The Franchise Tax Board is continuing to take applications for the state first-time home buyer tax credit more than a month after it looked as though the credit had run out.
The state Legislature allocated $100 million for the state income-tax credit. To qualify, a first-time home buyer had to close escrow on a new or existing home on or after May 1 and before the $100 million ran out.
At the end of June, the tax board estimated it had received 20,760 applications representing $105 million in tax credits but said it would continue accepting applications because many appeared to be duplicates, revised or invalid.
As of Friday, it had received 30,439 applications. It didn’t attach a dollar amount but based on its previous estimate, that would represent more than $155 million in tax credits.
Tax credits will be allocated on a first come, first served basis based on when the application was faxed in.
The tax board cannot issue more than $100 million worth of credits so many people who applied late in the game could be out of luck.
The tax board is not sure how many applications it has received, how many are valid and how much money, if any, remains in the program because it had to build a new computer system to process them.
That system was recently completed and the board is starting to enter information from the applications it has received.
Based on manual sampling and some information from the computer program, the tax board estimates that up to 20 percent of the applications it has received are duplicates.
In some cases, the home buyer and escrow company both sent in applications on the same property, tax board spokeswoman Denise Azimi says. In other cases, people sent in a second application to provide missing or corrected information.
Also, some people might have faxed in their applications more than once to make sure it went through. The fax line was sometimes overloaded and the tax board did not confirm that it had received anyone’s application.
14-day deadline
Some applicants might be rejected because they missed the deadline. To qualify, an application had to be received within 14 calendar days after the close of escrow and meet other requirements.
The tax board will start notifying people this week whether they were allocated a credit, but it will take several months to notify everyone who applied.
Last year, the state offered $100 million in tax credits to anyone who bought a brand-new home. Like this year, it also accepted extra applications in case some were invalid, but the rejection rate was only 3.5 percent, Azimi says.
She says the rejection rate is likely to be higher this year. Last year, it was for new homes only and most people got their information from developers, so it was probably more consistent than what people have been getting this year.
“We want to be very careful that we have enough unique applications that we will be able to award certificates for $100 million in credits. It would be very bad if we close the application (window) too soon and leave out people who could have gotten it,” Azimi says.
This year, the state is also offering a separate tax credit to anyone - first-time or repeat buyers - who buy a newly constructed (but not an existing) home. Buyers can reserve this New Home Credit by entering into a binding contract between May 1 and Dec. 31 and closing before Aug. 1, 2011. This program also has $100 million in credits available, but is not running out as quickly as the first-time buyer credit. As of July 27, it had $30 million remaining.
Both credits are worth up to $10,000 spread over three years. To get the full $10,000, a buyer must owe at least $3,333 in state income taxes each year. Because many won’t owe that much tax and lose part of their credit, lawmakers allowed the tax board to reduce both of the $100 million pots by less than $10,000 for each application received.
Updates posted
The board has been posting updates on its website (links.sfgate.com/ZJLF) showing how much money remains in each pot. It will announce a cutoff date at least 24 hours before it stops accepting applications.
John Lee, president of the San Francisco Association of Realtors, says buyers were more interested in the California tax credit earlier this year. For a brief period, they could combine it with the federal home buyer tax credit. But after the federal credit expired May 1, the California credit lost some of its appeal. Spread over three years, it’s not that much relative to the cost of homes in the Bay Area. “Buyers don’t even talk about it at this point,” he says.
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/08/02/BU891ENQVA.DTL#ixzz0vs5Ri9sV
