Bill Text: CA AB1399 | 2013-2014 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Income taxation: insurance taxation: credits: California

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Vetoed) 2014-09-29 - Vetoed by Governor. [AB1399 Detail]

Download: California-2013-AB1399-Amended.html

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BILL NUMBER: AB 1399	AMENDED
	BILL TEXT

	AMENDED IN SENATE  AUGUST 4, 2014
	AMENDED IN SENATE  JULY 3, 2014
	AMENDED IN SENATE  JUNE 18, 2014
	AMENDED IN SENATE  JUNE 9, 2014
	AMENDED IN SENATE  SEPTEMBER 6, 2013
	AMENDED IN SENATE  AUGUST 22, 2013

INTRODUCED BY   Assembly Members Medina and V. Manuel Pérez

                        MARCH 11, 2013

   An act to add Section 26011.9 to the Public Resources Code,
  and to amend Section 18410.2 of,  and to add and
repeal Sections 12283, 17053.9, and 23622.9  of, 
 of  the Revenue and Taxation Code, relating to taxation,
and making an appropriation therefor, to take effect immediately, tax
levy.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1399, as amended, Medina. Income taxation: insurance taxation:
credits: California New Markets Tax Credit.
   The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws. Existing law
also creates the California Competes Tax Credit Committee, which has
specified duties in regard to tax credits for economic development.
   Existing law imposes an annual tax on the gross premiums of an
insurer, as defined, doing business in this state at specified rates.

   This bill would allow a credit under the Personal Income Tax Law
and the Corporation Tax Law, and a credit against the tax imposed on
an insurer, in modified conformity with a federal New Markets Tax
Credit, for taxable years beginning on or after January 1, 2015, and
before January 1, 2027, in a specified amount for investments in
low-income communities. The bill would limit the total annual amount
of credit allowed pursuant to these provisions to an amount equal to
any portion not granted under a specified sales and use tax
exclusion, not to exceed $40,000,000 per calendar year, and would
limit the allocation of the credit to a cumulative total of no more
than $200,000,000, as provided. This bill would impose specified
duties on the California Competes Tax Credit Committee with regard to
the application for, and allocation of, the credit. The bill would
require the committee to establish and impose reasonable fees upon
entities that apply for the allocation of the credit and use the
revenue to defray the cost of administering the program, as
specified, thereby making an appropriation.
   This bill would take effect immediately as a tax levy.
   Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares the following:
   (a) While many areas of California have recovered from the
economic and community development impacts of the 2006 Financial
Crisis and the 2010 global recession, Californians in a number of
communities and neighborhoods are still experiencing their lingering
effects. In some cases this has resulted in small and medium
businesses in low-income areas lacking sufficient access to capital
and technical assistance. Given that the state has many needs and
limited resources, moneys from the private sector are necessary to
fill this capital and investment gap.
   (b) Initially enacted in 2000, the federal government established
the New Markets Tax Credit (NMTC) Program, which uses a market-based
approach for expanding capital and technical assistance to businesses
in lower income communities. The federal program is jointly
administered by the Community Development Financial Institutions Fund
(CDFI Fund) and the Internal Revenue Service. The NMTC Program
allocates federal tax incentives to community development entities
(CDE), which they then use to attract private investors who
contribute funds that can be used to finance and invest in businesses
and develop real estate in low-income communities. Through 
May 2013   the 2013-14 funding round  , the CDFI
Fund had awarded approximately  $36,500,000,000 
 $40,000,000,000  in NMTC in  749   836
 awards including $3,000,000,000 in American Recovery and
Investment Act of 2009 awards and $1,000,000,000 of special
allocation authority to be used for the recovery and redevelopment of
the Gulf Opportunity Zone.
   (c) The federal NMTC totals 39 percent of the original investment
amount in the CDE and is claimed over a period of seven years (5
percent for each of the first three years, and 6 percent for each of
the remaining four years). The investment by the taxpayer in the CDE
redeemed before the end of the seven-year period will be recaptured.
   (d) Fourteen states in the United States have adopted state
programs using the NMTC model including Alabama, Florida, Illinois,
Nevada, and Oregon. While some of the programs substantially mirror
the federal program, others vary in both the percentage of the credit
and some of the policies that form the foundation of the credit. One
of the reasons cited for establishing state-level programs is to
make their state more attractive to CDEs, which results in increasing
the amount of federal NMTCs being utilized in their state. Further,
several studies, including a January 1, 2011, case study by Pacific
Community Ventures, showed that for every dollar of forgone tax
revenue, the federal NMTC leverages $12 to $14 of private investment.

  SEC. 2.  Section 26011.9 is added to the Public Resources Code, to
read:
   26011.9.  The authority shall make a determination of the amount
of the one hundred million dollars ($100,000,000) in exclusions not
granted in the assigned calendar year pursuant to Section 26011.8. An
amount equal to that amount shall be granted in the subsequent
calendar year through the California New Markets Tax Credit Program
pursuant to Sections 12283, 17053.9, and 23622.9 of the Revenue and
Taxation Code. This section shall not prevent a taxpayer granted an
exclusion pursuant to Section 6010.8 of the Revenue and Taxation Code
from applying for, and receiving a refund for, taxes paid under Part
1 (commencing with Section 6001) of Division 2 of the Revenue and
Taxation Code.
  SEC. 3.  Section 12283 is added to the Revenue and Taxation Code,
to read:
   12283.  (a) There is hereby created the California New Markets Tax
Credit Program as provided in this section, Section 17053.9, and
Section 23622.9. The purpose of this program is to stimulate private
sector investment in lower income communities by providing a tax
incentive to  qualified  community and economic
development entities that can be leveraged by the entity to attract
private sector investment that in turn will be deployed by providing
financing and technical assistance to small- and medium-size
businesses and the development of commercial, industrial, and
community development projects, including, but not limited to,
facilities for nonprofit service organizations, light manufacturing,
and mixed-use and transit-oriented development. The California
Competes Tax Credit Committee shall administer this program as
provided in this section, Section 17053.9, and Section 23622.9.
   (b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, 2027, there shall be allowed as a credit
against the tax described in Sections 12201, 12204, 12206, and 12209,
an amount determined in accordance with Section 45D of the Internal
Revenue Code, as amended by Public Law 111-5, Public Law 111-312, and
Public Law 112-240, as modified as set forth in this section.
   (2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment, or has been allocated a credit pursuant
to paragraph (3), on the credit allowance date and each of the six
following anniversary dates of that date.
   (3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed or allocated 
to a partnership, limited liability company, or "S" corporation
  through a pass-thru entity  may be allocated to
the  partners, members, managers,   partners
 or shareholders of such entity for their use in accordance with
the provisions of any agreement among such  partners,
members, managers,   partners  or shareholders.
Such allocations shall not be considered a sale for the purposes of
this section. 
   (A) The credit shall be allocated to the partners of a partnership
in accordance with the partnership agreement, regardless of how the
federal New Markets Tax Credit is allocated to the partners, or
whether the allocation of the credit under the terms of the agreement
has substantial economic effect, within the meaning of Section 704
(b) of the Internal Revenue Code.  
   (B) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner's partnership interest made
prior to the expiration of the recapture period set forth in Section
45D(g)(1) of the Internal Revenue Code shall not be allowed in the
taxable year in which the sale or other disposition occurs, but shall
instead be deferred until and treated as if it occurred in the first
taxable year immediately following the taxable year in which that
recapture period expires.  
   (C) Credits awarded to an "S" corporation shall be allocated among
the shareholders of the "S" corporation pro rata in accordance with
their respective pro rata shares, determined in accordance with
Subchapter S of Chapter 1 of Subtitle A of the Internal Revenue Code
and the regulations promulgated thereunder. 
   (c) Section 45D of the Internal Revenue Code is modified as
follows:
   (1) (A) The references to "the Secretary" in Section 45D of the
Internal Revenue Code  , other than in Sections 45D(c)(1)(C) and
45D(d)(1)(C),  are modified to read "the  committee."
  committee." 
   (B) For purposes of this section, "committee" means the California
Competes Tax Credit Committee established under Section 18410.2.
   (2) Section 45D(a)(2) of the Internal Revenue Code, relating to
applicable percentage, is modified by substituting for "(A) 5 percent
with respect to the first 3 credit allowance dates, and (B) 6
percent with respect to the remainder of the credit allowance dates"
with the following:
   (A) Zero percent with respect to the first two credit allowance
dates.
   (B) Seven percent with respect to the third credit allowance date.

   (C) Eight percent with respect to the remainder of the credit
allowance dates.
   (3) Section 45D(b)(3) of the Internal Revenue Code, relating to
safe harbor for determining use of cash, is modified by substituting
"qualified low-income community investments in California" for
"qualified low-income community investments."
   (4)  (A) Section 45D(c)(1) of the Internal Revenue  Code,
relating to qualified community development entities,  
Code  is modified to additionally include:
   (i) A subsidiary community development entity of any such
qualified community development entity.
   (ii) A nonprofit organization, pursuant to Section 23701,
certified by the committee as having a primary mission of serving or
providing investment capital in low-income communities and the entity
maintains accountability to residents of low-income communities
through their representation on any governing board of the entity or
on an advisory board of the entity. The committee shall establish
guidelines for certifying nonprofit organizations pursuant to this
subparagraph. The committee may include reasonable conditions on the
certification to effectuate the intent of this section and may
suspend or revoke a certification, after affording the nonprofit
organization notice and the opportunity to be  heard,
  heard and appeal,  if the committee finds that
the nonprofit organization no longer meets the requirements for
certification. Such nonprofit organization is not subject to the
requirement of subparagraph (B).
   (B) Section 45D(c)(1) of the Internal Revenue  Code,
relating to a qualified community development entity,  
Code  is modified to only include a qualified community
development entity that has entered into an allocation agreement with
the Community Development Financial Institutions Fund of the United
States Treasury Department, with respect to credits authorized by
Section 45D of the Internal Revenue Code, that includes California
within the service area and is dated on or after January 1, 2012.
   (5)  Section 45D(d)(1)(A) of the Internal Revenue  Code,
relating to qualified low-income community investments, 
 Code  is modified to only include any capital or equity
investment in, or loan to, a qualified active low-income community
business.
   (6) The term "qualified active low-income community business," as
defined in Section 45D(d)(2) of the Internal Revenue Code, is
modified as follows:
   (A) Section 45D(d)(2)(A)(i) of the Internal Revenue  Code,
relating to qualified active low-income community businesses,
  Code  is modified by substituting "any low-income
community in California" for "any low-income community."
   (B) Section 45D(d)(2)(A)(ii) of the Internal Revenue 
Code, relating to qualified active low-income community businesses,
  Code  is modified as follows:
   (i) Substituting "any low-income community in California" for "any
low-income community."
   (ii) In determining whether the qualified active low-income
community business uses a substantial portion of its tangible
personal property within any low-income community, the term
"substantial portion" shall mean "at least 40 percent" as calculated
by the average value of the tangible property owned or leased and
used within a California low-income community by the entity divided
by the average value of the total tangible property owned or leased
and used by the entity in California during the taxable year. The
value assigned to the leased property by the entity must be
reasonable.
   (iii) Adding the provision that if the business meets the
requirements of a qualified low-income community business at the time
the investment is made, the business shall  continue to
satisfy   be treated as satisfying  the
requirements of Section 45D(d)(2)(A)(ii) for the duration of the
investment. 
   (C) An entity complies with Section 45D(d)(2)(A)(i) of the
Internal Revenue Code if, as calculated in subparagraph (B), it uses
50 percent of its tangible property, whether owned or leased, within
any low-income community for any taxable year.  
   (C) 
    (D)  Section 45D(d)(2)(A)(iii) of the Internal Revenue
 Code, relating to qualified active low-income community
business, a substantial portion of the services of which are
performed in a low-income community,   Code  is
modified to allow the services of employees of a service-based
qualified business to be performed outside the low-income community.
A service-based qualified business is a business that primarily earns
revenue through providing intangible products and services. 

   (D) An entity complies with Section 45D(d)(2)(A)(i) of the
Internal Revenue Code, relating to qualified active low-income
community business, if, as calculated in subparagraph (B), it uses 50
percent of its tangible property, whether owned or leased, within
any low-income community for any taxable year. 
   (E) (i) A qualified active low-income community business shall
exclude any business that derives, or projects to derive, 15 percent
or more of its annual revenue from the rental or sale of real estate.
This exclusion does not apply to a business that is controlled by,
or under common control with, another business if the second
business: (I) does not derive or project to derive 15 percent or more
of its annual revenue from the rental or sale of real estate; and
(II) is the primary tenant of the real estate leased from the first
business.
   (ii) A qualified active low-income community business shall only
include a business that, at the time the initial investment is made,
has 250 or fewer employees and is located in a California low-income
community. The operating business shall meet all other conditions of
a qualified active low-income business, except as modified by this
paragraph and paragraph (7).
   (iii) A qualified active low-income community business shall only
include a business located in census tracts with a poverty rate
greater than 30 percent, or census tracts, if located within a
non-metropolitan area, with a median family income that does not
exceed 60 percent of median family income for the State of
California, or census tracts, if located within a metropolitan area,
with a median family income that does not exceed 60 percent of the
greater of the California median family income or the metropolitan
area median family income, or census tracts with unemployment rates
at least 1.5 times the national average.
   (7) Section 45D(e)(1) of the Internal Revenue  Code,
relating to determining the eligible low-income community, 
 Code  is modified to add the following: "When the United
States Census Bureau discontinues using the decennial census to
report median family income on a census tract basis, census block
group data shall be used based on the American Community Survey."
   (8) The following shall apply in lieu of the provisions of Section
 45D(f)(1)   45D(f)  of the Internal
Revenue Code, relating to national limitation on amount of
investments designated: "The aggregate amount of credit that may be
allocated in any calendar year pursuant to this section, Section
17053.9, and Section 23622.9 shall be an amount equal to any unused
portion of the one hundred million dollars ($100,000,000) in
exclusions, authorized pursuant to Section 6010.8, as determined by
the California Alternative Energy and Advanced Transportation
Financing Authority and reported to the committee, not to exceed
forty million dollars ($40,000,000). The committee shall limit the
allocation of credits permitted under this section, Section 17053.9,
and Section 23622.9 to a cumulative total of no more than two hundred
million dollars ($200,000,000). Any unused credits shall be returned
to the committee  on   by March 1 of the
year following allocation and the value of the unused credit shall be
available for allocation in the following calendar years in
accordance with the application process. Any recaptured credits shall
be returned to the committee by March 1 of the year following
recapture and the value of the recaptured credit shall be available
for allocation in the following calendar years in accordance with
subparagraph (B) of paragraph (9). Reallocation credits shall not
count against the forty million dollars ($40,000,000) annual limit or
the two hundred million dollars ($200,000,000) cumulative limit."
   (9) Section 45D(g)(3) of the Internal Revenue Code, relating to
recapture event, does not apply and is replaced with the following:
   (A) The committee shall  recapture,  
establish a process, in consultation with the Department of
Insurance, for the recapture of credits allowed under this section
 from the entity that claimed the credit on a  return,
the tax credit allowed under this section if any of the following:
  return. The recapture process shall be applied if any
of the following conditions set forth occur. 
   (i) Any amount of a federal tax credit available with respect to a
qualified equity investment that is eligible for a credit under this
section is recaptured under Section 45D of the Internal Revenue
Code.  The qualified community development entity shall send
notice to the committee within 30   calendar days of being
notified by the United States Treasury that any amount of a federal
tax credit available with respect to a qualified equity investment
that is eligible for a credit under this section is recaptured. The
committee shall send written acknowledgment within five calendar days
of receipt of the qualified community development entity's notice of
potential noncompliance.  In such case the  committee's
 recapture shall be proportionate to the federal recapture
with respect to such qualified equity investment.
   (ii) The qualified community development entity redeems or makes
principal repayment with respect to a qualified equity investment
prior to the seventh anniversary of the issuance of such qualified
equity investment.  The qualified community development entity s
  hall send notice to the committee within 30 calendar days
of redeeming or making principal repayments with respect to a
qualified equity investment prior to the seventh anniversary of the
issuance of such qualified equity investment. The committee shall
send written acknowledgment within five calendar days of receipt of
the qualified community development entity's notice of potential
noncompliance.  In such case the committee's recapture shall be
proportionate to the amount of the redemption or repayment with
respect to such qualified equity investment.
   (iii) The qualified community development entity fails to invest
an amount equal to at least 85 percent of the purchase price of the
qualified equity investment in qualified low-income community
investments in California within 12 months of the issuance of the
qualified equity investment and maintain at least 85 percent of such
level of investment in qualified low-income community investments in
California until the last credit allowance date for the qualified
equity investment. For purposes of this section, an investment shall
be considered held by a qualified community development entity even
if the investment has been sold or repaid if the qualified community
development entity reinvests an amount equal to the capital returned
to, or recovered by, the qualified community development entity from
the original investment, exclusive of any profits realized, in
another qualified low-income community investment within 12 months of
the receipt of such capital.  The qualified community
development entity shall send notice to the committee within 30
calendar days of the 12-month deadline for the reinvestment if the
entity fails to meet any of the reinvestment requirements. The
committee shall send written acknowledgment within five calendar
  days of receipt of the qualified community development
entity's notice of pote   ntial noncompliance. 
Periodic amounts received as repayment of principal pursuant to
regularly scheduled amortization payments on a loan that is a
qualified low-income community investment shall be treated as
continuously invested in a qualified low-income community investment
if the amounts are reinvested in one or more qualified low-income
community investments by the end of the following calendar year. A
qualified community development entity shall not be required to
reinvest capital returned from qualified low-income community
investments after the sixth anniversary of the issuance of the
qualified equity investment, and the qualified low-income community
investment shall be considered held by the qualified community
development entity through the seventh anniversary of the qualified
equity investment's issuance.
   (B) Recaptured tax credits and the related qualified equity
investment authority revert back to the committee and shall be
reissued in the following order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B) of
paragraph (5) of subdivision (d) by the allocation limitation of
forty million dollars ($40,000,000) in paragraph (8) of subdivision
(c).
   (ii) Thereafter, in accordance with the application process.
   (C)  (i)    Enforcement of each of the recapture
provisions shall be subject to a six-month cure period.  No
recapture   Recapture  shall  not  occur
until the qualified community development entity  shall have
been given   gives  notice of  potential 
noncompliance  to the committee  and  is  afforded
six months from the date of such notice to cure the noncompliance.
 The six-month cure period shall begin on the day the committee
sends written acknowledgment of the qualified community development
entity's notice of the potential noncompliance. The qualified
community development entity is responsible for addressing the
circumstances of the potential noncompliance and providing all
documentation to the committee necessary to demonstrate, to the
committee's satisfaction, that those conditions no   longer
exist.  
   (ii) Not more than 45 calendar days following the close of the
cure period, the committee shall make a final determination as to
whether the credit is to be recaptured. This determination shall be
based on the review of the notice, information submitted by the
qualified community development entity, and any other information the
committee deems relevant to this determination.  
   (iii) The committee shall post, and update monthly, a tally of
returned credits, pursuant to paragraph (8), and recaptured credits
pursuant to this paragraph. Within 30 calendar days of making the
final determination that the credit is to be recaptured, the
committee shall notify the Department of Insurance of the
determination including, but not limited to, the tax identification
number of the taxpayer.  
   (10) Section 45D(h) of the Internal Revenue Code, relating to
basis reduction, shall not apply.  
   (10) 
    (11)  Section 45D(i) of the Internal Revenue Code,
relating to regulations, shall not apply. 
   (11) Section 45D(h) of the Internal Revenue Code, relating to
basis, shall not apply. 
   (12)  If a qualified community development entity makes a capital
or equity investment or a loan with respect to a qualified low-income
building under the state Low-Income  Housing  Tax Credit
Program, the investment or loan is not a qualified low-income
community investment under this section.
   (d) (1) The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section  and meet
the requirements of Section 45D of the Internal Revenue Code, as
modified by this section  . The guidelines shall not disqualify
a low-income community investment for the single reason that public
or private incentives, loans, equity investments, technical
assistance, or other forms of support have been or continue to be
provided. The adoption of the guidelines shall not be subject to the
rulemaking provisions of the Administrative Procedure Act of Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code.
   (2) The committee shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
and use the revenue to defray the cost of administering the program.
The committee shall establish the fees in a manner that ensures that
(A) the total amount collected equals the amount reasonably necessary
to defray the committee's costs in performing its administrative
duties under this section, and (B) the amount paid by each entity
reasonably corresponds with the value of the services provided to the
entity.
   (3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:
   (A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.
   (B) Sets minimum organizational capacity standards that applicants
must meet in order to receive an allocation of credits including,
but not limited to, its business strategy,  targeted 
community outcomes, capitalization strategy, and management capacity.

   (4) (A) The committee shall begin accepting applications on 
or before  March 15, 2015, and shall award credits at least two
times a year at dates set annually by the committee through 2019, to
the extent that allocations are available pursuant to Section 26011.9
of the Public Resources Code. To the extent reasonable and
consistent in carrying out the purposes of this section, the
committee shall consider how the timing of the state allocation
rounds correspond with the allocation schedule of the federal New
Markets Tax Credit Program.
   (B) Within 20 calendar days after receipt of an application the
committee shall determine whether the application is complete or
whether additional information is necessary in order to fully
evaluate the application. If additional information is requested and
the qualified community development entity provides that information
within five business days, the application shall be considered
completed as of the original date of receipt. If the qualified
community development entity fails
               to provide the information within the
five-business-day period, the application shall be denied and must be
resubmitted in full with a new receipt date.
   (C) Within 20 calendar days after receipt of an application
determined to be complete by the committee, the committee shall grant
or deny the application in full or in part. If the committee denies
any part of the application, it shall inform the qualified community
development entity of the grounds for the denial.
   (5) (A) The committee shall award tax credits to qualified
community development entities described in subparagraph (B) of
paragraph (4) of subdivision (c) in the order applications are
received by the committee  , subject to clause (i) or on a
competitive basis, pursuant to clause (ii)  . 
Applications received on the same day shall be deemed to have been
received simultaneously. 
   (i)  (I)    In 2015, the committee shall only
award tax credits to a qualified community development 
entity, exclusive of an entity described in clause (ii) of
subparagraph (A) of paragraph (4) of subdivision (c)  
entity in the order applications are received by the committee .
In the 2016 to 2019 award cycles, inclusive, at least 60 percent of
the credit allocation shall be awarded  to a qualified
community development entity, exclusive of an entity described in
clause (ii) of subparagraph (A) of paragraph (4) of subdivision (c)
  in the order applications are received by the
committee to a qualified community development entity . 
Applications received on the same day shall be deemed to have been
received simultaneously.  At the committee's discretion, a
higher percentage of credits may be  targeted to applicants
exclusive of an   awarded in the order that they are
received. Qualified community development entities that receive tax
credit awards pursuant to this clause shall commit to making
investments in a manner that engages community-based partnerships and
local grassroots stakeholders. 
    (II)     An  entity described in
clause (ii) of subparagraph (A) of paragraph (4) of subdivision (c)
 shall not receive a tax credit award pursuant to this clause
 .
   (ii) The committee shall award up to 40 percent of the credit
allocation in the 2016 to 2019, inclusive, award cycles, to a
qualified community development entity, as described in clause (ii)
of subparagraph (A) of paragraph (4) of subdivision (c) and
subparagraph (B) of paragraph (4) of subdivision (c), on a
competitive basis using blind scoring and a review committee that is
comprised of at least a majority of community development finance
practitioners  and at least one-third of the members having
demonstrated experience in assessing organizational business
strategy, community outcomes, capitalization strategy, and management
capacity  . A member of the review committee shall not have a
financial interest, which includes, but is not limited to, asking,
consenting, or agreeing to receive any commission, emolument,
gratuity, money, property, or thing of value for his or her own use,
benefit, or personal advantage for procuring or endeavoring to
procure for any person, partnership, joint venture, association, or
corporation any tax credit or other assistance from any applicant.
 Priority 
    (iii)     In awarding credits on a
competitive basis, priority  shall  be  given to
applications that can demonstrate that the credits will allow the
entity to undertake qualified low-income community investments in a
rural, suburban, or urban area that has been historically underserved
 and result in the greatest benefit to the hardest to serve
lower income populations and most undercapitalized,  or in newly
established businesses  , or in activities that support
neighborhood revitalization strategies driven by local grassroots
stakeholders in multiple low-income communities across one or more
regions or the state for the purpose of scaling economic development
activities that compliment regional industry clusters  that
 results   result  in the greatest benefit
to the largest number of lower income individuals.  All
competitive applications shall demonstrate strong linkages with
communities and neighborhoods in California low-income neighborhoods.

   (B)  For applications described in clause (i) of subparagraph (A),
in the event tax credit requests exceed the applicable annual
allocation limitation of up to forty million dollars ($40,000,000) in
paragraph (8) of subdivision (c), the committee shall certify,
consistent with remaining qualified equity investment capacity,
qualified equity investments of applicants in proportionate
percentages based upon the ratio of the amount of qualified equity
investments requested in such applications to the total amount of
qualified equity investments requested in all such applications
received on the same day.
   (C) If a pending request cannot be fully certified due to this
limit, the committee shall certify the portion that may be certified
unless the qualified community development entity elects to withdraw
its request rather than receive partial certification.
   (D) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity of
the controlling entity, provided that the applicant and the
transferee notify the committee  within 30 calendar days  of
such transfer and include the information required in the
application with respect to such transferee with such notice.
   (E) Within 60 calendar days of the committee sending notice of
certification, the qualified community development entity or any
transferee, under subparagraph (D), shall issue the qualified equity
investment and receive cash in the amount of the certified amount.
The qualified community development entity or transferee, under
subparagraph (D), must provide the committee with evidence of the
receipt of the cash investment within 65  calendar  days of
the applicant receiving notice of certification. If the qualified
community development entity or any transferee, under subparagraph
(D), does not receive the cash investment and issue the qualified
equity investment within 60 calendar days of the committee sending
the certification notice, the certification shall lapse and the
entity may not issue the qualified equity investment without
reapplying to the committee for certification. Lapsed certifications
revert back to the committee and shall be reissued in the following
order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B) of
paragraph (5) under the annual allocation limitation of forty million
dollars ($40,000,000) in paragraph (8) of subdivision (c).
   (ii) Thereafter, in accordance with the application process.
   (F) A qualified community development entity that issues qualified
equity investments must notify the committee of the names of the
entities that are eligible to utilize tax credits under paragraph (3)
of subdivision (b) pursuant to an allocation of tax credits or
change in allocation of tax credits or due to a transfer of a
qualified equity investment.
   (6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to the committee
within the first five business days after the first anniversary of
the initial credit allowance date that provides documentation as to
the investment of at least 85 percent of the purchase price in
qualified low-income community investments in qualified active
low-income community businesses located in California. Such report
shall include all of the following:
   (i) A bank statement of such qualified community development
entity evidencing each qualified low-income community investment.
   (ii) Evidence that such business was a qualified active low-income
community business at the time of such qualified low-income
community investment.
   (iii) Any other information required by the committee.
   (B) Thereafter, the qualified community development entity shall
submit an annual report to the committee within 60  calendar
 days of the beginning of the calendar year during the seven
years following submittal of the report, pursuant to subparagraph
(A). No annual report shall be due prior to the first anniversary of
the initial credit allowance date. The report shall include, but is
not limited to, the following:
   (i) The impact the credit had on the low-income community.
   (ii) The amount of moneys used for qualified low-income
investments in qualified low-income community businesses.
   (iii) The number of employment positions created and retained as a
result of qualified low-income community investments and the average
annual salary of such positions.
   (iv) The number of operating businesses assisted as a result of
qualified low-income community investments, by industry and number of
employees.
   (v) Number of owner-occupied real estate projects described in
subparagraph (E) of paragraph (6) of subdivision (c).
   (vi) Location of the qualified low-income community businesses.
   (e) In the case where the credit allowed by this section exceeds
the tax described in Sections 12201, 12204, 12206, and 12209, the
excess may be carried over to reduce that tax in the following year,
and the six succeeding years if necessary, until the credit is
exhausted.
   (f) The committee shall annually report on its Internet Web site
the information provided by low-income community development entities
and on the geographic distribution of the credits.
   (g) (1) The  Franchise Tax Board   Insurance
Commissioner  may prescribe any rules or regulations that may be
necessary or appropriate to implement this section. The 
Franchise Tax Board   Insurance Commissioner  shall
have access to any documentation held by the committee relative to
the application and reporting of a qualified community development
entity.
   (2) A qualifying community development entity shall provide the
committee with the name, address, and tax identification number of
each investor and entity for which a credit was allocated by the
qualifying community development entity, pursuant to paragraph (3) of
subdivision (b). The committee shall provide this information to the
Franchise Tax Board in a manner determined by the Franchise Tax
Board.
   (h) This section shall remain in effect only until December 1,
2028, and as of that date is repealed.
  SEC. 4.  Section 17053.9 is added to the Revenue and Taxation Code,
to read:
   17053.9.  (a) There is hereby created the California New Markets
Tax Credit Program as provided in this section, Section 12283, and
Section 23622.9. The purpose of this program is to stimulate private
sector investment in lower income communities by providing a tax
incentive to  qualified  community and economic
development entities that can be leveraged by the entity to attract
private sector investment that in turn will be deployed by providing
financing and technical assistance to small- and medium-size
businesses and the development of commercial, industrial, and
community development projects, including, but not limited to,
facilities for nonprofit service organizations, light manufacturing,
and mixed-use and transit-oriented development. The California
Competes Tax Credit Committee shall administer this program as
provided in this section, Section 12283, and Section 23622.9.
   (b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, 2027, there shall be allowed as a credit
against the "net tax," as defined in Section 17039, an amount
determined in accordance with Section 45D of the Internal Revenue
Code, as amended by Public Law 111-5, Public Law 111-312, and Public
Law 112-240, as modified as set forth in this section.
   (2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment, or has been allocated a credit pursuant
to paragraph (3), on the credit allowance date and each of the six
following anniversary dates of that date.
   (3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed or allocated 
to a partnership, limited liability company, or "S" corporation
  through a pass-thru entity  may be allocated to
the partners  , members, managers,  or shareholders
of such entity for their use in accordance with the provisions of any
agreement among such partners  , members, managers,
 or shareholders. Such allocations shall not be considered a
sale for the purposes of this section. 
   (A) The credit shall be allocated to the partners of a partnership
in accordance with the partnership agreement, regardless of how the
federal New Markets Tax Credit is allocated to the partners, or
whether the allocation of the credit under the terms of the agreement
has substantial economic effect, within the meaning of Section 704
(b) of the Internal Revenue Code.  
   (B) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner's partnership interest made
prior to the expiration of the recapture period set forth in Section
45D(g)(1) of the Internal Revenue Code shall not be allowed in the
taxable year in which the sale or other disposition occurs, but shall
instead be deferred until and treated as if it occurred in the first
taxable year immediately following the taxable year in which that
recapture period expires.  
   (C) Credits awarded to an "S" corporation shall be allocated among
the shareholders of the "S" corporation pro rata in accordance with
their respective pro rata shares, determined in accordance with
Subchapter S of Chapter 1 of Subtitle A of the Internal Revenue Code
and the regulations promulgated thereunder. 
   (c) Section 45D of the Internal Revenue Code is modified as
follows:
   (1) (A) The references to "the Secretary" in Section 45D of the
Internal Revenue Code  , other than in Sections 45D(c)(1)(C) and
45D(d)(1)(C),  are modified to read "the  committee."
  committee." 
   (B) For purposes of this section, "committee" means the California
Competes Tax Credit Committee established under Section 18410.2.
   (2) Section 45D(a)(2) of the Internal Revenue Code, relating to
applicable percentage, is modified by substituting for "(A) 5 percent
with respect to the first 3 credit allowance dates, and (B) 6
percent with respect to the remainder of the credit allowance dates"
with the following:
   (A) Zero percent with respect to the first two credit allowance
dates.
   (B) Seven percent with respect to the third credit allowance date.

   (C) Eight percent with respect to the remainder of the credit
allowance dates.
   (3) Section 45D(b)(3) of the Internal Revenue Code, relating to
safe harbor for determining use of cash, is modified by substituting
"qualified low-income community investments in California" for
"qualified low-income community investments."
   (4) (A) Section 45D(c)(1) of the Internal Revenue  Code,
relating to qualified community development entities,  
Code  is modified to additionally include:
   (i) A subsidiary community development entity of any such
qualified community development entity.
   (ii) A nonprofit organization, pursuant to Section 23701,
certified by the committee as having a primary mission of serving or
providing investment capital in low-income communities and the entity
maintains accountability to residents of low-income communities
through their representation on any governing board of the entity or
on an advisory board of the entity. The committee shall establish
guidelines for certifying nonprofit organizations pursuant to this
subparagraph. The committee may include reasonable conditions on the
certification to effectuate the intent of this section and may
suspend or revoke a certification, after affording the nonprofit
organization notice and the opportunity to be  heard,
  heard and appeal,  if the committee finds that
the nonprofit organization no longer meets the requirements for
certification. Such nonprofit organization is not subject to the
requirement of subparagraph (B).
   (B) Section 45D(c)(1) of the Internal Revenue  Code,
relating to a qualified community development entity,  
Code  is modified to only include a qualified community
development entity that has entered into an allocation agreement with
the Community Development Financial Institutions Fund of the United
States Treasury Department, with respect to credits authorized by
Section 45D of the Internal Revenue Code, that includes California
within the service area and is dated on or after January 1, 2012.
   (5) Section 45D(d)(1)(A) of the Internal Revenue  Code,
relating to qualified low-income community investments, 
 Code  is modified to only include any capital or equity
investment in, or loan to, a qualified active low-income community
business.
   (6) The term "qualified active low-income community business," as
defined in Section 45D(d)(2) of the Internal Revenue Code  ,
 is modified as follows:
   (A) Section 45D(d)(2)(A)(i) of the Internal Revenue  Code,
relating to qualified active low-income community businesses,
  Code  is modified by substituting "any low-income
community in California" for "any low-income community."
   (B) Section 45D(d)(2)(A)(ii) of the Internal Revenue 
Code, relating to qualified active low-income community businesses,
  Code  is modified as follows:
   (i) Substituting "any low-income community in California" for "any
low-income community."
   (ii) In determining whether the qualified active low-income
community business uses a substantial portion of its tangible
personal property within any low-income community, the term
"substantial portion" shall mean "at least 40 percent" as calculated
by the average value of the tangible property owned or leased and
used within a California low-income community by the entity divided
by the average value of the total tangible property owned or leased
and used by the entity in California during the taxable year. The
value assigned to the leased property by the entity must be
reasonable.
   (iii) Adding the provision that if the business meets the
requirements of a qualified low-income community business at the time
the investment is made, the business shall  continue to
satisfy   be treated as satisfying  the
requirements of Section 45D(d)(2)(A)(ii) for the duration of the
investment. 
   (C) An entity complies with Section 45D(d)(2)(A)(i) of the
Internal Revenue Code if, as calculated in subparagraph (B), it uses
50 percent of its tangible property, whether owned or leased, within
any low-income community for any taxable year.  
   (C) 
    (D)  Section 45D(d)(2)(A)(iii) of the Internal Revenue
 Code, relating to qualified active low-income community
business, a substantial portion of the services of which are
performed in a low-income community,   Code  is
modified to allow the services of employees of a service-based
qualified business to be performed outside the low-income community.
A service-based qualified business is a business that primarily earns
revenue through providing intangible products and services. 

   (D) An entity complies with Section 45D(d)(2)(A)(i) of the
Internal Revenue Code, relating to qualified active low-income
community business, if, as calculated in subparagraph (B), it uses 50
percent of its tangible property, whether owned or leased, within
any low-income community for any taxable year. 
   (E) (i) A qualified active low-income community business shall
exclude any business that derives, or projects to derive, 15 percent
or more of its annual revenue from the rental or sale of real estate.
This exclusion does not apply to a business that is controlled by,
or under common control with, another business if the second
business: (I) does not derive or project to derive 15 percent or more
of its annual revenue from the rental or sale of real estate; and
(II) is the primary tenant of the real estate leased from the first
business.
   (ii) A qualified active low-income community business shall only
include a business that, at the time the initial investment is made,
has 250 or fewer employees and is located in a California low-income
community. The operating business shall meet all other conditions of
a qualified active low-income business, except as modified by this
paragraph and paragraph (7).
   (iii) A qualified active low-income community business shall only
include a business located in census tracts with a poverty rate
greater than 30 percent, or census tracts, if located within a
non-metropolitan area, with a median family income that does not
exceed 60 percent of median family income for the State of
California, or census tracts, if located within a metropolitan area,
with a median family income that does not exceed 60 percent of the
greater of the California median family income or the metropolitan
area median family income, or census tracts with unemployment rates
at least 1.5 times the national average.
   (7) Section 45D(e)(1) of the Internal Revenue  Code,
relating to determining the eligible low-income community, 
 Code  is modified to add the following: "When the United
States Census Bureau discontinues using the decennial census to
report median family income on a census tract basis, census block
group data shall be used based on the American Community Survey."
   (8) The following shall apply in lieu of the provisions of Section
 45D(f)(1)   45D(f)  of the Internal
Revenue Code, relating to national limitation on amount of
investments designated: "The aggregate amount of credit that may be
allocated in any calendar year pursuant to this section, Section
12283, and Section 23622.9 shall be an amount equal to any unused
portion of the one hundred million dollars ($100,000,000) in
exclusions, authorized pursuant to Section 6010.8, as determined by
the California Alternative Energy and Advanced Transportation
Financing Authority and reported to the committee, not to exceed
forty million dollars ($40,000,000). The committee shall limit the
allocation of credits permitted under this section, Section 12283,
and Section 23622.9 to a cumulative total of no more than two hundred
million dollars ($200,000,000). Any unused credits shall be returned
to the committee  on   by  March 1 of the
year following allocation and the value of the unused credit shall be
available for allocation in the following calendar years in
accordance with the application process. Any recaptured credits shall
be returned to the committee by March 1 of the year following
recapture and the value of the recaptured credit shall be available
for allocation in the following calendar years in accordance with
clause (ii) of subparagraph (B) of paragraph (9). Reallocation
credits shall not count against the forty million dollars
($40,000,000) annual limit or the two hundred million dollars
($200,000,000) cumulative limit."
   (9) (A) Section 45D(g)(2)(B) of the Internal Revenue Code,
relating to credit recapture amount, is modified to substitute
"Section 19101 of this code" for "section 6621".
   (B) Section 45D(g)(3) of the Internal Revenue Code, relating to
recapture event, does not apply and is replaced with the following:
   (i) The committee shall  recapture,  
establish a process, in consultation with the Franchise Tax Board,
for the recapture of credits allowed under this section  from
the entity that claimed the credit on a  return, the tax
credit allowed under this section if any of the following: 
 return. The recapture process shall be applied if any of the
following conditions set forth occu   r. 
   (I)  Any amount of a federal tax credit available with respect to
a qualified equity investment that is eligible for a credit under
this section is recaptured under Section 45D of the Internal Revenue
Code.  The qualified community development entity shall send
notice to the committee within 30   calendar days of being
notified by the United States Treasury that any amount of a federal
tax credit available with respect to a qualified equity investment
that is eligible for a credit under this section is recaptured. The
committee shall send written acknowledgment within five calendar days
of receipt of the qualified community development entity's notice of
potential noncompliance.  In such case the  committee's
 recapture shall be proportionate to the federal recapture
with respect to such qualified equity investment.
   (II)  The qualified community development entity redeems or makes
principal repayment with respect to a qualified equity investment
prior to the seventh anniversary of the issuance of such qualified
equity investment. The qualified   community development
entity shall send notice to the committee within 30 calendar days of
redeeming or making principal repayments with respect to a qualified
equity investment prior to the seventh anniversary of the issuance
of such qualified equity investment. The committee shall send written
acknowledgment within five calendar days of receipt of the qualified
community development entity's notice of potential noncompliance.
 In such case the committee's recapture shall be proportionate
to the amount of the redemption or repayment with respect to such
qualified equity investment.
   (III)  The qualified community development entity fails to invest
an amount equal to at least 85 percent of the purchase price of the
qualified equity investment in qualified low-income community
investments in California within 12 months of the issuance of the
qualified equity investment and maintain at least 85 percent of such
level of investment in qualified low-income community investments in
California until the last credit allowance date for the qualified
equity investment. For purposes of this section, an investment shall
be considered held by a
  qualified community development entity even if the investment has
been sold or repaid if the qualified community development entity
reinvests an amount equal to the capital returned to, or recovered
by, the qualified community development entity from the original
investment, exclusive of any profits realized, in another qualified
low-income community investment within 12 months of the receipt of
such capital.  The qualified community development entity shall
send notice to the committee within 30 calendar days of the 12-month
deadline for the reinvestment if the entity fails to meet any of the
reinvestment requirements. The committee shall send written
acknowledgment within five calendar days of receipt of the  
qualified community development entity's notice of potential
noncompliance.  Periodic amounts received as repayment of
principal pursuant to regularly scheduled amortization payments on a
loan that is a qualified low-income community investment shall be
treated as continuously invested in a qualified low-income community
investment if the amounts are reinvested in one or more qualified
low-income community investments by the end of the following calendar
year. A qualified community development entity shall not be required
to reinvest capital returned from qualified low-income community
investments after the sixth anniversary of the issuance of the
qualified equity investment, and the qualified low-income community
investment shall be considered held by the qualified community
development entity through the seventh anniversary of the qualified
equity investment's issuance.
   (ii)  Recaptured tax credits and the related qualified equity
investment authority revert back to the committee and shall be
reissued in the following order:
   (I)  First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B) of
paragraph (5) of subdivision (d) by the allocation limitation of
forty million dollars ($40,000,000) in paragraph (8) of subdivision
(c).
   (II)  Thereafter, in accordance with the application process.
   (iii)  (I)    Enforcement of each of the
recapture provisions shall be subject to a six-month cure period.
 No recapture   Recapture  shall  not
 occur until the qualified community development entity 
shall have been given   gives  notice of 
potential  noncompliance  to the committee  and  is
 afforded six months from the date of such notice to cure the
noncompliance.  The six-month cure period shall begin on the day
the committee sends written acknowledgment of the qualified community
development entity's notice of the potential  
noncompliance. The qualified community development entity is
responsible for addressing the circumstances of the potential
noncompliance and providing all documentation to the committee
necessary to demonstrate, to the committee's satisfaction, that those
conditions no longer exist.  
   (II) Not more than 45 calendar days following the close of the
cure period, the committee shall make a final determination as to
whether the credit is to be recaptured. This determination shall be
based on the review of the notice, information submitted by the
qualified community development entity, and any other information the
committee deems relevant to this determination.  
   (III) The committee shall post, and update monthly, a tally of
returned credits, pursuant to paragraph (8), and recaptured credits
pursuant to this paragraph. Within 30 calendar days of making the
final determination that the credit is to be recaptured, the
committee shall notify the Department of Insurance of the
determination including, but not limited to, the tax identification
number of the taxpayer. 
   (10) Section 45D(i) of the Internal Revenue Code, relating to
regulations, shall not apply.
   (11) If a qualified community development entity makes a capital
or equity investment or a loan with respect to a qualified low-income
building under the state Low-Income  Housing  Tax Credit
Program, the investment or loan is not a qualified low-income
community investment under this section.
   (d) (1) The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section  and meet
the requirements of Section 45D of the Internal Revenue Code, as
modified by this section  . The guidelines shall not disqualify
a low-income community investment for the single reason that public
or private incentives, loans, equity investments, technical
assistance, or other forms of support have been or continue to be
provided. The adoption of the guidelines shall not be subject to the
rulemaking provisions of the Administrative Procedure Act of Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code.
   (2) The committee shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
and use the revenue to defray the cost of administering the program.
The committee shall establish the fees in a manner that ensures that
(A) the total amount collected equals the amount reasonably necessary
to defray the committee's costs in performing its administrative
duties under this section, and (B) the amount paid by each entity
reasonably corresponds with the value of the services provided to the
entity.
   (3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:
   (A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.
   (B) Sets minimum organizational capacity standards that applicants
must meet in order to receive an allocation of credits including,
but not limited to, its business strategy,  targeted 
community outcomes, capitalization strategy, and management capacity.

   (4) (A) The committee shall begin accepting applications on 
or before  March 15, 2015, and shall award credits at least two
times a year at dates set annually by the committee through 2019, to
the extent that allocations are available pursuant to Section 26011.9
of the Public Resources Code. To the extent reasonable and
consistent in carrying out the purposes of this section, the
committee shall consider how the timing of the state allocation
rounds correspond with the allocation schedule of the federal New
Markets Tax Credit Program.
   (B) Within 20 calendar days after receipt of an application the
committee shall determine whether the application is complete or
whether additional information is necessary in order to fully
evaluate the application. If additional information is requested and
the qualified community development entity provides that information
within five business days, the application shall be considered
completed as of the original date of receipt. If the qualified
community development entity fails to provide the information within
the five-business-day period, the application shall be denied and
must be resubmitted in full with a new receipt date.
   (C) Within 20 calendar days after receipt of an application
determined to be complete by the committee, the committee shall grant
or deny the application in full or in part. If the committee denies
any part of the application, it shall inform the qualified community
development entity of the grounds for the denial.
   (5) (A) The committee shall award tax credits to qualified
community development entities described in subparagraph (B) of
paragraph (4) of subdivision (c) in the order applications are
received by the committee  , subject to clause (i) or on a
competitive basis, pursuant to clause (ii)  . 
Applications received on the same day shall be deemed to have been
received simultaneously. 
   (i)  (I)    In 2015, the committee shall only
award tax credits to a qualified community development 
entity, exclusive of an entity described in clause (ii) of
subparagraph (A) of paragraph (4) of subdivision (c)  
entity in the order applications are received by the committee 
. In the 2016 to 2019 award cycles, inclusive, at least 60 percent
of the credit allocation shall be awarded  to a qualified
community development entity, exclusive of an entity described in
clause (ii) of subparagraph (A) of paragraph (4) of subdivision (c)
  in the order applications are received by the
committee to a qualified community development entity  . 
Applications received on the same day shall be deemed to have been
received simultaneously.  At the committee's discretion, a
higher percentage of credits may be  targeted to applicants
exclusive of an   awarded in the order that they are
received. Qualified community development entities that receive tax
credit awards pursuant to this clause shall commit to making
investments in a manner that engages community-based partnerships and
local grassroots stakeholders. 
    (II)     An  entity described in
clause (ii) of subparagraph (A) of paragraph (4) of subdivision (c)
 shall not receive a tax credit award pursuant to this clause
 .
   (ii) The committee shall award up to 40 percent of the credit
allocation in the 2016 to 2019, inclusive, award cycles, to a
qualified community development entity, as described in clause (ii)
of subparagraph (A) of paragraph (4) of subdivision (c) and
subparagraph (B) of paragraph (4) of subdivision (c), on a
competitive basis using blind scoring and a review committee that is
comprised of at least a majority of community development finance
practitioners  and at least one-third of the members having
demonstrated experience in assessing organizational business
strategy, community outcomes, capitalization strategy, and management
capacity  . A member of the review committee shall not have a
financial interest, which includes, but is not limited to, asking,
consenting, or agreeing to receive any commission, emolument,
gratuity, money, property, or thing of value for his or her own use,
benefit, or personal advantage for procuring or endeavoring to
procure for any person, partnership, joint venture, association, or
corporation any tax credit or other assistance from any applicant.
 Priority 
    (iii)     In awarding credits on a
competitive basis, priority  shall  be  given to
applications that can demonstrate that the credits will allow the
entity to undertake qualified low-income community investments in a
rural, suburban, or urban area that has been historically underserved
 and result in the greatest benefit to the hardest to serve
lower income populations and most undercapitalized,  or in newly
established businesses  , or in activities that support
neighborhood revitalization strategies driven by local grassroots
stakeholders in multiple low-income communities across one or more
regions or the state for the purpose of scaling economic development
activities that compliment regional industry clusters  that
 results   result  in the greatest benefit
to the largest number of lower income individuals.  All
competitive applications shall demonstrate strong linkages with
communities and neighborhoods in California low-income neighborhoods.

   (B)  For applications described in clause (i) of subparagraph (A),
in the event tax credit requests exceed the applicable annual
allocation limitation of up to forty million dollars ($40,000,000) in
paragraph (8) of subdivision (c), the committee shall certify,
consistent with remaining qualified equity investment capacity,
qualified equity investments of applicants in proportionate
percentages based upon the ratio of the amount of qualified equity
investments requested in such applications to the total amount of
qualified equity investments requested in all such applications
received on the same day.
   (C) If a pending request cannot be fully certified due to this
limit, the committee shall certify the portion that may be certified
unless the qualified community development entity elects to withdraw
its request rather than receive partial certification.
   (D) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity of
the controlling entity, provided that the applicant and the
transferee notify the committee  within 30 calendar days  of
such transfer and include the information required in the
application with respect to such transferee with such notice.
   (E) Within 60 calendar days of the committee sending notice of
certification, the qualified community development entity or any
transferee, under subparagraph (D), shall issue the qualified equity
investment and receive cash in the amount of the certified amount.
The qualified community development entity or transferee, under
subparagraph (D), must provide the committee with evidence of the
receipt of the cash investment within 65  calendar  days of
the applicant receiving notice of certification. If the qualified
community development entity or any transferee, under subparagraph
(D), does not receive the cash investment and issue the qualified
equity investment within 60 calendar days of the committee sending
the certification notice, the certification shall lapse and the
entity may not issue the qualified equity investment without
reapplying to the committee for certification. Lapsed certifications
revert back to the committee and shall be reissued in the following
order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B) of
paragraph (5) under the annual allocation limitation of forty million
dollars ($40,000,000) in paragraph (8) of subdivision (c).
   (ii) Thereafter, in accordance with the application process.
   (F) A qualified community development entity that issues qualified
equity investments must notify the committee of the names of the
entities that are eligible to utilize tax credits under paragraph (3)
of subdivision (b) pursuant to an allocation of tax credits or
change in allocation of tax credits or due to a transfer of a
qualified equity investment.
   (6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to the committee
within the first five business days after the first anniversary of
the initial credit allowance date that provides documentation as to
the investment of at least 85 percent of the purchase price in
qualified low-income community investments in qualified active
low-income community businesses located in California. Such report
shall include all of the following:
   (i) A bank statement of such qualified community development
entity evidencing each qualified low-income community investment.
   (ii) Evidence that such business was a qualified active low-income
community business at the time of such qualified low-income
community investment.
   (iii) Any other information required by the committee.
   (B) Thereafter, the qualified community development entity shall
submit an annual report to the committee within 60  calendar
 days of the beginning of the calendar year during the seven
years following submittal of the report, pursuant to subparagraph
(A). No annual report shall be due prior to the first anniversary of
the initial credit allowance date. The report shall include, but is
not limited to, the following:
   (i) The impact the credit had on the low-income community.
   (ii) The amount of moneys used for qualified low-income
investments in qualified low-income community businesses.
   (iii) The number of employment positions created and retained as a
result of qualified low-income community investments and the average
annual salary of such positions.
   (iv) The number of operating businesses assisted as a result of
qualified low-income community investments, by industry and number of
employees.
   (v) Number of owner-occupied real estate projects described in
subparagraph (E) of paragraph (6) of subdivision (c).
   (vi) Location of the qualified low-income community businesses.
   (e) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and the six succeeding years if necessary,
until the credit is exhausted.
   (f) The committee shall annually report on its Internet Web site
the information provided by low-income community development entities
and on the geographic distribution of the credits.
   (g) (1) The Franchise Tax Board may prescribe any rules or
regulations that may be necessary or appropriate to implement this
section. The Franchise Tax Board shall have access to any
documentation held by the committee relative to the application and
reporting of a qualified community development entity.
   (2) A qualifying community development entity shall provide the
committee with the name, address, and tax identification number of
each investor and entity for which a credit was allocated by the
qualifying community development entity, pursuant to paragraph (3) of
subdivision (b). The committee shall provide this information to the
Franchise Tax Board in a manner determined by the Franchise Tax
Board.
   (h) This section shall remain in effect only until December 1,
2028, and as of that date is repealed. 
  SEC. 5.    Section 18410.2 of the Revenue and
Taxation Code is amended to read:
   18410.2.  (a) The California Competes Tax Credit Committee is
hereby established. The committee shall consist of the Treasurer, the
Director of Finance, and the Director of the Governor's Office of
Business and Economic Development, who shall serve as chair of the
committee, or their designated representatives, and one appointee
each by the Speaker of the Assembly and the Senate Committee on
Rules. A Member of the Legislature shall not be appointed.
   (b) For purposes of Sections 12283, 17053.9, 17059.2, 23622.9, and
23689 the California Competes Tax Credit Committee shall do all of
the following:
   (1) Approve or reject any written agreement for a tax credit
allocation by resolution at a duly noticed public meeting held in
accordance with the Bagley-Keene Open Meeting Act (Article 9
(commencing with Section 11120) of Chapter 1 of Part 1 of Division 3
of Title 2 of the Government Code), but only after receipt of the
fully executed written agreement between the taxpayer and the
Governor's Office of Business and Economic Development.
   (2) Approve or reject any recommendation to recapture, in whole or
in part, a tax credit allocation by resolution at a duly noticed
public meeting held in accordance with the Bagley-Keene Open Meeting
Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1
of Division 3 of Title 2 of the Government Code), but only after
receipt of the recommendation from the Governor's Office of Business
and Economic Development pursuant to the terms of the fully executed
written agreement. 
   SEC. 6.   SEC. 5.   Section 23622.9 is
added to the Revenue and Taxation Code, to read:
   23622.9.  (a) There is hereby created the California New Markets
Tax Credit Program as provided in this section, Section 12283, and
Section 17053.9. The purpose of this program is to stimulate private
sector investment in lower income communities by providing a tax
incentive to  qualified  community and economic
development entities that can be leveraged by the entity to attract
private sector investment that in turn will be deployed by providing
financing and technical assistance to small- and medium-size
businesses and the development of commercial, industrial, and
community development projects, including, but not limited to,
facilities for nonprofit service organizations, light manufacturing,
and mixed-use and transit-oriented development. The California
Competes Tax Credit Committee shall administer this program as
provided in this section, Section 12283, and Section 17053.9.
   (b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, 2027, there shall be allowed as a credit
against the "tax," as defined in Section 23036, an amount determined
in accordance with Section 45D of the Internal Revenue Code, as
amended by Public Law 111-5, Public Law 111-312, and Public Law
112-240, as modified as set forth in this section.
   (2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment, or has been allocated a credit pursuant
to paragraph (3), on the credit allowance date and each of the six
following anniversary dates of that date.
   (3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed or allocated 
to a partnership, limited liability company, or "S" corporation
  through a pass-thru entity  may be allocated to
the  partners, members, managers,   partners
 or shareholders of such entity for their use in accordance with
the provisions of any agreement among such partners,
members, managers,   partners  or shareholders.
Such allocations shall not be considered a sale for the purposes of
this section. 
   (A) The credit shall be allocated to the partners of a partnership
in accordance with the partnership agreement, regardless of how the
federal New Markets Tax Credit is allocated to the partners, or
whether the allocation of the credit under the terms of the agreement
has substantial economic effect, within the meaning of Section 704
(b) of the Internal Revenue Code.  
   (B) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner's partnership interest made
prior to the expiration of the recapture period set forth in Section
45D(g)(1) of the Internal Revenue Code shall not be allowed in the
taxable year in which the sale or other disposition occurs, but shall
instead be deferred until and treated as if it occurred in the first
taxable year immediately following the taxable year in which that
recapture period expires.  
   (C) Credits awarded to an "S" corporation shall be allocated among
the shareholders of the "S" corporation pro rata in accordance with
their respective pro rata shares, determined in accordance with
Subchapter S of Chapter 1 of Subtitle A of the Internal Revenue Code
and the regulations promulgated thereunder. 
   (c) Section 45D of the Internal Revenue Code is modified as
follows:
   (1) (A) The references to "the Secretary" in Section 45D of the
Internal Revenue Code  , other than in Sections 45D(c)(1)(C) and
45D(d)(1)(C),  are modified to read "the  committee."
  committee." 
   (B) For purposes of this section, "committee" means the California
Competes Tax Credit Committee established under Section 18410.2.
   (2) Section 45D(a)(2) of the Internal Revenue Code, relating to
applicable percentage, is modified by substituting for "(A) 5 percent
with respect to the first 3 credit allowance dates, and (B) 6
percent with respect to the remainder of the credit allowance dates"
with the following:
   (A) Zero percent with respect to the first two credit allowance
dates.
   (B) Seven percent with respect to the third credit allowance date.

   (C) Eight percent with respect to the remainder of the credit
allowance dates.
   (3) Section 45D(b)(3) of the Internal Revenue Code, relating to
safe harbor for determining use of cash, is modified by substituting
"qualified low-income community investments in California" for
"qualified low-income community investments."
   (4) (A) Section 45D(c)(1) of the Internal Revenue  Code,
relating to qualified community development entities,  
Code  is modified to additionally include:
   (i) A subsidiary community development entity of any such
qualified community development entity.
   (ii) A nonprofit organization, pursuant to Section 23701,
certified by the committee as having a primary mission of serving or
providing investment capital in low-income communities and the entity
maintains accountability to residents of low-income communities
through their representation on any governing board of the entity or
on an advisory board of the entity. The committee shall establish
guidelines for certifying nonprofit organizations pursuant to this
subparagraph. The committee may include reasonable conditions on the
certification to effectuate the intent of this section and may
suspend or revoke a certification, after affording the nonprofit
organization notice and the opportunity to be  heard,
  heard and appeal,  if the committee finds that
the nonprofit organization no longer meets the requirements for
certification. Such nonprofit organization is not subject to the
requirement of subparagraph (B).
   (B) Section 45D(c)(1) of the Internal Revenue  Code,
relating to a qualified community development entity,  
Code  is modified to only include a qualified community
development entity that has entered into an allocation agreement with
the Community Development Financial Institutions Fund of the United
States Treasury Department, with respect to credits authorized by
Section 45D of the Internal Revenue Code, that includes California
within the service area and is dated on or after January 1, 2012.
   (5) Section 45D(d)(1)(A) of the Internal Revenue  Code,
relating to qualified low-income community investments, 
Code  is modified to only include any capital or equity
investment in, or loan to, a qualified active low-income community
business.
   (6) The term "qualified active low-income community business," as
defined in Section 45D(d)(2) of the Internal Revenue Code  ,
 is modified as follows:
   (A) Section 45D(d)(2)(A)(i) of the Internal Revenue  Code,
relating to qualified active low-income community businesses,
  Code  is
     modified by substituting "any low-income community in California"
for "any low-income community."
   (B) Section 45D(d)(2)(A)(ii) of the Internal Revenue 
Code, relating to qualified active low-income community businesses,
  Code is modified as follows:
   (i) Substituting "any low-income community in California" for "any
low-income community."
   (ii) In determining whether the qualified active low-income
community business uses a substantial portion of its tangible
personal property within any low-income community, the term
"substantial portion" shall mean "at least 40 percent" as calculated
by the average value of the tangible property owned or leased and
used within a California low-income community by the entity divided
by the average value of the total tangible property owned or leased
and used by the entity in California during the taxable year. The
value assigned to the leased property by the entity must be
reasonable.
   (iii) Adding the provision that if the business meets the
requirements of a qualified low-income community business at the time
the investment is made, the business shall  continue to
satisfy   be treated as satisfying  the
requirements of Section 45D(d)(2)(A)(ii) for the duration of the
investment. 
   (C) An entity complies with Section 45D(d)(2)(A)(i) of the
Internal Revenue Code if, as calculated in subparagraph (B), it uses
50 percent of its tangible property, whether owned or leased, within
any low-income community for any taxable year.  
   (C) 
    (D)  Section 45D(d)(2)(A)(iii) of the Internal Revenue
 Code, relating to qualified active low-income community
business, a substantial portion of the services of which are
performed in a low-income community,   Code  is
modified to allow the services of employees of a service-based
qualified business to be performed outside the low-income community.
A service-based qualified business is a business that primarily earns
revenue through providing intangible products and services. 

   (D) An entity complies with Section 45D(d)(2)(A)(i) of the
Internal Revenue Code, relating to qualified active low-income
community business, if, as calculated in subparagraph (B), it uses 50
percent of its tangible property, whether owned or leased, within
any low-income community for any taxable year. 
   (E) (i) A qualified active low-income community business shall
exclude any business that derives, or projects to derive, 15 percent
or more of its annual revenue from the rental or sale of real estate.
This exclusion does not apply to a business that is controlled by,
or under common control with, another business if the second
business: (I) does not derive or project to derive 15 percent or more
of its annual revenue from the rental or sale of real estate; and
(II) is the primary tenant of the real estate leased from the first
business.
   (ii) A qualified active low-income community business shall only
include a business that, at the time the initial investment is made,
has 250 or fewer employees and is located in a California low-income
community. The operating business shall meet all other conditions of
a qualified active low-income business, except as modified by this
paragraph and paragraph (7).
   (iii) A qualified active low-income community business shall only
include a business located in census tracts with a poverty rate
greater than 30 percent, or census tracts, if located within a
non-metropolitan area, with a median family income that does not
exceed 60 percent of median family income for the State of
California, or census tracts, if located within a metropolitan area,
with a median family income that does not exceed 60 percent of the
greater of the California median family income or the metropolitan
area median family income, or census tracts with unemployment rates
at least 1.5 times the national average.
   (7) Section 45D(e)(1) of the Internal Revenue  Code,
relating to determining the eligible low-income community 
 Code  is modified to add the following: "When the United
States Census Bureau discontinues using the decennial census to
report median family income on a census tract basis, census block
group data shall be used based on the American Community Survey."
   (8) The following shall apply in lieu of the provisions of Section
 45D(f)(1)   45D(f)  of the Internal
Revenue Code, relating to national limitation on amount of
investments designated: "The aggregate amount of credit that may be
allocated in any calendar year pursuant to this section, Section
12283, and Section 17053.9 shall be an amount equal to any unused
portion of the one hundred million dollars ($100,000,000) in
exclusions, authorized pursuant to Section 6010.8, as determined by
the California Alternative Energy and Advanced Transportation
Financing Authority and reported to the committee, not to exceed
forty million dollars ($40,000,000). The committee shall limit the
allocation of credits permitted under this section, Section 12283,
and Section 17053.9 to a cumulative total of no more than two hundred
million dollars ($200,000,000). Any unused credits shall be returned
to the committee  on   by  March 1 of the
year following allocation and the value of the unused credit shall be
available for allocation in the following calendar years in
accordance with the application process. Any recaptured credits shall
be returned to the committee by March 1 of the year following
recapture and the value of the recaptured credit shall be available
for allocation in the following calendar years in accordance with
clause (ii) of subparagraph (B) of paragraph (9). Reallocation
credits shall not count against the forty million dollars
($40,000,000) annual limit or the two hundred million dollars
($200,000,000) cumulative limit."
   (9) (A) Section 45D(g)(2)(B) of the Internal Revenue Code,
relating to credit recapture amount, is modified to substitute
"Section 19101 of this code" for "section 6621".
   (B) Section 45D(g)(3) of the Internal Revenue Code, relating to
recapture event, does not apply and is replaced with the following:
   (i) The committee shall  recapture,  
establish a process, in consultation with the Franchise Tax Board,
for the recapture of credits allowed under this section  from
the entity that claimed the credit on a  return, the tax
credit allowed under this section if any of the following: 
 return. The recapture process shall be applied if any of the
following conditions set forth occur. 
   (I) Any amount of a federal tax credit available with respect to a
qualified equity investment that is eligible for a credit under this
section is recaptured under Section 45D of the Internal Revenue
Code. The qualified community development entity shall send
notice to the committee within 30 calendar days of being  
notified by the United States Treasury that any amount of a federal
tax credit available with respect to a qualified equity investment
that is eligible for a credit under this section is recaptured. The
committee shall send written acknowledgment within five calendar days
of receipt of the qualified community development entity's notice of
potential noncompliance.  In such case the  committee's
 recapture shall be proportionate to the federal recapture
with respect to such qualified equity investment.
   (II) The qualified community development entity redeems or makes
principal repayment with respect to a qualified equity investment
prior to the seventh anniversary of the issuance of such qualified
equity investment.  The qualified community development entity
  shall send notice to the committee within 30 calendar days
of redeeming or making principal repayments with respect to a
qualified equity investment prior to the seventh anniversary of the
issuance of such qualified equity investment. The committee shall
send written acknowledgment within five calendar days of receipt of
the qualified community development entity's notice of potential
noncompliance.  In such case the committee's recapture shall be
proportionate to the amount of the redemption or repayment with
respect to such qualified equity investment.
   (III) The qualified community development entity fails to invest
an amount equal to at least 85 percent of the purchase price of the
qualified equity investment in qualified low-income community
investments in California within 12 months of the issuance of the
qualified equity investment and maintain at least 85 percent of such
level of investment in qualified low-income community investments in
California until the last credit allowance date for the qualified
equity investment. For purposes of this section, an investment shall
be considered held by a qualified community development entity even
if the investment has been sold or repaid if the qualified community
development entity reinvests an amount equal to the capital returned
to, or recovered by, the qualified community development entity from
the original investment, exclusive of any profits realized, in
another qualified low-income community investment within 12 months of
the receipt of such capital. The qualified community  
development entity shall send notice to the committee within 30
calendar days of the 12-month deadline for the reinvestment if the
entity fails to meet any of the reinvestment requirements. The
committee shall send written acknowledgment within five calendar days
of receipt of the qualified community development   entity'
s notice of potential noncompliance.  Periodic amounts received
as repayment of principal pursuant to regularly scheduled
amortization payments on a loan that is a qualified low-income
community investment shall be treated as continuously invested in a
qualified low-income community investment if the amounts are
reinvested in one or more qualified low-income community investments
by the end of the following calendar year. A qualified community
development entity shall not be required to reinvest capital returned
from qualified low-income community investments after the sixth
anniversary of the issuance of the qualified equity investment, and
the qualified low-income community investment shall be considered
held by the qualified community development entity through the
seventh anniversary of the qualified equity investment's issuance.
   (ii) Recaptured tax credits and the related qualified equity
investment authority revert back to the committee and shall be
reissued in the following order:
   (I) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B) of
paragraph (5) of subdivision (d) by the allocation limitation of
forty million dollars ($40,000,000) in paragraph (8) of subdivision
(c).
   (II) Thereafter, in accordance with the application process.
   (iii)  (I)   Enforcement of each of the
recapture provisions shall be subject to a six month cure period.
 No recapture   Recapture  shall  not
 occur until the qualified community development entity shall
 have been given   gives  notice of 
potential  noncompliance  to the committee  and  is
 afforded six months from the date of such notice to cure the
noncompliance.  The six-month cure period shall begin on 
 the day the committee sends written acknowledgment of the
qualified community development entity's notice of the potential
noncompliance. The qualified community development entity is
responsible for addressing the circumstances of the potential
noncompliance and providing all documentation to the committee
necessary to demonstrate, to the committee's satisfaction, that those
conditions no longer exist.  
   (II) Not more than 45 calendar days following the close of the
cure period, the committee shall make a final determination as to
whether the credit is to be recaptured. This determination shall be
based on the review of the notice, information submitted by the
qualified community development entity, and any other information the
committee deems relevant to this determination.  
   (III) The committee shall post, and update monthly, a tally of
returned credits, pursuant to paragraph (8), and recaptured credits
pursuant to this paragraph. Within 30 calendar days of making the
final determination that the credit is to be recaptured, the
committee shall notify the Department of Insurance of the
determination including, but not limited to, the tax identification
number of the taxpayer. 
   (10) Section 45D(i) of the Internal Revenue Code, relating to
regulations, shall not apply.
   (11) If a qualified community development entity makes a capital
or equity investment or a loan with respect to a qualified low-income
building under the state Low-Income  Housing  Tax Credit
Program, the investment or loan is not a qualified low-income
community investment under this section.
   (d) (1) The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section and meet
the requirements of Section 45D of the Internal Revenue Code, as
modified by this section  . The guidelines shall not disqualify
a low-income community investment for the single reason that public
or private incentives, loans, equity investments, technical
assistance, or other forms of support have been or continue to be
provided. The adoption of the guidelines shall not be subject to the
rulemaking provisions of the Administrative Procedure Act of Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code.
   (2) The committee shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
and use the revenue to defray the cost of administering the program.
The committee shall establish the fees in a manner that ensures that
(A) the total amount collected equals the amount reasonably necessary
to defray the committee's costs in performing its administrative
duties under this section, and (B) the amount paid by each entity
reasonably corresponds with the value of the services provided to the
entity.
   (3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:
   (A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.
   (B) Sets minimum organizational capacity standards that applicants
must meet in order to receive an allocation of credits including,
but not limited to, its business strategy,  targeted 
community outcomes, capitalization strategy, and management capacity.

   (4) (A) The committee shall begin accepting applications on 
or before  March 15, 2015, and shall award credits at least two
times a year at dates set annually by the committee through 2019, to
the extent that allocations are available pursuant to Section 26011.9
of the Public Resources Code. To the extent reasonable and
consistent in carrying out the purposes of this section, the
committee shall consider how the timing of the state allocation
rounds correspond with the allocation schedule of the federal New
Markets Tax Credit Program.
   (B) Within 20 calendar days after receipt of an application the
committee shall determine whether the application is complete or
whether additional information is necessary in order to fully
evaluate the application. If additional information is requested and
the qualified community development entity provides that information
within five business days, the application shall be considered
completed as of the original date of receipt. If the qualified
community development entity fails to provide the information within
the five-business-day period, the application shall be denied and
must be resubmitted in full with a new receipt date.
   (C) Within 20 calendar days after receipt of an application
determined to be complete by the committee, the committee shall grant
or deny the application in full or in part. If the committee denies
any part of the application, it shall inform the qualified community
development entity of the grounds for the denial.
   (5) (A) The committee shall award tax credits to qualified
community development entities described in subparagraph (B) of
paragraph (4) of subdivision (c) in the order applications are
received by the committee  , subject to clause (i) or on a
competitive basis, pursuant to clause (ii)  . 
Applications received on the same day shall be deemed to have been
received simultaneously. 
   (i) In 2015, the committee shall only award tax credits to a
qualified community development  entity, exclusive of an
entity described in clause (ii) of subparagraph (A) of paragraph (4)
of subdivision (c)   entity in the order applications
are   received by the committee  . In the 2016 to 2019
award cycles, inclusive, at least 60 percent of the credit allocation
shall be awarded  to a qualified community development
entity, exclusive of an entity described in clause (ii) of
subparagraph (A) of paragraph (4) of subdivision (c)  
in the order applications are received by the committee to a
qualified community development entity  .  Applications
received on the same day shall be deemed to have been received
simultaneously.  At the committee's discretion, a higher
percentage of credits may be  targeted to applicants
exclusive of an   awarded in the order that they are
received. Qualified community development entities that receive tax
credit awards pursuant to this clause shall commit to making
investments in a manner that engages community-based partnerships and
local grassroots stakeholders. 
    (II)     An  entity described in
clause (ii) of subparagraph (A) of paragraph (4) of subdivision (c)
 shall not receive a tax credit award pursuant to this clause
 .
   (ii) The committee shall award up to 40 percent of the credit
allocation in the 2016 to  2019 award cycles,  
2019,  inclusive,  award cycles,  to a qualified
community development entity, as described in clause (ii) of
subparagraph (A) of paragraph (4) of subdivision (c) and subparagraph
(B) of paragraph (4) of subdivision (c), on a competitive basis
using blind scoring and a review committee that is comprised of at
least a majority of community development finance practitioners 
and at least one-third of the members having demonstrated experience
in assessing organizational business strategy, community outcomes,
capitalization strategy, and management capacity  . A member of
the review committee shall not have a financial interest, which
includes, but is not limited to, asking, consenting, or agreeing to
receive any commission, emolument, gratuity, money, property, or
thing of value for his or her own use, benefit, or personal advantage
for procuring or endeavoring to procure for any person, partnership,
joint venture, association, or corporation any tax credit or other
assistance from any applicant.  Priority 
    (iii)     In awarding credits on a
competitive basis, priority  shall  be  given to
applications that can demonstrate that the credits will allow the
entity to undertake qualified low-income community investments in a
rural, suburban, or urban area that has been historically underserved
 and result in the greatest benefit to the hardest to serve
lower income populations and most undercapitalized,  or in newly
established  businesses   businesses, or in
activities that support neighborhood revitalization strategies driven
by local grassroots stakeholders in multiple low-income communities
across one or more regions or the state for the purpose of scaling
economic development activities that compliment regional industry
clusters  that  results   result  in
the greatest benefit to the largest number of lower income
individuals.  All competitive applications shall demonstrate
strong linkages with communities and neighborhoods in California
low-income neighborhoods. 
   (B)  For applications described in clause (i) of subparagraph (A),
in the event tax credit requests exceed the applicable annual
allocation limitation of up to forty million dollars ($40,000,000) in
paragraph (8) of subdivision (c), the committee shall certify,
consistent with remaining qualified equity investment capacity,
qualified equity investments of applicants in proportionate
percentages based upon the ratio of the amount of qualified equity
investments requested in such applications to the total amount of
qualified equity investments requested in all such applications
received on the same day.
   (C) If a pending request cannot be fully certified due to this
limit, the committee shall certify the portion that may be certified
unless the qualified community development entity elects to withdraw
its request rather than receive partial certification.
   (D) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity of
the controlling entity, provided that the applicant and the
transferee notify the committee  within 30 calendar days  of
such transfer and include the information required in the
application with respect to such transferee with such notice.
   (E) Within 60 calendar days of the committee sending notice of
certification, the qualified community development entity or any
transferee, under subparagraph (D), shall issue the qualified equity
investment and receive cash in the amount of the certified amount.
The qualified community development entity or transferee, under
subparagraph (D), must provide the committee with evidence of the
receipt of the cash investment within 65  calendar  days of
the applicant receiving notice of certification. If the qualified
community development entity or any transferee, under subparagraph
(D), does not receive the cash investment and issue the qualified
equity investment within 60 calendar days of the committee sending
the certification notice, the certification shall lapse and the
entity may not issue the qualified equity investment without
reapplying to the committee for certification. Lapsed certifications
revert back to the committee and shall be reissued in the following
order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B) of
paragraph (5) under the annual allocation limitation of forty million
dollars ($40,000,000) in paragraph (8) of subdivision (c).
   (ii) Thereafter, in accordance with the application process.
   (F) A qualified community development entity that issues qualified
equity investments must notify the committee of the names of the
entities that are eligible to utilize tax credits under paragraph (3)
of subdivision (b) pursuant to an allocation of tax credits or
change in allocation of tax credits or due to a transfer of a
qualified equity investment.
   (6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to the committee
within the first five business days after the first anniversary of
the initial credit allowance date that provides documentation as to
the investment of at least 85 percent of the purchase price in
qualified low-income community investments in qualified active
low-income community businesses located in California. Such report
shall include all of the following:
   (i) A bank statement of such qualified community development
entity evidencing each qualified low-income community investment.
   (ii) Evidence that such business was a qualified active low-income
community business at the time of such qualified low-income
community investment.
   (iii) Any other information required by the committee.
   (B) Thereafter, the qualified community development entity shall
submit an annual report to the committee within 60  calendar
 days of the beginning of the calendar year during the seven
years following submittal of the report, pursuant to subparagraph
(A). No annual report shall be due prior to the first anniversary of
the initial credit allowance date. The report shall include, but is
not limited to, the following:
   (i) The impact the credit had on the low-income community.
   (ii) The amount of moneys used for qualified low-income
investments in qualified low-income community businesses.
   (iii) The number of employment positions created and retained as a
result of qualified low-income community investments and the average
annual salary of such positions.
   (iv) The number of operating businesses assisted as a result of
qualified low-income community investments, by industry and number of
employees.
   (v) Number of owner-occupied real estate projects described in
subparagraph (E) of paragraph (6) of subdivision (c).
   (vi) Location of the qualified low-income community businesses.
   (e) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and the six succeeding years if necessary, until the
credit is exhausted.
   (f) The committee shall annually report on its Internet Web site
the information provided by low-income community development entities
and on the geographic distribution of the credits.
   (g) (1) The Franchise Tax Board may prescribe any rules or
regulations that may be necessary or appropriate to implement this
section. The Franchise Tax Board shall have access to any
documentation held by the committee relative to the application and
reporting of a qualified community development entity.
   (2) A qualifying community development entity shall provide the
committee with the name, address, and tax identification number of
each investor and entity for which a credit was allocated by the
qualifying community development entity, pursuant to paragraph (3) of
subdivision (b). The committee shall provide this information to the
Franchise Tax Board in a manner determined by the Franchise Tax
Board.
   (h) This section shall remain in effect only until December 1,
2028, and as of that date is repealed.

      SEC. 7.   SEC. 6.   This act provides
for a tax levy within the meaning of Article IV of the Constitution
and shall go into immediate effect.