Bill Text: TX HB1937 | 2019-2020 | 86th Legislature | Engrossed
Bill Title: Relating to a franchise or insurance tax credit for certain low-income housing developments.
Spectrum: Bipartisan Bill
Status: (Engrossed - Dead) 2019-05-07 - No action taken in committee [HB1937 Detail]
Download: Texas-2019-HB1937-Engrossed.html
By: Goldman, Murphy, Rodriguez, Guillen, | H.B. No. 1937 | |
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relating to a franchise or insurance tax credit for certain | ||
low-income housing developments. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Chapter 171, Tax Code, is amended by adding | ||
Subchapter V to read as follows: | ||
SUBCHAPTER V. TAX CREDIT FOR LOW-INCOME HOUSING DEVELOPMENTS | ||
Sec. 171.9241. DEFINITIONS. In this subchapter: | ||
(1) "Allocation certificate" means a statement issued | ||
by the department certifying that a qualified development qualifies | ||
for credits under this subchapter and Chapter 233, Insurance Code, | ||
and specifying the total amount of the credits awarded in | ||
connection with the qualified development. | ||
(2) "Credit" means the low-income housing development | ||
tax credit authorized by this subchapter. | ||
(3) "Credit period" means the period of 10 tax years | ||
beginning with the tax year in which a qualified development is | ||
placed in service. A qualified development consisting of more than | ||
one building is not considered to be in service until all buildings | ||
in the qualified development are placed in service. | ||
(4) "Department" means the Texas Department of Housing | ||
and Community Affairs. | ||
(5) "Development" has the meaning assigned by Section | ||
2306.6702, Government Code. | ||
(6) "Federal tax credit" means the federal low-income | ||
housing credit created by Section 42, Internal Revenue Code. | ||
(7) "Qualified basis" means the qualified basis of a | ||
qualified development, as determined under Section 42, Internal | ||
Revenue Code. | ||
(8) "Qualified development" means a development in | ||
this state, other than in a county with a population of four million | ||
or more, that the department determines is eligible for a federal | ||
tax credit and that: | ||
(A) is financed with tax-exempt bonds; | ||
(B) is the subject of a recorded restrictive | ||
covenant requiring the development to be maintained and operated as | ||
a qualified development; and | ||
(C) for the lesser of 15 years after the | ||
beginning of the credit period or the period required by the | ||
department, is in compliance with: | ||
(i) all accessibility and adaptability | ||
requirements for a federal tax credit; and | ||
(ii) Title VIII of the Civil Rights Act of | ||
1968 (42 U.S.C. Section 3601 et seq.). | ||
Sec. 171.9242. ENTITLEMENT TO CREDIT. A taxable entity is | ||
entitled to a credit against the taxes imposed under this chapter in | ||
the amount and under the limitations provided by this subchapter if | ||
the taxable entity owns an interest in a qualified development. | ||
Sec. 171.9243. ALLOCATION CERTIFICATE; CREDIT. (a) In a | ||
year during a credit period, a taxable entity or an entity subject | ||
to state insurance tax liability as defined by Section 233.0001, | ||
Insurance Code, may apply to the department for an allocation | ||
certificate in connection with a development in which the taxable | ||
entity or other entity owns an interest. | ||
(b) The department shall issue an allocation certificate if | ||
the development is a qualified development. | ||
(c) The department may determine the total amount of credits | ||
under this subchapter and Chapter 233, Insurance Code, awarded in | ||
connection with a qualified development, subject to the following: | ||
(1) the amount of credits awarded in connection with a | ||
qualified development must be the minimum amount necessary for the | ||
financial feasibility of the qualified development after | ||
considering any federal tax credit; | ||
(2) the amount of credits awarded in connection with a | ||
qualified development over the credit period may not exceed the | ||
total federal tax credit awarded to the owner or owners of the | ||
qualified development over the 10-year federal tax credit period; | ||
(3) the manner in which the department awards the | ||
amount of credits must be consistent with criteria established by | ||
the department; and | ||
(4) in a year, the total amount of credits awarded in | ||
connection with all qualified developments may not exceed the sum | ||
of: | ||
(A) $35 million; | ||
(B) any unallocated credits for the preceding | ||
year; and | ||
(C) any credit recaptured or otherwise returned | ||
to the department in the year. | ||
(d) The owners of a qualified development who intend to | ||
claim a credit under this subchapter or Chapter 233, Insurance | ||
Code, may by agreement determine the portion of the total amount of | ||
credits awarded under Subsection (c) that each owner is entitled to | ||
claim. If the owners do not agree, the department shall determine | ||
the portion each owner is entitled to claim based on each owner's | ||
ownership interest in the qualified development. | ||
Sec. 171.9244. LENGTH OF CREDIT; LIMITATION. (a) A taxable | ||
entity entitled to a credit under this subchapter shall claim the | ||
credit in equal installments during each year of the credit period. | ||
(b) The total credit claimed under this subchapter for a | ||
report, including any carry forward or backward under Section | ||
171.9245, may not exceed the amount of franchise tax due for the | ||
report after any other applicable credit. | ||
Sec. 171.9245. CARRY FORWARD OR BACKWARD. (a) If a taxable | ||
entity is eligible for a credit that exceeds the limitations under | ||
Section 171.9244, the taxable entity may carry the unused credit | ||
back for not more than three tax years or forward for not more than | ||
10 consecutive reports following the tax year in which the | ||
allocation was made. A credit carryforward from a previous report | ||
is considered to be used before the current year installment. | ||
(b) A credit that is not used may not be refunded. | ||
Sec. 171.9246. RECAPTURE. (a) The comptroller shall | ||
recapture the amount of a credit claimed on a franchise tax report | ||
filed under this chapter from a taxable entity if, on the last day | ||
of a tax year, the amount of the qualified basis of the qualified | ||
development is less than the amount of the qualified basis as of the | ||
last day of the prior tax year. The comptroller shall determine the | ||
amount required to be recaptured using the formula provided by | ||
Section 42(j), Internal Revenue Code, as that section existed on | ||
January 1, 2019. | ||
(b) A franchise tax report must include any portion of | ||
credit required to be recaptured, the identity of any taxable | ||
entity subject to the recapture, and the amount of any credit | ||
previously allocated to the taxable entity. | ||
Sec. 171.9247. ASSIGNMENT OF CREDIT. (a) If a taxable | ||
entity receiving a credit under this subchapter is a partnership, | ||
limited liability company, S corporation, or similar pass-through | ||
entity, the taxable entity may assign the credit to its partners, | ||
shareholders, members, or other constituent taxable entities in any | ||
manner agreed by those entities. | ||
(b) A taxable entity that makes an assignment under this | ||
section shall certify to the comptroller the amount of credit | ||
assigned to each constituent taxable entity or shall notify the | ||
comptroller that it has delegated the duty of certification to one | ||
constituent taxable entity that shall provide the notification to | ||
the comptroller. Each constituent taxable entity is entitled to | ||
claim the assigned amount subject to any restrictions prescribed by | ||
this subchapter. | ||
(c) An assignment under this section is not a transfer for | ||
purposes of state law. | ||
Sec. 171.9248. FILING REQUIREMENTS AFTER ASSIGNMENT. A | ||
taxable entity that assigns a portion of the credit under Section | ||
171.9247, and each taxable entity to which a portion was assigned, | ||
shall file with the taxable entity's report a copy of the allocation | ||
certificate received for that year. | ||
Sec. 171.9249. RULES; PROCEDURES. The department and | ||
comptroller, in consultation with each other, shall adopt rules and | ||
procedures to implement, administer, and enforce this subchapter. | ||
Sec. 171.9250. COMPLIANCE MONITORING. (a) The department, | ||
in consultation with the comptroller, shall monitor compliance with | ||
this subchapter in the same manner as the department monitors | ||
compliance with the federal tax credit program. | ||
(b) The department shall report any instances of | ||
noncompliance with this subchapter to the comptroller. | ||
Sec. 171.9251. REPORT. (a) Not later than December 31 of | ||
each year, the department shall deliver a written report to the | ||
legislature. The report must: | ||
(1) specify the number of qualified developments for | ||
which allocation certificates were issued during the year and the | ||
total number of units supported by the developments; | ||
(2) describe each qualified development for which an | ||
allocation certificate was issued during the year, including: | ||
(A) location; | ||
(B) household type; | ||
(C) available demographic information for the | ||
residents intended to be served by the development; | ||
(D) the income levels intended to be served by | ||
the development; and | ||
(E) the rents or set-asides authorized for the | ||
development; | ||
(3) include housing market and demographic | ||
information to demonstrate how the qualified developments, | ||
supported by the tax credits under this subchapter and Chapter 233, | ||
Insurance Code, are addressing the need for affordable housing in | ||
their communities; and | ||
(4) analyze any remaining disparities in the | ||
affordability of housing within those communities. | ||
(b) The department shall make a report delivered under this | ||
section available to the public. | ||
SECTION 2. Subtitle B, Title 3, Insurance Code, is amended | ||
by adding Chapter 233 to read as follows: | ||
CHAPTER 233. CREDIT AGAINST CERTAIN TAXES | ||
FOR LOW-INCOME HOUSING DEVELOPMENTS | ||
SUBCHAPTER A. GENERAL PROVISIONS | ||
Sec. 233.0001. DEFINITIONS. In this chapter: | ||
(1) "Allocation certificate" and "qualified | ||
development" have the meanings assigned by Section 171.9241, Tax | ||
Code. | ||
(2) "State insurance tax liability" means any tax | ||
liability incurred by an entity under Chapters 221 through 226 or | ||
Chapter 281. | ||
SUBCHAPTER B. CREDIT | ||
Sec. 233.0051. CREDIT. An entity is eligible for a credit | ||
against the entity's state insurance tax liability in the amount | ||
and under the conditions and limitations provided by this chapter | ||
if the entity owns an interest in a qualified development. | ||
Sec. 233.0052. LENGTH OF CREDIT; LIMITATION. The entity | ||
shall claim the credit in the manner provided by Section | ||
171.9244(a), Tax Code, subject to the limitation provided by | ||
Section 171.9244(b), Tax Code. The entity may carry a surplus | ||
credit forward or backward as provided by Section 171.9245, Tax | ||
Code. | ||
Sec. 233.0053. APPLICATION FOR CREDIT. (a) An entity must | ||
apply for a credit under this chapter on or with the tax report for | ||
the tax year for which the credit is claimed and submit with the | ||
application a copy of the allocation certificate issued in | ||
connection with the qualified development and any other information | ||
required by Subchapter V, Chapter 171, Tax Code. | ||
(b) The comptroller shall adopt a form for the application | ||
for the credit. An entity must use this form in applying for the | ||
credit. | ||
Sec. 233.0054. RULES; PROCEDURES. The comptroller and the | ||
Texas Department of Housing and Community Affairs, in consultation | ||
with each other, shall adopt rules and procedures to implement, | ||
administer, and enforce this chapter. | ||
Sec. 233.0055. APPLICABLE PROVISIONS. The provisions of | ||
Subchapter V, Chapter 171, Tax Code, relating to recapture, | ||
allocation of credit, filing requirements after allocation, and | ||
compliance monitoring apply to the credit authorized by this | ||
chapter. | ||
SECTION 3. (a) The Texas Department of Housing and | ||
Community Affairs may begin issuing allocation certificates under | ||
Section 171.9243, Tax Code, as added by this Act, in an open cycle | ||
beginning on January 1, 2020. | ||
(b) Subchapter V, Chapter 171, Tax Code, as added by this | ||
Act, and Chapter 233, Insurance Code, as added by this Act, apply | ||
only to a tax report originally due on or after January 1, 2021. | ||
SECTION 4. This Act takes effect January 1, 2020. |