the
Governor signed Chapter 11, Statutes of 2009-10, Second
Extraordinary Session (SB 15 X2 [Ashburn]), that authorized
a $10,000 tax credit (or five percent of the purchase price
if that amount is lower) for taxpayers purchasing qualified
CONTINUED
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homes after March 1, 2009 and before March 1, 2010. The
legislation allocated $100 million in credits for
previously unoccupied homes that serve as the taxpayer's
principle residence. The Franchise Tax Board (FTB)
allocated all of the available credits by July 2, 2009, on
a first-come, first-served basis.
This bill reauthorizes the tax credit authorized by Chapter
11, Statutes of 2009-10, Second Extraordinary Session, to
provide an additional $100 million in credits for taxpayers
purchasing previously unoccupied homes between May 1, 2010
and December 31, 2010, or any taxpayer who purchases a
qualified home on and after December 31, 2010, and before
August 1, 2011, pursuant to an enforceable contract
executed on or before December 31, 2010. This bill also
authorizes an additional $100 million in credits for
first-time homebuyers purchasing existing homes in the same
time frames. First-time homebuyers are defined as
taxpayers who have not had an ownership interest in a home
in the last three years. The taxpayer must occupy the
qualified home as their principle residence to be eligible
for the tax credit under either program.
Taxpayers who received a credit under Chapter 11, Statutes
of 2009-10, Second Extraordinary Session, are not eligible
for this credit. Additionally, the bill precludes persons
under the age of 18 from claiming the credit, unless the
person is married to someone over the age of 18, and also
prevents taxpayers who are related to the seller and
individuals who are claimed as dependents by another
taxpayer from claiming the credit.
The bill requires the taxpayer to submit to the FTB a
properly executed settlement statement. This bill also
requires the submission to the FTB a certification by the
seller that the home has never been occupied or a
certification from the taxpayer that he/she is a first-time
home buyer. This bill allows taxpayers to reserve a credit
prior to the close of escrow. The buyer and seller must
jointly sign and submit to the FTB a certification that
they have entered into an enforceable contract on and after
May 1, 2010, and before December 31, 2010.
The FTB allocates the credits on a first-come first-served
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basis. This bill directs the FTB to estimate that
taxpayers, on average, will offset tax liability equal to
70 percent of the credit for previously unoccupied homes.
This is based on a sampling of tax returns from taxpayers
awarded the credits allocated by Chapter 11x2. This bill
also directs the FTB to estimate that taxpayers, on
average, will offset tax liability equal to 57 percent of
the value of the credit for first-time homebuyers
purchasing an existing home. These estimates will allow
the FTB to allocate more than 10,000 credits for each
program to reach the full $200 million in credits allocated
by this bill. The taxpayer must apply the credit in equal
amounts over the next three tax years.
This bill also requires the FTB to establish a wait list of
taxpayers based on the date that the certifications and
reservations were received once the tax credits for
previously unoccupied homes are exhausted. The FTB shall
notify these taxpayers before December 31, 2011, whether
they have been allocated a credit.
Comments
There are no studies on the specific impacts of the 2009
tax credit. However, the author of the 2009 tax credit
claims that the credit encouraged reluctant homebuyers to
return to the market and new home sales started to rise
again. The author also claims that the 2009 tax credit
encouraged new home construction which generates jobs and
other economic benefits.
Homeownership is clearly a public goal under the existing
tax structure. Homeownership tax subsidies that already
exist include (1) the mortgage loan interest deductions,
which according to the Department of Finance will result in
more than $5.4 billion in foregone revenue in 2009-10; (2)
the capital gains exclusion, which the Department of
Finance estimates will result in more than $3.7 billion in
foregone revenue in 2009-10; (3) the deductibility of
property tax from federal income; and (4) the approximately
$6.6 billion in other federal tax credits made available as
part of the federal economic stimulus package to encourage
homeownership.
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The California Building Industry Association supported
similar legislation contained in SB 4 X6 (Ashburn).
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the FTB, this bill results in revenue losses
of $200 million General Fund to the state. The revenue
losses are expected to be distributed as follows: $6
million in 2009-10, $69 million in 2010-11, $67 million in
2011-12, $54 million 2012-13, and $4 million in 2013-14.
DLW:mw 3/22/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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