California Tax Credits for New Home Purchases – 2010
Tuesday, February 9th, 2010
As highlighted in my earlier post, the Governor has called for the re-institution of the Tax Credit for New Home Purchasers. We now have the first action by the California legislature to address that call to action.
SBX8 21, by Senator Ashburn has been introduced into the California State Senate. And, ABX8 34, by Assemblyman Jeffries has been introduced into the California State Assembly. Both of these bills would create a $10,000 tax credit per qualified buyer, to be paid over a three year period. Both bills are introduced into the Special Session #8 of the Legislature and could become law by passage during the special session. Both bills call for a May 1, 2010 start date, to coincide with the completion of the Federal Tax Credit program currently in place. For any other particulars of these bills, please see the links highlighted above.
The bill will normally undergo a series of changes as they work their way through the legislative approval process. Differences in the bills may arise as amendments and edits are made along the approval path of each chamber. There are a few key issues to keep watch over as the bills progress. First, the start date is a key issue. The Federal Tax Credit applies to purchase contracts entered into by April 30, 2010 and the home closes escrow by June 30, 2010. Starting the California Tax Credit on May 1, 2010 provides for a continuity of benefits available to the California purchaser. This continuity is important to maintain the construction of new homes (hence the benefits the State receives by offering the Tax Credit) and to support the confidence that is building in the demand for new homes. Any gap in this time line, from the Federal Tax Credit closing and the State Tax Credit opening, could create a hesitation in the minds of buyers and hence a slow down in the jobs recovery.
Another key issue is the direction to the Franchise Tax Board (FTB) to create a “reservation system” for the State Tax Credit. Again, modeled after the Federal Tax Credit, the reservation system allows buyers to contract for the purchase of a new home and receive a “reservation” of a future Tax Credit from the FTB. This approach allows buyers to purchase homes during the availability of the Tax Credit and close escrow at some time in the future, when the home construction is complete. It adds surety for the buyer that they will receive a Tax Credit and incentive for the home builder to create those needed construction jobs.
Most of the other qualifications for the Tax Credit remain consistent with the 2009 version. A new provision would cover First Time home buyers. The 2009 Tax Credit applied only to newly constructed homes, because of the greater surety around job creation and fiscal benefits to the state. The 2010 Tax Credit provides a portion of the Tax Credit Allocation be set aside for first time home buyers. There is no restriction for First Time home buyers to buy a newly constructed home. This provision will be a source of debate among the legislators. As proposed, the Ashburn and Jeffries bills each set aside $100 million for the qualified purchasers of newly constructed homes and $100 million for the purchase of homes by qualified first time buyers. This new provision will be ironed out through the legislative process.
Stay tuned for more information as the process unfolds.
Yuki,
I’m sorry the parties are making this so difficult on you. While the FTB does say it is best for the escrow company to fax the information, you may certainly do it yourself and I highly recommend that you do. If the FTB will allow you to leave off the Seller’s SSN, then do so. Keep confirmation of your fax transmission.
good luck,
Steve
Steve,
Wow. thank you for your comments. Ok, now I know what I can do!!
Yuki
Hi Steve,
I got back the 3549 RR from the seller on Sat and Fax it to 5/15 to FTB however the seller did help to fill out part IV but forgot to check on line 5 (it was blank) They check yes on line 4.They did fill out the escrow info for me. My husband just fill out page 2 buyer info and fax it in on Sat 5/15. Now I need to refax the form again to FTB. I hope it is ok. Since they can confirm on the form that they got the correct form or not.
Susan
Hi Steve,
I just noticed that the seller didn’t provide the parcel number and I read on the form that you need to provide it right?
Thanks,
Susan
Susan,
According to the FTB, if you need to make a change or addition to the form, after you have faxed in form, they ask that you re-fax the form with a letter of explanation as to why you are sending in the form a second time. This will help FTB coordinating the dual forms for the same escrow and to process the corrected form with a minimal amount of delay.
You can add the parcel number to the form, that info should be on your escrow statement or title report.
Good luck,
Steve
Hi Steve,
Thank you ! Since I don’t have the title report or enter into escrow yet so I called the seller agent for the parcel #. I wrote on my cover page with the explanation of why i need to refax it. My husband shrink the contract agreement long legal page into 8×11 so I can fax it to FTB. I am afraid that they don’thave the long legal page so it only show up half the page so my husbsand shrink it down but it is kind of small. Hopefully they can read it. The first time, we just fax the long contract agreement but i afradi that they didn’t get it. Will they send us something in the mail that they got it?
How long will it take before we receive anything from FTB?
Susan
Susan,
The following is from the FTB FAQ page, question #9:
“It will probably take FTB 3-6 months to respond to your application or reservation request. We must build a new computer system before we can begin verifying the applications and reservation requests. Please wait at least 4 months before contacting FTB regarding your application or reservation request. Because of this delay, it will be important to keep a copy of the fax confirmation.”
Good luck!
Steve
Hi Steve,
Thank you. My husband took to his company to fax it for the second time with the parcel # and 10,000 on question 5 and shrink down the contract to 8×11 so he can fax. However the fax machine just said “sucessful” but didn’t print out the report. For the first time, I faxed it at time, it did print out the report and with the date and time stamp. Hopefully they did get it though even though we don’t have the fax confirmation on the second fax.
Thanks,
Susan
Congrats Susan.
It sounds like you are on your way to a California Tax Credit! Make sure you keep the original fax report for your records. And, I suggest you wait three of four months before contacting the FTB about processing your paperwork. They are really backed up right now!
Steve
Hi Steve,
Thank you. Even though the original fax is the one without parcel # and question 5 fill in but it did give me the fax confirmation report. I hope they did get both of the fax. Let hope for the best.
Thanks,
Susan
Hi Steve,
I just send you a email but it doesn’t post.My question is that if we can’t come up with the down payment will the seller return our deposit 30k. We suppose to down 450k at that time, now we only have 200k because the seller and loan officer said i don’t need the money till Sept and told me that i can left in the stock acct so the stocks go down from these two month from 600k to 200k. I wish they told me to take out the money and put it in the bank. The seller said they can’t return the deposit , is that true?
Thanks,
Susan
Susan,
The answer is “it depends”. Without the specifics of your purchase agreement, I can not give you a clear answer. Did you make your offer contingent on getting financing? Are you approved for that financing? These are two important questions for you to answer and you may need to seek legal advice on those answers.
I’m sorry for the reduction in your stock portfolio. These are challenging times for all of us. Good luck,
Steve