Bill Text: CA AB1399 | 2013-2014 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
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
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
BILL NUMBER: AB 1399 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 19, 2014
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 add Section 18410.3 to, 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, taxation, 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 establishes the Governor's
Office of Business and Economic Development, also known as "GO-Biz,"
to, among other duties, serve the Governor as the lead entity
for economic strategy and the marketing of California on issues
relating to business development, private sector investment, and
economic growth.
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 The
bill would impose specified duties on the California Competes
Tax Credit Committee and GO-Biz with regard to the
application for, and allocation of, the credit. The bill would
require the committee GO-Biz to
establish and impose reasonable fees upon entities that apply for the
allocation of the credit , to be deposited in the California
New Markets Tax Credit Fund established by the bill, and use
the revenue , upon appropriation by the Legislature, to
defray the cost of administering the program, as specified,
thereby making an appropriation. specified. The bill
would specify that the credit would not be allowed unless the
Legislature makes an appropriation from the fund.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: yes no
. 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 the
2013-14 funding round, the CDFI Fund had awarded approximately
$40,000,000,000 in NMTC in 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 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 committee and GO-Biz 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, and subject to subdivision (h),
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 through
a pass-thru entity may be allocated to the partners or shareholders
of such entity for their use in accordance with the provisions of any
agreement among such 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.
(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 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.
(4) (A) For purposes of this section, "committee" means the
California Competes Tax Credit Committee established under Section
18410.2.
(B) For purposes of this section, "GO-Biz" means the Governor's
Office of Business and Economic Development.
(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." "GO-Biz."
(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 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
GO-Biz shall establish guidelines for certifying nonprofit
organizations pursuant to this subparagraph. The committee
GO-Biz 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 appeal and be
heard and appeal, by the committee, if
the committee GO-Biz 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 is modified to
only include a qualified community development entity and its
subsidiary qualified community development entities that
has have 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 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 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 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 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.
(D) Section 45D(d)(2)(A)(iii) of the Internal Revenue 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.
(E) (i) A qualified active low-income community business shall
exclude not include 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 community 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.
(iv) A qualified active low-income community business shall not
include any business that operates or derives revenues from the
operation of a country club, gaming establishment, massage parlor,
liquor store, or golf course.
(v) A qualified active low-income community business shall not
include a sexually oriented business. A "sexually oriented business"
means a nightclub, bar, restaurant, or similar commercial enterprise
that provides for an audience of two or more individuals live nude
entertainment or live nude performances where the nudity is a
function of everyday business operations and where nudity is a
planned and intentional part of the entertainment or performance.
"Nude" means clothed in a manner that leaves uncovered or visible,
through less than fully opaque clothing, any portion of the genitals
or, in the case of a female, any portion of the breasts below the top
of the areola of the breasts.
(vi) A qualified active low-income community business shall not
include a charter school.
(7) Section 45D(e)(1) of the Internal Revenue 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) 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 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 and recapture 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 GO-B iz
shall 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
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 GO-Biz 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 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
GO-Biz 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
GO-Biz 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 GO-Biz's recapture shall be
proportionate to the amount of the redemption or repayment
with respect to of 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
GO-Biz 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 GO-Biz
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.
(B) Recaptured tax credits and the related qualified equity
investment authority revert back to the committee
GO-Biz and shall be reissued in the following
order: reissued. The reissue shall not count toward
the annual allocation limitation of forty million dollars
($40,000,000) or overall credit allocation limitation of two hundred
million dollars ($200,000,000) in paragraph (8) of subdivision (c).
The reissue shall be done 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. Recapture shall not occur until
the qualified community development entity gives notice of potential
noncompliance to the committee GO-Biz
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 GO-Biz 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 GO-Biz necessary to demonstrate,
to the committee's GO-Biz's
satisfaction, that those conditions no longer exist.
(ii) Not more than 45 calendar days following the close of the
cure period, the committee GO-Biz 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
GO-Biz deems relevant to this determination.
(iii) The committee GO-Biz 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
GO-Biz 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.
(11) Section 45D(i) of the Internal Revenue Code, relating to
regulations, 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 GO-Biz
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. In
promulgating guidelines GO-Biz shall look for guidance in the rules
and regulations adopted under Section 45D of the Internal Revenue
Code to the extent that those rules and regulations are consistent
with 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 (A)
GO-Biz shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
and use the revenue to that in the aggregate
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.
(B) The fees collected shall be deposited in the California New
Markets Tax Credit Fund established in Section 18410.3.
(3) In
developing guidelines the committee GO-Biz
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.
(C) Considers the qualified community development entity's prior
qualified low-income community investments under Section 45D of the
Internal Revenue Code.
(D) Considers the qualified community development entity's prior
qualified low-income community investments under this section,
including subparagraph (D) of paragraph (5).
(E) Does not require the qualified community development entity to
identify the qualified active low-income community businesses in
which the qualified community development entity will invest in an
application for qualified equity investment allocation.
(4) (A) The committee GO-Biz shall
begin accepting applications on or before March
May 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 GO-Biz
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 GO-Biz 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,
GO-Biz, 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).
(i) (I) In 2015, the committee shall only award tax credits to a
qualified community development 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 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
awarded in the order that they are received.
pursuant to the first sentence in this subparagraph. 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.
(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 areas that has
have been historically underserved and result in the
greatest benefit to the hardest to serve and undercapitalized
lower income populations and most undercapitalized,
populations, 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 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
GO-Biz 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 GO-Biz 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 GO-Biz sending the certification
notice, the certification shall lapse and the entity may not issue
the qualified equity investment without reapplying to the
committee GO-Biz for certification. Lapsed
certifications revert back to the committee
GO-Biz 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
GO-Biz 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 GO-Biz 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.
GO-Biz as being necessar y to meet the
requirements of this section.
(B) Thereafter, the qualified community development entity shall
submit an annual report to the committee
GO-Biz 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 GO-Biz 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. qualified active
low-income community businesses assisted.
(g) (1) The Insurance Commissioner may prescribe any rules or
regulations that may be necessary or appropriate to implement this
section. The 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 GO-Biz 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 GO-Biz shall provide this
information to the Franchise Tax Board
Insurance Commissioner in a manner determined by the
Franchise Tax Board. Insurance Commissioner.
(h) The credit allowed under this section shall only be allowed
for taxable years in which the Legislature appropriates funds in the
California New Markets Tax Credit Fund pursuant to subdivision (b) of
Section 18410.3.
(h)
(i) 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 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 committee and GO-Biz 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, and subject to subdivision (h),
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 through
a pass-thru entity may be allocated to the partners or shareholders
of such entity for their use in accordance with the provisions of any
agreement among such 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.
(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 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.
(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." "GO-Biz. "
(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 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 GO-Biz 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 GO-Biz shall
establish guidelines for certifying nonprofit organizations pursuant
to this subparagraph. The committee GO-Biz
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 appeal and be heard and
appeal, by the committee, if the
committee GO-Biz 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 is modified to
only include a qualified community development entity and its
subsidiary qualified community development entities that
has have 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 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 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 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 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.
(D) Section 45D(d)(2)(A)(iii) of the Internal Revenue 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.
(E) (i) A qualified active low-income community business shall
exclude not include 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 community 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.
(iv) A qualified active low-income community business shall not
include any business that operates or derives revenues from the
operation of a country club, gaming establishment, massage parlor,
liquor store, or golf course.
(v) A qualified active low-income community business shall not
include a sexually oriented business. A "sexually oriented business"
means a nightclub, bar, restaurant, or similar commercial enterprise
that provides for an audience of two or more individuals live nude
entertainment or live nude performances where the nudity is a
function of everyday business operations and where nudity is a
planned and intentional part of the entertainment or performance.
"Nude" means clothed in a manner that leaves uncovered or visible,
through less than fully opaque clothing, any portion of the genitals
or, in the case of a female, any portion of the breasts below the top
of the areola of the breasts.
(vi) A qualified active low-income community business shall not
include a charter school.
(7) Section 45D(e)(1) of the Internal Revenue 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) 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 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 and recapture 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 GO-Biz shall
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 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 GO-Biz 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 GO-Biz
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 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
GO-Biz 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
GO-Biz 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 GO-Biz's recapture shall be
proportionate to the amount of the redemption or repayment
with respect to of 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
GO-Biz 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 GO-Biz
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
GO-Biz and shall be reissued in the following
order: reissued. The reissue shall not count toward
the annual allocation limitation of forty million dollars
($40,000,000) or overall credit allocation limitation of two hundred
million dollars ($200,000,000) in paragraph (8) of subdivision (c).
The reissue shall be done 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. Recapture shall not occur until
the qualified community development entity gives notice of potential
noncompliance to the committee GO-Biz
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 GO-Biz 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 GO-Biz necessary to demonstrate,
to the committee's GO-Biz's
satisfaction, that those conditions no longer exist.
(II) Not more than 45 calendar days following the close of the
cure period, the committee GO-Biz 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
GO-Biz deems relevant to this determination.
(III) The committee GO-Biz 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
GO-Biz 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 GO-Biz
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. In
promulgating guidelines GO-Biz shall look for guidance in the rules
and regulations adopted under Section 45D of the Internal Revenue
Code to the extent that those rules and regulations are consistent
with 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) (A) The committee
GO-Biz shall establish and impose reasonable
fees upon entities that apply for the allocation pursuant to this
subdivision and use the revenue to that in
the aggregate 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.
(B) The fees collected shall be deposited in the California New
Markets Tax Credit Fund established in Section 18410.3.
(3) In developing guidelines the committee
GO-Biz 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.
(C) Considers the qualified community development entity's prior
qualified low-income community investments under Section 45D of the
Internal Revenue Code.
(D) Considers the qualified community development entity's prior
qualified low-income community investments under this section,
including subparagraph (D) of paragraph (5).
(E) Does not require the qualified community development entity to
identify the qualified active low-income community businesses in
which the qualified community development entity will invest in an
application for qualified equity investment allocation.
(4) (A) The committee GO-Biz
shall begin accepting applications on or before March
May 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
GO-Biz 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 GO-Biz 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,
GO-Biz, 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).
(i) (I) In 2015, the committee shall only award tax credits to a
qualified community development 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 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
awarded in the order that they are received.
pursuant to the first sentence in this subparagraph. 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.
(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 areas that has
have been historically underserved and result in the
greatest benefit to the hardest to serve and undercapitalized
lower income populations and most undercapitalized,
populations, 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 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
GO-Biz 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 GO-Biz 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 GO-Biz sending the certification
notice, the certification shall lapse and the entity may not issue
the qualified equity investment without reapplying to the
committee GO-Biz for certification. Lapsed
certifications revert back to the committee
GO-Biz 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
GO-Biz 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 GO-Biz 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.
GO-Biz as being necessary to meet the requirements of
this section.
(B) Thereafter, the qualified community development entity shall
submit an annual report to the committee
GO-Biz 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 GO-Biz 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. qualified active
low-income community businesses assisted.
(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 GO-Biz 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 GO-Biz shall provide this
information to the Franchise Tax Board in a manner determined by the
Franchise Tax Board.
(h) The credit allowed under this section shall only be allowed
for taxable years in which the Legislature appropriates funds in the
California New Markets Tax Credit Fund pursuant to subdivision (b) of
Section 18410.3.
(h)
(i) This section shall remain in effect only until
December 1, 2028, and as of that date is repealed.
SEC. 5. Section 18410.3 is added to the
Revenue and Taxation Code , to read:
18410.3. (a) The California New Markets Tax Credit Fund is hereby
established in the State Treasury.
(b) Upon appropriation, moneys in the fund shall be used for the
purposes described in subdivision (d) of Section 12283, subdivision
(d) of Section 17053.9, and subdivision (d) of Section 23622.9.
SEC. 5. SEC. 6. 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 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 committee and GO-Biz 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, and subject to subdivision (h),
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 through
a pass-thru entity may be allocated to the partners or shareholders
of such entity for their use in accordance with the provisions of any
agreement among such 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.
(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 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.
(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." "GO-Biz .
"
(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 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 GO-Biz 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 GO-Biz shall
establish guidelines for certifying nonprofit organizations pursuant
to this subparagraph. The committee GO-Biz
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 appeal and be heard and
appeal, by the committee, if the
committee GO-Biz 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 is modified to
only include a qualified community development entity and its
subsidiary qualified community development entities that
has have 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 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 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 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 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.
(D) Section 45D(d)(2)(A)(iii) of the Internal Revenue 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.
(E) (i) A qualified active low-income community business shall
exclude not include 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 community 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.
(iv) A qualified active low-income community business shall not
include any business that operates or derives revenues from the
operation of a country club, gaming establishment, massage parlor,
liquor store, or golf course.
(v) A qualified active low-income community business shall not
include a sexually oriented business. A "sexually oriented business"
means a nightclub, bar, restaurant, or similar commercial enterprise
that provides for an audience of two or more individuals live nude
entertainment or live nude performances where the nudity is a
function of everyday business operations and where nudity is a
planned and intentional part of the entertainment or performance.
"Nude" means clothed in a manner that leaves uncovered or visible,
through less than fully opaque clothing, any portion of the genitals
or, in the case of a female, any portion of the breasts below the top
of the areola of the breasts.
(vi) A qualified active low-income community business shall not
include a charter school.
(7) Section 45D(e)(1) of the Internal Revenue 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) 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 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 and recapture 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 GO-Biz shall
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 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 GO-Biz 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 GO-Biz
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 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
GO-Biz 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
GO-Biz 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 GO-Biz's recapture shall be
proportionate to the amount of the redemption or repayment
with respect to of 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
GO-Biz 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 GO-Biz
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
GO-Biz and shall be reissued in the following
order: reissued. The reissue shall not count toward
the annual allocation limitation of forty million dollars
($40,000,000) or overall credit allocation limitation of two hundred
million dollars ($200,000,000) in paragraph (8) of subdivision (c).
The reissue shall be done 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. Recapture shall not occur until
the qualified community development entity shall
gives notice of potential noncompliance to the committee
GO-Biz 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 GO-Biz
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 GO-Biz
necessary to demonstrate, to the committee's
GO-Biz's satisfaction, that those conditions no longer exist.
(II) Not more than 45 calendar days following the close of the
cure period, the committee GO-Biz 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
GO-Biz deems relevant to this determination.
(III) The committee GO-Biz 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
GO-Biz 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 GO-Biz 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. In
promulgating guidelines GO-Biz shall look for guidance in the rules
and regulations adopted under Section 45D of the Internal Revenue
Code to the extent that those rules and regulations are consistent
with 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) (A) The committee
GO-Biz shall establish and impose reasonable
fees upon entities that apply for the allocation pursuant to this
subdivision and use the revenue to that in
the aggregate 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.
(B) The fees collected shall be deposited in the California New
Markets Tax Credit Fund established in Section 18410.3.
(3) In developing guidelines the committee
GO-Biz 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.
(C) Considers the qualified community development entity's prior
qualified low-income community investments under Section 45D of the
Internal Revenue Code.
(D) Considers the qualified community development entity's prior
qualified low-income community investments under this section,
including subparagraph (D) of paragraph (5).
(E) Does not require the qualified community development entity to
identify the qualified active low-income community businesses in
which the qualified community development entity will invest in an
application for qualified equity investment allocation.
(4) (A) The committee GO-Biz
shall begin accepting applications on or before March
May 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
GO-Biz 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 GO-Biz 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,
GO-Biz, 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).
(i) (I) In 2015, the committee shall only
award tax credits to a qualified community development 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 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 awarded in the order that they
are received. pursuant to the first sentence in this
subparagraph. 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.
(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 areas that has
have been historically underserved and result in the
greatest benefit to the hardest to serve and undercapitalized
lower income populations and most undercapitalized,
populations, 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 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
GO-Biz 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 GO-Biz 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
GO-Biz sending the certification notice, the
certification shall lapse and the entity may not issue the qualified
equity investment without reapplying to the committee
GO-Biz for certification. Lapsed certifications
revert back to the committee GO-Biz 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
GO-Biz 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 GO-Biz 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.
GO-Biz as being necessary to meet the requirements of
this section.
(B) Thereafter, the qualified community development entity shall
submit an annual report to the committee
GO-Biz 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 GO-Biz 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. qualified active
low-income community businesses assisted.
(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 GO-Biz 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 GO-Biz shall provide this
information to the Franchise Tax Board in a manner determined by the
Franchise Tax Board.
(h) The credit allowed under this section shall only be allowed
for taxable years in which the Legislature appropriates funds in the
California New Markets Tax Credit Fund pursuant to subdivision (b) of
Section 18410.3.
(h)
(i) This section shall remain in effect only until
December 1, 2028, and as of that date is repealed.
SEC. 6. SEC. 7. This act provides
for a tax levy within the meaning of Article IV of the Constitution
and shall go into immediate effect.
