Bill Text: CA SB16 | 2009-2010 | Regular Session | Amended
Bill Title: Low-income housing tax credits.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2010-02-01 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB16 Detail]
Download: California-2009-SB16-Amended.html
BILL NUMBER: SB 16 AMENDED
BILL TEXT
AMENDED IN SENATE DECEMBER 16, 2009
AMENDED IN SENATE FEBRUARY 11, 2009
AMENDED IN SENATE JANUARY 8, 2009
INTRODUCED BY Senator Lowenthal
(Coauthor: Senator Alquist)
DECEMBER 1, 2008
An act to amend Section 19611 of, and to add Sections
12206.5, 17058.5, 17058.6, 23610.6, and 23610.8 to, the Revenue and
Taxation Code, relating to taxation, making an appropriation
therefor, and declaring the urgency thereof, to take effect
immediately. An act to amend Sections 12206, 17058,
19611, and 23610.5 of, and to add Sections 17058.6 and 23610.6 to,
the Revenue and Taxation Code, relating to taxation, making an
appropriation therefor, and declaring the urgency thereof, to take
effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 16, as amended, Lowenthal. Low-income housing tax credits.
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 based on federal law.
This bill would, for calendar years 2010 to 2013, inclusive,
increase the aggregate housing credit dollar amount that may be
allocated among low-income housing projects, as specified. This bill
would, in the case of a project that receives a preliminary
reservation of a state low-income housing tax credit on or after
January 1, 2010, and before January 1, 2013, allow the income and
corporation tax credit to be refundable pursuant to specified laws,
and would make an appropriation therefor, as provided. This bill
would also authorize the California Tax Credit Allocation Committee
to require a fee to cover the costs incurred by the committee and the
Franchise Tax Board to make these refunds.
This bill would declare that it is to take effect immediately as
an urgency statute.
Existing law establishes a low-income housing tax credit program,
administered by the California Tax Credit Allocation Committee, which
provides procedures and requirements for the allocation of state tax
credit amounts among low-income housing projects based on federal
law.
This bill would, in the case of a project that has received or
receives preliminary reservation of state low-income housing tax
credit on or after July 1, 2008, and before January 1, 2011, allow
the credit to be refundable pursuant to specified laws, and make an
appropriation therefor, as provided.
Existing law, in the case of a partnership, requires the
allocation of the state low-income housing tax credits, on or after
January 1, 2009, and before January 1, 2016, to partners based upon
the partnership agreement, regardless of how the federal low-income
housing tax credit, as provided, is allocated to the partners, or
whether the allocation of the credit under the terms of the agreement
has substantial economic effect, as specified.
This bill would extend those requirements to a project that
receives a preliminary reservation of the state low-income housing
tax credit during calendar year 2008, as specified.
This bill would declare that it is to take effect immediately as
an urgency statute.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. 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" (as defined 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, 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 shall have been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue Code.
(ii) It shall qualify for a credit under Section 42(h)(4)(B) of
the Internal Revenue Code.
(B) The (i) Except as
provided in clause (ii), 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. 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.
(ii) For applications submitted in calendar years 2010 to 2012,
inclusive, the committee may require a fee to cover the costs
incurred by the committee and the Franchise Tax Board to administer
Sections 17058.6 and 23610.6.
(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.
(ii) This subparagraph shall 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
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 shall apply to this section.
(F) No credit shall be allocated under this section to buildings
located in a difficult development area or a qualified census tract
as defined in Section 42 of the Internal Revenue Code for which the
eligible basis of a new building or the rehabilitation expenditure of
an existing building is 130 percent of that amount pursuant to
Section 42(d)(5)(C) of the Internal Revenue Code, unless the
committee reduces the amount of federal credit, with the approval of
the applicant, so that the combined amount of federal and state
credit shall not exceed the total credit allowable pursuant to this
section and Section 42(b) of the Internal Revenue Code, computed
without regard to Section 42(d)(5)(C) of the Internal Revenue Code.
(c) Section 42(b) of the Internal Revenue Code 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, 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.
(B) The restrictions on rent and income levels will terminate or
the federal 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 regarding rehabilitation expenditures,
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 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,
which, 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.
(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 accumulate and be distributed any time
during the first 15 years of the compliance period but not
thereafter.
(2) The limitation on return shall apply 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.
(e) The provisions of Section 42(f) of the Internal Revenue Code
shall be modified as follows:
(1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code 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 shall not
apply to the tax credit under this section.
(3) Section 42(f)(3) of the Internal Revenue Code 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
shall be modified as follows:
(1) Section 42(h)(2) of the Internal Revenue Code shall not be
applicable and instead the following provisions shall be applicable:
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 shall
not be applicable.
(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.
(6) For calendar years 2010 to 2013, inclusive, in lieu of the
amounts prescribed in paragraphs (1) to (3), inclusive, the following
amounts shall apply:
(A) For calendar year 2010, ninety-two million nine hundred
thousand dollars ($92,900,000).
(B) For calendar year 2011, one hundred million eight hundred
thousand dollars ($100,800,000).
(C) For calendar year 2012, ninety-two million two hundred
thousand dollars ($92,200,000).
(D) For calendar year 2013, the sum of all of the following:
(i) The amount prescribed in paragraph (1) for that calendar year.
(ii) The total difference between the amounts prescribed in
paragraph (1) for calendar years 2010, 2011, and 2012, and the
amounts prescribed by subparagraphs (A), (B), and (C) for those
calendar years.
(iii) The amount of unused housing credit ceiling for calendar
years 2010 to 2012, inclusive.
(iv) The amount of housing credit ceiling for calendar years 2010
to 2012, inclusive, returned in the calendar year, as determined in
accordance with paragraph (2).
(h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code 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 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, which 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, providing the
agreement includes all of the following provisions:
(A) A term not less than the compliance period.
(B) A requirement that the agreement be filed 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 which 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 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.
(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) 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 which 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. 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.
(3) Notwithstanding Section 42(m) of the Internal Revenue Code,
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 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 is comprised
of 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 shall be modified
as follows:
The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
(l) In the case where the state 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, shall apply to calendar years after 1993.
(n) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall not apply.
(o) This section shall remain in effect for as long as Section 42
of the Internal Revenue Code, relating to low-income housing credits,
remains in effect.
SEC. 2. Section 17058 of the Revenue
and Taxation Code is amended to read:
17058. (a) (1) There shall be allowed as a credit against the
amount of net tax (as defined in Section 17039) a state low-income
housing credit in an amount equal to the amount determined in
subdivision (c), computed in accordance with the provisions of
Section 42 of the Internal Revenue Code, 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 shall have been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue Code.
(ii) It shall qualify for a credit under Section 42(h)(4)(B) of
the Internal Revenue Code.
(B) The (i) Except
as provided in clause (ii), 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. 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.
(ii) For applications submitted in calendar years 2010 to 2012,
inclusive, the committee may require a fee to cover the costs
incurred by the committee and the Franchise Tax Board to administer
Sections 17058.6 and 23610.6.
(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.
(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 shall 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
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 shall apply to this section.
(E) For buildings located in designated difficult development
areas or qualified census tracts as defined in Section 42(d)(5)(C) of
the Internal Revenue Code, 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 is computed on 100 percent of the qualified basis of the
building.
(c) Section 42(b) of the Internal Revenue Code 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, 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.
(B) The restrictions on rent and income levels will terminate or
the federal 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 regarding rehabilitation expenditures,
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 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 that 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.
(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 shall apply 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.
(e) The provisions of Section 42(f) of the Internal Revenue Code
shall be modified as follows:
(1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code 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 shall not
apply to the tax credit under this section.
(3) Section 42(f)(3) of the Internal Revenue Code 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
shall be modified as follows:
(1) Section 42(h)(2) of the Internal Revenue Code shall not be
applicable and instead the following provisions shall be applicable:
The total amount for the four-year 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 shall
not be applicable to this section.
(g) The aggregate housing credit dollar amount which 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.
(6) For calendar years 2010 to 2013, inclusive, in lieu of the
amounts prescribed in paragraphs (1) to (3), inclusive, the following
amounts shall apply:
(A) For calendar year 2010, ninety-two million nine hundred
thousand dollars ($92,900,000).
(B) For calendar year 2011, one hundred million eight hundred
thousand dollars ($100,800,000).
(C) For calendar year 2012, ninety-two million two hundred
thousand dollars ($92,200,000).
(D) For calendar year 2013, the sum of all of the following:
(i) The amount prescribed in paragraph (1) for that calendar year.
(ii) The total difference between the amounts prescribed in
paragraph (1) for calendar years 2010, 2011, and 2012, and the
amounts prescribed by subparagraphs (A), (B), and (C) for those
calendar years.
(iii) The amount of unused housing credit ceiling for calendar
years 2010 to 2012, inclusive.
(iv) The amount of housing credit ceiling for calendar years 2010
to 2012, inclusive, returned in the calendar year, as determined in
accordance with paragraph (2).
(h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code 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 shall not be
applicable 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, which 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, providing the
agreement includes all of the following provisions:
(1) A term not less than the compliance period.
(2) A requirement that the agreement be filed 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 which 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 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.
(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) 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. 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.
(3) Notwithstanding Section 42(m) of the Internal Revenue Code,
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 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 is comprised of
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 shall
be modified as follows:
The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
( l ) In the case where the credit allowed under this
section exceeds the net tax, the excess credit may be carried over to
reduce the net tax in the following year, and succeeding taxable
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 shall be 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, shall apply to calendar years after 1989.
(p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall not apply.
(q) Any unused credit may continue to be carried forward, as
provided in subdivision (l), until the credit has been exhausted.
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 credits, remains in effect.
(r) The amendments to this section by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 1994.
SEC. 3. Section 17058.6 is added to the
Revenue and Taxation Code , to read:
17058.6. (a) (1) If a project receives a preliminary reservation
of state low-income housing tax credit under Section 17058 on or
after January 1, 2010, and before January 1, 2013, and the
application for the credit includes the written irrevocable election
of the housing sponsor for the credit for that project to be
refundable, then the amount allowable as a credit under Section 17058
in excess of the tax liability of the taxpayer for the taxable year
shall be credited against other amounts due, if any, and the balance,
if any, shall be refunded to the taxpayer.
(2) Notwithstanding any other law to the contrary, any amount
refundable under this section may not be carried over under
subdivision (l) of Section 17058.
(3) For purposes of applying paragraph (1), Section 17039 shall be
applied by first reducing the "net tax" to the extent allowed under
that section by any other credits, and then any remaining "net tax"
shall first be offset by the amount described in paragraph (1) and
any remaining amount described in paragraph (1) shall then be
refunded to the taxpayer.
(b) Any credit refunded to a taxpayer pursuant to this section
shall not be included in income subject to tax under this part or
Part 11 (commencing with Section 23001).
(c) The Franchise Tax Board shall not pay refunds authorized by
subdivision (a) before January 1, 2011. Refunds may be paid after
that date only if both of the following have occurred:
(1) An agreement has been executed between the California Tax
Credit Allocation Committee and the Franchise Tax Board that provides
that an amount equal to all first year costs of the Franchise Tax
Board associated with the refund of low-income housing credits
authorized by subdivision (a) shall be received by the Franchise Tax
Board. For purposes of this paragraph, first year costs of the
Franchise Tax Board include, but are not limited to, costs associated
with the development of processes or system changes, if necessary,
and labor.
(2) Pursuant to the agreement specified in paragraph (1), the
Franchise Tax Board has received an amount equal to the first year
costs specified in paragraph (1).
SEC. 4. Section 19611 of the Revenue
and Taxation Code is amended to read:
19611. (a) The Tax Relief and Refund Account is hereby created in
the General Fund. Notwithstanding Section 13340 of the Government
Code, all moneys in the Tax Relief and Refund Account are hereby
continuously appropriated, without regard to fiscal year, to the
Franchise Tax Board for purposes of making all payments as provided
in this section.
(b) Notwithstanding any other provision of law, all payments
required to be made to taxpayers or other persons from the Personal
Income Tax Fund shall be paid from the Tax Relief and Refund Account.
(c) The Controller shall transfer, as needed, to the Tax Relief
and Refund Account:
(1) From the unexpended balance of the annual Budget Act
appropriation for Item 9100-101-001, Schedule 80-Renter's Tax Relief,
an amount determined by the Franchise Tax Board to be equivalent to
the total amount of renters' assistance credits and refunds allowed
under Section 17053.5.
(A) If there is no unexpended balance of the appropriation, as
provided for in paragraph (1), the Controller shall transfer
sufficient moneys from the Personal Income Tax Fund to make the
renters' assistance credits and refunds until there is an unexpended
balance.
(B) Subsequent to there being no unexpended balance of the
appropriation, as provided for in paragraph (1), and there being a
transfer of moneys from the Personal Income Tax Fund to make the
renters' assistance credits and refunds, reimbursement shall be made
from the unexpended balance of the appropriation as provided for in
paragraph (1) to the Personal Income Tax Fund. However, if no such
appropriation is subsequently made, reimbursement shall be made from
the General Fund.
(2) From the disability fund
Disability Fund , the amount transferable to the General Fund
pursuant to subdivision (a) of Section 1176.5 of the Unemployment
Insurance Code.
(3) From the Personal Income Tax Fund, such additional amounts as
determined by the Franchise Tax Board to be necessary to make the
payments required under this section.
(4) From the Personal Income Tax Fund, those amounts as determined
by the Franchise Tax Board to be necessary to make the refunds
required under Section 17058.6.
(5) From the Corporation Income Tax Fund, those amounts as
determined by the Franchise Tax Board to be necessary to make the
refunds required under Section 23610.6.
SEC. 5. 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" (as 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 of 1986, 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.
(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
Internal Revenue Code.
(B) The (i) Except
as provided in clause (ii), 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. 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.
(ii) For applications submitted in calendar years 2010 to 2012,
inclusive, the committee may require a fee to cover the costs
incurred by the committee and the Franchise Tax Board to administer
Sections 17058.6 and 23610.6.
(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.
(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 shall 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
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 shall apply to this section.
(E) For buildings located in designated difficult development
areas or qualified census tracts as defined in Section 42(d)(5)(C) of
the Internal Revenue Code, 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 is computed on 100 percent of the qualified basis of the
building.
(c) Section 42(b) of the Internal Revenue Code 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, in lieu of the percentage prescribed in Section 42(b)(1)(A).
(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.
(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 regarding rehabilitation expenditures,
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 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,
which, at the election of the taxpayer, shall be 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.
(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 accumulate and be distributed at any time
during the first 15 years of the compliance period but not
thereafter.
(2) The limitation on return shall apply 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.
(e) The provisions of Section 42(f) of the Internal Revenue Code
shall be modified as follows:
(1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code 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 shall not
apply to the tax credit under this section.
(3) Section 42(f)(3) of the Internal Revenue Code 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
shall be modified as follows:
(1) Section 42(h)(2) of the Internal Revenue Code shall not be
applicable and instead the following provisions shall be applicable:
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 shall
not be applicable.
(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.
(6) For calendar years 2010 to 2013, inclusive, in lieu of the
amounts prescribed in paragraphs (1) to (3), inclusive, the following
amounts shall apply:
(A) For calendar year 2010, ninety-two million nine hundred
thousand dollars ($92,900,000).
(B) For calendar year 2011, one hundred million eight hundred
thousand dollars ($100,800,000).
(C) For calendar year 2012, ninety-two million two hundred
thousand dollars ($92,200,000).
(D) For calendar year 2013, the sum of all of the following:
(i) The amount prescribed in paragraph (1) for that calendar year.
(ii) The total difference between the amounts prescribed in
paragraph (1) for calendar years 2010, 2011, and 2012, and the
amounts prescribed by subparagraphs (A), (B), and (C) for those
calendar years.
(iii) The amount of unused housing credit ceiling for calendar
years 2010 to 2012, inclusive.
(iv) The amount of housing credit ceiling for calendar years 2010
to 2012, inclusive, returned in the calendar year, as determined in
accordance with paragraph (2).
(h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code 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 shall not be
applicable 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 filed 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 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.
(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 allocation dates.
(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code. 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.
(3) Notwithstanding Section 42(m) of the Internal Revenue Code,
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 shall
be modified as follows:
The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
(l) In the case where the state 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 shall be 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, shall apply to calendar years after 1989.
(p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall 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) Any unused credit may continue to be carried forward, as
provided in subdivision (k), until the credit has been exhausted.
This section shall remain in effect on or after December 1, 1990,
for as long as Section 42 of the Internal Revenue Code, relating to
low-income housing credits, remains in effect.
(s) The amendments to this section made by the act adding this
subdivision 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. 6. Section 23610.6 is added to the
Revenue and Taxation Code , to read:
23610.6. (a) (1) If a project receives a preliminary reservation
of state low-income housing tax credit under Section 23610.5 on or
after January 1, 2010, and before January 1, 2013, and the
application for the credit includes the written irrevocable election
of the housing sponsor for the credit for that project to be
refundable, then the amount allowable as a credit under Section
23610.5 in excess of the tax liability of the taxpayer for the
taxable year shall be credited against other amounts due, if any, and
the balance, if any, shall be refunded to the taxpayer.
(2) Notwithstanding any other law to the contrary, any amount
refundable under this section may not be carried over under
subdivision (l) of Section 23610.5.
(3) For purposes of applying paragraph (1), Section 23036 shall be
applied by first reducing the "tax" to the extent allowed under that
section by any other credits, and then any remaining "tax" shall
first be offset by the amount described in paragraph (1) and any
remaining amount described in paragraph (1) shall then be refunded to
the taxpayer.
(b) Notwithstanding any other law to the contrary, credits for a
project referred to in paragraph (1) of subdivision (a) may not be
assigned pursuant to Section 23663.
(c) Any credit refunded to a taxpayer pursuant to this section
shall not be included in income subject to tax under this part or
Part 10 (commencing with Section 17001).
(d) The Franchise Tax Board shall not pay refunds authorized by
subdivision (a) before January 1, 2011. Refunds may be paid after
that date only if both of the following have occurred:
(1) An agreement has been executed between the California Tax
Credit Allocation Committee and the Franchise Tax Board that provides
that an amount equal to all first year costs of the Franchise Tax
Board associated with the refund of low-income housing credits
authorized by subdivision (a) shall be received by the Franchise Tax
Board. For purposes of this paragraph, first year costs of the
Franchise Tax Board include, but are not limited to, costs associated
with the development of processes or system changes, if necessary,
and labor.
(2) Pursuant to the agreement specified in paragraph (1), the
Franchise Tax Board has received an amount equal to the first year
costs specified in paragraph (1).
SEC. 7. This act is an urgency statute necessary
for the immediate preservation of the public peace, health, or safety
within the meaning of Article IV of the Constitution and shall go
into immediate effect. The facts constituting the necessity are:
The state low-income housing tax credit is a critical source of
funding for the development of affordable rental housing. Because of
the financial downturn and the disruption to global capital markets,
the ability of affordable housing developers, who have been awarded
credits, to obtain private equity investment in return for the
credits, has decreased precipitously and, in some cases, disappeared
altogether. Some developers have been forced to return tax credit
awards unused, others are struggling to arrange investors, and those
projects that have found investors have had to seek additional public
funding to offset the decline in pricing and to maintain the
financial feasibility of projects, severely jeopardizing the state's
goal of providing decent, safe, and sanitary housing for all
Californians. An immediate and short-term change to make state
low-income housing tax credits refundable will entice investors back
into affordable housing until global financial markets stabilize.
All matter omitted in this version of the bill appears in the
bill as amended in the Senate, February 11, 2009.(JR11)
