Thursday, June 4, 2009
8:30 a.m. – 11:00 a.m.
Presiding:
Cynthia Carley, Chair
Curt Cournale, Vice-Chair
Mark Peterson, Vice-Chair
Bill Jansen, Executive Committee Liaison
Jimmy La Peter, NAR Committee Representative
CAR Staff:
Christopher Carlisle, Legislative
Advocate
Jeff Keller, Public Policy Analyst
I. Opening Comments
II. State Taxation Issues
A. Discussion/Reporting Items:
1. Home Purchase Tax Credits
a. AB 765 (Caballero) Housing Tax Credit - SB 15XX created
a tax credit for new home purchasers equal to 5% of the sale price of a
home, not to exceed $10,000. The credit is only available for the purchase
of new (previously unoccupied) homes between March 1, 2009, and March 1,
2010. The current program authorized by SB 15XX allocated $100 million in
state funds to provide these tax credits. AB 765 was amended in mid-May to
remove the funding cap for the tax credits for homes purchased prior to
December 1, 2010. C.A.R. supports AB 765 because the revisions to the
current state housing tax credit will further assist the recovery of
California's housing economy.
Position: Support
Status: Assembly Revenue and Taxation Committee
b. AB 902 (Torres) Foreclosed Homes Income Tax Credit - AB
902 would grant purchasers of foreclosed homes, whose annual gross income
is no more than 120% of the area's medium income, a tax credit equal to two
percent of the cost of the home up to $3,000. The credit will be available
to buyers purchasing the foreclosed property as a principle residence if
the purchase is made after January 1, 2009, and before January 1, 2012.
Unfortunately, AB 902 proposes to fund this tax credit by repealing the
mortgage interest deduction for second homes from January 1, 2010 through
January 1, 2012. C.A.R. will oppose AB 902 until it is amended to utilize
an alternative funding source for this tax credit.
Position: Oppose Unless
Amended Status: Assembly
Revenue and Taxation Committee
c. SB 49 (Dutton) Housing Tax Credit - SB 15XX created a
tax credit for new home purchasers equal to 5% of the sale price of a home,
not to exceed $10,000. The credit is only available for the purchase of new
(previously unoccupied) homes between March 1, 2009, and March 1, 2010. The
current program authorized by SB 15XX allocated $100 million in state funds
to provide these tax credits. SB 49 was amended in April to remove the
funding cap for the tax credits for homes purchased prior to December 1,
2010. C.A.R. supports SB 49 because the revisions to the current state
housing tax credit will further assist the recovery of California's housing
economy.
Position: Support
Status: Senate Revenue and Taxation Committee, Suspense
File
d. SB 206 (Dutton) First Time Homebuyer Tax Credit -
C.A.R. is the sponsor of SB 206 which would create a first-time homebuyer's
tax credit equal to 10% of the sale price of a home, not to exceed $8,000,
for homes purchased as the principal residence of the taxpayer. This credit
will only be available to individual purchasers whose income does not
exceed $95,000, and married couples whose combined income does not exceed
$170,000. SB 206 will not only provide parity with the current federal
housing tax credit, but increases the incentive for first-time homebuyers
to get into homeownership. Recent amendments also provide this tax credit
to anyone purchasing an REO property for a principal residence and make the
bill effective for one year from the date of its enactment.
Position: Sponsor
Status: Senate Revenue and Taxation Committee
e. SB 15XX (Ashburn) Housing Tax Credit - SB 15XX, which
was signed into law as part of the 2009-10 state budget negotiations in
February, created an additional tax credit for new home purchasers that
equals 5% of the sale price of a home, not to exceed $10,000. The credit is
only available for new (previously unoccupied) homes purchased between
March 1, 2009 and March 1, 2010. The purchaser must live in the home for at
least two years or the repay the credit back to the state. The bill
allocated $100 million from the state's general fund for these tax credits.
C.A.R. sought amendments to expand this credit to all homes.
Position: Oppose Unless
Amended Status: Signed by
the Governor on February 20, 2009 (Chapter 11, Statutes of 2009)
2. Debt Forgiveness
a. AB 111 (Niello) and SB 97 (R. Calderon) Cancellation of Mortgage
Indebtedness - The federal government enacted the Mortgage Debt
Relief Act of 2007 that permitted 3 years of mortgage debt relief by not
requiring borrowers to pay income tax on debt forgiven in a “short” sale.
In late 2008 the federal government extended this relief until December 31,
2012. Last year, California enacted SB 1055 which provided conformity with
the federal statute for the 2007 and 2008 tax years. These measures would
extend debt forgiveness on "phantom" income until December 31, 2012.
Position: Support
Status: Assembly Revenue and Taxation Committee, Suspense
File; Senate Revenue and Taxation Committee, Suspense File,
respectively
3. Property Tax Base Year Value Transfers
a. AB 157 (Anderson) Property Tax Base Year Value Transfers for
Disaster Relief - Currently, homeowners whose homes are damaged or
destroyed by a disaster are permitted to transfer the property tax base
year value of that property to a replacement property of comparable value
within five years of the disaster, provided the replacement property is
located in the same county as the original property. AB 157 would extend
that time period to seven years. C.A.R. supports AB 157 because disputes
with home insurers regarding compensation in the wake of a disaster can be
extremely protracted, and AB 157 recognizes this fact by extending the
period for these transfers by an additional two years.
Position: Support
Status: Assembly Revenue and Taxation Committee, Suspense
File
b. AB 321 (Niello) Retention of Spouse’s Eligibility Under
Proposition 60 - Proposition 60 allows a homeowner 55 years of age
or older to transfer – on a one-time basis – their property tax base year
value to another home of equal or lesser value. Currently, married
homeowners can transfer the property tax base year value of their home to
another home based on the qualification of one of the spouses.
Unfortunately, the other spouse loses the ability to similarly transfer the
base year value of a property. If the two individuals were not married,
both individuals would be able to transfer the base year value of their
home one time. This measure would preserve the ability of the
non-qualifying spouse to subsequently transfer the base year value of that
home, or another home subsequently owned by that individual. C.A.R.
supports AB 321 because it addresses this inequity by proposing to amend
the existing statute so that the non-qualifying spouse is not considered a
“claimant” of the Proposition 60 benefit.
Position: Support
Status: Assembly Appropriations Committee, Suspense
File
c. SB 274/SB 11 (Dutton) Transfer to More Expensive Home -
Currently, Proposition 60 allows a homeowner 55 years of age or older to
transfer, on a one-time basis, their property tax base year value to
another home of equal or lesser value. This measure would allow senior
homeowners to transfer their property tax base year value to a more
expensive home; however, the difference in value between the original and
replacement homes would be added to the base year value, which would
eliminate any negative fiscal impacts on government. C.A.R. supports SB 274
because it protects seniors who are often on a fixed and/or limited income
from property tax increases that can occur when purchasing a new
home.
Position: Support
Status: Failed passage in the Senate Revenue and Taxation
Committee (reconsideration granted)
4. Recording Fee Increases
a. AB 827 (Yamada) Recording Fees to Fund Historical County
Records - This measure would authorize county boards of
supervisors to impose an additional recording fee of three dollars for the
first page and one dollar for each additional page on property related
documents. The fee would be used to fund the archiving of historical
documents including real property records, local agency meetings and
actions, roads and other public works, and other records of general public
or historical interest. Current law requires that fee amounts be
related to the cost of providing the service for which the fee is
collected. C.A.R. opposes AB 287 because the fee collected is not related
the cost of recoding the affected documents but, instead, will be used to
archive historical county records.
Position: Oppose
Status: Assembly Floor
b. SB 676 (Wolk) Recording Fees - C.A.R. opposes SB 676
which proposes to increase the cost for recording the first page of a
document from $4 to $10 without any reference to the actual cost of
providing the recording service. C.A.R. argues that the amount of the
recoding fee should be limited to the actual cost of providing the service,
and is concerned that SB 676 is merely intended to increase revenue for
local governments. SB 676 was approved by the Senate Local Government
Committee on May 6, with an amendment requested by C.A.R. that would limit
any recoding fee increase to actual costs up to a maximum of $10. Once the
bill was amended, C.A.R. removed its opposition.
Position: Watch File
Status: Senate Floor
5. Vote Threshold Reductions (Note: Constitutional
amendments require approval of both houses of the legislature by a
two-thirds vote.)
a. ACA 9 (Huffman) Property Tax and Special Tax Vote Threshold
Reduction - Proposition 13, which was approved by the voters
during the 70s, prohibits property taxes from exceeding 1% of the full cash
value of the property. Current law also requires a two-thirds vote to
approve special taxes. ACA 9 proposes to reduce the vote requirement for
the imposition of property taxes and special taxes to 55%. C.A.R. opposes
ACA 9 and argues that California voters have on several occasions clearly
stated that property taxes and special taxes should only be approved by a
two-thirds vote and that the higher standard that a two-thirds vote
represents reflects the public’s view that the imposition of special taxes
should be held to a stringent standard.
Position: Oppose
Status: Assembly Revenue and Taxation Committee
b. ACA 10 (Torlakson) Education Finance District Special Tax Vote
Threshold Reduction - ACA 10 would reduce the vote required to
approve special taxes for education finance districts from a two-thirds
vote to a simple majority. C.A.R. opposes ACA 10 because it runs counter to
the expressed views of California voters who have clearly stated that
special taxes should only be approved by a two-thirds vote.
Position: Oppose
Status: Assembly Appropriations Committee
c. ACA 15 (Arambula) Local Transportation Project Special Tax Vote
Threshold Reduction - This bill would reduce the vote required to
approve special taxes for local transportation projects, from a two-thirds
vote to 55 percent. C.A.R. opposes ACA 15 and argues that California voters
have on several occasions clearly stated that special taxes should only be
approved by a two-thirds vote and that the higher standard that a
two-thirds vote reflects the public’s view that the imposition of special
taxes should held to a stringent standard.
Position: Oppose
Status: Assembly Appropriations Committee
d. SCA 6 (Simitian) Vote Threshold Reduction for Parcel
Taxes - This measure would reduce the vote required for a school
district to impose a parcel tax from two-thirds to 55%. C.A.R. opposes SCA
6 because parcel taxes are not limited to facility construction, can be
imposed indefinitely, and are a “flat fee” per parcel that may place an
additional burden on homeowners least able to afford it.
Position: Oppose
Status: Senate Floor
e. SCA 12 (Kehoe) Special Tax and Bonded Indebtedness Vote
Threshold Reduction - This bill would reduce the vote required to
approve special taxes and bonded indebtedness to fund emergency and public
safety services, from a two-thirds vote to 55 percent. C.A.R. opposes SCA
12 and argues that California voters have on several occasions clearly
stated that special taxes and bonded indebtedness should only be approved
by a two-thirds vote and that the higher standard that a two-thirds vote
reflects the public’s view that the imposition of special taxes and bonded
indebtedness should held to a stringent standard.
Position: Oppose
Status: Senate Elections, Redistricting and Constitutional
Amendments
6. Miscellaneous
a. SB 279 (Hancock) Mello-Roos Districts/Energy Efficiency
- This bill would authorize a Mello-Roos district to finance the
acquisition and installation of energy efficiency improvements on public
and privately owned real property. SB 279 also creates an alternate
procedure for creating a Mello-Roos district that allows property owners to
individually opt into the district and be accessed a special tax to pay for
energy efficiency upgrades to their existing home. The author has agreed to
an amendment that would allow Mello-Roos districts to finance energy
efficiency improvements but only those districts formed through the
alternative method that only assesses those homeowners that opt-into the
district. C.A.R. will remove its opposition when the bill is, in fact,
amended.
Position: Oppose Unless Amended (Amendment
Pending) Status: Passed
Senate, in Assembly Local Government Committee
b. SB 306 (Calderon) Real Property Transactions - Created
in 1982, the Escrow Agents' Fidelity Corporation (EAFC) serves to indemnify
escrow agents against certain losses. EAFC membership is required for each
person licensed under the Escrow Law who engages in the business of
receiving escrows for deposit or delivery of real property transactions. SB
306, among other things, appears to exempt money or property held by, or
deposited with, a person acting as an exchange facilitator from real
property escrows for which EAFC is required to provide fidelity coverage.
C.A.R. will oppose SB 306 until it is amended to clarify that this
provision only applies to funds placed with an escrow to meet the financial
responsibility requirements of last session’s SB 1007. C.A.R. secured an
agreement with the sponsor to so amend the bill. C.A.R. will move to a
support position when the bill is, in fact, amended.
Position: Support if Amended (Amendment
Pending) Status: Assembly
Banking and Finance Committee
c. SCA 18 (Liu) Local Government: Property-Related Fees –
The California Constitution conditions the imposition or increase of a
property-related fee or charge upon the approval of either a majority vote
of the owners of the properties subject to the fee or charge or, at the
option of the agency imposing the fee or charge, by a two-thirds vote of
the voters residing in the area affected by the fee or charge. However,
there’s an exception for sewer, water and refuse collection services. This
measure would add stormwater and urban runoff management from these
approval requirements for the imposition or increase of a property-related
fee or charge.
Position: Not Rated File
Status: Senate Local Government Committee
III. Federal Taxation Issues
A. Action Items:
1. Withdrawing From 401(k) Plan Without Penalty - As the
housing market continues to face a tough decline, there has been a rise in
homeowners that are finding themselves struggling to pay their mortgages.
These troubled mortgages are leading to an increase in loan modifications,
foreclosures, and attempts to help people access cash to help save their
homes. One option proposed is allowing homeowners to withdrawal from their
401(k), without penalty, to help pay their troubled mortgage. (Please see
IBP for further information)
B. Discussion/Reporting Items:
1. Homebuyer Tax Credit -The First-time Homebuyer Tax
Credit (HTC) was changed as part of the 2009 Stimulus Package. Below is a
description of the previous HTC and the updated HTC.
If the home was purchased between April 8, 2008 and December 31,
2008:
The tax credit is 10% of the purchase price, capped at $7,500.
The tax credit does need to be repaid, therefore working more as an
interest free loan. The credit is repaid out of your taxes over
15-years.
You cannot get the credit if the property is financed by a tax exempt
qualified mortgage issue/bond.
If the home was purchased between January 1, 2009 and November 30,
2009:
The tax credit is 10% of the purchase price, capped at $8,000.
The tax credit does not need to be repaid – the only exception being if the
property is sold within 3-years of purchase.
You can get the credit if the property is financed by a tax exempt
qualified mortgage issue/bond.
2. Estate Tax - The Economic Growth and Tax Reconciliation
Act of 2001 set in motion a ten-year plan to increase the exemptions from
the estate tax and lead to a one-year full repeal in 2010. Effective in
2010, the estate tax will be repealed, but only for 2010. In the interim,
the amount of the exclusion will gradually increase from $675,000 to $3
million and the estate tax rates are gradually reduced from a maximum of
50% to a maximum of 45%. However, in 2011, the estate tax laws will revert
to the laws that were in effect on June 6, 2001.
As under prior law, the basis of assets received between 2001 and 2010 is
"stepped up" to its fair market value at the time of death. When repeal
comes into effect, the estate will not be taxed, but the basis of assets
that heirs receive will be "carried over" so that the basis in the hands of
the heir is the same as the basis of the previous owner.
Below is a chart showing the progression of the estate tax’s top rates and
exemption maximum through its full repeal in 2010 and its reversion back to
the old rates and exemption levels in 2011.
|
Year |
Exemption Maximum |
Top Estate Tax Rate |
|
2004 |
$1,500,000 |
48% |
|
2005 |
$1,500,000 |
47% |
|
2006 |
$2,000,000 |
46% |
|
2007 |
$2,000,000 |
45% |
|
2008 |
$2,000,000 |
45% |
|
2009 |
$3,500,000 |
45% |
|
2010 |
No Maximum |
0% |
|
2011 |
$1,000,000 |
55% |
