BILL ANALYSIS
SENATE COMMITTEE ON VETERANS AFFAIRS
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)."
COMMENT
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
SUPPORT
American Legion, Department of California
AMVETS-Department of California
Vietnam Veterans of America, California State Council
OPPOSE
None received
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