In his last State of the State address, the Governor announced his upcoming budget proposal (to be released on Friday) would include $200 million for Tax Credits to home buyers in California. Based upon the success of last year’s New Home Purchase Tax Credit, the Governor will propose to the Legislature that the purchasers of each new and resale home in California be granted up to $10,000 of State Tax Credit (within specific guidelines and time frames).

The idea for a California Home Purchase Tax Credit is driven by a number of factors. First, the incentive for providing the Tax Credit is the creation of new jobs. As highlighted by the California Building Industry Association (CBIA) a Tax Credit for the construction of each new home in the state generates up to 3 new jobs. Second, the Tax Credit has been shown to also generate up to $10,000 of new State revenues (through sales, income and property taxes) and up to $3,000 of local revenue (through sales and property taxes). And third, the Tax Credit also helps stabilize neighbor home prices through increased demand and sales activity.

A new twist on the proposal this year is the provision to utilize the Tax Credit for resale home purchases. This change follows the recent Federal Housing Tax Credit extension plan, which opened up the Federal Tax Credit to any purchaser of a home, not just to first time home buyers.

A number of issues will need to be worked out with the Governor’s proposal. For example, it is likely that the new State Tax Credit will follow the guidelines utilized by the 2009 Housing Tax Credit, requiring the credit amount to be spread over three years and limiting the credit amount to the amount of state tax owed by the home buyer, not to exceed $3,333 per year. Additionally, by placing a limit on the Tax Credit allocation of $200 million and opening the Tax Credit eligibility to resale and new home buyers, the Franchise Tax Board (FTB) will need to create a program allowing prospective home buyers to reserve an allocation of the limited Tax Credits at the time a purchase contract is signed for the home sale. There may also need to be a division of the Tax Credit allocation between new and resale home buyers, as the resale homes will be more available and will dominate the sales activity in the early weeks of the Tax Credit life. While this may sound like a “so what?” to most people, the job creation aspect of the stimulus provided by a Tax Credit will not achieved if only a small number of new homes buyers are able to take part in the program.

And, finally, remember this is a proposal. The Governor can not make the law, he can only approve a law drafted by the Legislature. The Governor’s budget proposal contains the provision for a Housing Tax Credit. The Administration will need to work with the State Senate and Assembly to craft the language, the rules and the “where as-es” to draft a Bill that creates a Tax Credit for California home buyers. As they say … “the devil is in the details”. Stay tuned as the adventure begins again!

The State Senate has approved an extension of the California Tax Credit for new home purchases! On October 14, 2009, the State Senate voted 35 – 1 to approve Senate Bill 37xxx. Senator Roy Ashburn (R – Bakersfield) is the author of the Bill. Senator Ron Calderon (D- Montebello) and Assemblywoman Anna Caballero (D – Salinas) are the principal co-authors. The Bill now returns to the State Assembly where it will be voted on early next week. Then it must go to the Governor’s office for approval to establish the effective date of the Bill.

The Bill allows for the 30% of the original allocation (of $100 million in tax credits) to be applied to new home purchases that closed escrow between March 1, 2009 and July 2, 2009 (and did not receive a Tax Credit allocation) and that will close escrow between the effective date of this Bill and March 1, 2010. That means approximately 4,300 additional requests for the California New Home State Tax Credit would be considered by the Franchise Tax Board. Many questions still remain with regards to the application process and existing unfulfilled application requests. For example:

1) There are 1,479 pending applications, filed through July 2, 2009, that have not received a Tax Credit authorization. Will these applications be re-visited?

2) Since the application must have been be submitted no earlier than one week prior, nor more than one week after the close of escrow, and in no case later than July 2, 2009, how many of these 1,479 pending applications are valid?

3) Any new applications will have to be submitted at the close of escrow, after the effective date of the new Bill. How many new applications will be considered?

4) The Franchise Tax Board received an average of 670 applications per week for the original Tax Credit. If half of the outstanding credits already applied for are approved, that leaves about 6 weeks for new applications to be filed. How quickly will these credits be utilized?

These and other questions will be answered by the legislature and the Franchise Tax Board in the next couple of weeks, assuming the Assembly passes SB 37xxx (they passed the earlier version of the Tax Credit Bill AB 765 by Assemblywoman Caballero, 71-4) and assuming the governor signs the new Bill into law (he has stated his intent to do so).

The next step is passage by the Assembly. That vote could come as early as October 27th. Then, it is anticipated the Governor will receive the Bill on his desk within a week. Check back regularly for further updates!

The Franchise Tax Board announced on Monday an interim extension of the California Tax Credit for New Home Purchases. This extension will likely extend the application period for tax credit requests for another week or two. The details of the extension are outlined in the FTB press release below:

State’s New Home Tax Credit Going Fast

Released: June 22, 2009

Sacramento –The Franchise Tax Board (FTB) announced today that the $100 million allocated by the state in new home tax credits will soon be gone.

As of June 17, 2009, FTB had received more than 9,800 applications claiming nearly $95 million. Because some of these applications are duplicates, revisions, or invalid, FTB plans to accept 12,000 applications. This will ensure enough valid applications will be available to allocate the full $100 million credit. However, FTB will only issue approved credit certificates until the $100 million is exhausted.

When 11,000 applications are received, FTB will update its Tax Credit for New Home Purchases web page at www.ftb.ca.gov each business day with the new totals. Once FTB receives 12,000 applications, the fax service will be disconnected.

This tax credit is available for qualified buyers who on or after March 1, 2009, and before March 1, 2010 purchase a qualified principal residence that has never been occupied. The buyer must reside in the new home for a minimum of two years immediately following the purchase date. To apply, an Application for New Home Credit must be completed by the buyer and seller within one week after the close of escrow and faxed by the escrow person to FTB at 916.845.9754.

To expedite the processing of applications, qualified buyers are reminded to: submit only one application per new home purchase, only send in the application after escrow closes, and complete the application carefully and accurately. Applications received before escrow closes will be denied.

FTB will continue to report the certificates issued on a weekly basis until the full $100 million has been allocated. FTB expects to complete processing all certificates in August. Each applicant will receive a notification indicating the amount of credit allocated or denied.

In addition, the California Building Industry Association is working with the state legislature to modify the Tax Credit bill and allow the FTB to make full use of the allocated credit amount. The timing of this new legislation is critical to keeping the Tax Credit program up and working. California home builders are touting the successes of the first bill and looking to our elected leaders to continue a “real stimulus plan” that provides new home buyers with incentives to put the construction industry back to work. Independent financial analysis shows the Tax Credit generates approximately $16,000 of revenue to the State and $3,000 of revenue locally for each $10,000 credit authorized. This is a stimulus bill that makes money and puts people back to work!

Stand by for more up to the minute news on the possible extension of the California Tax Credit for new home purchasers!

]]> http://blog.brookfieldsd.com/tax-credit-extension-in-the-works/feed/ 4 http://blog.brookfieldsd.com/the-pacific-coast-builders-conference/ http://blog.brookfieldsd.com/the-pacific-coast-builders-conference/#comments Fri, 19 Jun 2009 23:22:21 +0000 Steve http://blog.brookfieldsd.com/?p=571 Today is the final day of the 2009 Pacific Coast Builders Conference (PCBC). The three day educational conference was filled with thought provoking speakers, educational programming, recognition events and a great supplier / services exhibition. More than 13,000 people registered for this year’s conference and they will all be going home a little smarter, a little more informed and a little better educated on the latest and greatest for the community and home building industry.

My time at PCBC was spent at each of the various offering. I attended the Opening Breakfast and was fascinated by Fareed Zakaria’s powerful insights into the world’s economical and political realities. He took the audience from the biggest international news of the day, right down to its impacts on our local economy and neighborhood consumers. He provided tremendous insight and understanding of the issues critical to our daily business decisions.

I celebrated the induction of six new members into the California Homebuilding Foundation’s Hall of Fame. I’m proud to say I consider Forest “Woody” Brehm of Brehm Communities, Layne Marcaeu of Shea Homes, Chip Pierson of the Dahlin Group and Jeffrey Slavin of HomeAid good friends and colleagues. Ray Becker of DMB, who left us too early last year, was also a good friend and colleague. I was pleased to meet and get to know Richard Oliphant of Oliphant Enterprises, a builder from the Coachella Valley. All six of these gentlemen are very deserving and great additions to the Hall of Fame.

I spent a couple of days working the exhibition floor. Sustainability and Green Building were definitely the issues in the forefront for most exhibitors and many home builders and industry members. Upgrades in photovoltaic systems were big attention grabbers. New forms of insulation, high energy savings devices and appliances, and sustainable construction materials were also well represented. Learning to be a “greener builder” or “greener developer” was an easy goal to accomplish.

Likewise, the educational programs were focused on delivering the “Green” message. From the way home builders design new communities, to products going into their new homes, to how we advertise and market our “Green” product, if you wanted to learn about “Green” PCBC was a great source of information.

Brookfield’s own, Lora Heramb, VP of Sales and Marketing, headlined one of the first educational sessions of the conference, “Building an Effective Homebuilder Brand Using Social Media”. Lora, along with Jason Baer of Convince & Convert and Jonathan Bailey of Bailey Gardiner Inc, lead a discussion and provided hands on participation in the use of Social Media tools to reach out and touch the next generation of home buyers. I mean, when was the last time you sat down in a meeting or classroom and the leader of the program asked the audience to “turn on your cells phones and computers! We want your participation in this discussion.”

PCBC turned 50 in 2009! “The New Age of Invention” delivered on all cylinders! I’m sorry if you missed the Big Show! We’ve come a long way from the Palace Hotel in 1959. But, we are just getting started. Mark your calendars now and be sure to attend PCBC, June 9 – 11, 2010. It is the best of the best, when you need to know what is going on in the Community Development and New Home Construction Industry.

The $10,000 State Tax Credit for the purchase of a hew home in California has proven to be a huge success! According to the California State Franchise Tax Board (FTB) over 50% of the $100 million tax credit allocation has been requested! In 10 weeks, 5,668 home buyers in California have requested $54.9 million of State Tax Credit. At this rate, the balance of the credit will be requested by early July.

Originally, the Tax Credit was adopted with a March 1, 2010 deadline and a $100 million allocation cap. Home buyers have easily recognized the value of this stimulus program and have been utilizing the Tax Credit at an increasing rate. Over the past week, the number of requests received by the FTB increased to 788 in a 7 day period. And the dollar volume of those requests increased to $7.58 million per week.

Research showed that each $10,000 Tax Credit award generated over $16,000 of new tax revenues to the State of California and $3,000 to the local jurisdiction. These tax revenues come from a variety of sources, such as: increased property tax collections, increased sales tax collections, and increased income tax collections. The tax revenue increase comes during the design and construction of the new home, and the first year following the close of escrow on the home. The tax credit is awarded over three years, at a rate of $3,333 per year, starting with the taxes paid in 2010 (for 2009 income).

The property tax increases are easy to understand. As you add new homes onto the property tax rolls, you replace the lower raw land tax valuation (that existed before the house was built), with a higher developed tax valuation (for the newly built home) that will generate the higher property tax revenue.

The sales tax increase comes from a variety of sources. Materials used during the design and construction of the new home generate sales tax revenue. Furnishings and materials purchased by the new home owner generate sales tax revenue. A lot of spending occurs during the design, construction and finally the move-in of a new home.

The income tax revenue increases come from the workers that are being paid to design, construct and sell the new home. It takes a lot of people, from architects, to contractors, to real estate brokers to complete the new home design, build and sale process. Each of these people makes their living on that new home and subsequently, pays income taxes to the State based upon their income.

There are additional economic benefits to employing these people. As the architects, contractors and sales people make their living, they in turn buy goods and services from their neighborhood retailers. The money continues to cycle through the economy, generating more economic activity and more tax revenue for the State. That is the nature of a stimulus program and that is certainly the result of the $10,000 California Tax Credit for new home purchases.

Well, first and foremost the $10,000 California Tax Credit for new home purchases have brought buyers to the communities of Veranda and Ironwood at MorningStar Ranch. Coupled with an opportunity for many buyers to qualify for the $8,000 Federal Tax Credit, some new homeowners are looking at up to $18,000 in future tax credits for buying a home today!

Additionally, many new home buyers have tried to participate in the “foreclosure market” and been treated poorly. We are hearing from a number of our new home buyers that they made multiple offers on foreclosed homes and never heard back from the bank or the broker. They have also told us about the deplorable condition of many of the foreclosed homes they looked at and when they added up the costs to bring the home back to “livable condition”, they were discouraged by the whole process. Then they heard about the California New Home Tax Credit and found out it doesn’t apply to foreclosed home purchases! Their disappointment was complete.

MorningStar Ranch Homeowners

Now, they are in the new home market and they have found a refreshingly different approach to buying a home. They can select their floorplan, their lot, their flooring, countertops and cabinets! They receive assistance with their purchase process, their loan process and their escrow. They receive a warranty for the new home they purchase and they get up to $10,000 in California Tax Credit! If they qualify for the Federal Tax Credit, they can receive an additional $8,000!

With 8 sales in the last 3 plus weeks, buyers are making their dreams a reality with a new MorningStar Ranch home. The recent sales activity has also prompted Brookfield Homes to start construction on nine more homes! This means a better selection on the floorplans and options that buyers are looking for. Priced from the low $300k’s, with generous builder incentives, and coupled with historic low mortgage rates, these new homes are a tremendous value for today’s cost conscious home buyer.

Stop in and take a look at our award winning homes and let the professional sales counselors show you how easy and affordable a new home in Riverside County can be. Then one day soon, you could be watching the sun rise at your very own home in MorningStar Ranch.