BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
765 (Caballero)
Hearing Date: 08/27/2009 Amended: 08/25/2009
Consultant: Mark McKenzie Policy Vote: Rev&Tax 8-0
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BILL SUMMARY: AB 765, an urgency measure, would expand usage
of the Qualified Principal Residence Purchase Credit enacted as
part of the 2009-10 state budget. Specifically, this bill
would:
Reduce the total amount of tax credit available for allocation
by 70 percent, thereby allowing $30 million to be allocated to
additional applicants.
Specify that the credit is only eligible for purchases of a
qualified principal residence from March 1, 2009 through July
2, 2009, and from the effective date of this bill until March
1, 2010. The credit would not be available for purchases
between July 2, 2009 and the effective date of the bill.
Specify that the total amount of tax credit that may be
allocated under the program would be $100 million, rather than
the total amount that may be allowed.
Require the specified certification to be provided by the
seller within one week of the close of escrow of the
residence, rather than within one week of the sale.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Housing tax credit $14,000 $11,000 $6,000 General
FTB administration $44 General
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
SB x2 15 (Ashburn), Chapter 11 of the 2009 Second Extraordinary
Session, which passed as part of the 2009-10 budget, authorized
a one time tax credit for individuals purchasing a new,
previously unoccupied, personal residence after March 1, 2009
and before March 1, 2010. The credit is equal to the lesser of
5% of the purchase price or $10,000, and is applied in equal
amounts over three successive taxable years beginning with the
year in which the purchase is made. The credit is capped at
$100 million, and is allocated on a first-come first-served
basis, which provides a credit to 10,000 eligible taxpayers. In
order to receive a reservation for the credit, the seller must
provide certification of sale to the taxpayer and to the
Franchise Tax Board (FTB) within one week of the sale of the
principal residence.
Within four months of the effective date of the credit, FTB
received 11,925 applications representing an excess of $100
million in tax credits available for new home purchases. Even
though FTB awarded the full amount allowable, many taxpayers
will not have sufficient tax liability over the three-year claim
period to offset the entire credit amount. FTB estimates that
70 percent of the allowable credits will be used to reduce
income tax liabilities. Therefore, the full amount awarded will
not be claimed. Staff notes that the
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AB 765 (Caballero)
Assembly Floor Analysis of SB x2 15 anticipated that the full
amount awarded would not be claimed by taxpayers, noting that
the General Fund impact of that bill would be "somewhat less
than the maximum because some qualifying taxpayers may not have
enough tax liability to fully utilize their credits each year."
That analysis also noted the full $100 million could be reserved
within the first few months of availability.
Of the $100 million currently approved for use by 10,000
taxpayers, FTB estimates that $70 million will be used to reduce
taxes over the 2009, 2010, and 2011 tax years. By reducing the
total amount of credit available for allocation by 70 percent,
AB 765 would allow $30 million to be allocated to other
taxpayers, thereby ensuring that the General Fund impact of this
program would be $100 million over three years. New credits
generated under this bill would allow approximately 4,285
additional new home purchases to qualify. FTB indicates that
this bill would result in General Fund revenue losses of
approximately $14 million in 2009-10, $11 million in 2010-11,
and $6 million in 2011-12. These figures represent tax credit
claims that would not otherwise occur absent this bill.
FTB estimates a combined one-time cost of approximately $44,000
to develop, program, and test revisions to the existing systems
for the revised credit limit and process new applications
received for the credit. FTB may be required to redirect
existing resources to these duties which could have an adverse
impact on current revenue generating programs and procedures.