California Lawmakers Approve Tax Breaks to Create Jobs

On Monday, lawmakers in California sent Governor Arnold Schwarzenegger two job creation bills. The first piece of legislation would extend the $10,000 homebuyer's tax credit through the end of while the second would provide tax break to the green-technology industry.

According to Business Week, the Senate and Assembly passed the bills with bipartisan support in hopes of promoting housing construction and making California more inviting to businesses involved in developing alternative energy.

"Today, the Legislature approved two important job creation measures that put Californians back to work," Assembly Speaker John Perez said in a statement after the votes were completed.

Passage of the legislation was intended to buy favor with Schwarzenegger in hopes that he would sign a budget bill Democrats sent to him earlier this month. That bill involves a complicated swap of the state sales tax on gasoline for a gasoline excise tax that would send more money to the cash-starved general fund.

The governor signed that bill late Monday and indicated he would sign the two tax-break bills later.

Continue reading at Business Week.com…

California Laws Get Tough on Mortgage Finance

California Governor Arnold Schwarzenegger signed seven new mortgage finance bills in to law on Monday, most of which crack down on fraud and set new requirements and restrictions for mortgage and reverse mortgage originators. Yesterday Housingwire.com posted an in depth article describing each bill and their intended purposes. Check out their list below.

Senate Bill (SB) 36 regulates the licensing requirements for residential loan originators in compliance with the federal Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act.

SB 237 requires appraisal management companies (AMCs) and appraisers register with the Office of Real Estate Appraisers and subjects appraisers to the provisions of the Real Estate Appraisers’ Licensing and Certification Law.

SB 239 raises the crime of mortgage fraud from a misdemeanor to a felony and makes it easier for prosecutors to obtain fraudulent loan documents to investigate cases.

Assembly Bill (AB) 260 places restrictions on subprime loans and prohibits originators from “steering” borrowers, or encouraging borrowers to buy riskier loan products when they are eligible for affordable products. It also gives state regulatory agencies the authority to suspend or revoke the licenses of real estate lenders and mortgage brokers that violate the state’s lending laws.

AB 329 sets guidelines for reverse mortgages originated for elderly borrowers — those over 65 years old — requiring specific disclosures and offering counseling service referrals. Originators are also prohibited from selling other financial products to a reverse mortgage borrower.

AB 957 gives the buyers of foreclosed property the right to choose local escrow officers to complete transactions. It prohibits the seller of a residential property from requiring the buyer to use an escrow service company or purchase title insurance chosen by the seller.

AB 1160 requires originators to provide borrowers with a mortgage summary document translated in the language the contract was verbally negotiated.

State Budget Plan to Demand Faster Tax Payments

California lawmakers are voting on their new budget plan today, and the San Francisco Gate posted a new article taking a look at the proposed budget. According to their article, the State would “increase the amount withheld from employee paychecks by 10 percent, speed up estimated tax payments, and begin withholding state income tax from certain payments - such as interest, dividends and gambling winnings”. Although the plan has a lot of critics, it is expected to help close the state’s budget gap.

These maneuvers will not increase tax revenue by more than a token amount. They will simply bring revenue that normally would be paid in the fiscal year that begins July 1, 2010, into the current fiscal year, which ends June 30, and thereby help "balance the budget."

And what about the hole in next year's budget? The state could fill it by stealing from the next year.

"It's a gimmick," says Gina Rodriquez of Spidell Publishing, which provides information to tax professionals.

Here's a closer look at how this would impact taxpayers. Remember that the state's fiscal year ends June 30 but the tax year ends Dec. 31:

-- Starting in October, employers would have to increase the amount withheld from employee paychecks for state taxes by 10 percent. If you were having $50 withheld, starting in October you would have $55 deducted.

When you file your 2009 tax return, you would owe less or get a bigger refund than you would if this change did not take place.

People could prevent or reverse the withholding increase by filing a new Form DE 4 with their employer. But the state figures most people won't, because they're lazy or busy or like getting a big tax refund.

This move would accelerate $1.7 billion of personal income tax receipts into 2009-10, mainly through increased withholding in January through June. Any excess revenue collected during that period would not have to be refunded until taxpayers file their 2010 returns in early 2011, which falls into next fiscal year.

Continue reading at SF Gate.com…

Toyota to End Calif. Joint Venture with GM

Just last week I posted a blog entry discussing how California lawmakers were struggling to find a way to save the State’s last remaining auto plant. However, earlier today I came across this Associated Press article published by the SacBee.com announcing that Toyota Motor Corporation has indeed decided to liquidate its joint venture with General Motors. For those of you who do not recall, the plant assembled vehicles for both Toyota and GM. However, just because Toyota is pulling out does not mean the factory will close, but it does not give GM a short time frame to decide the fate of the factory and the 6,400 California taxpayers it employs. Check out a clip from the AP story below, or check out the full article below.

Toyota Motor Corp. has decided to liquidate its stake in a California manufacturing plant that it jointly operated with General Motors, a Japanese news agency reported Thursday.

The Japanese carmaker will begin negotiating with the "Old GM" starting next week, Kyodo News reported, citing unnamed company officials.

Toyota spokesman Mike Goss would not confirm that the Japanese automaker had made a final decision on the fate of Fremont, Calif.-based New United Motor Manufacturing Inc., also known as NUMMI. Goss said Toyota will begin negotiations with the GM officials about the plant and added that the company is conducting an "extensive review" of its production needs.

A GM spokeswoman was not immediately available to comment.

Nummi's fate was thrown into question last month when GM announced it was withdrawing from the 50-50 joint venture. GM emerged from bankruptcy protection shortly after the announcement and the company's stake in NUMMI is now part of Motors Liquidation Co. - also known as Old GM - where it will be liquidated under court supervision.

The NUMMI plant, established in 1984, employs 4,600 workers and makes the Pontiac Vibe station wagon for GM, and the Corolla compact car and Tacoma pickup truck for Toyota.

California Budget Deal Closes $26 Billion Gap

California Governor Arnold Schwarzenegger and the California legislature announced yesterday that they had finally put together a budget deal that settles the states whopping $26 billion deficit. Reactions to the budget are mixed, but at least the state is finally taking responsibility for their budget. According to the LA Times, the following changes will be made to the stat budget. However, as the author points out the reductions do not add up to $26 billion, and are pretty general to say the least.

Cuts

• K-12 and community college education -- $4.3 billion
• Higher education -- $3 billion
• Medi-Cal -- $1.3 billion
• State worker pay -- $1.3 billion
• Corrections -- $1.2 billion
• CalWorks/welfare -- $528 million
• Home health aides -- $226 million
• Healthy Families children’s insurance -- $124 million
• Local transportation -- $1 billion
• Redevelopment agencies -- $1.7 billion

Additional Revenues

• Accelerate income tax withholding -- $1.7 billion
• Increase estimated tax payments for businesses and the self-employed -- $610 million

New Funds

• Sale of State Compensation Insurance Fund -- $1 billion
• Assumed federal funds for Medi-Cal program -- $1 billion

Accounts Shift / Borrowing

• Local government borrowing -- $2 billion
• Education deferrals -- $1.7 billion
• June 2010 state worker paycheck deferral -- $1.2 billion

The Wall Street Journal also published a piece with strong opinions on some of the cuts. Check out a clip of their article below, or find the entire full here.

Under the budget plan, state lawmakers would cut $15 billion in spending. The rest of the gap would be filled by taking funds from local governments and through one-time fixes and accounting maneuvers. The deal must still be approved by rank-and-file legislators, who are expected to vote on it Thursday.

"We have accomplished a lot in this budget," Mr. Schwarzenegger told reporters after lawmakers struck the deal Monday evening. "We dealt with the entire $26 billion deficit," he said.

The nation's most populous state faces a $26 billion gap in a $92 billion general-fund budget through June 2010. Mr. Schwarzenegger and legislators have been wrestling over the budget for weeks, forcing the state's chief accountant to issue IOUs to many creditors, including some welfare recipients.

As of Friday, the state had issued 153,711 IOUs, worth a total of $682 million. The office of Controller John Chiang said it would need to evaluate the budget proposal before determining when it could stop issuing the warrants.

Economists said the spending cuts would bruise a California economy already slammed by rising unemployment and foreclosure rates. "It will certainly offset a fraction of the federal-stimulus effect this fall," said Roger Noll, a professor emeritus of economics at Stanford University. "That will mean the depth and duration of the recession [in California] will both be bigger than otherwise would've been the case," he said.

The leaders of the Democratic-controlled state legislature said that of the $15 billion in cuts, $9 billion would come from education, $1.3 billion from state-worker furloughs and $1.2 billion from the prison system.

"For Democrats, I have to tell you that many of cuts we had to make, at another time, we would've thought unthinkable," said Assembly Speaker Karen Bass.

Ms. Bass also said that local governments "will have to share the pain." The state will take away $4.3 billion from local governments by borrowing from them or redirecting funds that had been earmarked for them.

California Lawmakers Scramble to Keep State's Last Car Factory Open

Lawmakers are struggling to save California’s last remaining car factory, NUMMI plant, in Fremont. The plant is operated by both GM and Toyota, and employs over 5,000 Californians. Legislators are hoping to push through a bill that will give the plant increased tax breaks, and a decision is expected this afternoon. Check out the following article from the LA Times discussing the issue.

"We believe that plant is a public good," said state Sen. Roderick Wright (D-Inglewood), who co-wrote the Senate bill. He added that his own Los Angeles County district is home to parts suppliers that would be affected should NUMMI close. "The fact that we could lose our last car manufacturing facility is unconscionable."

But amid Sacramento's grinding budget crisis, there is considerable doubt about how much money would be available to provide tax cuts to one of the world's largest companies -- and whether any amount of taxpayer-funded goodies would be sufficient considering the depths of the auto industry's woes.

"How many extra millions do taxpayers have to give Toyota to stay?" said Lenny Goldberg, executive director of the California Tax Reform Assn., who questions whether those kinds of incentives even work. "If you're going to give it away, give it away right."

Manufacturers have long complained about the cost of doing business in California. The legislation proposed this week would, in part, reduce that burden for the auto industry, sponsors said.

The bills, ABX4 31 and SB 830, would exempt NUMMI and other auto plants from sales tax on improvements and retooling of the plant, a process that can cost hundreds of millions of dollars. Toyota is not currently retooling NUMMI, but it could in the future to build fuel-efficient vehicles such as hybrids.

The Senate bill goes further. It would designate the plant and the area around it an enterprise zone, which provides a variety of other tax benefits. In addition, the bill would cut state fees that NUMMI pays for utilities, and it would encourage state and local agencies to buy vehicles made at the plant.

Legislators say they will urge Gov. Arnold Schwarzenegger to use the incentives as leverage with Toyota to keep the plant operating.

Calif. Legislators Try Again To Reach Budget Deal

California officials have been trying to come to an agreement on a budget plan, and have recently taken to trying to pin down some decisions. The associated press recently posted an interesting article discussing the newest developments in their decisions. A snippet of the post can be found below, but the full article can be found here.

California lawmakers are still trying to pass a massive $42 billion budget-balancing plan after a marathon weekend session that produced some last-minute fireworks but no agreement on a key part of the plan — $14.4 billion in higher taxes.

Senate President Pro Tem Darrell Steinberg planned to bring lawmakers back Monday to try to salvage the combination of spending cuts, tax hikes and additional borrowing designed to erase the deficit after angrily adjourning the proceedings Sunday night without a deal.

"We're going to come back at 11 o'clock tomorrow morning, and we're going to stay and we're going to work again and we are going to come back every day until we get this done," he said. "This will get done, and it will get done with the framework that has been presented to you as a result of 90 days of work by your elected leaders."

The proposed tax hikes include an increase of 1 cent on the dollar in the state sales tax, a 12-cent-a-gallon hike in the gasoline tax and a boost in vehicle licensing fees.

The measure also includes a one-time, 5-percent income tax surcharge for taxpayers who owe money to the state at the end of 2009. The surcharge would drop to 2.5 percent if California gets its expected share of money from the federal stimulus bill.

Many of the tax hikes would remain in effect through the 2013-14 fiscal year if voters approve a cap on state spending at a special election Gov. Arnold Schwarzenegger plans to call in May. That deal is designed to limit opposition to the spending cap, which was sought by Republicans as part of the budget deal.

Steinberg said that the Assembly was ready to approve the tax bill, but that Republicans refused to supply enough votes to get it out of the Senate. It needs a two-thirds majority to reach the governor's desk.

Schwarzenegger and legislative leaders from both parties warned that California faces insolvency unless the Legislature enacts a midyear budget fix.

"I don't know what it takes for people to believe this really is a crisis," said Senate Budget Committee chair Denise Ducheny, a Democrat. "Maybe with a little sleep folks will appreciate the fact the governor and the leaders and many of us believe we have a budget."