BILL ANALYSIS
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THIRD READING
Bill No: AB 765
Author: Caballero (D) and Solorio (D), et al
Amended: 9/4/09 in Senate
Vote: 27 - Urgency
SENATE REVENUE & TAXATION COMMITTEE : 8-0, 8/26/09
AYES: Wolk, Walters, Alquist, Ashburn, Florez, Padilla,
Runner, Wiggins
ASSEMBLY FLOOR : 71-4, 6/1/09 - See last page for vote
SUBJECT : Income tax credits: purchase: principal
residence
SOURCE : Author
DIGEST : This bill expands usage of the Qualified
Principal Residence Purchase Credit enacted as part of the
2009-10 Budget. Specifically, this bill (1) reduces the
total amount of tax credit available for allocation by 70
percent, thereby allowing $30 million to be allocated to
additional applicants, (2) specifies 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 will not be available for purchases between July 2,
2009 and the effective date of the bill, (3) specifies that
the total amount of tax credit that may be allocated under
the program will be $100 million, rather than the total
amount that may be allowed, and (4) requires the specified
CONTINUED
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certification to be provided by the seller within one week
before or after the close of escrow and secured by the
Franchise Tax Board no later than July 2, 2009.
ANALYSIS : Legislation passed with 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 the
lesser of five percent 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. 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. Senate
Appropriations Committee staff notes that the Assembly
Floor Analysis of SB 15XX (Ashburn), Chapter 11, Statutes
of 2009, Second Extraordinary Session, 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, this bill allows $30 million to
be allocated to other taxpayers, thereby ensuring that the
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General Fund impact of this program will be $100 million
over three years. New credits generated under this bill
allow approximately 4,285 additional new home purchases to
qualify. FTB indicates that this bill will 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.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
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. This bill provides for
a $44,000 appropriation.
SUPPORT : (Verified 9/9/09)
California Building Industry Association
San Diego Regional Chamber of Commerce
OPPOSITION : (Verified 9/9/09)
California Tax Reform Association
ARGUMENTS IN SUPPORT : The author states that, "When
legislators passed the tax credit back in February, we were
hopeful it would work to stimulate the state's hibernating
housing market. Then, as we all know, home shoppers were
sitting on the fence, refusing to go back into the market.
In just two months, more than half of the credits are gone.
At this pace, the credit will run out early this summer,
even though legislators approved the program for a full
year - through March 1, 2010. The tax credit is doing a
lot to restore confidence in California's housing market.
We have been hearing from homebuilders and in news reports
that both traffic and sales are up dramatically and we've
seen a surge in permits for new construction. That's why
I'm pleased to be a joint author of this legislation, along
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with Assembly Member Solorio. This legislation is about
job creation and economic stimulus."
ARGUMENTS IN OPPOSITION : The California Tax Reform
Association indicates they "question the effectiveness of
the tax credit for new home purchases and do not believe
that it should be expanded further, since it appears mostly
to be a subsidy to new home developers. Taxpayers are
already afforded generous tax benefits for homeownership.
There is no public policy purpose to subsidize homes which
have never been occupied instead of homes put on the market
for sale, or foreclosed homes for that matter. Sincere
there are no income limitations on this program, it may
subsidize the purchase of new high-end homes, at cost to
the state's taxpayers and programs."
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Tom
Berryhill, Blakeslee, Blumenfield, Brownley, Buchanan,
Caballero, Charles Calderon, Carter, Chesbro, Conway,
Cook, Coto, Davis, De La Torre, De Leon, DeVore, Duvall,
Emmerson, Eng, Evans, Fletcher, Fong, Fuentes, Fuller,
Furutani, Gaines, Galgiani, Garrick, Gilmore, Hagman,
Hall, Harkey, Hayashi, Hernandez, Hill, Huber, Jeffries,
Jones, Knight, Krekorian, Lieu, Logue, Bonnie Lowenthal,
Ma, Mendoza, Miller, Monning, Nestande, Niello, Nielsen,
John A. Perez, V. Manuel Perez, Portantino, Salas,
Saldana, Silva, Skinner, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
Bass
NOES: Feuer, Huffman, Ruskin, Villines
NO VOTE RECORDED: Bill Berryhill, Block, Nava, Price,
Yamada
DLW:mw 9/9/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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