Wednesday, Mar. 24, 2010
Sacramento-area buyers can begin claiming $10,000 tax credits starting May 1 under a bill expected to be signed soon by Gov. Arnold Schwarzenegger.
The legislation allocates $200 million for more state tax credits – twice what was offered last year to 10,659 buyers of new, unoccupied homes. The state’s newest housing stimulus will grant $100 million in tax credits to first-time buyers of existing homes and $100 million to anyone who buys a new, unoccupied home.
The state Franchise Tax Board on Tuesday estimated nearly 32,000 homeowners statewide might get the tax breaks. Buyers must close escrow or reserve a credit on or after May 1 and before or on Dec. 31 to qualify.
“I think it’s a lot of money in a deficit situation that doesn’t have the desired benefit,” Niello said Tuesday, noting that housing prices are still depressed despite earlier credits designed to stimulate the market.
Niello’s view was clearly a minority one, however.
“This tax credit has a proven track record,” said Assemblywoman Anna Caballero, D-Salinas, who authored the bill along with Sen. Roy Ashburn, R-Bakersfield. Caballero said California’s construction industry reported a 39 percent increase in building permits after the first round of tax credits began in March 2009 and proved more popular than expected. It ran out last July 2.
Schwarzenegger spokesman Mike Naple said Tuesday the governor supports the bill “and is expected to sign it.”
The governor signaled his intent Monday while signing two other budget bills. In a signing message, he commended the Legislature for approving the tax credit bill, saying it will stimulate “the housing industry, creating jobs for thousands of Californians.”
Schwarzenegger proposed the housing stimulus in his January State of the State Address to help revive the California economy. The new state tax credit would take effect one day after expiration of a federal $8,000 tax credit for first-time homebuyers.
As was the case last year, buyers won’t be eligible for the full $10,000 credit if they owe the state less than that amount over a three-year period. Buyers can get up to $3,333 off their tax obligation in each of the three years after buying a house.
Buyers must be at least 18 years old and be unrelated to the seller. They must live in the home they buy. First-time buyers are defined as those who have not owned a home in the past three years.
The Franchise Tax Board estimates the tax credit will cost the state $6 million for the fiscal year ending June 30 and $69 million next year. For three years after that, it will cost the state treasury $67 million, $54 million and $4 million.
This year’s legislation is different in that it allows buyers of new homes to reserve a tax credit in advance. A buyer signing a sales contract in June can claim the credit in November when the house is completed, a capital-area building industry official said Tuesday.
“In our parlance, that allows dirt sales,” said Dennis Rogers, a vice president at the Roseville-based North State Building Industry Association. “We’ll be able to build new houses now and get jobs going.”