Authorizes an income tax deduction of monies deposited into a house, townhouse, condominium or unit in a cooperative housing corporation account

3 Co-sponsors

• Joseph P. Addabbo Jr.
• Kevin S. Parker
• David Storobin

BILL NUMBER:S735

Title of bill

An act to amend the tax law, in relation to establishing a first time home buyer income tax deduction for monies deposited into a house, townhouse, condominium or unit in a cooperative housing corporation purchase account and providing for penalties for unauthorized withdrawals from such an account

Purpose

To provide for future homebuyers a special savings account and deduction similar to an individual retirement account that may be used for the purchase of a first home.

Justification

Home ownership has long been recognized as a part of the "Great American Dream". However, real estate values in New York State make the purchase of a first home extremely difficult for young people and others who have yet to buy a first home.

The first-time homebuyers' account will allow persons who have not had an ownership interest in a principal residence to establish an account for the purchase of a home, using a deduction from personal income of up to five thousands dollars for individuals and ten thousand dollars for married couples.

The lack of affordable housing is causing an exodus of young people who are moving from New York to states with lower housing market values. In addition to an easing of the exodus, this legislation will help stimulate the construction industry by increasing the long-term demand for individual housing units, townhouses, condominiums and cooperative housing units and thereby create jobs. This is important because it has long been recognized that the building industry is the engine that drives the state's economy. Unfortunately, the engine is sputtering as evidenced by a 24% decline in single family housing starts in New York State from 1995 to 1996 as compared to the national average which showed an increase of 8% for the same period.

This legislation will also encourage savings by those who have not yet purchased homes but who plan to do so.

Legislative history

2008 REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS 2009 REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS 2010 REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS

Fiscal implications

The Tax Department estimates that, if this bill were enacted into law, it would result in a $3 million revenue loss during SFY 2003-2004 and a $11 million annual loss in subsequent fiscal years. However, it is estimated that each new home (avg. cost $125,000) sale generates approximately $95,000 in related economic activity. Even if the establishment of the first-time homebuyers' account increased home sales by only 4% annually, or 6,600 new homes per year, an additional $627 million in related economic activity would occur. Taxed at a rate of 10%, this activity would generate $62.70 million in personal and business tax revenues to the state. The result would be an increase in state revenues, not to mention the creation of more jobs, due to the homebuyers' account credit. Moreover, it is estimated that a 4% increase in the construction of new homes in New York will generate approximately $76.23 million in local taxes.

Effective date

This act shall take effect on the 120th day after it shall have become a law and shall apply to all taxable years commencing on or after January 1 of the year next succeeding the year in which it shall have become a law; provided, however, that paragraph 6 of subsection (w) of section 612 of the tax law, as added by section two of this act, shall take effect immediately.