Bill Text: CA AB2647 | 2015-2016 | Regular Session | Amended

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Bill Title: Insurance taxes: income taxes: credits: community development financial institution investments.

Sponsorship: Partisan Bill (Democrat 2)

Status: (Failed) 2016-11-30 - From committee without further action. [AB2647 Detail]

Download: California-2015-AB2647-Amended.html

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BILL NUMBER: AB 2647	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MAY 17, 2016
	AMENDED IN ASSEMBLY  APRIL 12, 2016
	AMENDED IN ASSEMBLY  MARCH 29, 2016

INTRODUCED BY   Assembly Members Eduardo Garcia and Medina
    (   Principal  
coauthors:   Assembly Members  
Brown,     Chu,  
  and Dodd   ) 

                        FEBRUARY 19, 2016

   An act to  add Section 18410.3 to, and to add and repeal
Sections 12283, 17053.9, and 23622.9 of,   amend
Sections 12209, 17053.57, and 23657   of  the Revenue
and Taxation Code, relating to taxation, to take effect immediately,
tax levy.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 2647, as amended, Eduardo Garcia.  Income taxation:
insurance taxation: credits: California New Markets Tax Credit.
  Insurance taxes: income taxes: credits: community
development financial institution investments.  
   Existing law, until January 1, 2017, allows a credit under the
Personal Income Tax Law, the Corporation Tax Law, and a credit
against the tax imposed on an insurer in an amount equal to 20% of a
qualified investment, as defined, made into a community development
financial institution, as defined, but not to exceed, in the
aggregate amount under all those laws, $50,000,000 per year, and
authorizes the California Organized Investment Network to certify
investments for the credit until January 1, 2017.  
   This bill would extend the provisions relating to the
authorization of the credits and certification by the Department of
Insurance and the California Organized Investment Network until
January 1, 2027. The bill would also increase the aggregate amount
under all those laws of qualified investments allowed to be certified
by the California Organized Investment Network for the credits to
$120,000,000 per year.  
   This bill would take effect immediately as a tax levy. 

   Existing federal law allows a New Markets Tax Credit to a taxpayer
holding a qualified equity investment in an amount equal to the
applicable percentage of the amount paid to the qualified community
development entity for investment in low-income communities.
 
   The state Personal Income Tax Law and the Corporation Tax Law
allow various credits against the taxes imposed by those laws.
Existing state constitutional law governing insurance taxation
imposes an annual tax on the gross premiums of an insurer, as
defined, doing business in this state at specified rates. 

   Existing law establishes the Governor's Office of Business and
Economic Development, also known as " GO-Biz," to, among other
things, 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.
 
   This bill would allow a California New Markets Tax Credit under
the Personal Income Tax Law, the Corporation Tax Law, and the law
governing insurance taxation, in modified conformity with the federal
New Markets Tax Credit, for taxable years beginning on or after
January 1, 2017, and before January 1, 2022, 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
$40,000,000 per calendar year. The bill would impose specified
duties on the Responsible Tax Credit Administrator (RTCA), to be
designated by the Governor, with regard to the application for, and
allocation of, the credit. The bill would require the RTCA 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 annual appropriation by the Legislature, to defray the cost of
applying to and administering the credits, as specified. The bill
would only authorize the allocation for these credits for those
taxable years for which moneys are appropriated to the RTCA to
administer these credits for those taxable years.  
   Existing law requires any bill authorizing a new personal or
corporation income tax credit to contain, among other things,
specific goals, purposes, and objectives that the tax credit will
achieve, detailed performance indicators, and data collection
requirements, as provided.  
   This bill would also include that additional information required
for any bill authorizing a new personal or corporation income tax
credit.  
   The bill would provide that its provisions are severable.
 
   This bill would take effect immediately as a tax levy. 
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


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

   SECTION 1.    Section 12209 of the   Revenue
and Taxation Code   is amended to read: 
   12209.  (a) For each year beginning on or after January 1, 1999,
and before January 1,  2017,   2027,  there
shall be allowed as a credit against the amount of tax, as defined
in Section 28 of Article XIII of the California Constitution, an
amount equal to 20 percent of the amount of each qualified investment
made by a taxpayer during the taxable year into a community
development financial institution that is certified by the Department
of Insurance, California Organized Investment Network, or any
successor thereof.
   (b) For purposes of determining any tax that may be imposed under
Section 685 of the Insurance Code on a taxpayer not organized under
the laws of this state, the amount of the credit allowed by
subdivision (a) shall be treated as a tax paid under Section 12201 or
Section 28 of Article XIII of the California Constitution.
   (c) (1) Notwithstanding any other provision of this part, a credit
shall not be allowed under this section unless the California
Organized Investment Network, or its successor within the Department
of Insurance, certifies that the investment described in subdivision
(a) qualifies for the credit under this section and certifies the
total amount of the credit allocated to the taxpayer pursuant to this
section.
   (2) A credit shall not be allowed by this section unless the
applicant and the taxpayer provide satisfactory substantiation to,
and in the form and manner requested by, the Department of Insurance,
California Organized Investment Network, or any successor thereof,
that the investment is a qualified investment as defined in paragraph
(1) of subdivision (h).
   (3) (A) The aggregate amount of qualified investments made by all
taxpayers pursuant to this section, Section 17053.57, and Section
23657 shall not exceed  fifty million dollars ($50,000,000)
  one hundred twenty million dollars ($120,000,000)
 for each calendar year. However, if the aggregate amount of
qualified investments made in any calendar year is less than 
fifty million dollars ($50,000,000),  one hundred 
 twenty million dollars ($120,000,000),  the difference may
be carried over to the next year, and any succeeding year during
which this section remains in effect, and added to the aggregate
amount authorized for those years.
   (B) The total amount of qualified investments certified by the
California Organized Investment Network in any calendar year to any
one community development financial institution together with its
affiliates, as defined in Section 1215 of the Insurance Code, shall
not exceed 30 percent of the annual aggregate amount of qualified
investments certified by the California Organized Investment Network.
If, after October 1, the California Organized Investment Network has
determined that the availability of tax credits exceed their demand,
then a community development financial institution that has been
allocated 30 percent of the annual aggregate amount of qualified
investments shall become eligible to apply to be certified for any
remaining tax credits in that calendar year.
   (C) Each year, 10 percent of the annual aggregate amount of
qualified investments shall be reserved for investment amounts of
less than or equal to two hundred thousand dollars ($200,000). If,
after October 1, there remains an unallocated portion of the amount
reserved for investments of less than or equal to two hundred
thousand dollars ($200,000), then qualified investments in excess of
two hundred thousand dollars ($200,000) may be eligible for that
remaining unallocated portion.
   (4) Priority among housing applications shall be given to
applications that support affordable rental housing, housing for
veterans, mortgages for community-based residential programs, and
self-help housing ahead of single-family owned housing.
   (d) The community development financial institution shall do all
of the following:
   (1) Apply to the Department of Insurance, California Organized
Investment Network, or its successor, for certification of its status
as a community development financial institution.
   (2) (A) Apply to the Department of Insurance, California Organized
Investment Network, or its successor, on behalf of the taxpayer for
certification of the amount of the investment and the credit amount
allocated to the taxpayer, obtain the certification, and retain a
copy of the certification.
   (B) Provide in the application a detailed description of the
intended use of the investment funds including, but not limited to,
the following:
   (i) All of the programs, projects, and services that would be
funded.
   (ii) The percentage of the intended use of the investment funds
that would directly benefit low-to-moderate income households.
   (iii) The percentage of the intended use of the investment funds
that would directly benefit rural areas.
   (iv) The percentage of the intended use of the investment funds
that is a green investment as defined in Section 926.1 of the
Insurance Code.
   (3) (A) Provide in the application required in paragraph (2) the
following information to the Department of Insurance, California
Organized Investment Network, or its successor:
   (i) Name of the taxpayer.
   (ii) Postal address of the taxpayer, or residential address of the
taxpayer if the taxpayer is an individual.
   (iii) Phone number of the taxpayer.
   (iv) Email address of the taxpayer.
   (v) The taxpayer's California company identification number for
tax administration purposes.
   (B) The information provided in subparagraph (A) shall be used
only for internal purposes by the Department of Insurance, California
Organized Investment Network, or its successor, and any public
disclosure of that information shall be limited to the name of the
taxpayer only.
   (4) Provide an annual listing to the State Board of Equalization,
in the form and manner agreed upon by the State Board of Equalization
and the Department of Insurance, California Organized Investment
Network, or its successor, of the names and taxpayer's California
company identification numbers of any taxpayer who makes any
withdrawal or partial withdrawal of a qualified investment before the
expiration of 60 months from the date of the qualified investment.
   (5) Submit reports to the department, California Organized
Investment Network, or any successor thereof, as required pursuant to
subdivision (a) of Section 12939.1 of the Insurance Code.
   (e) The California Organized Investment Network may certify
investments for the credit allowed by this section on or before
January 1,  2017,   2027,  but not after
that date.
   (f) (1) The Insurance Commissioner may develop instructions,
procedures, and standards for applications, and for administering the
criteria for the evaluation of applications under this section. The
Insurance Commissioner may, from time to time, adopt, amend, or
repeal regulations to implement the provisions of this section.
   (2) The initial adoption of the regulations implementing this
section shall be deemed to be an emergency and necessary in order to
address a situation calling for immediate action to avoid serious
harm to the public peace, health, safety, or general welfare.
   (3) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, any
emergency regulation adopted or amended by the Insurance Commissioner
pursuant to this section shall remain in effect until amended or
repealed by the department.
   (g) The Department of Insurance, California Organized Investment
Network, or any successor thereof, shall do all of the following:
   (1) Accept and evaluate applications for certification from
financial institutions and issue certificates that the applicant is a
community development financial institution qualified to receive
qualified investments. To receive a certificate, an applicant shall
satisfy the Department of Insurance, California Organized Investment
Network, or any successor thereof, that it meets the specific
requirements to be a community development financial institution for
this state program as defined in paragraph (2) of subdivision (h).
The certificate may be issued for a specified period of time, and may
include reasonable conditions to effectuate the intent of this
section. The Insurance Commissioner may suspend or revoke a
certification, after affording the institution notice and the
opportunity to be heard, if the commissioner finds that an
institution no longer meets the requirement for certification.
   (2) Accept and evaluate applications for certification from any
community development financial institution on behalf of the taxpayer
and issue certificates to taxpayers in an aggregate amount that
shall not exceed the limit specified in subdivision (c), with highest
priority granted to those applications where the intended use of the
investments has the greatest aggregate benefit for low-to-moderate
income areas or households or rural areas or households. The
certificate shall include the amount eligible to be made as an
investment that qualifies for the credit and the total amount of the
credit to which the taxpayer is entitled for the year. Applications
for tax credits shall be accepted and evaluated throughout the year.
The Insurance Commissioner shall establish tax credit issuance cycles
throughout the year as necessary in order to issue tax credit
certificates to those applications granted the highest priority.
   (3) Provide an annual listing to the State Board of Equalization,
in the form or manner agreed upon by the State Board of Equalization
and the Department of Insurance, California Organized Investment
Network, or its successor, of the taxpayers who were issued
certificates, their respective National Association of Insurance
Commissioners company number and employer's tax identification
number, the amount of the qualified investment made by each taxpayer,
and the total amount of qualified investments.
   (4) Include information specified pursuant to subdivision (b) of
Section 12939.1 of the Insurance Code in the report required by
Section 12922 of the Insurance Code.
   (h) For purposes of this section:
   (1) "Qualified investment" means an investment that is a deposit
or loan that does not earn interest, or an equity investment, or an
equity-like debt instrument that conforms to the specifications for
these instruments as prescribed by the United States Department of
the Treasury, Community Development Financial Institutions Fund, or
its successor, or, in the absence of that prescription, as defined by
the Insurance Commissioner. The investment must be equal to or
greater than fifty thousand dollars ($50,000) and made for a minimum
duration of 60 months. During that 60-month period, the community
development financial institution shall have full use and control of
the proceeds of the entire amount of the investment as well as any
earnings on the investment for its community development purposes.
The entire amount of the investment shall be received by the
community development financial institution before the application
for the tax credit is submitted. The community development financial
institution shall use the proceeds of the investment for a purpose
that is consistent with its community development mission and for the
benefit of economically disadvantaged communities and low-income
people in California.
   (2) "Community development financial institution" means a private
financial institution located in this state that is certified by the
Department of Insurance, California Organized Investment Network, or
its successor, that, consistent with the legislative findings,
declarations, and intent set forth in Section 12939 of the Insurance
Code, has community development as its primary mission, and that
lends in urban, rural, or reservation-based communities in this
state. A community development financial institution may include a
community development bank, a community development loan fund, a
community development credit union, a microenterprise fund, a
community development corporation-based lender, or a community
development venture fund.
   (i) (1) If a qualified investment is withdrawn before the end of
the 60th month and not reinvested in another community development
financial institution within 60 days, there shall be added to the
"tax," as defined in Section 28 of Article XIII of the California
Constitution, for the year in which the withdrawal occurs, the entire
amount of any credit previously allowed under this section.
   (2) If a qualified investment is reduced before the end of the
60th month, but not below fifty thousand dollars ($50,000), there
shall be added to the "tax," as defined in Section 28 of Article XIII
of the California Constitution, for the taxable year in which the
reduction occurs, an amount equal to 20 percent of the total
reduction for the year.
   (j) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" for the
next four years, or until the credit has been exhausted, whichever
occurs first.
   (k) The State Board of Equalization shall, as requested by the
Department of Insurance, California Organized Investment Network, or
its successor, advise and assist in the administration of this
section.
   (  l  ) On or before June 30, 2016, the Legislative
Analyst's Office shall submit a report to the Legislature, in
compliance with Section 9795 of the Government Code, on the effects
of the tax credits allowed under this section, Section 17053.57, and
Section 23657, with a focus on employment in low-to-moderate income
and rural areas, and on the benefits of these tax credits to
low-to-moderate income and rural persons.
   (m) This section shall remain in effect only until December 1,
 2017,   2027,  and as of that date is
repealed.
   SEC. 2.    Section 17053.57 of the   Revenue
and Taxation Code   is amended to read: 
   17053.57.  (a) For each taxable year beginning on or after January
1, 1997, and before January 1,  2017,   2027,
 there shall be allowed as a credit against the amount of "net
tax," as defined in Section 17039, an amount equal to 20 percent of
the amount of each qualified investment made by a taxpayer during the
taxable year into a community development financial institution that
is certified by the Department of Insurance, California Organized
Investment Network, or any successor thereof.
   (b) (1) Notwithstanding any other provision of this part, a credit
shall not be allowed under this section unless the California
Organized Investment Network, or its successor within the Department
of Insurance, certifies that the investment described in subdivision
(a) qualifies for the credit under this section and certifies the
total amount of the credit allocated to the taxpayer pursuant to this
section.
   (2) A credit shall not be allowed by this section unless the
applicant and the taxpayer provide satisfactory substantiation to,
and in the form and manner requested by, the Department of Insurance,
California Organized Investment Network, or any successor thereof,
that the investment is a qualified investment, as defined in
paragraph (1) of subdivision (g).
   (3) (A) The aggregate amount of qualified investments made by all
taxpayers pursuant to this section, Section 12209, and Section 23657
shall not exceed  fifty million dollars ($50,000,000)
  one hundred twenty million dollars ($120,000,000)
 for each calendar year. However, if the aggregate amount of
qualified investments made in any calendar year is less than 
fifty million dollars ($50,000,000),   one hundred
twenty million dollars ($120,000,000),  the difference may be
carried over to the next year, and any succeeding year during which
this section remains in effect, and added to the aggregate amount
authorized for those years.
   (B) The total amount of qualified investments certified by the
California Organized Investment Network in any calendar year to any
one community development financial institution together with its
affiliates, as defined in Section 1215 of the Insurance Code, shall
not exceed 30 percent of the annual aggregate amount of qualified
investments certified by the California Organized Investment Network.
If, after October 1, the California Organized Investment Network has
determined that the availability of tax credits exceed their demand,
then a community development financial institution that has been
allocated 30 percent of the annual aggregate amount of qualified
investments shall become eligible to apply to be certified for any
remaining tax credits in that calendar year.
   (C) Each year, 10 percent of the annual aggregate amount of
qualified investments shall be reserved for investment amounts of
less than or equal to two hundred thousand dollars ($200,000). If,
after October 1, there remains an unallocated portion of the amount
reserved for investments of less than or equal to two hundred
thousand dollars ($200,000), then qualified investments in excess of
two hundred thousand dollars ($200,000) may be eligible for that
remaining unallocated portion.
   (4) Priority among housing applications shall be given to
applications that support affordable rental housing, housing for
veterans, mortgages for community-based residential programs, and
self-help housing ahead of single-family owned housing.
   (c) The community development financial institution shall do all
of the following:
   (1) Apply to the Department of Insurance, California Organized
Investment Network, or its successor, for certification of its status
as a community development financial institution.
   (2) (A) Apply to the Department of Insurance, California Organized
Investment Network, or its successor, on behalf of the taxpayer, for
certification of the amount of the investment and the credit amount
allocated to the taxpayer, obtain the certification, and retain a
copy of the certification.
   (B) Provide in the application a detailed description of the
intended use of the investment funds including, but not limited to,
the following:
   (i) All of the programs, projects, and services that would be
funded.
   (ii) The percentage of the intended use of the investment funds
that would directly benefit low-to-moderate income households.
   (iii) The percentage of the intended use of the investment funds
that would directly benefit rural areas.
   (iv) The percentage of the intended use of the investment funds
that is a green investment as defined in Section 926.1 of the
Insurance Code.
   (3) (A) Provide in the application required in paragraph (2) the
following information to the Department of Insurance, California
Organized Investment Network, or its successor:
   (i) Name of the taxpayer.
   (ii) Postal address of the taxpayer, or residential address of the
taxpayer if the taxpayer is an individual.
   (iii) Phone number of the taxpayer.
   (iv) Email address of the taxpayer.
   (v) The taxpayer's identification number, or in the case of a
partnership, the taxpayer identification numbers of all the partners
for tax administration purposes.
   (B) The information provided in subparagraph (A) shall be used
only for internal purposes by the Department of Insurance, California
Organized Investment Network, or its successor, and  any
network or its successor shall limit  all public disclosure
of that information  shall be limited  to the name of the
taxpayer only.
   (4) Provide an annual listing to the Franchise Tax Board, in the
form and manner agreed upon by the Franchise Tax Board and the
Department of Insurance, California Organized Investment Network, or
its successor, of the names and taxpayer identification numbers of
any taxpayer who makes any withdrawal or partial withdrawal of a
qualified investment before the expiration of 60 months from the date
of the qualified investment.
   (5) Submit reports to the Department of Insurance, California
Organized Investment Network, or any successor thereof, as required
pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.

   (d) (1) The Insurance Commissioner may develop instructions,
procedures, and standards for applications, and for administering the
criteria for the evaluation of applications under this section. The
Insurance Commissioner may, from time to time, adopt, amend, or
repeal regulations to implement the provisions of this section.
   (2) The initial adoption of the regulations implementing this
section shall be deemed to be an emergency and necessary in order to
address a situation calling for immediate action to avoid serious
harm to the public peace, health, safety, or general welfare.
   (3) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, any
emergency regulation adopted or amended by the Insurance Commissioner
pursuant to this section shall remain in effect until amended or
repealed by the department.
   (e) The California Organized Investment Network may certify
investments for the credit allowed by this section on or before
January 1,  2017,   2027,  but not after
that date.
   (f) The Department of Insurance, California Organized Investment
Network, or any successor thereof, shall do all of the following:
   (1) Accept and evaluate applications for certification from
financial institutions and issue certificates that the applicant is a
community development financial institution qualified to receive
qualified investments. To receive a certificate, an applicant shall
satisfy the Department of Insurance, California Organized Investment
Network, or any successor thereof, that it meets the specific
requirements to be a community development financial institution for
this state program as defined in paragraph (2) of subdivision (g).
The certificate may be issued for a specified period of time, and may
include reasonable conditions to effectuate the intent of this
section. The Insurance Commissioner may suspend or revoke a
certification, after affording the institution notice and the
opportunity to be heard, if the commissioner finds that an
institution no longer meets the requirement for certification.
   (2) Accept and evaluate applications for certification from a
community development financial institution on behalf of the taxpayer
and issue certificates to taxpayers in an aggregate amount that
shall not exceed the limit specified in subdivision (b), with highest
priority granted to those applications where the intended use of the
investments has the greatest aggregate benefit for low-to-moderate
income areas or households or rural areas or households. The
certificate shall include the amount eligible to be made as an
investment that qualifies for the credit and the total amount of the
credit to which the taxpayer is entitled for the taxable year.
Applications for tax credits shall be accepted and evaluated
throughout the year. The Insurance Commissioner shall establish tax
credit issuance cycles throughout the year as necessary in order to
issue tax credit certificates to those applications granted the
highest priority.
   (3) Provide an annual listing to the Franchise Tax Board, in the
form or manner agreed upon by the Franchise Tax Board and the
Department of Insurance, California Organized Investment Network, or
its successor, of the taxpayers who were issued certificates, their
respective tax identification numbers, the amount of the qualified
investment made by each taxpayer, and the total amount of qualified
investments.
   (4) Include information specified pursuant to subdivision (b) of
Section 12939.1 of the Insurance Code in the report required by
Section 12922 of the Insurance Code.
   (g) For purposes of this section:
   (1) "Qualified investment" means an investment that is a deposit
or loan that does not earn interest, or an equity investment, or an
equity-like debt instrument that conforms to the specifications for
these instruments as prescribed by the United States Department of
the Treasury, Community Development Financial Institutions Fund, or
its successor, or, in the absence of that prescription, as defined by
the Insurance Commissioner. The investment must be equal to or
greater than fifty thousand dollars ($50,000) and made for a minimum
duration of 60 months. During that 60-month period, the community
development financial institution shall have full use and control of
the proceeds of the entire amount of the investment as well as any
earnings on the investment for its community development purposes.
The entire amount of the investment shall be received by the
community development financial institution before the application
for the tax credit is submitted. The community development financial
institution shall use the proceeds of the investment for a purpose
that is consistent with its community development mission and for the
benefit of economically disadvantaged communities and low-income
people in California.
   (2) "Community development financial institution" means a private
financial institution located in this state that is certified by the
Department of Insurance, California Organized Investment Network, or
its successor, that, consistent with the legislative findings,
declarations, and intent set forth in Section 12939 of the Insurance
Code, has community development as its primary mission, and that
lends in urban, rural, or reservation-based communities in this
state. A community development financial institution may include a
community development bank, a community development loan fund, a
community development credit union, a microenterprise fund, a
community development corporation-based lender, or a community
development venture fund.
   (h) (1) If a qualified investment is withdrawn before the end of
the 60th month and not reinvested in another community development
financial institution within 60 days, there shall be added to the
"net tax," as defined in Section 17039, for the taxable year in which
the withdrawal occurs, the entire amount of any credit previously
allowed under this section.
   (2) If a qualified investment is reduced before the end of the
60th month, but not below fifty thousand dollars ($50,000), there
shall be added to the "net tax," as defined in Section 17039, for the
taxable year in which the reduction occurs, an amount equal to 20
percent of the total reduction for the taxable year.
   (i) 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"
for the next four taxable years, or until the credit has been
exhausted, whichever occurs first.
                                 (j) The Franchise Tax Board shall,
as requested by the Department of Insurance, California Organized
Investment Network, or its successor, advise and assist in the
administration of this section.
   (k) On or before June 30, 2016, the Legislative Analyst's Office
shall submit a report to the Legislature, in compliance with Section
9795 of the Government Code, on the effects of the tax credits
allowed under this section, Section 12209, and Section 23657, with a
focus on employment in low-to-moderate income and rural areas, and on
the benefits of these tax credits to low-to-moderate income and
rural persons.
   (  l  ) This section shall remain in effect only until
December 1,  2017,   2027,  and as of that
date is repealed.
   SEC. 3.    Section 23657 of the   Revenue
and Taxation Code   is amended to read: 
   23657.  (a) For each taxable year beginning on or after January 1,
1997, and before January 1,  2017,   2027,
 there shall be allowed as a credit against the amount of "tax,"
as defined in Section 23036, an amount equal to 20 percent of the
amount of each qualified investment made by a taxpayer during the
taxable year into a community development financial institution that
is certified by the Department of Insurance, California Organized
Investment Network, or any successor thereof.
   (b) (1) Notwithstanding any other provision of this part, a credit
shall not be allowed under this section unless the California
Organized Investment Network, or its successor within the Department
of Insurance, certifies that the investment described in subdivision
(a) qualifies for the credit under this section and certifies the
total amount of the credit allocated to the taxpayer pursuant to this
section.
   (2) A credit shall not be allowed by this section unless the
applicant and the taxpayer provide satisfactory substantiation to,
and in the form and manner requested by, the Department of Insurance,
California Organized Investment Network, or any successor thereof,
that the investment is a qualified investment, as defined in
paragraph (1) of subdivision (g).
   (3) (A) The aggregate amount of qualified investments made by all
taxpayers pursuant to this section, Section 12209, and Section
17053.57 shall not exceed  fifty million dollars
($50,000,000)   one hundred twenty million dollars
($120,000,000)  for each calendar year. However, if the
aggregate amount of qualified investments made in any calendar year
is less than  fifty million dollars ($50,000,000), 
 one hundred twenty million dollars ($120,000,000),  the
difference may be carried over to the next year, and any succeeding
year during which this section remains in effect, and added to the
aggregate amount authorized for those years.
   (B) The total amount of qualified investments certified by the
California Organized Investment Network in any calendar year to any
one community development financial institution together with its
affiliates, as defined in Section 1215 of the Insurance Code, shall
not exceed 30 percent of the annual aggregate amount of qualified
investments certified by the California Organized Investment Network.
If, after October 1, the California Organized Investment Network has
determined that the availability of tax credits exceed their demand,
then a community development financial institution that has been
allocated 30 percent of the annual aggregate amount of qualified
investments shall become eligible to apply to be certified for any
remaining tax credits in that calendar year.
   (C) Each year, 10 percent of the annual aggregate amount of
qualified investments shall be reserved for investment amounts of
less than or equal to two hundred thousand dollars ($200,000). If,
after October 1, there remains an unallocated portion of the amount
reserved for investments of less than or equal to two hundred
thousand dollars ($200,000), then qualified investments in excess of
two hundred thousand dollars ($200,000) may be eligible for that
remaining unallocated portion.
   (4) Priority among housing applications shall be given to
applications that support affordable rental housing, housing for
veterans, mortgages for community-based residential programs, and
self-help housing ahead of single-family owned housing.
   (c) The community development financial institution shall do all
of the following:
   (1) Apply to the Department of Insurance, California Organized
Investment Network, or its successor, for certification of its status
as a community development financial institution.
   (2) (A) Apply to the Department of Insurance, California Organized
Investment Network, or its successor, on behalf of the taxpayer, for
certification of the amount of the investment and the credit amount
allocated to the taxpayer, obtain the certification, and retain a
copy of the certification.
   (B) Provide in the application a detailed description of the
intended use of the investment funds including, but not limited to,
the following:
   (i) All of the programs, projects, and services that would be
funded.
   (ii) The percentage of the intended use of the investment funds
that would directly benefit low-to-moderate income households.
   (iii) The percentage of the intended use of the investment funds
that would directly benefit rural areas.
   (iv) The percentage of the intended use of the investment funds
that is a green investment as defined in Section 926.1 of the
Insurance Code.
   (3) (A) Provide in the application required in paragraph (2) the
following information to the Department of Insurance, California
Organized Investment Network, or its successor:
   (i) Name of the taxpayer.
   (ii) Postal address of the taxpayer, or residential address of the
taxpayer if the taxpayer is an individual.
   (iii) Phone number of the taxpayer.
   (iv) Email address of the taxpayer.
   (v) The taxpayer's California company identification number for
tax administration purposes, or in the case of an "S" corporation,
the taxpayer identification numbers of all the shareholders for tax
administration purposes.
   (B) The information provided in subparagraph (A) shall be used
only for internal purposes by the Department of Insurance, California
Organized Investment Network, or its successor, and any public
disclosure of that information shall be limited to the name of the
taxpayer only.
   (4) Provide an annual listing to the Franchise Tax Board, in the
form and manner agreed upon by the Franchise Tax Board and the
Department of Insurance, California Organized Investment Network, or
its successor, of the names and taxpayer identification numbers of
any taxpayer who makes any withdrawal or partial withdrawal of a
qualified investment before the expiration of 60 months from the date
of the qualified investment.
   (5) Submit reports to the  department,  
Department of Insurance,  California Organized Investment
Network, or any successor thereof, as required pursuant to
subdivision (a) of Section 12939.1 of the Insurance Code.
   (d) The California Organized Investment Network may certify
investments for the credit allowed by this section on or before
January 1,  2017,   2027,  but not after
that date.
   (e) (1) The Insurance Commissioner may develop instructions,
procedures, and standards for applications, and for administering the
criteria for the evaluation of applications under this section. The
Insurance Commissioner may, from time to time, adopt, amend, or
repeal regulations to implement the provisions of this section.
   (2) The initial adoption of the regulations implementing this
section shall be deemed to be an emergency and necessary in order to
address a situation calling for immediate action to avoid serious
harm to the public peace, health, safety, or general welfare.
   (3) Notwithstanding Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, any
emergency regulation adopted or amended by the Insurance Commissioner
pursuant to this section shall remain in effect until amended or
repealed by the department.
   (f) The Department of Insurance, California Organized Investment
Network, or any successor thereof, shall do all of the following:
   (1) Accept and evaluate applications for certification from
financial institutions and issue certificates that the applicant is a
community development financial institution qualified to receive
qualified investments. To receive a certificate, an applicant shall
satisfy the Department of Insurance, California Organized Investment
Network, or any successor thereof, that it meets the specific
requirements to be a community development financial institution for
this state program as defined in paragraph (2) of subdivision (g).
The certificate may be issued for a specified period of time, and may
include reasonable conditions to effectuate the intent of this
section. The Insurance Commissioner may suspend or revoke a
certification, after affording the institution notice and the
opportunity to be heard, if the commissioner finds that an
institution no longer meets the requirement for certification.
   (2) Accept and evaluate applications for certification from any
community development financial institution on behalf of the taxpayer
and issue certificates to taxpayers in an aggregate amount that
shall not exceed the limit specified in subdivision (b), with highest
priority granted to those applications where the intended use of the
investments has the greatest aggregate benefit for low-to-moderate
income areas or households or rural areas or households. The
certificate shall include the amount eligible to be made as an
investment that qualifies for the credit and the total amount of the
credit to which the taxpayer is entitled for the taxable year.
Applications for tax credits shall be accepted and evaluated
throughout the year. The Insurance Commissioner shall establish tax
credit issuance cycles throughout the year as necessary in order to
issue tax credit certificates to those applications granted the
highest priority.
   (3) Provide an annual listing to the Franchise Tax Board, in the
form or manner agreed upon by the Franchise Tax Board and the
Department of Insurance, California Organized Investment Network, or
its successor, of the taxpayers who were issued certificates, their
respective tax identification numbers, the amount of the qualified
investment made by each taxpayer, and the total amount of qualified
investments.
   (4) Include information specified pursuant to subdivision (b) of
Section 12939.1 of the Insurance Code in the report required by
Section 12922 of the Insurance Code.
   (g) For purposes of this section:
   (1) "Qualified investment" means an investment that is a deposit
or loan that does not earn interest, or an equity investment, or an
equity-like debt instrument that conforms to the specifications for
these instruments as prescribed by the United States Department of
the Treasury, Community Development Financial Institutions Fund, or
its successor, or, in the absence of that prescription, as defined by
the Insurance Commissioner. The investment must be equal to or
greater than fifty thousand dollars ($50,000) and made for a minimum
duration of 60 months. During that 60-month period, the community
development financial institution shall have full use and control of
the proceeds of the entire amount of the investment as well as any
earnings on the investment for its community development purposes.
The entire amount of the investment shall be received by the
community development financial institution before the application
for the tax credit is submitted. The community development financial
institution shall use the proceeds of the investment for a purpose
that is consistent with its community development mission and for the
benefit of economically disadvantaged communities and low-income
people in California.
   (2) "Community development financial institution" means a private
financial institution located in this state that is certified by the
Department of Insurance, California Organized Investment Network, or
its successor, that, consistent with the legislative findings,
declarations, and intent set forth in Section 12939 of the Insurance
Code, has community development as its primary mission, and that
lends in urban, rural, or reservation-based communities in this
state. A community development financial institution may include a
community development bank, a community development loan fund, a
community development credit union, a microenterprise fund, a
community development corporation-based lender, or a community
development venture fund.
   (h) (1) If a qualified investment is withdrawn before the end of
the 60th month and not reinvested in another community development
financial institution within 60 days, there shall be added to the
"tax," as defined in Section 23036, for the taxable year in which the
withdrawal occurs, the entire amount of any credit previously
allowed under this section.
   (2) If a qualified investment is reduced before the end of the
60th month, but not below fifty thousand dollars ($50,000), there
shall be added to the "tax," as defined in Section 23036, for the
taxable year in which the reduction occurs, an amount equal to 20
percent of the total reduction for the taxable year.
   (i) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" for the
next four taxable years, or until the credit has been exhausted,
whichever occurs first.
   (j) The Franchise Tax Board shall, as requested by the Department
of Insurance, California Organized Investment Network, or its
successor, advise and assist in the administration of this section.
   (k) On or before June 30, 2016, the Legislative Analyst's Office
shall submit a report to the Legislature, in compliance with Section
9795 of the Government Code, on the effects of the tax credits
allowed under this section, Section 12209, and Section 17053.57, with
a focus on employment in low-to-moderate income and rural areas, and
on the benefits of these tax credits to low-to-moderate income and
rural persons.
   (  l  ) This section shall remain in effect only until
December 1,  2017,   2027,  and as of that
date is repealed.
   SEC. 4.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.  
  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 forty
billion dollars ($40,000,000,000) in NMTC in 836 awards, including
three billion dollars ($3,000,000,000) in American Recovery and
Investment Act of 2009 awards and one billion dollars
($1,000,000,000) of special allocation authority to be used for the
recovery and redevelopment of the Gulf Opportunity Zone.
   (c) Since 2003, the NMTC Program has created or retained an
estimated 197,585 jobs nationally. It has also supported the
construction of 32.4 million square feet of manufacturing space, 74.8
million square feet of office space, and 57.5 million square feet of
retail space. The United States Department of the Treasury reports
that a secondary benefit is that as these communities develop, they
become more attractive to investors, catalyzing a ripple effect that
spurs further investments and revitalization.
   (d) For every one dollar ($1) invested by the federal government,
the NMTC Program generates over eight dollars ($8) of private
investment. The NMTC Program catalyzes investment in the most
economically challenged areas of the state. Over 75 percent of New
Markets Tax Credit investments have been made in highly distressed
areas, meaning the household income was less than 60 percent of
statewide median income and the poverty rate was higher than 30
percent.
   (e) 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). Any investment by any taxpayer in the CDE
redeemed before the end of the seven-year period will be recaptured.
   (f) 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 a state more attractive to CDEs, which results in increasing the
amount of federal NMTCs being utilized in a 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 twelve dollars ($12) to fourteen dollars ($14)
of private investment. 
  SEC. 2.    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-sized 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. RTCA 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, 2017,
and before January 1, 2022, and subject to subdivision (h), there
shall be allowed as a credit against the tax described in Section
12201, in an amount determined in accordance with Section 45D of the
Internal Revenue Code, relating to the new markets tax credit, as
modified in this section.
   (2) For the purposes of this section, "RTCA" means the Responsible
Tax Credit Administrator, as designated by the Governor.
   (c) Section 45D of the Internal Revenue Code is modified as
follows:
   (1) 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.
   (2) (A) Section 45D(c)(1) of the Internal Revenue Code, relating
to qualified community development entity, is modified to only
include a qualified community development entity, that is certified
by the Secretary of the Treasury, and its subsidiary qualified
community development entities that 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.
   (B)  Section 45D(c)(2) of the Internal Revenue Code, relating to
special rules for certain organizations, is modified to only include
a specialized small business investment company or community
development financial institution that 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.
   (3) 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) By substituting "any low-income community in California" for
"any low-income community" every place it appears in Section 45D of
the Internal Revenue Code.
   (B) A qualified active low-income community business shall 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.
   (C) 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 one or more California
low-income communities. The operating business shall meet all other
conditions of a qualified active low-income community business,
except as modified by this paragraph. This requirement does not apply
to a business that is located on land and is controlled by, or under
common control with, a federally recognized tribe.
   (D) 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
nonmetropolitan area, with a median family income that does not
exceed 60 percent of median family income for this state, 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.
   (E) 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.
   (F) 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.
   (G) A qualified active low-income community business shall not
include a charter school.
   (4) Section 45D(f) of the Internal Revenue Code, relating to
national limitation on amount of investments designated, is modified
as follows:
   (A) The following shall apply in lieu of the provisions of Section
45D(f)(1) of the Internal Revenue Code: The aggregate amount of
qualified equity investments that may be allocated in any calendar
year for purposes of this section, Section 17053.9, and Section
23622.9 shall be forty million dollars ($40,000,000) per calendar
year. The allocation of any undesignated qualified equity investments
shall be returned to RTCA by March 1 of the year following
allocation and the value of the undesignated qualified equity
investment shall be available for allocation in the following
calendar years in accordance with the application process. Any
qualified equity investment attributable
             to recaptured credits shall be available to RTCA on
March 1 of the year following recapture and shall be available for
allocation in the following calendar years in accordance with
subparagraph (B) of paragraph (5). Reallocated qualified equity
investments attributable to recapture credits shall not count against
the annual or the cumulative limit.
   (B) The references to "the Secretary" in Section 45D(f)(2) of the
Internal Revenue Code, relating to allocation of limitation, is
modified to read "RTCA."
   (C) The last sentence of Section 45D(f)(3) of the Internal Revenue
Code, relating to carryover of unused limitation, shall not apply.
   (5) Section 45D(g)(3) of the Internal Revenue Code, relating to
recapture event, is modified to add the following:
   (A) The qualified community development entity fails to comply
with subparagraph (D) of paragraph (5) of subdivision (d). In this
case, recapture shall be 100 percent of the credit.
   (B) RTCA 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.
   (C) Recaptured qualified equity investments revert back to RTCA
and shall be reissued. The reissue shall not count toward the annual
or cumulative allocation limitation. 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 (E) of
paragraph (5) of subdivision (d) by the annual allocation limitation.

   (ii) Thereafter, in accordance with the application process.
   (D) Enforcement of each of the recapture provisions shall be
subject to a six-month cure period.
   (d) (1) RTCA shall adopt guidelines necessary or appropriate to
carry out its responsibilities with respect to the allocation,
monitoring, and management of the tax credit program authorized by
this section.
   (2) (A) RTCA shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
that in the aggregate defray the cost of reviewing applications for
the program. RTCA may impose other reasonable fees upon entities that
receive the allocation pursuant to this subdivision that in the
aggregate defray the cost of administering the program.
   (B) The fees collected shall be deposited in the California New
Markets Tax Credit Fund established in Section 18410.3.
   (3) In developing guidelines, RTCA shall adopt an allocation
process that does all of the following:
   (A) Creates an equitable distribution process that ensures that
low-income community populations 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 authority to
designate qualified equity investments, 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).
   (4) (A) Subject to subdivision (h), RTCA shall begin accepting
applications on or before May 15, 2017, and shall award authority to
designate qualified equity investments annually through 2021.
   (B) In the instance where RTCA determines that an application is
incomplete, the qualified community development entity shall be given
five business days to provide the omitted information.
   (5) (A) In the 2017 awards cycle, RTCA shall award authority to
designate qualified equity investments to qualified community
development entities described in paragraph (2) of subdivision (c) in
the order applications are received by RTCA. Applications received
on the same day shall be deemed to have been received simultaneously.

   (B) In the 2018 to 2021 award cycles, inclusive, at least 60
percent of the authority to designate qualified equity investments
shall be awarded pursuant to subparagraph (A). At the discretion of
RTCA, a higher percentage of authority to designate qualified equity
investments may be awarded pursuant to subparagraph (A).
   (C) RTCA shall award up to 40 percent of the authority to
designate qualified equity investments in the 2018 to 2021,
inclusive, award cycles, to qualified community development entities
on a competitive basis that meets the following criteria:
   (i) Awards shall be reviewed using blind scoring and a review
committee that is composed of community development finance
practitioners and members having demonstrated experience in assessing
organizational business strategy, community outcomes, capitalization
strategy, and management capacity.
   (ii) 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
qualified equity investment or other assistance from any applicant.
   (iii) Priority shall be provided to both of the following:
   (I) Applications that commit to addressing the hardest to serve
and undercapitalized lower income populations.
   (II) Applications that support neighborhood revitalization
strategies driven by local grassroots stakeholders in multiple
low-income communities across one or more regions or the state. These
applications shall demonstrate how their investment activity
provides a scalable economic development model.
   (D) For applications described in subparagraphs (A) and (B),
applications for awards shall include a commitment to make at least
15 percent of qualified community development investments to a
qualified community development entity with the assistance of a
nonprofit organization, as documented by a cooperation agreement that
states the terms and conditions of that assistance. For the purposes
of this subparagraph, the following shall apply:
   (i) A qualified community development entity shall be certified
under Section 45D of the Internal Revenue Code but has not received a
federal New Markets Tax Credit allocation on or after January 1,
2012, and has either a local service area that includes one or more
California communities or a California statewide service area, but
excluding qualified community development entities with a national
service area.
   (ii) A nonprofit organization shall meet all of the following
requirements: Is tax exempt under Section 23701, is registered with
the Registry of Charitable Trusts, which is administered by the
Attorney General, has articles of incorporation or articles of
organization that state the primary mission of the organization is
focused on improving the economic well-being of low-income
communities or individuals, and has bylaws that provide that the
organization maintains accountability to residents of low-income
communities through their representation on any governing board or on
an advisory board of the nonprofit organization.
   (E) (i)  For applications described in subparagraph (A), in the
event requests for authority to designate qualified equity
investments exceed the applicable annual allocation limitation, RTCA
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.
   (ii) If a pending request cannot be fully certified due to this
limit, RTCA shall certify the portion that may be certified unless
the qualified community development entity elects to withdraw its
request rather than receive partial certification.
   (F) 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 RTCA within 30 calendar days of such transfer and
include the information required in the application with respect to
such transferee with such notice. The transferee shall be subject to
the same rules, requirements, and limitations applicable to the
transferor.
   (G) Within 200 calendar days of RTCA sending notice of
certification, the qualified community development entity or any
transferee, under subparagraph (F), 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 (F), shall provide RTCA with evidence of the receipt of
the cash investment within 205 calendar days of the applicant
receiving notice of certification. If the qualified community
development entity or any transferee, under subparagraph (F), does
not receive the cash investment and issue the qualified equity
investment within 200 calendar days of RTCA sending the certification
notice, the certification shall lapse and the entity may not issue
the qualified equity investment without reapplying to RTCA for
certification. Lapsed certifications revert back to RTCA and shall be
reissued in the following order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (E)
under the annual allocation limitation of forty million dollars
($40,000,000) in paragraph (4) of subdivision (c).
   (ii) Thereafter, in accordance with the application process.
   (H) A qualified community development entity that issues qualified
equity investments shall notify RTCA of the names of taxpayers that
are eligible to utilize tax credits pursuant to this section and any
transfer of a qualified equity investment.
   (6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to RTCA that
provides documentation as to the investment of at least 85 percent of
the funds being deployed within one year 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) Evidence that the community development entity complied with
subparagraph (D) of paragraph (5).
   (iv) Any other information required by RTCA as being necessary to
meet the requirements of this section.
   (B) Thereafter, the qualified community development entity shall
submit an annual report to RTCA 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 social, environmental, and economic impact the credit had
on the low-income community during the report period and
cumulatively.
   (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.
   (vi) Location of each qualified low-income community business
assisted by a qualified low-income community investment.
   (vii) Summary of the outcomes of each of the revenue impact
assessments undertaken by the qualified community development entity
during the year.
   (viii) Any other information requested by RTCA.
   (e) (1) In the case where the credit allowed by this section
exceeds the tax described in Section 12201, 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.
   (2) A taxpayer allowed a credit under this section for a qualified
equity investment shall not be eligible for any other credit under
this part with respect to that investment.
   (3) The credit allowed under this section may be in addition to
any credit allowed under Section 45D of the Internal Revenue Code.
   (f) RTCA shall annually report on its Internet Web site the
information provided by low-income community development entities and
on the geographic distribution of the 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 RTCA relative to the application and reporting
of a qualified community development entity.
   (2) A qualified community development entity shall provide RTCA
with the name, address, and tax identification number of each
investor and entity for which a qualified equity investment was
designated by the qualified community development entity, pursuant to
this section. RTCA shall provide this information to the Insurance
Commissioner in a manner determined by the Insurance Commissioner.
   (h) (1) The credit authorized by this section shall only be
allowed for those taxable years for which moneys are appropriated to
RTCA to administer the California New Markets Tax Credit pursuant to
18410.3 for that taxable year. The appropriation shall specifically
identify the California New Markets Tax Credit.
   (2) For those taxable years for which those moneys are
appropriated pursuant to paragraph (1), RTCA shall post notice of the
appropriation on the homepage of its Internet Web site and send
notice of such appropriation to the Secretary of State and the
Legislative Counsel.
   (i) This section shall be repealed on December 1, 2022. 

  SEC. 3.    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-sized 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. RTCA 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, 2017,
and before January 1, 2022, and subject to subdivision (h), there
shall be allowed as a credit against the "net tax," as defined in
Section 17039, in an amount determined in accordance with Section 45D
of the Internal Revenue Code, relating to the new markets tax
credit, as modified in this section.
   (2) For the purposes of this section, "RTCA" means the Responsible
Tax Credit Administrator, as designated by the Governor.
   (c) Section 45D of the Internal Revenue Code is modified as
follows:
   (1) 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.
   (2) (A) Section 45D(c)(1) of the Internal Revenue Code, relating
to qualified community development entity, is modified to only
include a qualified community development entity, that is certified
by the Secretary of the Treasury, and its subsidiary qualified
community development entities that 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.
   (B) Section 45D(c)(2) of the Internal Revenue Code, relating to
special rules for certain organizations, is modified to only include
a specialized small business investment company or community
development financial institution that 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.
   (3) 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) By substituting "any low-income community in California" for
"any low-income community" every place it appears in Section 45D of
the Internal Revenue Code.
   (B) A qualified active low-income community business shall 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.
   (C) 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 one or more California
low-income communities. The operating business shall meet all other
conditions of a qualified active low-income community business,
except as modified by this paragraph. This requirement does not apply
to a business that is located on land and is controlled by, or under
common control with, a federally recognized tribe.
   (D) 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
nonmetropolitan area, with a median family income that does not
exceed 60 percent of median family income for this state, 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.
   (E) 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.
   (F) 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.
   (G) A qualified active low-income community business shall not
include a charter school.
   (4) Section 45D(f) of the Internal Revenue Code, relating to
national limitation on amount of investments designated, is modified
as follows:
   (A) The following shall apply in lieu of the provisions of Section
45D(f)(1) of the Internal Revenue Code: The aggregate amount of
qualified equity investments that may be allocated in any calendar
year for purposes of this section, Section 12283, and Section 23622.9
shall be forty million dollars ($40,000,000) per calendar year. The
allocation of any undesignated qualified equity investments shall be
returned to RTCA by March 1 of the year following allocation and the
value of the undesignated qualified equity investment shall be
available for allocation in the following calendar years in
accordance with the application process. Any qualified equity
investment attributable to recaptured credits shall be available to
RTCA on March 1 of the year following recapture and shall be
available for allocation in the following calendar years in
accordance with clause (ii) of subparagraph (B) of paragraph (5).
Reallocated qualified equity investments attributable to recapture
credits shall not count against the annual or the cumulative limit.
   (B) The references to "the Secretary" in Section 45D(f)(2) of the
Internal Revenue Code, relating to allocation of limitation, is
modified to read "RTCA."
   (C) The last sentence of Section 45D(f)(3) of the Internal Revenue
Code, relating to carryover of unused limitation, shall not apply.
   (5) (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, is modified to add the following:
   (i) The qualified community development entity fails to comply
with subparagraph (D) of paragraph (5) of subdivision (d). In this
case, recapture shall be 100 percent of the credit.
   (ii) RTCA 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.
   (iii)  Recaptured qualified equity investments revert back to RTCA
and shall be reissued. The reissue shall not count toward the annual
or cumulative allocation limitation. 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 (E) of
paragraph (5) of subdivision (d) by the annual allocation limitation.

                                                     (II)
Thereafter, in accordance with the application process.
   (iv) Enforcement of each of the recapture provisions shall be
subject to a six-month cure period.
   (d) (1) RTCA shall adopt guidelines necessary or appropriate to
carry out its responsibilities with respect to the allocation,
monitoring, and management of the tax credit program authorized by
this section.
   (2) (A) RTCA shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
that in the aggregate defray the cost of reviewing applications for
the program. RTCA may impose other reasonable fees upon entities that
receive the allocation pursuant to this subdivision that in the
aggregate defray the cost of administering the program.
   (B) The fees collected shall be deposited in the California New
Markets Tax Credit Fund established in Section 18410.3.
   (3) In developing guidelines, RTCA shall adopt an allocation
process that does all of the following:
   (A) Creates an equitable distribution process that ensures that
low-income community populations 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 authority to
designate qualified equity investments, 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).
   (4) (A) Subject to subdivision (h), RTCA shall begin accepting
applications on or before May 15, 2017, and shall award authority to
designate qualified equity investments annually through 2021.
   (B) In the instance where RTCA determines that an application is
incomplete, the qualified community development entity shall be given
five business days to provide the omitted information.
   (5) (A) In the 2017 awards cycle, RTCA shall award authority to
designate qualified equity investments to qualified community
development entities described in paragraph (2) of subdivision (c) in
the order applications are received by RTCA. Applications received
on the same day shall be deemed to have been received simultaneously.

   (B) In the 2018 to 2021 award cycles, inclusive, at least 60
percent of the authority to designate qualified equity investments
shall be awarded pursuant to subparagraph (A). At the discretion of
RTCA, a higher percentage of authority to designate qualified equity
investments may be awarded pursuant to subparagraph (A).
   (C) RTCA shall award up to 40 percent of the authority to
designate qualified equity investments in the 2018 to 2021,
inclusive, award cycles, to qualified community development entities
on a competitive basis that meets the following criteria:
   (i) Awards shall be reviewed using blind scoring and a review
committee that is composed of community development finance
practitioners and members having demonstrated experience in assessing
organizational business strategy, community outcomes, capitalization
strategy, and management capacity.
   (ii) 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
qualified equity investment or other assistance from any applicant.
   (iii) Priority shall be provided to both of the following:
   (I) Applications that commit to addressing the hardest to serve
and undercapitalized lower income populations.
   (II) Applications that support neighborhood revitalization
strategies driven by local grassroots stakeholders in multiple
low-income communities across one or more regions or the state. These
applications shall demonstrate how their investment activity
provides a scalable economic development model.
   (D) For applications described in subparagraphs (A) and (B),
applications for awards shall include a commitment to make at least
15 percent of qualified community development investments to a
qualified community development entity with the assistance of a
nonprofit organization as documented by a cooperation agreement that
states the terms and conditions of that assistance. For the purposes
of this subparagraph, the following shall apply:
   (i) A qualified community development entity shall be certified
under Section 45D of the Internal Revenue Code but has not received a
federal New Markets Tax Credit allocation on or after January 1,
2012, and has either a local service area that includes one or more
California communities or a California statewide service area, but
excluding qualified community development entities with a national
service area.
   (ii) A nonprofit organization shall meet all of the following
requirements: Is tax exempt under Section 23701, is registered with
the Registry of Charitable Trusts, which is administered by the
Attorney General, has articles of incorporation or articles of
organization that state the primary mission of the organization is
focused on improving the economic well-being of low-income
communities or individuals, and has bylaws that provide that the
organization maintains accountability to residents of low-income
communities through their representation on any governing board or on
an advisory board of the nonprofit organization.
   (E) (i) For applications described in subparagraph (A), in the
event requests for authority to designate qualified equity
investments exceed the applicable annual allocation limitation, RTCA
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.
   (ii) If a pending request cannot be fully certified due to this
limit, RTCA shall certify the portion that may be certified unless
the qualified community development entity elects to withdraw its
request rather than receive partial certification.
   (F) 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 RTCA within 30 calendar days of such transfer and
include the information required in the application with respect to
such transferee with such notice. The transferee shall be subject to
the same rules, requirements, and limitations applicable to the
transferor.
   (G) Within 200 calendar days of RTCA sending notice of
certification, the qualified community development entity or any
transferee, under subparagraph (F), 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 (F), shall provide RTCA with evidence of the receipt of
the cash investment within 205 calendar days of the applicant
receiving notice of certification. If the qualified community
development entity or any transferee, under subparagraph (F), does
not receive the cash investment and issue the qualified equity
investment within 200 calendar days of RTCA sending the certification
notice, the certification shall lapse and the entity may not issue
the qualified equity investment without reapplying to RTCA for
certification. Lapsed certifications revert back to RTCA and shall be
reissued in the following order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (E)
under the annual allocation limitation of forty million dollars
($40,000,000) in paragraph (4) of subdivision (c).
   (ii) Thereafter, in accordance with the application process.
   (H) A qualified community development entity that issues qualified
equity investments shall notify RTCA of the names of taxpayers that
are eligible to utilize tax credits pursuant to this section and any
transfer of a qualified equity investment.
   (6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to RTCA that
provides documentation as to the investment of at least 85 percent of
the funds being deployed within one year 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) Evidence that the community development entity complied with
subparagraph (D) of paragraph (5).
   (iv) Any other information required by RTCA as being necessary to
meet the requirements of this section.
   (B) Thereafter, the qualified community development entity shall
submit an annual report to RTCA 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 social, environmental, and economic impact the credit had
on the low-income community during the report period and
cumulatively.
   (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.
   (vi) Location of each qualified low-income community business
assisted by a qualified low-income community investment.
   (vii) Summary of the outcomes of each of the revenue impact
assessments undertaken by the qualified community development entity
during the year.
   (viii) Any other information requested by RTCA.
   (e) (1) 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.
   (2) A taxpayer allowed a credit under this section for a qualified
equity investment shall not be eligible for any other credit under
this part with respect to that investment.
   (3) The credit allowed under this section may be in addition to
any credit allowed under Section 45D of the Internal Revenue Code.
   (f) RTCA shall annually report on its Internet Web site the
information provided by low-income community development entities and
on the geographic distribution of the 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 RTCA relative to the application and reporting
of a qualified community development entity.
   (2) A qualified community development entity shall provide RTCA
with the name, address, and tax identification number of each
investor and entity for which a qualified equity investment was
designated by the qualified community development entity, pursuant to
this section. RTCA shall provide this information to the Franchise
Tax Board in a manner determined by the Franchise Tax Board.
   (h) (1) The credit authorized by this section shall only be
allowed for those taxable years for which moneys are appropriated to
RTCA to administer the California New Markets Tax Credit pursuant to
18410.3 for that taxable year. The appropriation shall specifically
identify the California New Markets Tax Credit.
   (2) For those taxable years for which those moneys are
appropriated pursuant to paragraph (1), RTCA shall post notice of the
appropriation on the homepage of its Internet Web site and send
notice of such appropriation to the Secretary of State and the
Legislative Counsel.
   (i) This section shall be repealed on December 1, 2022. 

  SEC. 4.    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 annual 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.    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-sized 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. RTCA 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, 2017,
and before January 1, 2022, and subject to subdivision (h), there
shall be allowed as a credit against the "tax," as defined in Section
23036, in an amount determined in accordance with Section 45D of the
Internal Revenue Code, relating to the new markets tax credit, as
modified in this section.
   (2) For the purposes of this section, "RTCA" means the Responsible
Tax Credit Administrator, as designated by the Governor.
   (c) Section 45D of the Internal Revenue Code is modified as
follows:
   (1) 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.
   (2) (A) Section 45D(c)(1) of the Internal Revenue Code, relating
to qualified community development entity, is modified to only
include a qualified community development entity, that is certified
by the Secretary of the Treasury, and its subsidiary qualified
community development entities that 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.
   (B) Section 45D(c)(2) of the Internal Revenue Code, relating to
special rules for certain organizations, is modified to only include
a specialized small business investment company or community
development financial institution that 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.
   (3) 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) By substituting "any low-income community in California" for
"any low-income community" every place it appears in Section 45D of
the Internal Revenue Code.
   (B) A qualified active low-income community business shall 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.
   (C) 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 one or more California
low-income communities. The operating business shall meet all other
conditions of a qualified active low-income community business,
except as modified by this paragraph. This requirement does not apply
to a business that is located on land and is controlled by, or under
common control with, a federally recognized tribe.
   (D) 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
nonmetropolitan area, with a median family income that does not
exceed 60 percent of median family income for this state, 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.
   (E) 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.
   (F) 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.
   (G) A qualified active low-income community business shall not
include a charter school.
   (4) Section 45D(f) of the Internal Revenue Code, relating to
national limitation on amount of investments designated, is modified
as follows:
   (A) The following shall apply in lieu of the provisions of Section
45D(f)(1) of the Internal Revenue Code: The aggregate amount of
qualified equity investments that may be allocated in any calendar
year for purposes of this section, Section 12283, and Section 17053.9
shall be forty million dollars ($40,000,000) per calendar year. The
allocation of any undesignated qualified equity investments shall be
returned to RTCA by March 1 of the year following allocation and the
value of the undesignated qualified equity investment shall be
available for allocation in the following calendar years in
accordance with the application process. Any qualified equity
investment attributable to recaptured credits shall be available to
RTCA on March 1 of the year following recapture and shall be
available for allocation in the following calendar years in
accordance with clause (ii) of subparagraph (B) of paragraph (5).
Reallocated qualified equity investments attributable to recapture
credits shall not count against the annual or the cumulative limit.
   (B) The references to "the Secretary" in Section 45D(f)(2) of the
Internal Revenue Code, relating to allocation of limitation, is
modified to read "RTCA."
   (C) The last sentence of Section 45D(f)(3) of the Internal Revenue
Code, relating to carryover of unused limitation, shall not apply.
   (5) (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, is modified to add the following:
   (i) The qualified community development entity fails to comply
with subparagraph (D) of paragraph (5) of subdivision (d). In this
case, recapture shall be 100 percent of the credit.
   (ii) RTCA 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.
   (iii) Recaptured qualified equity investments revert back to RTCA
and shall be reissued. The reissue shall not count toward the annual
or cumulative allocation limitation. 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 (E) of
paragraph (5) of subdivision (d) by the annual allocation limitation.

   (II) Thereafter, in accordance with the application process.
   (iv) Enforcement of each of the recapture provisions shall be
subject to a six-month cure period.
   (d) (1) RTCA shall adopt guidelines necessary or appropriate to
carry out its responsibilities with respect to the allocation,
monitoring, and management of the tax credit program authorized by
this section.
   (2) (A) RTCA shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
that in the aggregate defray the cost of reviewing applications for
the program. RTCA may impose other reasonable fees upon entities that
receive the allocation pursuant to this subdivision that in the
aggregate defray the cost of administering the program.
   (B) The fees collected shall be deposited in the California New
Markets Tax Credit Fund established in Section 18410.3.
   (3) In developing guidelines, RTCA shall adopt an allocation
process that does all of the following:
   (A) Creates an equitable distribution process that ensures that
low-income community populations 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 authority to designate qualified equity investments, 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).
   (4) (A) Subject to subdivision (h), RTCA shall begin accepting
applications on or before May 15, 2017, and shall award authority to
designate qualified equity investments annually through 2021.
   (B) In the instance where RTCA determines that an application is
incomplete, the qualified community development entity shall be given
five business days to provide the omitted information.
   (5) (A) In the 2017 awards cycle, RTCA shall award authority to
designate qualified equity investments to qualified community
development entities described in paragraph (2) of subdivision (c) in
the order applications are received by RTCA. Applications received
on the same day shall be deemed to have been received simultaneously.

   (B) In the 2018 to 2021 award cycles, inclusive, at least 60
percent of the authority to designate qualified equity investments
shall be awarded pursuant to subparagraph (A). At the discretion of
RTCA, a higher percentage of authority to designate qualified equity
investments may be awarded pursuant to subparagraph (A).
   (C) RTCA shall award up to 40 percent of the authority to
designate qualified equity investments in the 2018 to 2021,
inclusive, award cycles, to qualified community development entities
on a competitive basis that meets the following criteria:
   (i) Awards shall be reviewed using blind scoring and a review
committee that is composed of community development finance
practitioners and members having demonstrated experience in assessing
organizational business strategy, community outcomes, capitalization
strategy, and management capacity.
   (ii) 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
qualified equity investment or other assistance from any applicant.
   (iii) Priority shall be provided to both of the following:
   (I) Applications that commit to addressing the hardest to serve
and undercapitalized lower income populations.
   (II) Applications that support neighborhood revitalization
strategies driven by local grassroots stakeholders in multiple
low-income communities across one or more regions or the state. These
applications shall demonstrate how their investment activity
provides a scalable economic development model.
   (D) For applications described in subparagraphs (A) and (B),
applications for awards shall include a commitment to make at least
15 percent of qualified community development investments to a
qualified community development entity with the assistance of a
nonprofit organization as documented by a cooperation agreement that
states the terms and conditions of that assistance. For the purposes
of this subparagraph, the following shall apply:
   (i) A qualified community development entity shall be certified
under Section 45D of the Internal Revenue Code but has not received a
federal New Markets Tax Credit allocation on or after January 1,
2012, and has either a local service area that includes one or more
California communities or a California statewide service area, but
excluding qualified community development entities with a national
service area.
   (ii) A nonprofit organization shall meet all of the following
requirements: Is tax exempt under Section 23701, is registered with
the Registry of Charitable Trusts, which is administered by the
Attorney General, has articles of incorporation or articles of
organization that state the primary mission of the organization is
focused on improving the economic well-being of low-income
communities or individuals, and has bylaws that provide that the
organization maintains accountability to residents of low-income
communities through their representation on any governing board or on
an advisory board of the nonprofit organization.
   (E) (i) For applications described in subparagraph (A), in the
event requests for authority to designate qualified equity
investments exceed the applicable annual allocation limitation, RTCA
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.
   (ii) If a pending request cannot be fully certified due to this
limit, RTCA shall certify the portion that may be certified unless
the qualified community development entity elects to withdraw its
request rather than receive partial certification.
   (F) 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 RTCA within 30 calendar days of such transfer and
include the information required in the application with respect to
such transferee with such notice. The transferee shall be subject to
the same rules, requirements, and limitations applicable to the
transferor.
   (G) Within 200 calendar days of RTCA sending notice of
certification, the qualified community development entity or any
transferee, under subparagraph (F), 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 (F), shall provide RTCA with evidence of the receipt of
the cash investment within 205 calendar days of the applicant
receiving notice of certification. If the qualified community
development entity or any transferee, under subparagraph (F), does
not receive the cash investment and issue the qualified equity
investment within 200 calendar days of RTCA sending the certification
notice, the certification shall lapse and the entity may not issue
the qualified equity investment without reapplying to RTCA for
certification. Lapsed certifications revert back to RTCA and shall be
reissued in the following order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (E)
under the annual allocation limitation of forty million dollars
($40,000,000) in paragraph (4) of subdivision (c).
   (ii) Thereafter, in accordance with the application process.
   (H) A qualified community development entity that issues qualified
equity investments shall notify RTCA of the names of taxpayers that
are eligible to utilize tax credits pursuant to this section and any
transfer of a qualified equity investment.
   (6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to RTCA that
provides documentation as to the investment of at least 85 percent of
the funds being deployed within one year 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) Evidence that the community development entity complied with
subparagraph (D) of paragraph (5).
   (iv) Any other information required by RTCA as being necessary to
meet the requirements of this section.
   (B) Thereafter, the qualified community development entity shall
submit an annual report to RTCA 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 social, environmental, and economic impact the credit had
on the low-income community during the report period and
cumulatively.
   (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.
   (vi) Location of each qualified low-income community business
assisted by a qualified low-income community investment.
   (vii) Summary of the outcomes of each of the revenue impact
assessments undertaken by the qualified community development entity
during the year.
   (viii) Any other information requested by RTCA.
   (e) (1) 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.
   (2) A taxpayer allowed a credit under this section for a qualified
equity investment shall not be eligible for any other credit under
this part with respect to that investment.
   (3) The credit allowed under this section may be in addition to
any credit allowed under Section 45D of the Internal Revenue Code.
   (f) RTCA shall annually report on its Internet Web site the
information provided by low-income community development entities and
on the geographic distribution of the 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 RTCA relative to the application and reporting
of a qualified community development entity.
   (2) A qualified community development entity shall provide RTCA
with the name, address, and tax identification number of each
investor and entity for which a qualified equity investment was
designated by the qualified community development entity, pursuant to
this section. RTCA shall provide this information to the Franchise
Tax Board in a manner determined by the Franchise Tax Board.
   (h) (1) The credit authorized by this section shall only be
allowed for those taxable years for which moneys are appropriated to
RTCA to administer the California New Markets Tax Credit pursuant to
18410.3 for that taxable year. The appropriation shall specifically
identify the California New Markets Tax Credit.
   (2) For those taxable years for which those moneys are
appropriated pursuant to paragraph (1), RTCA shall post notice of the
appropriation on the homepage of its Internet Web site and send
notice of such appropriation to the Secretary of State and the
Legislative Counsel.
   (i) This section shall be repealed on December 1, 2022. 

  SEC. 6.    For the purposes of complying with
Section 41 of the Revenue and Taxation Code, the Legislature finds
and declares as follows:
   (a) Specific goals, purposes, and objectives: attract private
sector investment in lower income communities in California.
   (b) Performance indicators:
   (1) Amount of qualified low-income community investments issued.
   (2) Amount of dollars deployed in qualified low-income community
investments.
   (3) Number of operating businesses assisted as a result of
qualified low-income community investments.
   (4) Number of employment positions created and retained as a
result of qualified low-income community investments and the average
annual salary of those positions.
   (c) Data collection requirements and baseline measurements:
   (1) The baseline measurements include:
   (A) The amount of tax credits issued in the year.
   (B) The unemployment rate of the area.
   (C) The poverty rate of the area.
   (2) Data to collect includes:
   (A) The amount of tax credits issued in the year.
   (B) The number of operating businesses in a low-income community
assisted.
   (C) The number of jobs created and retained as a result of
qualified low-income community investments.  
  SEC. 7.    The provisions of this act are
severable. If any provision of this act or its application is held
invalid, that invalidity shall not affect other provisions or
applications that can be given effect without the invalid provision
or application.  
  SEC. 8.    This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.