Article
2.5. Community Development Tax Credit Program
12335.
(a)This article shall be known and may be cited as the Community Development Tax Credit Program.(b)The Legislature finds and declares that the purpose of this article is to enable local residents and stakeholders to work with and through community development corporations to partner with nonprofit, public, and private entities to improve economic opportunities for low- and moderate-income households and other residents in urban, rural, and suburban communities across the state.
12335.2.
For purposes of this article, the following definitions shall apply:(a) “CDC tax credit” means a tax credit allowed pursuant to Section 17053.60 or 23660 of the Revenue and Taxation Code.
(b) “Community development financial institution” means any community development financial institution certified by the federal Community Development Financial Institutions Fund under Part 1805 (commencing with Section 1805.100) of Chapter XVIII of Title 12 of the Code of Federal Regulations.
(c) (1) “Eligible community development corporation” means a
nonprofit corporation in good standing, as determined by the Secretary of State, that is created for the purpose of supporting and revitalizing communities and that meets all of the following requirements:
(A) It focuses a substantial majority of its efforts on serving one or more specific neighborhoods, municipalities, a region of the state, or a constituency that is economically disadvantaged.
(B) Its stated purpose in its articles of incorporation and bylaws is to engage local residents and businesses to work together to undertake community development programs, projects, and activities that develop and improve urban, rural, and suburban communities in sustainable ways that create and expand economic opportunities for low- and moderate-income people.
(C) It demonstrates that the members of its board of directors are a meaningful representation of the community the corporation intends to serve, including, but not limited to, the percentage of board members that reside in the area.
(2) “Eligible community development corporation” includes a community development financial institution or a community action agency if that entity meets the requirements specified in subparagraphs (A), (B), and (C) of paragraph (1).
(d) “Qualified investment” means a grant, donation equity investment, or charitable contribution made by a taxpayer, that does not require repayment, interest payment, or financial return back to the taxpayer. “Qualified investment” does not include loans or
equity equivalent investments.
12335.4.
(a) The Treasurer shall collaborate with the Department of Community Services and Development to administer this article.(b) (1) On or before July 1, 2023, the Department of Community Services and Development shall develop and provide forms for, and establish uniform procedures for the submission and review of, applications for an allocation of CDC tax credits in accordance with this article.
(2) The procedure shall include a process to determine whether the applicant is an eligible community development corporation as defined in Section 12335.2.
(3) The procedure shall include the requirement that the applicant submit a community investment plan. The community investment plan required shall be an organizational business plan that details the applicant’s goals, outcomes, strategies, programs, and activities for a three- to five-year period and its financial plans for supporting its strategy. A community investment plan shall be designed to engage local residents and businesses to work together to undertake community development programs, projects, and activities that develop and improve urban, rural, or suburban communities in sustainable ways that create and expand economic opportunities for low- and moderate-income households. Any community investment plan shall be valid, for application purposes, for three years beginning January 1 of the year for which the CDC tax credits are
being applied.
(c) The Department of Community Services and Development shall certify that an applicant for an allocation of CDC tax credits is an eligible community development corporation as defined in Section 12335.2 before that applicant may be allocated a CDC tax credit by the Treasurer pursuant to Section 12335.6.
(d) A fee may be imposed on each applicant that does not exceed the reasonable administrative costs for the Treasurer and the Department of Community Services and Development in developing and evaluating the applications pursuant to this article. Any fee imposed pursuant to this section may not exceed ____.
12335.6.
For purposes of allocating CDC tax credits in accordance with this article, the Treasurer shall do all of the following:(a) Accept and evaluate applications in order to certify an allocation of CDC tax credits to an eligible community development corporation.
(b) Except as provided in Section 12335.14, beginning Beginning with the 2023 calendar year, allocate the CDC tax credits for a current calendar year, in an amount not to exceed fifty
twenty million dollars ($50,000,000)
($20,000,000) per calendar year, among eligible community development corporations pursuant to the following criteria:
(1) The determination by the Treasurer of the amount of the CDC tax credit allocated to any eligible community development corporation shall be based on the quality of that eligible community development corporation’s community investment plan.
(2) The allocation process shall prioritize allocations to community development corporations with the highest quality community investment plans and strong track records and shall strive to ensure that all regions of the state are able to fairly compete for allocations, including gateway municipalities, rural areas, and suburban areas.
(3) In an allocation period, at least 30 percent of the eligible community development corporations that are allocated a CDC tax credit shall be located in or serving gateway municipalities and at least 20 percent of the eligible community development corporations that are allocated a CDC tax credit shall be located in or serving rural areas, as defined by the Treasurer, unless the Treasurer finds that there are not a sufficient number of applicants for the CDC tax credits from those areas.
(4) In an allocation period, not more than 50 percent of the total number of eligible community development corporations that are allocated a CDC tax credit may be community development financial institutions.
(5) If an eligible community development corporation is allocated a CDC
tax credit, the amount of CDC tax credit that is allocated shall be at least one hundred thousand dollars ($100,000), but shall not exceed five hundred thousand dollars ($500,000), in any one fiscal year.
(6) An allocation of CDC tax credits shall be valid for a period of three years from the date of allocation, subject to revocation or extension pursuant to Section 12335.8.
(7) No eligible community development corporation shall receive a subsequent allocation of CDC tax credits until it has received amounts in qualified investments for which a CDC tax credit has been transferred in exchange that equal 95 percent of the total amount of CDC tax credits it has been allocated in the three-year period.
(c) Issue to an
eligible community development corporation that has been allocated a CDC tax credit a certification of CDC tax credit allocation. The certification shall identify the name of the eligible community development corporation, the amount of CDC tax credit that has been allocated, the date of allocation, and any other necessary information as may be determined by the Treasurer. An eligible community development corporation that is issued a certification pursuant to this section may transfer its allocation of CDC tax credits, or a portion thereof, to taxpayers who make qualified investments to that eligible community development corporation.
(d) (1) Create a CDC investor tax credit certificate that shall be given by an eligible community development corporation to a person who makes a qualified investment in the eligible
community development corporation upon receipt of that qualified investment. The CDC investor tax credit certificate shall require the identification of the name of the person who made the qualified investment, the amount of the qualified investment, the date the qualified investment was made, and any other necessary information as may be determined by the Treasurer.
(2) The CDC investor tax credit certificate shall be acceptable as proof that the person has made qualified investments in an eligible community development corporation, the amount of which could be taken into account in calculating the tax credits allowed pursuant to Sections 17053.60 and 23660 of the Revenue and Taxation Code.
(e) Maintain a list on its internet website of all eligible community development
corporations as certified by the Department of Community Services and Development.
12335.8.
The Treasurer may revoke a certification of allocation of CDC tax credits to an eligible community development corporation after two years from the date of the allocation, after affording the corporation notice and the opportunity to be heard, if the Treasurer finds any of the following:(a) The amount of qualified investments in the eligible community development corporation for which a CDC tax credit has been transferred in exchange in that two-year period is less than 50 percent of the total amount of CDC tax credits allocated to the eligible community development corporation.
(b) The entity is no longer is
an eligible community development corporation, as defined in this article or any regulations promulgated hereunder, or is not in compliance with the requirements of Section 12335.12 or any regulations promulgated hereunder. the regulations established under Section 12335.12.
(c) The eligible community development corporation is not making adequate progress on its community investment plan.
(d) Other good cause for revocation, as determined by the Treasurer.
12335.10.
An eligible community development corporation that has received a certification of an allocation of CDC tax credits shall do both of the following:(a) Receive qualified investments directly from one or more taxpayers and, in exchange, transfer a portion of its allocation of CDC tax credits equivalent to the amount of the qualified investment and issue a CDC tax credit certificate in that amount to that taxpayer.
(b) Commencing with the calendar year after an allocation has been made, submit an annual report to the Treasurer regarding outcomes achieved during the prior calendar year. The Treasurer may require any
other information they deem necessary for them to determine whether the eligible community development corporation is making adequate progress on the corporation’s community investment plan. These reports shall be made available to the public by the Treasurer.
12335.12.
The Treasurer may prescribe rules and regulations to carry out the purposes of this article, including any rules and regulations necessary to establish procedures, processes, and requirements that are necessary to implement this article.12335.14.The allocations required to be made by the Treasurer in this article shall only be operative for those calendar years in which the Legislature increases the aggregate housing credit dollar amount that may be allocated annually by the California Tax Credit Allocation Committee pursuant to Sections 17058 and 23610.5 of the Revenue and Taxation Code by fifty million dollars ($50,000,000)
or more for the calendar year by legislation enacted after January 1, 2022, and reserves that additional allocation amount for tax credits allowed by Sections 17053.60 and 23660 of the Revenue and Taxation Code.
12335.14.
(a) The Franchise Tax Board shall prepare a written report on all of the following:(1) The number and common characteristics of taxpayers claiming the credit.
(2) The average credit amount on taxpayer tax returns claiming the credit.
(3) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.
(4) An analysis, by county, detailing the number of credits administered by community development corporations, community development financial institutions, community action agencies, and
community housing development corporations that received a credit.
(5) An analysis, by amount, detailing the number of credits administered by community development corporations, community development financial institutions, community action agencies, and community housing development corporations that received a credit.
(b) The Franchise Tax Board shall submit the written report, prepared pursuant to subdivision (a), on or before January 1, 2028, and in compliance with Section 9795, to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Government and Finance, and the Assembly Committee on Revenue and Taxation.
12335.16.
This article shall remain in effect until January 1, 2028, and as of that date is repealed.