Legislation to extend California's maximum $10,000 new-home buyer tax credit to thousands more buyers has stalled, failing to pass during the Legislature's weekend rush to adjournment.

Assembly Bill 765, a priority for home builders in the capital region and statewide, was among many pushed aside by bigger final-hour issues, backers said Monday.

"With the prison reform package still being negotiated and water discussions going on, things like that kind of got pushed to the back," said Willie Armstrong, chief aide to Assemblywoman Anna Caballero, D-Salinas, the bill's author. "It's unfortunate."

The legislation's status was unclear Monday. Armstrong said it could receive a vote during special sessions being considered later this year.

But that provides little certainty to first-time new-home buyers still hoping to combine a maximum $10,000 state tax credit with a federal $8,000 homebuyer tax credit.

The state tax credit hasn't been available since July, and the federal tax credit expires Nov. 30.

"We need it," said Dennis Rogers, an executive with the Roseville-based North State Building Industry Association. "We've been pushing on people that a state credit will work. It has worked."

The program, which proved more popular than expected, moved thousands of buyers off the fence, state home builders contend. But critics call it a taxpayer subsidy to buyers and question its expansion while the state has a glut of unsold existing homes.

Statewide, 10,659 Californians who bought new unoccupied homes between March 1 and July 2 this year will get credits up to $3,333 off their state taxes in each of the next three years. All new-home buyers after that July 2 cutoff date remain ineligible.

Roseville and Sacramento ranked among the top 10 cities for recipients.

The state Franchise Tax Board has mailed letters to recipients, notifying them of their exact credit amounts, said spokeswoman Brenda Voet. The average credit is expected to be about $7,000, leaving about $30 million of the original $100 million allocation unclaimed, according to the tax board.

That estimate prompted the building industry to press for an extension of the tax credit program to at least 4,300 more recipients.

The Caballero bill, which had easily passed the full Assembly and reached the Senate floor, would have enabled a fresh round of new-home buyers to apply for the credit almost immediately, if passed and signed by Gov. Arnold Schwarzenegger.

If passed during a special session and signed, the clock would begin running again, said the tax board. Buyers must apply within one week of closing escrow. "If they pass something, we're prepared to implement it just as we did before," Voet said Monday.

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