California re-ups home tax credit

Tuesday, March 30, 2010
Posted 11 a.m. Eastern

The latest move by the Obama Administration to help out struggling homeowners has raised a lot of eyebrows.

Those folks questioning whether the U.S. should continue to prop up the housing industry -- and make no mistake about it; that's as much a part of the deal as helping out homeowners -- better not look at what's going on in California. A just-enacted law there could send them over the edge.

Last week, Gov. Arnold Schwarzenegger signed a bill that will give state tax credits to residents who buy new homes beginning May 1. The cost to the sieve that is the California State Treasury: $200 million.

This is a second round of a credit that ran out of money last year. So this time, the amount of money allocated for the credits is twice as much and eligibility has been expanded to more properties.

And you wonder how the Golden State has had a less than golden Treasury of late?

Expanded credit: In this latest version, Californians who buy a qualifying property between May 1 and Aug. 1, 2011, can claim the credit. It's worth up to $10,000, spread evenly over three years.

So what's a credit-acceptable property? A newly built home purchased by anyone or an existing home that's purchased by first-time homebuyers. The first-time provision is new. The funds for the taxpayers credits will be split evenly between the two housing groups, and all buyers will have to occupy the homes for at least two years.

It's no surprise that this revived and expanded credit had the backing of the California Building Industry Association, or CBIA, and the California Association of Realtors.

Liz Snow, CIBA's President and CEO, called the credit "a true win-win ... (that) will help push prospective buyers off the fence, clear out inventory and jump-start the homebuilding industry, which will help create jobs and reinvigorate the state's economy."

Snow also cited figures from recent studies (but not the studies themselves) as showing that building a new home generates roughly $16,000 in state tax revenues. That alone, said Snow, "supports the notion that the credit will more than pay for itself."

Maybe I'm being a bit too skeptical and a bit of an obsessive wordsmith, but I found her choice of "notion" interesting.

According to the dictionaries I checked, a common definition of notion is:

  • A fanciful or foolish idea or whim, or
  • An ingenious article, device or contrivance.

I suppose we'll just have to wait and see if state lawmaker and housing industry hopes are borne out of the new credit or whether Merriam-Webster's characterization proves truer.

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