Bill Text: CA AB2842 | 2015-2016 | Regular Session | Amended
Bill Title: Workforce Housing Tax Credit Pilot: property taxes: income taxes: insurance taxes: credits: low-income housing: sale of credit.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Failed) 2016-11-30 - From committee without further action. [AB2842 Detail]
Download: California-2015-AB2842-Amended.html
BILL NUMBER: AB 2842 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 12, 2016
AMENDED IN ASSEMBLY MARCH 18, 2016
INTRODUCED BY Assembly Member Thurmond
FEBRUARY 19, 2016
An act to amend Sections 12206, 17058, and 23610.5
Section 214 of, and to add Sections 12206.1,
17058.1, and 23610.7 to, the Revenue and Taxation Code, relating to
taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 2842, as amended, Thurmond. Workforce Housing Tax Credit
Act: Pilot: property taxes: income
taxes: insurance taxes: credits: low-income housing: sale of credit.
Existing law establishes a low-income housing tax credit program
pursuant to which the California Tax Credit Allocation Committee
provides procedures and requirements for the allocation of state
insurance, income, and corporation tax credit amounts among
low-income housing projects in modified conformity to federal law
that have been allocated, or qualify for, a federal low-income
housing tax credit and for farmworker housing.
This bill, beginning on or after January 1, 2016, would allow a
taxpayer that is allowed a low-income housing tax credit to elect to
sell all or a portion of that credit to one or more unrelated
parties, as described, for each taxable year in which the credit is
allowed for not less than 80% of the amount of the credit to be sold,
and would provide for the one-time resale of that credit, as
provided.
This bill, beginning on or after January 1, 2017, would
additionally allow a credit to a taxpayer with a qualified low-income
building that is eligible for a federal low-income housing tax
credit, in an amount determined pursuant to federal law,
equal to 20% of the projects unadjusted unallocated
basis, not to exceed $ 50,000 per unit, for housing
projects that meet specified criteria. The bill would limit the
aggregate amount of credits allocated by the California Tax Credit
Allocation Committee, on a first-come-first-served basis, to
$100,000,000 per fiscal year plus any unallocated credit amount from
the preceding fiscal year. $100,000,000, and would
provide for the one-time resale of that credit, as provided.
Existing property tax law establishes a partial welfare exemption
for property used exclusively for rental housing and related
facilities, as defined, that are owned and operated by either of any
certain types of nonprofit entities or veterans' organizations that
meet specified exemption requirements, including that the owner of
the property is eligible for and receives a federal income tax credit
related to low-income housing.
Ths bill would include, as a qualifying criterion for the partial
welfare exemption, that the owner of the property is allowed one of
the income tax credits described above.
By imposing new duties upon local tax officials with respect to
the welfare exemption, this bill would impose a state-mandated local
program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these
statutory provisions.
Section 2229 of the Revenue and Taxation Code requires the
Legislature to reimburse local agencies annually for certain property
tax revenues lost as a result of any exemption or classification of
property for purposes of ad valorem property taxation.
This bill would provide that, notwithstanding Section 2229 of the
Revenue and Taxation Code, no appropriation is made and the state
shall not reimburse local agencies for property tax revenues lost by
them pursuant to the bill.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. This act shall be known, and may be cited, as the
Workforce Housing Tax Credit Act. Pilot.
SEC. 2. Section 12206 of the Revenue and
Taxation Code is amended to read:
12206. (a) (1) There shall be allowed as a credit against the
"tax," described by Section 12201, a state low-income housing tax
credit in an amount equal to the amount determined in subdivision
(c), computed in accordance with Section 42 of the Internal Revenue
Code, relating to low-income housing credit, except as otherwise
provided in this section.
(2) "Taxpayer," for purposes of this section, means the sole owner
in the case of a "C" corporation, the partners in the case of a
partnership, and the shareholders in the case of an "S" corporation.
(3) "Housing sponsor," for purposes of this section, means the
sole owner in the case of a "C" corporation, the partnership in the
case of a partnership, and the "S" corporation in the case of an "S"
corporation.
(b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
(A) Except for projects to provide farmworker housing, as defined
in subdivision (h) of Section 50199.7 of the Health and Safety Code,
that are allocated credits solely under the set-aside described in
subdivision (c) of Section 50199.20 of the Health and Safety Code,
the low-income housing project shall be located in California and
shall meet either of the following requirements:
(i) The project's housing sponsor has been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue Code,
relating to low-income housing credit.
(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
Internal Revenue Code, relating to special rule where 50 percent or
more of building is financed with tax-exempt bonds subject to volume
cap.
(B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code, relating to low-income housing
credit. The committee may require a fee if the application for the
credit under this section is submitted in a calendar year after the
year the application is submitted for the federal tax credit.
(C) (i) For a project that receives a preliminary reservation of
the state low-income housing tax credit, allowed pursuant to
subdivision (a), on or after January 1, 2009, and before January 1,
2016, the credit shall be allocated to the partners of a partnership
owning the project in accordance with the partnership agreement,
regardless of how the federal low-income housing tax credit with
respect to the project is allocated to the partners, or whether the
allocation of the credit under the terms of the agreement has
substantial economic effect, within the meaning of Section 704(b) of
the Internal Revenue Code, relating to determination of distributive
share.
(ii) This subparagraph does not apply to a project that receives a
preliminary reservation of state low-income housing tax credits
under the set-aside described in subdivision (c) of Section 50199.20
of the Health and Safety Code unless the project also receives a
preliminary reservation of federal low-income housing tax credits.
(iii) This subparagraph shall cease to be operative with respect
to any project that receives a preliminary reservation of a credit on
or after January 1, 2016.
(2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
(B) In the case of a partnership or an "S" corporation, the
housing sponsor shall provide a copy of the California Tax Credit
Allocation Committee certification to the taxpayer.
(C) The taxpayer shall attach a copy of the certification to any
return upon which a tax credit is claimed under this section.
(D) In the case of a failure to attach a copy of the certification
for the year to the return in which a tax credit is claimed under
this section, no credit under this section shall be allowed for that
year until a copy of that certification is provided.
(E) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code, relating to low-income housing credit,
apply to this section.
(F) (i) Except as described in clause (ii), for buildings located
in designated difficult development areas (DDAs) or qualified census
tracts (QCTs), as defined in Section 42(d)(5)(B) of the Internal
Revenue Code, relating to increase in credit for buildings in
high-cost areas, credits may be allocated under this section in the
amounts prescribed in subdivision (c), provided that the amount of
credit allocated under Section 42 of the Internal Revenue Code,
relating to low-income housing credit, is computed on 100 percent of
the qualified basis of the building.
(ii) Notwithstanding clause (i), the California Tax Credit
Allocation Committee may allocate the credit for buildings located in
DDAs or QCTs that are restricted to having 50 percent of its
occupants be special needs households, as defined in the California
Code of Regulations by the California Tax Credit Allocation
Committee, even if the taxpayer receives federal credits pursuant to
Section 42(d)(5)(B) of the Internal Revenue Code, relating to
increase in credit for buildings in high-cost areas, provided that
the credit allowed under this section shall not exceed 30 percent of
the eligible basis of the building.
(G) (i) The California Tax Credit Allocation Committee may
allocate a credit under this section in exchange for a credit
allocated pursuant to Section 42(d)(5)(B) of the Internal Revenue
Code, relating to increase in credit for buildings in high-cost
areas, in amounts up to 30 percent of the eligible basis of a
building if the credits allowed under Section 42 of the Internal
Revenue Code, relating to low-income housing credit, are reduced by
an equivalent amount.
(ii) An equivalent amount shall be determined by the California
Tax Credit Allocation Committee based upon the relative amount
required to produce an equivalent state tax credit to the taxpayer.
(c) Section 42(b) of the Internal Revenue Code, relating to
applicable percentage, shall be modified as follows:
(1) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, relating to temporary minimum credit rate for nonfederally
subsidized new buildings, in lieu of the percentage prescribed in
Section 42(b)(1)(A) of the Internal Revenue Code.
(B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
(2) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
(B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
(3) For purposes of this section, the term "at risk of conversion,"
with respect to an existing property means a property that satisfies
all of the following criteria:
(A) The property is a multifamily rental housing development in
which at least 50 percent of the units receive governmental
assistance pursuant to any of the following:
(i) New construction, substantial rehabilitation, moderate
rehabilitation, property disposition, and loan management set-aside
programs, or any other program providing project-based assistance
pursuant to Section 8 of the United States Housing Act of 1937,
Section 1437f of Title 42 of the United States Code, as amended.
(ii) The Below-Market-Interest-Rate Program pursuant to Section
221(d)(3) of the National Housing Act, Sections 1715 l
(d)(3) and (5) of Title 12 of the United States Code.
(iii) Section 236 of the National Housing Act, Section 1715z-1 of
Title 12 of the United States Code.
(iv) Programs for rent supplement assistance pursuant to Section
101 of the Housing and Urban Development Act of 1965, Section 1701s
of Title 12 of the United States Code, as amended.
(v) Programs pursuant to Section 515 of the Housing Act of 1949,
Section 1485 of Title 42 of the United States Code, as amended.
(vi) The low-income housing credit program set forth in Section 42
of the Internal Revenue Code, relating to low-income housing credit.
(B) The restrictions on rent and income levels will terminate or
the federally insured mortgage on the property is eligible for
prepayment any time within five years before or after the date of
application to the California Tax Credit Allocation Committee.
(C) The entity acquiring the property enters into a regulatory
agreement that requires the property to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the property.
(D) The property satisfies the requirements of Section 42(e) of
the Internal Revenue Code, relating to rehabilitation expenditures
treated as a separate new building, except that the provisions of
Section 42(e)(3)(A)(ii)(I) shall not apply.
(d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code, relating to qualified
low-income building, is modified by adding the following
requirements:
(1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
that, at the election of the taxpayer, is equal to:
(A) An amount not to exceed 8 percent of the lesser of:
(i) The owner equity, which shall include the amount of the
capital contributions actually paid to the housing sponsor and shall
not include any amounts until they are paid on an investor note.
(ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.
(B) The amount of the cashflow from those units in the building
that are not low-income units. For purposes of computing cashflow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code, relating to low-income
housing credit.
(C) Any amount allowed to be distributed under subparagraph (A)
that is not available for distribution during the first five years of
the compliance period may be accumulated and distributed any time
during the first 15 years of the compliance period but not
thereafter.
(2) The limitation on return applies in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an "S" corporation.
(3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code, relating to in
general.
(e) The provisions of Section 42(f) of the Internal Revenue Code,
relating to definition and special rules relating to credit period,
shall be modified as follows:
(1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code, relating to credit period defined, is
modified by substituting "four taxable years" for "10 taxable years."
(2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code, relating
to special rule for first year of credit period, shall not apply to
the tax credit under this section.
(3) Section 42(f)(3) of the Internal Revenue Code, relating to
determination of applicable percentage with respect to increases in
qualified basis after first year of credit period, is modified to
read:
If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the later of the taxable years in which the increase
in qualified basis occurs.
(f) The provisions of Section 42(h) of the Internal Revenue Code,
relating to limitation on aggregate credit allowable with respect to
projects located in a state, shall be modified as follows:
(1) Section 42(h)(2) of the Internal Revenue Code, relating to
allocated credit amount to apply to all taxable years ending during
or after credit allocation year, does not apply and instead the
following provisions apply:
The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which the
allocation is made.
(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code,
relating to limitation on aggregate credit allowable with respect to
projects located in a state, do not apply to this section.
(g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 17058, and Section 23610.5 shall be
an amount equal to the sum of all the following:
(1) Seventy million dollars ($70,000,000) for the 2001 calendar
year, and, for the 2002 calendar year and each calendar year
thereafter, seventy million dollars ($70,000,000) increased by the
percentage, if any, by which the Consumer Price Index for the
preceding calendar year exceeds the Consumer Price Index for the 2001
calendar year. For the purposes of this paragraph, the term
"Consumer Price Index" means the last Consumer Price Index for All
Urban Consumers published by the federal Department of Labor.
(2) The unused housing credit ceiling, if any, for the preceding
calendar years.
(3) The amount of housing credit ceiling returned in the calendar
year. For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income housing project within the period
required by this section or to any project with respect to which an
allocation is canceled by mutual consent of the California Tax Credit
Allocation Committee and the allocation recipient.
(4) Five hundred thousand dollars ($500,000) per calendar year for
projects to provide farmworker housing, as defined in subdivision
(h) of Section 50199.7 of the Health and Safety Code.
(5) The amount of any unallocated or returned credits under former
Sections 17053.14, 23608.2, and 23608.3, as those sections read
prior to January 1, 2009, until fully exhausted for projects to
provide farmworker housing, as defined in subdivision (h) of Section
50199.7 of the Health and Safety Code.
(h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code, relating to compliance period, is
modified to mean, with respect to any building, the period of 30
consecutive taxable years beginning with the first taxable year of
the credit period with respect thereto.
(i) (1) Section 42(j) of the Internal Revenue Code, relating to
recapture of credit, shall not be applicable and the provisions in
paragraph (2) shall be substituted in its place.
(2) The requirements of this section shall be set forth in a
regulatory agreement between the California Tax Credit Allocation
Committee and the housing sponsor, and this agreement shall be
subordinated, when required, to any lien or encumbrance of any banks
or other institutional lenders to the project. The regulatory
agreement entered into pursuant to subdivision (f) of Section
50199.14 of the Health and Safety Code, shall apply, provided that
the agreement includes all of the following provisions:
(A) A term not less than the compliance period.
(B) A requirement that the agreement be recorded in the official
records of the county in which the qualified low-income housing
project is located.
(C) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
(D) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto
and that allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation applicable
to the building, the right to enforce the regulatory agreement in any
state court.
(E) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code, relating to low-income housing credit, as
modified by this section.
(F) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee and the local agency
that can enforce the regulatory agreement if there is a determination
by the Internal Revenue Service that the project is not in
compliance with Section 42(g) of the Internal Revenue Code, relating
to qualified low-income housing project.
(G) A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.
(H) A provision that the remedies available in the event of a
default under the regulatory agreement that is not cured within a
reasonable cure period include, but are not limited to, allowing any
of the parties designated to enforce the regulatory agreement to
collect all rents with respect to the project; taking possession of
the project and operating the project in accordance with the
regulatory agreement until the enforcer determines the housing
sponsor is in a position to operate the project in accordance with
the regulatory agreement; applying to any court for specific
performance; securing the appointment of a receiver to operate the
project; or any other relief as may be appropriate.
(j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered. The committee
shall establish application filing deadlines, the maximum percentage
of federal and state low-income housing tax credit ceiling that may
be allocated by the committee in that period, and the approximate
date on which allocations shall be made. If the enactment of federal
or state law, the adoption of rules or regulations, or other similar
events prevent the use of two allocation periods, the committee may
reduce the number of periods and adjust the filing deadlines, maximum
percentage of credit allocated, and the allocation dates.
(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code, relating
to plans for allocation of credit among projects. In adopting this
plan, the committee shall comply with the provisions of Sections 42
(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code, relating to
qualified allocation plan and relating to certain selection criteria
must be used, respectively.
(3) Notwithstanding Section 42(m) of the Internal Revenue Code,
relating to responsibilities of housing credit agencies, the
California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
(A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
(i) The housing sponsor shall demonstrate that there is a need and
demand for low-income housing in the community or region for which
it is proposed.
(ii) The project's proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and that the
proposed operating income shall be adequate to operate the project
for the extended use period.
(iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
(iv) The housing sponsor shall have and maintain control of the
site for the project.
(v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
(vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.
(vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies and required equity, and a development fee that does
not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
(B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if
both of the following apply:
(i) The project serves the lowest income tenants at rents
affordable to those tenants.
(ii) The project is obligated to serve qualified tenants for the
longest period.
(C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
(i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units are low-income
units with three and more bedrooms.
(ii) Projects providing single-room occupancy units serving very
low income tenants.
(iii) Existing projects that are "at risk of conversion," as
defined by paragraph (3) of subdivision (c).
(iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
(v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
(4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application except to break a tie when
two or more of the projects have an equal rating.
(k) Section 42(l) of the Internal Revenue Code, relating to
certifications and other reports to secretary, shall be modified as
follows:
The term "secretary" shall be replaced by the term "Franchise Tax
Board."
( l ) In the case in which the credit allowed under
this section exceeds the "tax," the excess may be carried over to
reduce the "tax" in the following year, and succeeding years if
necessary, until the credit has been exhausted.
(m) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, apply to calendar years after 1993.
(n) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, do not apply.
(o) (1) For a project that receives a preliminary reservation
under this section beginning on or after January 1, 2016, a taxpayer
may make an irrevocable election in its application to the California
Tax Credit Allocation Committee to sell all or any portion of any
credit allowed under this section to one or more unrelated parties
for each taxable year in which the credit is allowed subject to both
of the following
conditions:
(A) The credit is sold for consideration that is not less than 80
percent of the amount of the credit.
(B) The unrelated party or parties purchasing any or all of the
credit pursuant to this subdivision is a taxpayer allowed the credit
under this section for the taxable year of the purchase or any prior
taxable year or is a taxpayer allowed the federal credit under
Section 42 of the Internal Revenue Code, relating to low-income
housing credit, for the taxable year of the purchase or any prior
taxable year in connection with any project located in this state.
For purposes of this subparagraph, "taxpayer allowed the credit under
this section" means a taxpayer that is allowed the credit under this
section without regard to the purchase of a credit pursuant to this
subdivision.
(2) (A) The taxpayer that originally received the credit shall
report to the California Tax Credit Allocation Committee within 10
days of the sale of the credit, in the form and manner specified by
the California Tax Credit Allocation Committee, all required
information regarding the purchase and sale of the credit, including
the social security or other taxpayer identification number of the
unrelated party to whom the credit has been sold, the face amount of
the credit sold, and the amount of consideration received by the
taxpayer for the sale of the credit.
(B) The California Tax Credit Allocation Committee shall provide
an annual listing to the Franchise Tax Board, in a form and manner
agreed upon by the California Tax Credit Allocation Committee and the
Franchise Tax Board, of the taxpayers that have sold or purchased a
credit pursuant to this subdivision.
(3) (A) A credit may be sold pursuant to this subdivision to more
than one unrelated party.
(B) (i) Except as provided in clause (ii), a credit shall not be
resold by the unrelated party to another taxpayer or other party.
(ii) All or any portion of any credit allowed under this section
may be resold once by an original purchaser to one or more unrelated
parties, subject to all of the requirements of this subdivision.
(4) Notwithstanding any other provision of law, the taxpayer that
originally received the credit that is sold pursuant to paragraph (1)
shall remain solely liable for all obligations and liabilities
imposed on the taxpayer by this section with respect to the credit,
none of which shall apply to any party to whom the credit has been
sold or subsequently transferred. Parties who purchase credits
pursuant to paragraph (1) shall be entitled to utilize the purchased
credits in the same manner in which the taxpayer that originally
received the credit could utilize them.
(5) A taxpayer shall not sell a credit allowed by this section if
the taxpayer was allowed the credit on any tax return of the
taxpayer.
(6) Notwithstanding paragraph (1), the taxpayer, with the approval
of the Executive Director of the California Tax Credit Allocation
Committee, may rescind the election to sell all or any portion of the
credit allowed under this section if the consideration for the
credit falls below 80 percent of the amount of the credit after the
California Tax Credit Allocation Committee reservation.
(p) The California Tax Credit Allocation Committee may prescribe
rules, guidelines, or procedures necessary or appropriate to carry
out the purposes of this section, including any guidelines regarding
the allocation of the credit allowed under this section. Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code shall not apply to any rule, guideline, or
procedure prescribed by the California Tax Credit Allocation
Committee pursuant to this section.
(q) This section shall remain in effect for as long as Section 42
of the Internal Revenue Code, relating to low-income housing credit,
remains in effect.
SEC. 2. Section 214 of the Revenue and
Taxation Code is amended to read:
214. (a) Property used exclusively for religious, hospital,
scientific, or charitable purposes owned and operated by community
chests, funds, foundations, limited liability companies, or
corporations organized and operated for religious, hospital,
scientific, or charitable purposes is exempt from taxation, including
ad valorem taxes to pay the interest and redemption charges on any
indebtedness approved by the voters prior to July 1, 1978, or any
bonded indebtedness for the acquisition or improvement of real
property approved on or after July 1, 1978, by two-thirds of the
votes cast by the voters voting on the proposition, if:
(1) The owner is not organized or operated for profit. However, in
the case of hospitals, the organization shall not be deemed to be
organized or operated for profit if, during the immediately preceding
fiscal year, operating revenues, exclusive of gifts, endowments and
grants-in-aid, did not exceed operating expenses by an amount
equivalent to 10 percent of those operating expenses. As used herein,
operating expenses include depreciation based on cost of replacement
and amortization of, and interest on, indebtedness.
(2) No part of the net earnings of the owner inures to the benefit
of any private shareholder or individual.
(3) The property is used for the actual operation of the exempt
activity, and does not exceed an amount of property reasonably
necessary to the accomplishment of the exempt purpose.
(A) For the purposes of determining whether the property is used
for the actual operation of the exempt activity, consideration shall
not be given to use of the property for either or both of the
following described activities if that use is occasional:
(i) The owner conducts fundraising activities on the property and
the proceeds derived from those activities are not unrelated business
taxable income, as defined in Section 512 of the Internal Revenue
Code, of the owner and are used to further the exempt activity of the
owner.
(ii) The owner permits any other organization that meets all of
the requirements of this subdivision, other than ownership of the
property, to conduct fundraising activities on the property and the
proceeds derived from those activities are not unrelated business
taxable income, as defined in Section 512 of the Internal Revenue
Code, of the organization, are not subject to the tax on unrelated
business taxable income that is imposed by Section 511 of the
Internal Revenue Code, and are used to further the exempt activity of
the organization.
(B) For purposes of subparagraph (A):
(i) "Occasional use" means use of the property on an irregular or
intermittent basis by the qualifying owner or any other qualifying
organization described in clause (ii) of subparagraph (A) that is
incidental to the primary activities of the owner or the other
organization.
(ii) "Fundraising activities" means both activities involving the
direct solicitation of money or other property and the anticipated
exchange of goods or services for money between the soliciting
organization and the organization or person solicited.
(C) Subparagraph (A) shall have no application in determining
whether paragraph (3) has been satisfied unless the owner of the
property and any other organization using the property as provided in
subparagraph (A) have filed with the assessor a valid organizational
clearance certificate issued pursuant to Section 254.6.
(D) For the purposes of determining whether the property is used
for the actual operation of the exempt activity, consideration shall
not be given to the use of the property for meetings conducted by any
other organization if the meetings are incidental to the other
organization's primary activities, are not fundraising meetings or
activities as defined in subparagraph (B), are held no more than once
per week, and the other organization and its use of the property
meet all other requirements of paragraphs (1) to (5), inclusive, of
this subdivision. The owner or the other organization also shall file
with the assessor a copy of a valid, unrevoked letter or ruling from
the Internal Revenue Service or the Franchise Tax Board stating that
the other organization, or the national organization of which it is
a local chapter or affiliate, qualifies as an exempt organization
under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code or
Section 23701d, 23701f, or 23701w.
(E) Nothing in subparagraph (A), (B), (C), or (D) shall be
construed to either enlarge or restrict the exemption provided for in
subdivision (b) of Section 4 and Section 5 of Article XIII of the
California Constitution and this section.
(4) The property is not used or operated by the owner or by any
other person so as to benefit any officer, trustee, director,
shareholder, member, employee, contributor, or bondholder of the
owner or operator, or any other person, through the distribution of
profits, payment of excessive charges or compensations, or the more
advantageous pursuit of their business or profession.
(5) The property is not used by the owner or members thereof for
fraternal or lodge purposes, or for social club purposes except where
that use is clearly incidental to a primary religious, hospital,
scientific, or charitable purpose.
(6) The property is irrevocably dedicated to religious,
charitable, scientific, or hospital purposes and upon the
liquidation, dissolution, or abandonment of the owner will not inure
to the benefit of any private person except a fund, foundation, or
corporation organized and operated for religious, hospital,
scientific, or charitable purposes.
(7) The property, if used exclusively for scientific purposes, is
used by a foundation or institution that, in addition to complying
with the foregoing requirements for the exemption of charitable
organizations in general, has been chartered by the Congress of the
United States (except that this requirement shall not apply when the
scientific purposes are medical research), and whose objects are the
encouragement or conduct of scientific investigation, research, and
discovery for the benefit of the community at large.
The exemption provided for herein shall be known as the "welfare
exemption." This exemption shall be in addition to any other
exemption now provided by law, and the existence of the exemption
provision in paragraph (2) of subdivision (a) of Section 202 shall
not preclude the exemption under this section for museum or library
property. Except as provided in subdivision (e), this section shall
not be construed to enlarge the college exemption.
(b) Property used exclusively for school purposes of less than
collegiate grade and owned and operated by religious, hospital, or
charitable funds, foundations, limited liability companies, or
corporations, which property and funds, foundations, limited
liability companies, or corporations meet all of the requirements of
subdivision (a), shall be deemed to be within the exemption provided
for in subdivision (b) of Section 4 and Section 5 of Article XIII of
the California Constitution and this section.
(c) Property used exclusively for nursery school purposes and
owned and operated by religious, hospital, or charitable funds,
foundations, limited liability companies, or corporations, which
property and funds, foundations, limited liability companies, or
corporations meet all the requirements of subdivision (a), shall be
deemed to be within the exemption provided for in subdivision (b) of
Section 4 and Section 5 of Article XIII of the California
Constitution and this section.
(d) Property used exclusively for a noncommercial educational FM
broadcast station or an educational television station, and owned and
operated by religious, hospital, scientific, or charitable funds,
foundations, limited liability companies, or corporations meeting all
of the requirements of subdivision (a), shall be deemed to be within
the exemption provided for in subdivision (b) of Section 4 and
Section 5 of Article XIII of the California Constitution and this
section.
(e) Property used exclusively for religious, charitable,
scientific, or hospital purposes and owned and operated by religious,
hospital, scientific, or charitable funds, foundations, limited
liability companies, or corporations or educational institutions of
collegiate grade, as defined in Section 203, which property and
funds, foundations, limited liability companies, corporations, or
educational institutions meet all of the requirements of subdivision
(a), shall be deemed to be within the exemption provided for in
subdivision (b) of Section 4 and Section 5 of Article XIII of the
California Constitution and this section. As to educational
institutions of collegiate grade, as defined in Section 203, the
requirements of paragraph (6) of subdivision (a) shall be deemed to
be met if both of the following are met:
(1) The property of the educational institution is irrevocably
dedicated in its articles of incorporation to charitable and
educational purposes, to religious and educational purposes, or to
educational purposes.
(2) The articles of incorporation of the educational institution
provide for distribution of its property upon its liquidation,
dissolution, or abandonment to a fund, foundation, or corporation
organized and operated for religious, hospital, scientific,
charitable, or educational purposes meeting the requirements for
exemption provided by Section 203 or this section.
(f) Property used exclusively for housing and related facilities
for elderly or handicapped families and financed by, including, but
not limited to, the federal government pursuant to Section 202 of
Public Law 86-372 (12 U.S.C. Sec. 1701q), as amended, Section 231 of
Public Law 73-479 (12 U.S.C. Sec. 1715v), Section 236 of Public Law
90-448 (12 U.S.C. Sec. 1715z), or Section 811 of Public Law 101-625
(42 U.S.C. Sec. 8013), and owned and operated by religious, hospital,
scientific, or charitable funds, foundations, limited liability
companies, or corporations meeting all of the requirements of this
section shall be deemed to be within the exemption provided for in
subdivision (b) of Section 4 and Section 5 of Article XIII of the
California Constitution and this section.
The amendment of this paragraph made by Chapter 1102 of the
Statutes of 1984 does not constitute a change in, but is declaratory
of, existing law. However, no refund of property taxes shall be
required as a result of this amendment for any fiscal year prior to
the fiscal year in which the amendment takes effect.
Property used exclusively for housing and related facilities for
elderly or handicapped families at which supplemental care or
services designed to meet the special needs of elderly or handicapped
residents are not provided, or that is not financed by the federal
government pursuant to Section 202 of Public Law 86-372 (12 U.S.C.
Sec. 1701q), as amended, Section 231 of Public Law 73-479 (12 U.S.C.
Sec. 1715v), Section 236 of Public Law 90-448 (12 U.S.C. Sec. 1715z),
or Section 811 of Public Law 101-625 (42 U.S.C. Sec. 8013), shall
not be entitled to exemption pursuant to this subdivision unless the
property is used for housing and related facilities for low- and
moderate-income elderly or handicapped families. Property that would
otherwise be exempt pursuant to this subdivision, except that it
includes some housing and related facilities for other than low- or
moderate-income elderly or handicapped families, shall be entitled to
a partial exemption. The partial exemption shall be equal to that
percentage of the value of the property that is equal to the
percentage that the number of low- and moderate-income elderly and
handicapped families represents of the total number of families
occupying the property.
As used in this subdivision, "low and moderate income" has the
same meaning as the term "persons and families of low or moderate
income" as defined by Section 50093 of the Health and Safety Code.
(g) (1) Property used exclusively for rental housing and related
facilities and owned and operated by religious, hospital, scientific,
or charitable funds, foundations, limited liability companies, or
corporations, including limited partnerships in which the managing
general partner is an eligible nonprofit corporation or eligible
limited liability company, meeting all of the requirements of this
section, or by veterans' organizations, as described in Section
215.1, meeting all the requirements of paragraphs (1) to (7),
inclusive, of subdivision (a), shall be deemed to be within the
exemption provided for in subdivision (b) of Section 4 and Section 5
of Article XIII of the California Constitution and this section and
shall be entitled to a partial exemption equal to that percentage of
the value of the property that is equal to the percentage that the
number of units serving lower income households represents of the
total number of residential units in any year in which any of the
following criteria applies:
(A) The acquisition, rehabilitation, development, or operation of
the property, or any combination of these factors, is financed with
tax-exempt mortgage revenue bonds or general obligation bonds, or is
financed by local, state, or federal loans or grants and the rents of
the occupants who are lower income households do not exceed those
prescribed by deed restrictions or regulatory agreements pursuant to
the terms of the financing or financial assistance.
(B) The owner of the property is eligible for and receives
low-income housing tax credits pursuant to Section 42 of the Internal
Revenue Code of 1986, as added by Public Law 99-514.
Code, relating to low-income housing tax credit, or is
allowed a workforce housing tax credit pursuant to Section 12206.1,
17058.1, or 23610.7.
(C) In the case of a claim, other than a claim with respect to
property owned by a limited partnership in which the managing general
partner is an eligible nonprofit corporation, that is filed for the
2000-01 fiscal year or any fiscal year thereafter, 90 percent or more
of the occupants of the property are lower income households whose
rent does not exceed the rent prescribed by Section 50053 of the
Health and Safety Code. The total exemption amount allowed under this
subdivision to a taxpayer, with respect to a single property or
multiple properties for any fiscal year on the sole basis of the
application of this subparagraph, may not exceed twenty thousand
dollars ($20,000) of tax.
(D) (i) The property was previously purchased and owned by the
Department of Transportation pursuant to a consent decree requiring
housing mitigation measures relating to the construction of a freeway
and is now solely owned by an organization that qualifies as an
exempt organization under Section 501(c)(3) of the Internal Revenue
Code.
(ii) This subparagraph shall not apply to property owned by a
limited partnership in which the managing partner is an eligible
nonprofit corporation.
(2) In order to be eligible for the exemption provided by this
subdivision, the owner of the property shall do both of the
following:
(A) (i) For any claim filed for the 2000-01 fiscal year or any
fiscal year thereafter, certify and ensure, subject to the limitation
in clause (ii), that there is an enforceable and verifiable
agreement with a public agency, a recorded deed restriction, or other
legal document that restricts the project's usage and that provides
that the units designated for use by lower income households are
continuously available to or occupied by lower income households at
rents that do not exceed those prescribed by Section 50053 of the
Health and Safety Code, or, to the extent that the terms of federal,
state, or local financing or financial assistance conflicts with
Section 50053, rents that do not exceed those prescribed by the terms
of the financing or financial assistance.
(ii) In the case of a limited partnership in which the managing
general partner is an eligible nonprofit corporation, the restriction
and provision specified in clause (i) shall be contained in an
enforceable and verifiable agreement with a public agency, or in a
recorded deed restriction to which the limited partnership certifies.
(B) Certify that the funds that would have been necessary to pay
property taxes are used to maintain the affordability of, or reduce
rents otherwise necessary for, the units occupied by lower income
households.
(3) As used in this subdivision:
(A) "Lower (i)
Except as provided in paragraph (2), income households" has the
same meaning as the term "lower income households" as defined by
Section 50079.5 of the Health and Safety Code.
(ii) "Lower income households," for purposes of subparagraph (B)
of paragraph (1), has the same meaning as "low-income household" as
defined by Sections 12206.1, 17058.1, and 23610.7.
(B) "Related facilities" means any manager's units and any and all
common area spaces that are included within the physical boundaries
of the rental housing development, including, but not limited to,
common area space, walkways, balconies, patios, clubhouse space,
meeting rooms, laundry facilities and parking areas, except any
portions of the overall development that are nonexempt commercial
space.
(C) "Units serving lower income households" shall mean units that
are occupied by lower income households at an affordable rent, as
defined in Section 50053 of the Health and Safety Code or, to the
extent that the terms of federal, state, or local financing or
financial assistance conflicts with Section 50053, rents that do not
exceed those prescribed by the terms of the financing or financial
assistance. Units reserved for lower income households at an
affordable rent that are temporarily vacant due to tenant turnover or
repairs shall be counted as occupied.
(h) Property used exclusively for an emergency or temporary
shelter and related facilities for homeless persons and families and
owned and operated by religious, hospital, scientific, or charitable
funds, foundations, limited liability companies, or corporations
meeting all of the requirements of this section shall be deemed to be
within the exemption provided for in subdivision (b) of Section 4
and Section 5 of Article XIII of the California Constitution and this
section. Property that otherwise would be exempt pursuant to this
subdivision, except that it includes housing and related facilities
for other than an emergency or temporary shelter, shall be entitled
to a partial exemption.
As used in this subdivision, "emergency or temporary shelter"
means a facility that would be eligible for funding pursuant to
Chapter 11 11.5 (commencing with
Section 50800) of Part 2 of Division 31 of the Health and Safety
Code.
(i) Property used exclusively for housing and related facilities
for employees of religious, charitable, scientific, or hospital
organizations that meet all the requirements of subdivision (a) and
owned and operated by funds, foundations, limited liability
companies, or corporations that meet all the requirements of
subdivision (a) shall be deemed to be within the exemption provided
for in subdivision (b) of Section 4 and Section 5 of Article XIII of
the California Constitution and this section to the extent the
residential use of the property is institutionally necessary for the
operation of the organization.
(j) For purposes of this section, charitable purposes include
educational purposes. For purposes of this subdivision, "educational
purposes" means those educational purposes and activities for the
benefit of the community as a whole or an unascertainable and
indefinite portion thereof, and do not include those educational
purposes and activities that are primarily for the benefit of an
organization's shareholders. Educational activities include the study
of relevant information, the dissemination of that information to
interested members of the general public, and the participation of
interested members of the general public.
(k) In the case of property used exclusively for the exempt
purposes specified in this section, owned and operated by limited
liability companies that are organized and operated for those
purposes, the State Board of Equalization shall adopt regulations to
specify the ownership, organizational, and operational requirements
for those companies to qualify for the exemption provided by this
section.
( l ) The amendments made by Chapter 354 of the
Statutes of 2004 shall apply with respect to lien dates occurring on
and after January 1, 2005.
SEC. 3. Section 12206.1 is added to the Revenue and Taxation Code,
to read:
12206.1. (a) (1) For taxable years beginning on or after January
1, 2017, there shall be allowed to a taxpayer a credit against the
"tax," as defined by Section 12201, for a qualified low-income
building in an amount equal to the amount computed in
accordance with Section 42 of the Internal Revenue Code,
relating to low-income housing credit as modified by this section.
(2) In determining the amount of credit allowed pursuant to this
section, the following shall apply:
(A) The eligible basis of a building shall be equal to the project'
s total cost basis.
(B) The applicable percentage shall be:
(1) For a project with units for low-income households, 130
percent.
(2) For a project with units for median-income households with
incomes between 80 percent and 99 percent of the area median income,
108 percent.
(3) For a project with units for median-income households with
incomes of 100 percent of the area median income, 76 percent.
(2) The amount of credit shall be equal to 20 percent of the
project's unadjusted allocated basis, as defined by the California
Tax Credit Allocation Committee by regulation, not to exceed fifty
thousand dollars ($50,000) per unit.
(b) For purposes of this section:
(1) "Low-income household" means a household with an income that
is greater than 60 percent and not higher than 80 percent of the area
median household income.
(2) "Median-income household" means a household with an income
that is greater than 80 percent but not higher than 100 percent of
the area median household income.
(3)
(2) "Qualified low-income building" has the same
meaning as in Section 42(c)(2) of the Internal Revenue Code, relating
to qualified low-income housing building, and also means the
qualified low-income building is eligible for a tax credit pursuant
to Section 42 of the Internal Revenue Code, relating to low-income
housing credit, except that Section 42(g)
of the Internal Revenue Code, relating to qualified
low-income housing project, shall not apply and instead the following
requirements shall be met:
(A) The project is for the acquisition or substantial
rehabilitation of a building at least 20 years old or is a new
development.
(B) The project includes no more than 50 percent of its units that
are eligible for the tax credit allowed pursuant to Section 12206.
(C) Any units reserved for a tax credit allowed pursuant to this
section shall not supplant existing affordable housing units not
eligible for a tax credit pursuant to this section, including any
units for households with an income that is less than that of a
low-income household. household, and the rent
for those units is at least 20 percent below market rate at the time
the tax credit is allocated.
(D) The project will allocate at least 20
40 percent of its units to low-income households and
median-income households.
(E) The project is located, in the year of the application for the
tax credit, in one of the 12 counties within this state identified
by the United State Department of Housing and Urban Development as
having the highest fair market rents in the state. The California Tax
Credit Allocation Committee shall annually publish those counties on
its Internet Web site.
(c) (1) This section shall not be construed to require a taxpayer
to have been previously or currently allocated a tax credit pursuant
to Section 42 of the Internal Revenue Code, relating low-income
housing credit.
(2) This section shall not be construed to preclude a taxpayer,
allowed a credit pursuant to this section, from being allocated a
credit pursuant to Section 12206 or Section 42 of the Internal
Revenue Code, relating to low-income housing credit.
(3) A credit shall not be allowed pursuant to this section if a
taxpayer has been allocated a credit pursuant to Section 42 of the
Internal Revenue Code, relating to low-income housing credit, for
units for a household with a household income that is greater than 60
percent of the area median household income.
(d) An applicant for the credit allowed pursuant to this section
must demonstrate to the California Tax Credit Allocation Committee
that, within the city in which the project is situated, the area
median income for the average rental unit is above the area median
income for the project.
(e) (1) In the case where the credit allowed under this section
exceeds the "tax," the excess may be carried over to reduce the "tax"
in the following year, and succeeding 14 years if necessary, until
the credit has been exhausted.
(2) The credit shall be claimed in the same manner, with regard to
the credit period, as a credit claimed pursuant to Section 12206.
(3) The credit allowed pursuant to this section shall have a
compliance period of 55 consecutive taxable years at the affordable
rate or at substantially below-market rate beginning with the first
taxable year of the credit period with respect thereto, administered
in the same manner as under Section 12206.
(f) The California Tax Credit Allocation Committee shall allocate,
on a first-come-first-served basis, the credit allowed by this
section. The aggregate amount of credit that may be allocated
in any fiscal year pursuant to this section and
Sections 17058.1 and 23610.7 shall be an amount equal to the
sum of paragraphs (1) and (2). one hundred million do
llars ($100,000,000).
(1) One hundred million dollars ($100,000,000) for the 2016-17
fiscal year, and for each fiscal year thereafter.
(2) The unallocated credit amount, if any, from the preceding
fiscal year.
(g) (1) For a project that is allocated a credit under this
section, a taxpayer may make an irrevocable election in its
application to the California Tax Credit Allocation Committee to sell
all or any portion of any credit allowed under this section to one
or more unrelated parties for each taxable year in which the credit
is allowed, subject to both of the following conditions:
(A) The credit is sold for consideration that is not less than 80
percent of the amount of the credit.
(B) The unrelated party or parties purchasing any or all of the
credit pursuant to this subdivision are taxpayers allowed the credit
under this section for the taxable year of the purchase or any prior
taxable year or is a taxpayer allowed the federal credit under
Section 42 of the Internal Revenue Code, relating to low-income
housing credit, for the taxable year of the purchase or any prior
taxable year in connection with any project located in this state.
For purposes of this subparagraph, "taxpayer allowed the credit under
this section" means a taxpayer that is allowed the credit under this
section without regard to the purchase of a credit pursuant to this
subdivision.
(2) (A) The taxpayer that originally received the credit shall
report to the California Tax Credit Allocation Committee within 10
days of the sale of the credit, in the form and manner specified by
the California Tax Credit Allocation Committee, all required
information regarding the purchase and sale of the credit, including
the social security or other taxpayer identification number of the
unrelated party or parties to whom the credit has been sold, the face
amount of the credit sold, and the amount of consideration received
by the taxpayer for the sale of the credit.
(B) The California Tax Credit Allocation Committee shall provide
an annual listing to the Franchise Tax Board, in a form and manner
agreed upon by the California Tax Credit Allocation Committee and the
Franchise Tax Board, of the taxpayers that have sold or purchased a
credit pursuant to this subdivision.
(3) (A) A credit may be sold pursuant to this subdivision to more
than one unrelated party.
(B) (i) Except as provided in clause (ii), a credit shall not be
resold by the unrelated party to another taxpayer or other party.
(ii) All or any portion of any credit allowed under this section
may be resold once by an original purchaser to one or more unrelated
parties, subject to all of the requirements of this subdivision.
(4) Notwithstanding any other provision of law, the taxpayer that
originally received the credit that is sold pursuant to paragraph (1)
shall remain solely liable for all obligations and liabilities
imposed on the taxpayer by this section with respect to the credit,
none of which shall apply to any party to whom the credit has been
sold or subsequently transferred. Parties who purchase credits
pursuant to paragraph (1) shall be entitled to utilize the purchased
credits in the same manner in which the taxpayer that originally
received the credit could utilize them.
(5) A taxpayer shall not sell a credit allowed by this section if
the taxpayer was allowed the credit on any tax return of the
taxpayer.
(6) Notwithstanding paragraph (1), the taxpayer, with the approval
of the Executive Director of the California Tax Credit Allocation
Committee, may rescind the election to sell all or any portion of the
credit allowed under this section if the consideration for the
credit falls below 80 percent of the amount of the credit after the
California Tax Credit Allocation Committee reservation.
(g)
(h) (1) The California Tax Credit Allocation Committee
shall establish guidelines to specify that a taxpayer may be allowed
a tax credit pursuant to this section, Section 12206, and Section 42
of the Internal Revenue Code, relating to low-income housing credit,
subject to the requirements of these sections.
sections and paragraph (3) of subdivision (c).
(2) The California Tax Credit Allocation Committee and
the Department of Insurance may adopt regulations, rules,
guidelines, or procedures necessary or appropriate to carry out the
purposes of this section, including guidelines to conform the credit
allowed by this section to any procedures established pursuant to
Section 12206.
(3) The Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) does not apply to this subdivision.
(h) Section 41 does not apply to the credit allowed by this
section.
SEC. 4. Section 17058 of the Revenue and
Taxation Code is amended to read:
17058. (a) (1) There shall be allowed as a credit against the
"net "tax," defined in Section 17039, a state low-income housing tax
credit in an amount equal to the amount determined in subdivision
(c), computed in accordance with Section 42 of the Internal Revenue
Code, relating to low-income housing credit, except as otherwise
provided in this section.
(2) "Taxpayer," for purposes of this section, means the sole owner
in the case of an individual, the partners in the case of a
partnership, and the shareholders in the case of an "S" corporation.
(3) "Housing sponsor," for purposes of this section, means the
sole owner in the case of an individual, the partnership in the case
of a partnership, and the "S" corporation in the case of an "S"
corporation.
(b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
(A) The low-income housing project shall be located in California
and shall meet either of the following requirements:
(i) Except for projects to provide farmworker housing, as defined
in subdivision (h) of Section 50199.7 of the Health and Safety Code,
that are allocated credits solely under the set-aside described in
subdivision (c) of Section 50199.20 of the Health and Safety Code,
the project's housing sponsor has been allocated by the California
Tax Credit Allocation Committee a credit for federal income tax
purposes under Section 42 of the Internal Revenue Code, relating to
low-income housing credit.
(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
Internal Revenue Code, relating to special rule where 50 percent or
more of building is financed with tax-exempt bonds subject to volume
cap.
(B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code, relating to low-income housing
credit. The committee may require a fee if the application for the
credit under this section is submitted in a calendar year after the
year the application is submitted for the federal tax credit.
(C) (i) For a project that receives a preliminary reservation of
the state low-income housing tax credit, allowed pursuant to
subdivision (a), on or after January 1, 2009, and before January 1,
2016, the credit shall be allocated to the partners of a partnership
owning the project in accordance with the partnership agreement,
regardless of how the federal low-income housing tax credit with
respect to the project is allocated to the partners, or whether the
allocation of the credit under the terms of the agreement has
substantial economic effect, within the meaning of Section 704(b) of
the Internal Revenue Code, relating to determination of distributive
share.
(ii) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or
deduction otherwise allowable under this part that is attributable to
the sale or other disposition of that partner's partnership interest
made prior to the expiration of the federal credit shall not be
allowed in the taxable year in which the sale or other disposition
occurs, but shall instead be deferred until and treated as if it
occurred in the first taxable year immediately following the taxable
year in which the federal credit period expires for the project
described in clause (i).
(iii) This subparagraph does not apply to a project that receives
a preliminary reservation of state low-income housing tax credits
under the set-aside described in subdivision (c) of Section 50199.20
of the Health and Safety Code unless the project also receives a
preliminary reservation of federal low-income housing tax credits.
(iv) This subparagraph shall cease to be operative with respect to
any project that receives a preliminary reservation of a credit on
or after January 1, 2016.
(2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
(B) In the case of a partnership or an "S" corporation, the
housing sponsor shall provide a copy of the California Tax Credit
Allocation Committee certification to the taxpayer.
(C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
(D) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code, relating to low-income housing credit,
apply to this section.
(E) (i) Except as described in clause (ii), for buildings located
in designated difficult development areas (DDAs) or qualified census
tracts (QCTs), as defined in Section 42(d)(5)(B) of the Internal
Revenue Code, relating to increase in credit for buildings in
high-cost areas, credits may be allocated under this section in the
amounts prescribed in subdivision (c), provided that the amount of
credit allocated under Section 42 of the Internal Revenue Code,
relating to low-income housing credit, is computed on 100 percent of
the qualified basis of the building.
(ii) Notwithstanding clause (i), the California Tax Credit
Allocation Committee may allocate the credit for buildings located in
DDAs or QCTs that are restricted to having 50 percent of its
occupants be special needs households, as defined in the California
Code of Regulations by the California Tax Credit Allocation
Committee, even if the taxpayer receives federal credits pursuant to
Section 42(d)(5)(B) of the Internal Revenue Code, relating to
increase in credit for buildings in high-cost areas, provided that
the credit allowed under this section shall not exceed 30 percent of
the eligible basis of the building.
(F) (i) The California Tax Credit Allocation Committee may
allocate a credit under this section in exchange for a credit
allocated pursuant to Section 42(d)(5)(B) of the Internal Revenue
Code, relating to increase in credit for buildings in high-cost
areas, in amounts up to 30 percent of the eligible basis of a
building if the credits allowed under Section 42 of the Internal
Revenue Code, relating to low-income housing credit, are reduced by
an equivalent amount.
(ii) An equivalent amount shall be determined by the California
Tax Credit Allocation Committee based upon the relative amount
required to produce an equivalent state tax credit to the taxpayer.
(c) Section 42(b) of the Internal Revenue Code, relating to
applicable percentage, shall be modified as follows:
(1) In the case of any qualified low-income building placed in
service by the housing sponsor during 1987, the term "applicable
percentage" means 9 percent for each of the first three years and 3
percent for the fourth year for new buildings (whether or not the
building is federally subsidized) and for existing buildings.
(2) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, relating to temporary minimum credit rate for nonfederally
subsidized new buildings, in lieu of the percentage prescribed in
Section 42 (b)(1)(A) of the Internal Revenue Code.
(B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
(3) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
(B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
(4) For purposes of this section, the term "at risk of conversion,"
with respect to an existing property means a property that satisfies
all of the following criteria:
(A) The property is a multifamily rental housing development in
which at least 50 percent of the units receive governmental
assistance pursuant to any of the following:
(i) New construction, substantial rehabilitation, moderate
rehabilitation, property disposition, and loan management set-aside
programs, or any other program providing project-based assistance
pursuant to Section 8 of the United States Housing Act of 1937,
Section 1437f of Title 42 of the United States Code, as amended.
(ii) The Below-Market-Interest-Rate Program pursuant to Section
221(d)(3) of the National Housing Act, Sections 1715 l
(d)(3) and (5) of Title 12 of the United States Code.
(iii) Section 236 of the National Housing Act, Section 1715z-1 of
Title 12 of the United States Code.
(iv) Programs for rent supplement assistance pursuant to Section
101 of the Housing and Urban Development Act of 1965, Section 1701s
of Title 12 of the United States Code, as amended.
(v) Programs pursuant to Section 515 of the Housing Act of 1949,
Section 1485 of Title 42 of the United States Code, as amended.
(vi) The low-income housing credit program set forth in Section 42
of the Internal Revenue Code, relating to low-income housing credit.
(B) The restrictions on rent and income levels will terminate or
the federally insured mortgage on the property is eligible for
prepayment any time within five years before or after the date of
application to the California Tax Credit Allocation Committee.
(C) The entity acquiring the property enters into a regulatory
agreement that requires the property to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the property.
(D) The property satisfies the requirements of Section 42(e) of
the Internal Revenue Code, relating to rehabilitation expenditures
treated as a separate new building, except that the provisions of
Section 42(e)(3)(A)(ii)(I) shall not apply.
(d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code, relating to qualified
low-income building, is modified by adding the following
requirements:
(1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
that, at the election of the taxpayer, is equal to:
(A) An amount not to exceed 8 percent of the lesser of:
(i) The owner equity, which shall include the amount of the
capital contributions actually paid to the housing sponsor and shall
not include any amounts until they are paid on an investor note.
(ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.
(B) The amount of the cashflow from those units in the building
that are not low-income units. For purposes of computing cashflow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code, relating to low-income
housing credit.
(C) Any amount allowed to be distributed under subparagraph (A)
that is not available for distribution during the first five years of
the compliance period may be accumulated and distributed any time
during the first 15 years of the compliance period but not
thereafter.
(2) The limitation on return applies in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an "S" corporation.
(3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code, relating to in
general.
(e) The provisions of Section 42(f) of the Internal Revenue Code,
relating to definition and special rules relating to credit period,
shall be modified as follows:
(1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code, relating to credit period defined, is
modified by substituting "four taxable years" for "10 taxable years."
(2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code, relating
to special rule for first year of credit period, shall not apply to
the tax credit under this section.
(3) Section 42(f)(3) of the Internal Revenue Code, relating to
determination of applicable percentage with respect to increases in
qualified basis after first year of credit period, is modified to
read:
If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the taxable year in which the increase in qualified
basis occurs.
(f) The provisions of Section 42(h) of the Internal Revenue Code,
relating to limitation on aggregate credit allowable with respect to
projects located in a state, shall be modified as follows:
(1) Section 42(h)(2) of the Internal Revenue Code, relating to
allocated credit amount to apply to all taxable years ending during
or after credit allocation year, does not apply and instead the
following provisions apply:
The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which the
allocation is made.
(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code,
relating to limitation on aggregate credit allowable with respect to
projects located in a state, do not apply to this section.
(g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 12206, and Section 23610.5 shall be
an amount equal to the sum of all the following:
(1) Seventy million dollars ($70,000,000) for the 2001 calendar
year, and, for the 2002 calendar year and each calendar year
thereafter, seventy million dollars ($70,000,000) increased by the
percentage, if any, by which the Consumer Price Index for the
preceding calendar year exceeds the Consumer Price Index for the 2001
calendar year. For the purposes of this paragraph, the term
"Consumer Price Index" means the last Consumer Price Index for All
Urban Consumers published by the federal Department of Labor.
(2) The unused housing credit ceiling, if any, for the preceding
calendar years.
(3) The amount of housing credit ceiling returned in the calendar
year. For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income housing project within the period
required by this section or to any project with respect to which an
allocation is canceled by mutual consent of the California Tax Credit
Allocation Committee and the allocation recipient.
(4) Five hundred thousand dollars ($500,000) per
calendar year for projects to provide farmworker housing, as defined
in subdivision (h) of Section 50199.7 of the Health and Safety Code.
(5) The amount of any unallocated or returned credits under former
Sections 17053.14, 23608.2, and 23608.3, as those sections read
prior to January 1, 2009, until fully exhausted for projects to
provide farmworker housing, as defined in subdivision (h) of Section
50199.7 of the Health and Safety Code.
(h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code, relating to compliance period, is
modified to mean, with respect to any building, the period of 30
consecutive taxable years beginning with the first taxable year of
the credit period with respect thereto.
(i) Section 42(j) of the Internal Revenue Code, relating to
recapture of credit, does not apply and the following requirements of
this section shall be set forth in a regulatory agreement between
the California Tax Credit Allocation Committee and the housing
sponsor, and this agreement shall be subordinated, when required, to
any lien or encumbrance of any banks or other institutional lenders
to the project. The regulatory agreement entered into pursuant to
subdivision (f) of Section 50199.14 of the Health and Safety Code
shall apply, provided that the agreement includes all of the
following provisions:
(1) A term not less than the compliance period.
(2) A requirement that the agreement be recorded in the official
records of the county in which the qualified low-income housing
project is located.
(3) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
(4) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto
and that allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation applicable
to the building, the right to enforce the regulatory agreement in any
state court.
(5) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code, relating to low-income housing credit, as
modified by this section.
(6) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee if there is a
determination by the Internal Revenue Service that the project is not
in compliance with Section 42(g) of the Internal Revenue Code,
relating to qualified low-income housing project.
(7) A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.
(8) A provision that the remedies available in the event of a
default under the regulatory agreement that is not cured within a
reasonable cure period include, but are not limited to, allowing any
of the parties designated to enforce the regulatory agreement to
collect all rents with respect to the project; taking possession of
the project and operating the project in accordance with the
regulatory agreement until the enforcer determines the housing
sponsor is in a position to operate the project in accordance with
the regulatory agreement; applying to any court for specific
performance; securing the appointment of a receiver to operate the
project; or any other relief as may be appropriate.
(j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered. The committee
shall establish application filing deadlines, the maximum percentage
of federal and state low-income housing tax credit ceiling that may
be allocated by the committee in that period, and the approximate
date on which allocations shall be made. If the enactment of federal
or state law, the adoption of rules or regulations, or other similar
events prevent the use of two allocation periods, the committee may
reduce the number of periods and adjust the filing deadlines, maximum
percentage of credit allocated, and the allocation dates.
(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code, relating
to plans for allocation of credit among projects. In adopting this
plan, the committee shall comply with the provisions of Sections 42
(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code, relating to
qualified allocation plan and relating to certain selection criteria
must be used, respectively.
(3) Notwithstanding Section 42(m) of the Internal Revenue Code,
relating to responsibilities of housing credit agencies, the
California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
(A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
(i) The housing sponsor shall demonstrate that there is a need and
demand for low-income housing in the community or region for which
it is proposed.
(ii) The project's proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and that the
proposed operating income shall be adequate to operate the project
for the extended use period.
(iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
(iv) The housing sponsor shall have and maintain control of the
site for the project.
(v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
(vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.
(vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies and required equity, and a development fee that does
not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
(B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if
both of the following apply:
(i) The project serves the lowest income tenants at rents
affordable to those tenants.
(ii) The project is obligated to serve qualified tenants for the
longest period.
(C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
(i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units are low-income
units with three and more bedrooms.
(ii) Projects providing single-room occupancy units serving very
low income tenants.
(iii) Existing projects that are "at risk of conversion," as
defined by paragraph (4) of subdivision (c).
(iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
(v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
(4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application.
(k) Section 42( l ) of the Internal Revenue Code,
relating to certifications and other reports to secretary, shall be
modified as follows:
The term "secretary" shall be replaced by the term "Franchise Tax
Board."
( l ) In the case in which the credit allowed under
this section exceeds the net tax, the excess may be carried over to
reduce the net tax in the following year, and succeeding years, if
necessary, until the credit has been exhausted.
(m) A project that received an allocation of a 1989 federal
housing credit dollar amount shall be eligible to receive an
allocation of a 1990 state housing credit dollar amount, subject to
all of the following conditions:
(1) The project was not placed in service prior to 1990.
(2) To the extent the amendments made to this section by the
Statutes of 1990 conflict with any provisions existing in this
section prior to those amendments, the prior provisions of law shall
prevail.
(3) Notwithstanding paragraph (2), a project applying for an
allocation under this subdivision is subject to the requirements of
paragraph (3) of subdivision (j).
(n) The credit period with respect to an allocation of credit in
1989 by the California Tax Credit Allocation Committee of which any
amount is attributable to unallocated credit from 1987 or 1988 shall
not begin until after December 31, 1989.
(o) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, apply to calendar years after 1989.
(p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, do not apply.
(q) (1) For a project that receives a preliminary reservation
under this section beginning on or after January 1, 2016, a taxpayer
may make an irrevocable election in its application to the California
Tax Credit Allocation Committee to sell all or any portion of any
credit allowed under this section to one or more unrelated parties
for each taxable year in which the credit is allowed subject to both
of the following conditions:
(A) The credit is sold for consideration that is not less than 80
percent of the amount of the credit.
(B) The unrelated party or parties purchasing any or all of the
credit pursuant to this subdivision is a taxpayer allowed the credit
under this section for the taxable year of the purchase or any prior
taxable year or is a taxpayer allowed the federal credit under
Section 42 of the Internal Revenue Code, relating to low-income
housing credit, for the taxable year of the purchase or any prior
taxable year in connection with any project located in this state.
For purposes of this subparagraph, "taxpayer allowed the credit under
this section" means a taxpayer that is allowed the credit under this
section without regard to the purchase of a credit pursuant to this
subdivision.
(2) (A) The taxpayer that originally received the credit shall
report to the California Tax Credit Allocation Committee within 10
days of the sale of the credit, in the form and manner specified by
the California Tax Credit Allocation Committee, all required
information regarding the purchase and sale of the credit, including
the social security or other taxpayer identification number of the
unrelated party to whom the credit has been sold, the face amount of
the credit sold, and the amount of consideration received by the
taxpayer for the sale of the credit.
(B) The California Tax Credit Allocation Committee shall provide
an annual listing to the Franchise Tax Board, in a form and manner
agreed upon by the California Tax Credit Allocation Committee and the
Franchise Tax Board, of the taxpayers that have sold or purchased a
credit pursuant to this subdivision.
(3) (A) A credit may be sold pursuant to this subdivision to more
than one unrelated party.
(B) (i) Except as provided in clause (ii), a credit shall not be
resold by the unrelated party to another taxpayer or other party.
(ii) All or any portion of any credit allowed under this section
may be resold once by an original purchaser to one or more unrelated
parties, subject to all of the requirements of this subdivision.
(4) Notwithstanding any other provision of law, the taxpayer that
originally received the credit that is sold pursuant to paragraph (1)
shall remain solely liable for all obligations and liabilities
imposed on the taxpayer by this section with respect to the credit,
none of which shall apply to any party to whom the credit has been
sold or subsequently transferred. Parties who purchase credits
pursuant to paragraph (1) shall be entitled to utilize the purchased
credits in the same manner in which the taxpayer that originally
received the credit could utilize them.
(5) A taxpayer shall not sell a credit allowed by this section if
the taxpayer was allowed the credit on any tax return of the
taxpayer.
(6) Notwithstanding paragraph (1), the taxpayer, with the approval
of the Executive Director of the California Tax Credit Allocation
Committee, may rescind the election to sell all or any portion of the
credit allowed under this section if the consideration for the
credit falls below 80 percent of the amount of the credit after the
California Tax Credit Allocation Committee reservation.
(r) The California Tax Credit Allocation Committee may prescribe
rules, guidelines, or procedures necessary or appropriate to carry
out the purposes of this section, including any guidelines regarding
the allocation of the credit allowed under this section. Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code shall not apply to any rule, guideline, or
procedure prescribed by the California Tax Credit Allocation
Committee pursuant to this section.
(s) The amendments to this section made by Chapter 1222 of the
Statutes of 1993 apply only to taxable years beginning on or after
January 1, 1994.
(t) This section shall remain in effect on and after December 1,
1990, for as long as Section 42 of the Internal Revenue Code,
relating to low-income housing credit, remains in effect. Any unused
credit may continue to be carried forward, as provided in subdivision
( l ), until the credit has been exhausted.
SEC. 5. SEC. 4. Section 17058.1 is
added to the Revenue and Taxation Code, to read:
17058.1. (a) (1) For taxable years beginning on or after January
1, 2017, there shall be allowed to a taxpayer a credit against the
"net tax," as defined by Section 17039, for a qualified low-income
building in an amount equal to the amount computed in
accordance with Section 42 of the Internal Revenue Code,
relating to low-income housing credit as modified by this section.
(2) In determining the amount of credit allowed pursuant to this
section, the following shall apply:
(A) The eligible basis of a building shall be equal to the project'
s total cost basis.
(B) The applicable percentage shall be:
(1) For a project with units for low-income households, 130
percent.
(2) For a project with units for median-income households with
incomes between 80 percent and 99 percent of the area median income,
108 percent.
(3) For a project with units for median-income households with
incomes of 100 percent of the area median income, 76 percent.
(2) The amount of credit shall be equal to 20 percent of the
project's unadjusted allocated basis, as defined by the California
Tax Credit Allocation Committee by regulation, not to exceed fifty
thousand dollars ($50,000) per unit.
(b) For purposes of this section:
(1) "Low-income household" means a household with an income that
is greater than 60 percent and not higher than 80 percent of the area
median household income.
(2) "Median-income household" means a household with an income
that is greater than 80 percent but not higher than 100 percent of
the area median household income.
(3)
(2) "Qualified low-income building" has the same
meaning as in Section 42(c)(2) of the Internal Revenue Code, relating
to qualified low-income housing building, and also means the
qualified low-income building is eligible for a tax credit pursuant
to Section 42 of the Internal Revenue Code, relating to low-income
housing credit, except that Section 42(g) of the Internal Revenue
Code, relating to qualified low-income housing project, shall not
apply and instead the following requirements shall be met:
(A) The project is for the acquisition or substantial
rehabilitation of a building at least 20 years old or is a new
development.
(B) The project includes no more than 50 percent of its units that
are eligible for the tax credit allowed pursuant to Section 17058.
(C) Any units reserved for a tax credit allowed pursuant to this
section shall not supplant existing affordable housing units not
eligible for a tax credit pursuant to this section, including any
units for households with an income that is less than that of a
low-income household. household, and the rent
for those units is at least 20 percent below market rate
at the time the tax credit is allocated.
(D) The project will allocate at least 20
40 percent of its units to low-income households and
median-income households.
(E) The project is located, in the year of the application for the
tax credit, in one of the 12 counties within this state identified
by the United State Department of Housing and Urban Development as
having the highest fair market rents in the state. The California Tax
Credit Allocation Committee shall annually publish those counties on
its Internet Web site.
(c) (1) This section shall not be construed to require a taxpayer
to have been previously or currently allocated a tax credit pursuant
to Section 42 of the Internal Revenue Code, relating low-income
housing credit.
(2) This section shall not be construed to preclude a taxpayer,
allowed a credit pursuant to this section, from being allocated a
credit pursuant to Section 17058 or Section 42 of the Internal
Revenue Code, relating to low-income housing credit.
(3) A credit shall not be allowed pursuant to this section if a
taxpayer has been allocated a credit pursuant to Section 42 of the
Internal Revenue Code, relating to low-income housing credit, for
units for a household with a household income that is greater than 60
percent of the area median household income.
(d) An applicant for the credit allowed pursuant to this section
must demonstrate to the California Tax Credit Allocation Committee
that, within the city in which the project is situated, the area
median income for the average rental unit is above the area median
income for the project.
(e) (1) In the case where the credit allowed under this section
exceeds the "net tax," the excess may be carried over to reduce the
"net tax" in the following year, and succeeding 14 years if
necessary, until the credit has been exhausted.
(2) The credit shall be claimed in the same manner, with regard to
the credit period, as a credit claimed pursuant to Section 17058.
(3) The credit allowed pursuant to this section shall have a
compliance period of 55 consecutive taxable years at the affordable
rate or at substantially below-market rate beginning with the first
taxable year of the credit period with respect thereto, administered
in the same manner as under Section 17058.
(f) The California Tax Credit Allocation Committee shall allocate,
on a first-come-first-served basis, the credit allowed by this
section. The aggregate amount of credit that may be allocated
in any fiscal year pursuant to this section and
Sections 12206.1 and 23610.7 shall be an amount equal to the
sum of paragraphs (1) and (2). one hundred million
dollars ($100,000,000).
(1) One hundred million dollars ($100,000,000) for the 2016-17
fiscal year, and for each fiscal year thereafter.
(2) The unallocated credit amount, if any, from the preceding
fiscal year.
(g) (1) For a project that is allocated a credit under this
section, a taxpayer may make an irrevocable election in its
application to the California Tax Credit Allocation Committee to sell
all or any portion of any credit allowed under this section to one
or more unrelated parties for each taxable year in which the credit
is allowed, subject to both of the following conditions:
(A) The credit is sold for consideration that is not less than 80
percent of the amount of the credit.
(B) The unrelated party or parties purchasing any or all of the
credit pursuant to this subdivision are taxpayers allowed the credit
under this section for the taxable year of the purchase or any prior
taxable year or is a taxpayer allowed the federal credit under
Section 42 of the Internal Revenue Code, relating to low-income
housing credit, for the taxable year of the purchase or any prior
taxable year in connection with any project located in this state.
For purposes of this subparagraph, "taxpayer allowed the credit under
this section" means a taxpayer that is allowed the credit under this
section without regard to the purchase of a credit pursuant to this
subdivision.
(2) (A) The taxpayer that originally received the credit shall
report to the California Tax Credit Allocation Committee within 10
days of the sale of the credit, in the form and manner specified by
the California Tax Credit Allocation Committee, all required
information regarding the purchase and sale of the credit, including
the social security or other taxpayer identification number of the
unrelated party or parties to whom the credit has been sold, the face
amount of the credit sold, and the amount of consideration received
by the taxpayer for the sale of the credit.
(B) The California Tax Credit Allocation Committee shall provide
an annual listing to the Franchise Tax Board, in a form and manner
agreed upon by the California Tax Credit Allocation Committee and the
Franchise Tax Board, of the taxpayers that have sold or purchased a
credit pursuant to this subdivision.
(3) (A) A credit may be sold pursuant to this subdivision to more
than one unrelated party.
(B) (i) Except as provided in clause (ii), a credit shall not be
resold by the unrelated party to another taxpayer or other party.
(ii) All or any portion of any credit allowed under this section
may be resold once by an original purchaser to one or more unrelated
parties, subject to all of the requirements of this subdivision.
(4) Notwithstanding any other provision of law, the taxpayer that
originally received the credit that is sold pursuant to paragraph (1)
shall remain solely liable for all obligations and liabilities
imposed on the taxpayer by this section with respect to the credit,
none of which shall apply to any party to whom the credit has been
sold or subsequently transferred. Parties who purchase credits
pursuant to paragraph (1) shall be entitled to utilize the purchased
credits in the same manner in which the taxpayer that originally
received the credit could utilize them.
(5) A taxpayer shall not sell a credit allowed by this section if
the taxpayer was allowed the credit on any tax return of the
taxpayer.
(6) Notwithstanding paragraph (1), the taxpayer, with the approval
of the Executive Director of the California Tax Credit Allocation
Committee, may rescind the election to sell all or any portion of the
credit allowed under this section if the consideration for the
credit falls below 80 percent of the amount of the credit after the
California Tax Credit Allocation Committee reservation.
(g)
(h) (1) The California Tax Credit Allocation Committee
shall establish guidelines to specify that a taxpayer may be allowed
a tax credit pursuant to this section, Section 17058, and Section 42
of the Internal Revenue Code, relating to low-income housing credit,
subject to the requirements of these sections.
sections and paragraph (3) of subdivision (c).
(2) The California Tax Credit Allocation Committee and
the Department of Insurance may adopt regulations, rules,
guidelines, or procedures necessary or appropriate to carry out the
purposes of this section, including guidelines to conform the credit
allowed by this section to any procedures established pursuant to
Section 17058.
(3) The Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) does not apply to this subdivision.
(h) Section 41 does not apply to the credit allowed by this
section.
SEC. 6. Section 23610.5 of the Revenue and
Taxation Code is amended to read:
23610.5. (a) (1) There shall be allowed as a credit against the
"tax," defined by Section 23036, a state low-income housing tax
credit in an amount equal to the amount determined in subdivision
(c), computed in accordance with Section 42 of the Internal Revenue
Code, relating to low-income housing credit, except as otherwise
provided in this section.
(2) "Taxpayer," for purposes of this section, means the sole owner
in the case of a "C" corporation, the partners in the case of a
partnership, and the shareholders in the case of an "S" corporation.
(3) "Housing sponsor," for purposes of this section, means the
sole owner in the case of a "C" corporation, the partnership in the
case of a partnership, and the
"S" corporation in the case of an "S" corporation.
(b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
(A) The low-income housing project shall be located in California
and shall meet either of the following requirements:
(i) Except for projects to provide farmworker housing, as defined
in subdivision (h) of Section 50199.7 of the Health and Safety Code,
that are allocated credits solely under the set-aside described in
subdivision (c) of Section 50199.20 of the Health and Safety Code,
the project's housing sponsor has been allocated by the California
Tax Credit Allocation Committee a credit for federal income tax
purposes under Section 42 of the Internal Revenue Code, relating to
low-income housing credit.
(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
Internal Revenue Code, relating to special rule where 50 percent or
more of building is financed with tax-exempt bonds subject to volume
cap.
(B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code, relating to low-income housing
credit. The committee may require a fee if the application for the
credit under this section is submitted in a calendar year after the
year the application is submitted for the federal tax credit.
(C) (i) For a project that receives a preliminary reservation of
the state low-income housing tax credit, allowed pursuant to
subdivision (a), on or after January 1, 2009, and before January 1,
2016, the credit shall be allocated to the partners of a partnership
owning the project in accordance with the partnership agreement,
regardless of how the federal low-income housing tax credit with
respect to the project is allocated to the partners, or whether the
allocation of the credit under the terms of the agreement has
substantial economic effect, within the meaning of Section 704(b) of
the Internal Revenue Code, relating to determination of distributive
share.
(ii) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or
deduction otherwise allowable under this part that is attributable to
the sale or other disposition of that partner's partnership interest
made prior to the expiration of the federal credit shall not be
allowed in the taxable year in which the sale or other disposition
occurs, but shall instead be deferred until and treated as if it
occurred in the first taxable year immediately following the taxable
year in which the federal credit period expires for the project
described in clause (i).
(iii) This subparagraph does not apply to a project that receives
a preliminary reservation of state low-income housing tax credits
under the set-aside described in subdivision (c) of Section 50199.20
of the Health and Safety Code unless the project also receives a
preliminary reservation of federal low-income housing tax credits.
(iv) This subparagraph shall cease to be operative with respect to
any project that receives a preliminary reservation of a credit on
or after January 1, 2016.
(2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
(B) In the case of a partnership or an "S" corporation, the
housing sponsor shall provide a copy of the California Tax Credit
Allocation Committee certification to the taxpayer.
(C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
(D) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code, relating to low-income housing credit,
apply to this section.
(E) (i) Except as described in clause (ii), for buildings located
in designated difficult development areas (DDAs) or qualified census
tracts (QCTs), as defined in Section 42(d)(5)(B) of the Internal
Revenue Code, relating to increase in credit for buildings in
high-cost areas, credits may be allocated under this section in the
amounts prescribed in subdivision (c), provided that the amount of
credit allocated under Section 42 of the Internal Revenue Code,
relating to low-income housing credit, is computed on 100 percent of
the qualified basis of the building.
(ii) Notwithstanding clause (i), the California Tax Credit
Allocation Committee may allocate the credit for buildings located in
DDAs or QCTs that are restricted to having 50 percent of its
occupants be special needs households, as defined in the California
Code of Regulations by the California Tax Credit Allocation
Committee, even if the taxpayer receives federal credits pursuant to
Section 42(d)(5)(B) of the Internal Revenue Code, relating to
increase in credit for buildings in high cost areas, provided that
the credit allowed under this section shall not exceed 30 percent of
the eligible basis of the building.
(F) (i) The California Tax Credit Allocation Committee may
allocate a credit under this section in exchange for a credit
allocated pursuant to Section 42(d)(5)(B) of the Internal Revenue
Code, relating to increase in credit for buildings in high cost
areas, in amounts up to 30 percent of the eligible basis of a
building if the credits allowed under Section 42 of the Internal
Revenue Code, relating to low-income housing credit, are reduced by
an equivalent amount.
(ii) An equivalent amount shall be determined by the California
Tax Credit Allocation Committee based upon the relative amount
required to produce an equivalent state tax credit to the taxpayer.
(c) Section 42(b) of the Internal Revenue Code, relating to
applicable percentage, shall be modified as follows:
(1) In the case of any qualified low-income building placed in
service by the housing sponsor during 1987, the term "applicable
percentage" means 9 percent for each of the first three years and 3
percent for the fourth year for new buildings (whether or not the
building is federally subsidized) and for existing buildings.
(2) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, relating to temporary minimum credit rate for nonfederally
subsidized new buildings, in lieu of the percentage prescribed in
Section 42(b)(1)(A) of the Internal Revenue Code.
(B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
(3) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
(B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
(4) For purposes of this section, the term "at risk of conversion,"
with respect to an existing property means a property that satisfies
all of the following criteria:
(A) The property is a multifamily rental housing development in
which at least 50 percent of the units receive governmental
assistance pursuant to any of the following:
(i) New construction, substantial rehabilitation, moderate
rehabilitation, property disposition, and loan management set-aside
programs, or any other program providing project-based assistance
pursuant to Section 8 of the United States Housing Act of 1937,
Section 1437f of Title 42 of the United States Code, as amended.
(ii) The Below-Market-Interest-Rate Program pursuant to Section
221(d)(3) of the National Housing Act, Sections 1715 l
(d)(3) and (5) of Title 12 of the United States Code.
(iii) Section 236 of the National Housing Act, Section 1715z-1 of
Title 12 of the United States Code.
(iv) Programs for rent supplement assistance pursuant to Section
101 of the Housing and Urban Development Act of 1965, Section 1701s
of Title 12 of the United States Code, as amended.
(v) Programs pursuant to Section 515 of the Housing Act of 1949,
Section 1485 of Title 42 of the United States Code, as amended.
(vi) The low-income housing credit program set forth in Section 42
of the Internal Revenue Code, relating to low-income housing credit.
(B) The restrictions on rent and income levels will terminate or
the federally insured mortgage on the property is eligible for
prepayment any time within five years before or after the date of
application to the California Tax Credit Allocation Committee.
(C) The entity acquiring the property enters into a regulatory
agreement that requires the property to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the property.
(D) The property satisfies the requirements of Section 42(e) of
the Internal Revenue Code, relating to rehabilitation expenditures
treated as a separate new building, except that the provisions of
Section 42(e)(3)(A)(ii)(I) shall not apply.
(d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code, relating to qualified
low-income building, is modified by adding the following
requirements:
(1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
that, at the election of the taxpayer, is equal to:
(A) An amount not to exceed 8 percent of the lesser of:
(i) The owner equity, which shall include the amount of the
capital contributions actually paid to the housing sponsor and shall
not include any amounts until they are paid on an investor note.
(ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.
(B) The amount of the cashflow from those units in the building
that are not low-income units. For purposes of computing cashflow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code, relating to low-income
housing credit.
(C) Any amount allowed to be distributed under subparagraph (A)
that is not available for distribution during the first five years of
the compliance period may be accumulated and distributed any time
during the first 15 years of the compliance period but not
thereafter.
(2) The limitation on return applies in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an "S" corporation.
(3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code, relating to in
general.
(e) The provisions of Section 42(f) of the Internal Revenue Code,
relating to definition and special rules relating to credit period,
shall be modified as follows:
(1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code, relating to credit period defined, is
modified by substituting "four taxable years" for "10 taxable years."
(2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code, relating
to special rule for first year of credit period, shall not apply to
the tax credit under this section.
(3) Section 42(f)(3) of the Internal Revenue Code, relating to
determination of applicable percentage with respect to increases in
qualified basis after first year of credit period, is modified to
read:
If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the later of the taxable years in which the increase
in qualified basis occurs.
(f) The provisions of Section 42(h) of the Internal Revenue Code,
relating to limitation on aggregate credit allowable with respect to
projects located in a state, shall be modified as follows:
(1) Section 42(h)(2) of the Internal Revenue Code, relating to
allocated credit amount to apply to all taxable years ending during
or after credit allocation year, does not apply and instead the
following provisions apply:
The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which the
allocation is made.
(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code,
relating to limitation on aggregate credit allowable with respect to
projects located in a state, do not apply to this section.
(g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 12206, and Section 17058 shall be
an amount equal to the sum of all the following:
(1) Seventy million dollars ($70,000,000) for the 2001 calendar
year, and, for the 2002 calendar year and each calendar year
thereafter, seventy million dollars ($70,000,000) increased by the
percentage, if any, by which the Consumer Price Index for the
preceding calendar year exceeds the Consumer Price Index for the 2001
calendar year. For the purposes of this paragraph, the term
"Consumer Price Index" means the last Consumer Price Index for All
Urban Consumers published by the federal Department of Labor.
(2) The unused housing credit ceiling, if any, for the preceding
calendar years.
(3) The amount of housing credit ceiling returned in the calendar
year. For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income housing project within the period
required by this section or to any project with respect to which an
allocation is canceled by mutual consent of the California Tax Credit
Allocation Committee and the allocation recipient.
(4) Five hundred thousand dollars ($500,000) per calendar year for
projects to provide farmworker housing, as defined in subdivision
(h) of Section 50199.7 of the Health and Safety Code.
(5) The amount of any unallocated or returned credits under former
Sections 17053.14, 23608.2, and 23608.3, as those sections read
prior to January 1, 2009, until fully exhausted for projects to
provide farmworker housing, as defined in subdivision (h) of Section
50199.7 of the Health and Safety Code.
(h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code, relating to compliance period, is
modified to mean, with respect to any building, the period of 30
consecutive taxable years beginning with the first taxable year of
the credit period with respect thereto.
(i) Section 42(j) of the Internal Revenue Code, relating to
recapture of credit, does not apply and the following shall be
substituted in its place:
The requirements of this section shall be set forth in a
regulatory agreement between the California Tax Credit Allocation
Committee and the housing sponsor, and this agreement shall be
subordinated, when required, to any lien or encumbrance of any banks
or other institutional lenders to the project. The regulatory
agreement entered into pursuant to subdivision (f) of Section
50199.14 of the Health and Safety Code shall apply, provided that the
agreement includes all of the following provisions:
(1) A term not less than the compliance period.
(2) A requirement that the agreement be recorded in the official
records of the county in which the qualified low-income housing
project is located.
(3) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
(4) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto
and that allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation applicable
to the building, the right to enforce the regulatory agreement in any
state court.
(5) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code, relating to low-income housing credit, as
modified by this section.
(6) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee if there is a
determination by the Internal Revenue Service that the project is not
in compliance with Section 42(g) of the Internal Revenue Code,
relating to qualified low-income housing project.
(7) A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.
(8) A provision that the remedies available in the event of a
default under the regulatory agreement that is not cured within a
reasonable cure period include, but are not limited to, allowing any
of the parties designated to enforce the regulatory agreement to
collect all rents with respect to the project; taking possession of
the project and operating the project in accordance with the
regulatory agreement until the enforcer determines the housing
sponsor is in a position to operate the project in accordance with
the regulatory agreement; applying to any court for specific
performance; securing the appointment of a receiver to operate the
project; or any other relief as may be appropriate.
(j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered. The committee
shall establish application filing deadlines, the maximum percentage
of federal and state low-income housing tax credit ceiling that may
be allocated by the committee in that period, and the approximate
date on which allocations shall be made. If the enactment of federal
or state law, the adoption of rules or regulations, or other similar
events prevent the use of two allocation periods, the committee may
reduce the number of periods and adjust the filing deadlines, maximum
percentage of credit allocated, and the allocation dates.
(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code, relating
to plans for allocation of credit among projects. In adopting this
plan, the committee shall comply with the provisions of Sections 42
(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code, relating to
qualified allocation plan and relating to certain selection criteria
must be used, respectively.
(3) Notwithstanding Section 42(m) of the Internal Revenue Code,
relating to responsibilities of housing credit agencies, the
California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
(A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
(i) The housing sponsor shall demonstrate that there is a need for
low-income housing in the community or region for which it is
proposed.
(ii) The project's proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and shall be
adequate to operate the project for the extended use period.
(iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
(iv) The housing sponsor shall have and maintain control of the
site for the project.
(v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
(vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.
(vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies and required equity, and a development fee that does
not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
(B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if
both of the following apply:
(i) The project serves the lowest income tenants at rents
affordable to those tenants.
(ii) The project is obligated to serve qualified tenants for the
longest period.
(C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
(i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units are low-income
units with three and more bedrooms.
(ii) Projects providing single-room occupancy units serving very
low income tenants.
(iii) Existing projects that are "at risk of conversion," as
defined by paragraph (4) of subdivision (c).
(iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
(v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
(4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application except to break a tie when
two or more of the projects have an equal rating.
(5) Not less than 20 percent of the low-income housing tax credits
available annually under this section, Section 12206, and Section
17058 shall be set aside for allocation to rural areas as defined in
Section 50199.21 of the Health and Safety Code. Any amount of credit
set aside for rural areas remaining on or after October 31 of any
calendar year shall be available for allocation to any eligible
project. No amount of credit set aside for rural areas shall be
considered available for any eligible project so long as there are
eligible rural applications pending on October 31.
(k) Section 42( l ) of the Internal Revenue Code,
relating to certifications and other reports to secretary, shall be
modified as follows:
The term "secretary" shall be replaced by the term "Franchise Tax
Board."
( l ) In the case in which the credit allowed under
this section exceeds the "tax," the excess may be carried over to
reduce the "tax" in the following year, and succeeding years if
necessary, until the credit has been exhausted.
(m) A project that received an allocation of a 1989 federal
housing credit dollar amount shall be eligible to receive an
allocation of a 1990 state housing credit dollar amount, subject to
all of the following conditions:
(1) The project was not placed in service prior to 1990.
(2) To the extent the amendments made to this section by the
Statutes of 1990 conflict with any provisions existing in this
section prior to those amendments, the prior provisions of law shall
prevail.
(3) Notwithstanding paragraph (2), a
project applying for an allocation under this subdivision is subject
to the requirements of paragraph (3) of subdivision (j).
(n) The credit period with respect to an allocation of credit in
1989 by the California Tax Credit Allocation Committee of which any
amount is attributable to unallocated credit from 1987 or 1988 shall
not begin until after December 31, 1989.
(o) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, apply to calendar years after 1989.
(p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, do not apply.
(q) (1) A corporation may elect to assign any portion of any
credit allowed under this section to one or more affiliated
corporations for each taxable year in which the credit is allowed.
For purposes of this subdivision, "affiliated corporation" has the
meaning provided in subdivision (b) of Section 25110, as that section
was amended by Chapter 881 of the Statutes of 1993, as of the last
day of the taxable year in which the credit is allowed, except that
"100 percent" is substituted for "more than 50 percent" wherever it
appears in the section, as that section was amended by Chapter 881 of
the Statutes of 1993, and "voting common stock" is substituted for
"voting stock" wherever it appears in the section, as that section
was amended by Chapter 881 of the Statutes of 1993.
(2) The election provided in paragraph (1):
(A) May be based on any method selected by the corporation that
originally receives the credit.
(B) Shall be irrevocable for the taxable year the credit is
allowed, once made.
(C) May be changed for any subsequent taxable year if the election
to make the assignment is expressly shown on each of the returns of
the affiliated corporations that assign and receive the credits.
(r) (1) For a project that receives a preliminary reservation
under this section beginning on or after January 1, 2016, a taxpayer
may make an irrevocable election in its application to the California
Tax Credit Allocation Committee to sell all or any portion of any
credit allowed under this section to one or more unrelated parties
for each taxable year in which the credit is allowed, subject to both
of the following conditions:
(A) The credit is sold for consideration that is not less than 80
percent of the amount of the credit.
(B) (i) The unrelated party or parties purchasing any or all of
the credit pursuant to this subdivision is a taxpayer allowed the
credit under this section for the taxable year of the purchase or any
prior taxable year or is a taxpayer allowed the federal credit under
Section 42 of the Internal Revenue Code, relating to low-income
housing credit, for the taxable year of the purchase or any prior
taxable year in connection with any project located in this state.
(ii) For purposes of this subparagraph, "taxpayer allowed the
credit under this section" means a taxpayer that is allowed the
credit under this section without regard to the purchase of a credit
pursuant to this subdivision without regard to any of the following:
(I) The purchase of a credit under this section pursuant to this
subdivision.
(II) The assignment of a credit under this section pursuant to
subdivision (q).
(III) The assignment of a credit under this section pursuant to
Section 23363.
(2) (A) The taxpayer that originally received the credit shall
report to the California Tax Credit Allocation Committee within 10
days of the sale of the credit, in the form and manner specified by
the California Tax Credit Allocation Committee, all required
information regarding the purchase and sale of the credit, including
the social security or other taxpayer identification number of the
unrelated party to whom the credit has been sold, the face amount of
the credit sold, and the amount of consideration received by the
taxpayer for the sale of the credit.
(B) The California Tax Credit Allocation Committee shall provide
an annual listing to the Franchise Tax Board, in a form and manner
agreed upon by the California Tax Credit Allocation Committee and the
Franchise Tax Board, of the taxpayers that have sold or purchased a
credit pursuant to this subdivision.
(3) (A) A credit may be sold pursuant to this subdivision to more
than one unrelated party.
(B) (i) Except as provided in clause (ii), a credit shall not be
resold by the unrelated party to another taxpayer or other party.
(ii) All or any portion of any credit allowed under this section
may be resold once by an original purchaser to one or more unrelated
parties, subject to all of the requirements of this subdivision.
(4) Notwithstanding any other provision of law, the taxpayer that
originally received the credit that is sold pursuant to paragraph (1)
shall remain solely liable for all obligations and liabilities
imposed on the taxpayer by this section with respect to the credit,
none of which shall apply to any party to whom the credit has been
sold or subsequently transferred. Parties who purchase credits
pursuant to paragraph (1) shall be entitled to utilize the purchased
credits in the same manner in which the taxpayer that originally
received the credit could utilize them.
(5) A taxpayer shall not sell a credit allowed by this section if
the taxpayer was allowed the credit on any tax return of the
taxpayer.
(6) Notwithstanding paragraph (1), the taxpayer, with the approval
of the Executive Director of the California Tax Credit Allocation
Committee, may rescind the election to sell all or any portion of the
credit allowed under this section if the consideration for the
credit falls below 80 percent of the amount of the credit after the
California Tax Credit Allocation Committee reservation.
(s) The California Tax Credit Allocation Committee may prescribe
rules, guidelines, or procedures necessary or appropriate to carry
out the purposes of this section, including any guidelines regarding
the allocation of the credit allowed under this section. Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code shall not apply to any rule, guideline, or
procedure prescribed by the California Tax Credit Allocation
Committee pursuant to this section.
(t) Any unused credit may continue to be carried forward, as
provided in subdivision ( l ), until the credit has been
exhausted.
(u) This section shall remain in effect on and after December 1,
1990, for as long as Section 42 of the Internal Revenue Code,
relating to low-income housing credit, remains in effect.
(v) The amendments to this section made by Chapter 1222 of the
Statutes of 1993 shall apply only to taxable years beginning on or
after January 1, 1994, except that paragraph (1) of subdivision (q),
as amended, shall apply to taxable years beginning on or after
January 1, 1993.
SEC. 7. SEC. 5. Section 23610.7 is
added to the Revenue and Taxation Code, to read:
23610.7. (a) (1) For taxable years beginning on or after January
1, 2017, there shall be allowed to a taxpayer a credit against the
"tax," as defined by Section 23036, for a qualified low-income
building in an amount equal to the amount computed in
accordance with Section 42 of the Internal Revenue Code,
relating to low-income housing credit as modified by this section.
(2) In determining the amount of credit allowed pursuant to this
section, the following shall apply:
(A) The eligible basis of a building shall be equal to the project'
s total cost basis.
(B) The applicable percentage shall be:
(1) For a project with units for low-income households, 130
percent.
(2) For a project with units for median-income households with
incomes between 80 percent and 99 percent of the area median income,
108 percent.
(3) For a project with units for median-income households with
incomes of 100 percent of the area median income, 76 percent.
(2) The amount of credit shall be equal to 20 percent of the
project's unadjusted allocated basis, as defined by the California
Tax Credit Allocation Committee by regulation, not to exceed fifty
thousand dollars ($50,000) per unit.
(b) For purposes of this section:
(1) "Low-income household" means a household with an income that
is greater than 60 percent and not higher than 80 percent of the area
median household income.
(2) "Median-income household" means a household with an income
that is greater than 80 percent but not higher than 100 percent of
the area median household income.
(3)
(2) "Qualified low-income building" has the same
meaning as in Section 42(c)(2) of the Internal Revenue Code, relating
to qualified low-income housing building, and also means the
qualified low-income building is eligible for a tax credit pursuant
to Section 42 of the Internal Revenue Code, relating to low-income
housing credit, except that Section 42(g) of the Internal Revenue
Code, relating to qualified low-income housing project, shall not
apply and instead the following requirements shall be met:
(A) The project is for the acquisition or substantial
rehabilitation of a building at least 20 years old or is a new
development.
(B) The project includes no more than 50 percent of its units that
are eligible for the tax credit allowed pursuant to Section 23610.5.
(C) Any units reserved for a tax credit allowed pursuant to this
section shall not supplant existing affordable housing units not
eligible for a tax credit pursuant to this section, including any
units for households with an income that is less than that of a
low-income household. household, and the rent
for those units is at least 20 percent below market rate at the time
the tax credit is allocated.
(D) The project will allocate at least 20
40 percent of its units to low-income households and
median-income households.
(E) The project is located, in the year of the application for the
tax credit, in one of the 12 counties within this state identified
by the United State Department of Housing and Urban Development as
having the highest fair market rents in the state. The California Tax
Credit Allocation Committee shall annually publish those counties on
its Internet Web site.
(c) (1) This section shall not be construed to require a taxpayer
to have been previously or currently allocated a tax credit pursuant
to Section 42 of the Internal Revenue Code, relating low-income
housing credit.
(2) This section shall not be construed to preclude a taxpayer,
allowed a credit pursuant to this section, from being allocated a
credit pursuant to Section 23610.5 or Section 42 of the Internal
Revenue Code, relating to low-income housing credit.
(3) A credit shall not be allowed pursuant to this section if a
taxpayer has been allocated a credit pursuant to Section 42 of the
Internal Revenue Code, relating to low-income housing credit, for
units for a household with a household income that is greater than 60
percent of the area median household income.
(d) An applicant for the credit allowed pursuant to this section
must demonstrate to the California Tax Credit Allocation Committee
that, within the city in which the project is situated, the area
median income for the average rental unit is above the area median
income for the project.
(e) (1) In the case where the credit allowed under this section
exceeds the "tax," the excess may be carried over to reduce the "tax"
in the following year, and succeeding 14 years if necessary, until
the credit has been exhausted.
(2) The credit shall be claimed in the same manner, with regard to
the credit period, as a credit claimed pursuant to Section 23610.5.
(3) The credit allowed pursuant to this section shall have a
compliance period of 55 consecutive taxable years at the affordable
rate or at substantially below-market rate beginning with the first
taxable year of the credit period with respect thereto, administered
in the same manner as under Section 23610.5.
(f) The California Tax Credit Allocation Committee shall allocate,
on a first-come-first-served basis, the credit allowed by this
section. The aggregate amount of credit that may be allocated
in any fiscal year pursuant to this section and
Sections 12206.1 and 17058.1 shall be an amount equal to the
sum of paragraphs (1) and (2). one hundred milli
on dollars ($100,000,000).
(1) One hundred million dollars ($100,000,000) for the 2016-17
fiscal year, and for each fiscal year thereafter.
(2) The unallocated credit amount, if any, from the preceding
fiscal year.
(g) (1) For a project that is allocated a credit under this
section, a taxpayer may make an irrevocable election in its
application to the California Tax Credit Allocation Committee to sell
all or any portion of any credit allowed under this section to one
or more unrelated parties for each taxable year in which the credit
is allowed, subject to both of the following conditions:
(A) The credit is sold for consideration that is not less than 80
percent of the amount of the credit.
(B) The unrelated party or parties purchasing any or all of the
credit pursuant to this subdivision are taxpayers allowed the credit
under this section for the taxable year of the purchase or any prior
taxable year or is a taxpayer allowed the federal credit under
Section 42 of the Internal Revenue Code, relating to low-income
housing credit, for the taxable year of the purchase or any prior
taxable year in connection with any project located in this state.
For purposes of this subparagraph, "taxpayer allowed the credit under
this section" means a taxpayer that is allowed the credit under this
section without regard to the purchase of a credit pursuant to this
subdivision.
(2) (A) The taxpayer that originally received the credit shall
report to the California Tax Credit Allocation Committee within 10
days of the sale of the credit, in the form and manner specified by
the California Tax Credit Allocation Committee, all required
information regarding the purchase and sale of the credit, including
the social security or other taxpayer identification number of the
unrelated party or parties to whom the credit has been sold, the face
amount of the credit sold, and the amount of consideration received
by the taxpayer for the sale of the credit.
(B) The California Tax Credit Allocation Committee shall provide
an annual listing to the Franchise Tax Board, in a form and manner
agreed upon by the California Tax Credit Allocation Committee and the
Franchise Tax Board, of the taxpayers that have sold or purchased a
credit pursuant to this subdivision.
(3) (A) A credit may be sold pursuant to this subdivision to more
than one unrelated party.
(B) (i) Except as provided in clause (ii), a credit shall not be
resold by the unrelated party to another taxpayer or other party.
(ii) All or any portion of any credit allowed under this section
may be resold once by an original purchaser to one or more unrelated
parties, subject to all of the requirements of this subdivision.
(4) Notwithstanding any other provision of law, the taxpayer that
originally received the credit that is sold pursuant to paragraph (1)
shall remain solely liable for all obligations and liabilities
imposed on the taxpayer by this section with respect to the credit,
none of which shall apply to any party to whom the credit has been
sold or subsequently transferred. Parties who purchase credits
pursuant to paragraph (1) shall be entitled to utilize the purchased
credits in the same manner in which the taxpayer that originally
received the credit could utilize them.
(5) A taxpayer shall not sell a credit allowed by this section if
the taxpayer was allowed the credit on any tax return of the
taxpayer.
(6) Notwithstanding paragraph (1), the taxpayer, with the approval
of the Executive Director of the California Tax Credit Allocation
Committee, may rescind the election to sell all or any portion of the
credit allowed under this section if the consideration for the
credit falls below 80 percent of the amount of the credit after the
California Tax Credit Allocation Committee reservation.
(g)
(h) (1) The California Tax Credit Allocation Committee
shall establish guidelines to specify that a taxpayer may be allowed
a tax credit pursuant to this section, Section 23610.5, and Section
42 of the Internal Revenue Code, relating to low-income housing
credit, subject to the requirements of these sections.
sections and paragraph (3) of subdivision (c).
(2) The California Tax Credit Allocation Committee and
the Department of Insurance may adopt regulations, rules,
guidelines, or procedures necessary or appropriate to carry out the
purposes of this section, including guidelines to conform the credit
allowed by this section to any procedures established pursuant to
Section 23610.5.
(3) The Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) does not apply to this subdivision.
(h) Section 41 does not apply to the credit allowed by this
section.
SEC. 6. (a) In accordance
with Section 41 of the Revenue and Taxation Code, to measure whether
the Sections 12206.1, 17058.1, and 23610.7 of the Revenue and
Taxation Code, as added by Sections 3, 4, and 5 of this act, achieve
their intended purpose, on the January 1 after the final allocation
of tax credits allowed pursuant to those sections, the California Tax
Credit Allocation Committee shall prepare a written report to the
Legislature which shall include, but is not limited to, the
following:
(1) The total number of units for which the tax credits were
allowed.
(2) The geographic areas of the tax credit allocations.
(3) A recommendation as to whether the tax credits should continue
to be allowed.
(b) A report submitted pursuant to subdivision (a) shall be
submitted in compliance with Section 9795 of the Government Code.
SEC. 7. If the Commission on State Mandates
determines that this act contains costs mandated by the state,
reimbursement to local agencies and school districts for those costs
shall be made pursuant to Part 7 (commencing with Section 17500) of
Division 4 of Title 2 of the Government Code.
SEC. 8. Notwithstanding Section 2229 of the
Revenue and Taxation Code, no appropriation is made by this act and
the state shall not reimburse any local agency for any property tax
revenues lost by it pursuant to this act.
SEC. 8. SEC. 9. This act provides
for a tax levy within the meaning of Article IV of the Constitution
and shall go into immediate effect.
