AB 183 was passed by the legislature on March 22 and gives the Franchise Tax Board authority to extend a total of $200 million in tax credits to California homebuyers; $100 million for buyers of new construction homes and another $100 million for first-time buyers of existing homes.

The tax credit will be available to buyers on a first-come, first-served basis and is applied in equal amounts over a period of three taxable years. To qualify, the buyer must not be a dependant and must purchase a home that does not belong to a relative.

This bill would authorize a credit against taxes in an amount equal to the lesser of 5% of the purchase price of a qualified principal residence, as defined, or $10,000, for purchases made between May 1, 2010, and on or before December 31, 2010, or on or after December 31, 2010, and before August 1, 2011, subject to specified restrictions, including the submission of a certification to the Franchise Tax Board by either the taxpayer or seller, made under the penalty of perjury, that the residence has either never been occupied or that the taxpayer is a first-time home buyer.

Here are some additional specifics:

There shall be allowed as a credit against the "net tax", an amount equal to the lesser of 5 percent of the purchase price of the qualified principal residence or ten thousand dollars ($10,000).

The amount of any credit allowed shall be applied in equal amounts over the three successive taxable years beginning with the taxable year in which the purchase of the qualified principal residence is made.

"Qualified principal residence" means a single-family residence, whether detached or attached, that is purchased to be the principal residence of the taxpayer, and has either never been occupied or is purchased by a first-time home buyer.

"First-time home buyer" means any individual, or individual's spouse, who had no present ownership interest in a principal residence during the preceding three-year period ending on the date of the purchase of the qualified principal residence.

A taxpayer may, but is not required to, reserve a credit prior to close of escrow for the purchase of a qualified principal residence that has never been occupied. To reserve a credit, the taxpayer and seller shall jointly sign and submit to the Franchise Tax Board a certification that they have entered into an enforceable contract. Upon receipt of the joint certification, the Franchise Tax Board shall notify the taxpayer that the board has reserved the credit for the taxpayer, pending receipt, within two weeks after the close of escrow, of the certification that the residence has either never been occupied or that the taxpayer is a first-time home buyer.

No credit shall be allowed unless the taxpayer submits to the Franchise Tax Board, within two weeks after the date of the purchase of the qualified principal residence, a copy of the properly executed settlement statement and either one of the following:

• If the qualified principal residence has never been occupied, a certification by the seller, made under penalty of perjury, that the residence has never been previously occupied.

• If the qualified principal residence is purchased by a taxpayer who is a first-time home buyer, a certification from the taxpayer, made under penalty of perjury, that he or she is a first-time home buyer.

If the taxpayer does not occupy the qualified principal residence as his or her principal residence for at least two years immediately following the purchase, any remaining unapplied credit shall be canceled and any previously applied credit shall be recaptured, and the taxpayer shall be liable for any increase in tax attributable to the recapture of any credit previously allowed.

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