BILL NUMBER: AB 1399	AMENDED
	BILL TEXT

	AMENDED IN SENATE  JULY 3, 2014
	AMENDED IN SENATE  JUNE 18, 2014
	AMENDED IN SENATE  JUNE 9, 2014
	AMENDED IN SENATE  SEPTEMBER 6, 2013
	AMENDED IN SENATE  AUGUST 22, 2013

INTRODUCED BY   Assembly Members Medina and V. Manuel Pérez

                        MARCH 11, 2013

   An act to add Section 26011.9 to the Public Resources Code, and to
amend Section 18410.2 of, and to add and repeal Sections 12283,
 17053.9   17053.9,  and 23622.9 of, the
Revenue and Taxation Code, relating to taxation, and making an
appropriation therefor, to take effect immediately, tax levy.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1399, as amended, Medina. Income taxation: insurance taxation:
credits: California New Markets Tax Credit.
   The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws. Existing law
also creates the California Competes Tax Credit Committee, which has
specified duties in regard to tax credits for economic development.
   Existing law imposes an annual tax on the gross premiums of an
insurer, as defined, doing business in this state at specified rates.

   This bill would allow a credit under the Personal Income Tax Law
and the Corporation Tax Law, and a credit against the tax imposed on
an insurer, in modified conformity with a federal New Markets Tax
Credit, for taxable years beginning on or after January 1, 2015, and
before January 1, 2027, in a specified amount for investments in
low-income communities. The bill would limit the total annual amount
of credit allowed pursuant to these provisions to an amount equal to
any portion not granted under a specified sales and use tax
exclusion, not to exceed $40,000,000 per calendar year, and would
limit the allocation of the credit to a cumulative total of no more
than $200,000,000, as provided. This bill would impose specified
duties on the California Competes Tax Credit Committee with regard to
the application for, and allocation of, the credit. The bill would
require the committee to establish and impose reasonable fees upon
entities that apply for the allocation of the credit and use the
revenue to defray the cost of administering the program, as
specified, thereby making an appropriation.
   This bill would take effect immediately as a tax levy.
   Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.


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

  SECTION 1.  The Legislature finds and declares the following:
   (a) While many areas of California have recovered from the
economic and community development impacts of the 2006 Financial
Crisis and the 2010 global recession, Californians in a number of
communities and neighborhoods are still experiencing their lingering
effects. In some cases this has resulted in small and medium
businesses in low-income areas lacking sufficient access to capital
and technical assistance. Given that the state has many needs and
limited resources, moneys from the private sector are necessary to
fill this capital and investment gap.
   (b) Initially enacted in 2000, the federal government established
the New Markets Tax Credit (NMTC) Program, which uses a market-based
approach for expanding capital and technical assistance to businesses
in lower income communities. The federal program is jointly
administered by the Community Development Financial Institutions Fund
(CDFI Fund) and the Internal Revenue Service. The NMTC Program
allocates federal tax incentives to community development entities
(CDE), which they then use to attract private investors who
contribute funds that can be used to finance and invest in businesses
and develop real estate in low-income communities. Through May 2013,
the CDFI Fund had awarded approximately $36,500,000,000 in NMTC in
749 awards including $3,000,000,000 in American Recovery and
Investment Act of 2009 awards and $1,000,000,000 of special
allocation authority to be used for the recovery and redevelopment of
the Gulf Opportunity Zone.
   (c) The federal NMTC totals 39 percent of the original investment
amount in the CDE and is claimed over a period of seven years (5
percent for each of the first three years, and 6 percent for each of
the remaining four years). The investment by the taxpayer in the CDE
redeemed before the end of the seven-year period will be recaptured.
   (d) Fourteen states in the United States have adopted state
programs using the NMTC model including Alabama, Florida, Illinois,
Nevada, and Oregon. While some of the programs substantially mirror
the federal program, others vary in both the percentage of the credit
and some of the policies that form the foundation of the credit. One
of the reasons cited for establishing state-level programs is to
make their state more attractive to CDEs, which results in increasing
the amount of federal NMTCs being utilized in their state. Further,
several studies, including a January 1, 2011, case study by Pacific
Community Ventures, showed that for every dollar of forgone tax
revenue, the federal NMTC leverages $12 to $14 of private investment.

  SEC. 2.  Section 26011.9 is added to the Public Resources Code, to
read:
   26011.9.  The authority shall make a determination of the amount
of the one hundred million dollars ($100,000,000) in exclusions not
granted in the assigned calendar year pursuant to Section 26011.8. An
amount equal to that amount shall be granted in the subsequent
calendar year through the California New Markets Tax Credit Program
pursuant to Sections 12283, 17053.9, and 23622.9 of the Revenue and
Taxation Code. This section shall not prevent a taxpayer granted an
exclusion pursuant to Section 6010.8 of the Revenue and Taxation Code
from applying for, and receiving a refund for, taxes paid under Part
1 (commencing with Section 6001) of Division 2 of the Revenue and
Taxation Code.
  SEC. 3.  Section 12283 is added to the Revenue and Taxation Code,
to read:
   12283.  (a) There is hereby created the California New Markets Tax
Credit Program as provided in this section, Section 17053.9, and
Section 23622.9. The purpose of this program is to stimulate private
sector investment in lower income communities by providing a tax
incentive to qualified community and economic development entities
that can be leveraged by the entity to attract private sector
investment that in turn will be deployed by providing financing and
technical assistance to  small and medium size  
small- and medium-size  businesses and the development of
commercial, industrial, and community development projects,
including, but not limited to, facilities for nonprofit service
organizations, light manufacturing, and mixed-use and
transit-oriented development. The California Competes Tax Credit
Committee shall administer this program as provided in this section,
Section 17053.9, and Section 23622.9.
   (b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, 2027, there shall be allowed as a credit
against the tax described in Sections 12201, 12204, 12206, and 12209,
an amount determined in accordance with Section 45D of the Internal
Revenue Code, as amended by Public Law 111-5, Public Law 111-312, and
Public Law 112-240, as modified as set forth in this section.
   (2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment, or has been allocated a credit pursuant
to paragraph (3), on the credit allowance date and each of the six
following anniversary dates of that date.
   (3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed or allocated to a
partnership, limited liability company, or "S" corporation may be
allocated to the partners, members, managers, or shareholders of such
entity for their use in accordance with the provisions of any
agreement among such partners, members, managers, or shareholders.
Such allocations shall not be considered a sale for the purposes of
this section.
   (c) Section 45D of the Internal Revenue Code is modified as
follows:
   (1) (A) The references to "the Secretary" in Section 45D of the
Internal Revenue Code are modified to read "the committee."
   (B) For purposes of this section, "committee" means the California
Competes Tax Credit Committee established under Section 18410.2.
   (2) Section 45D(a)(2) of the Internal Revenue Code, relating to
applicable percentage, is modified by substituting for "(A) 5 percent
with respect to the first 3 credit allowance dates, and (B) 6
percent with respect to the remainder of the credit allowance dates"
with the following:
   (A) Zero percent with respect to the first two credit allowance
dates.
   (B) Seven percent with respect to the third credit allowance date.

   (C) Eight percent with respect to the remainder of the credit
allowance dates.
   (3) Section 45D(b)(3) of the Internal Revenue Code, relating to
safe harbor for determining use of cash, is modified by substituting
"qualified low-income community investments in California" for
"qualified low-income community investments." 
   (4) 
    (4)   (A)    Section 45D(c)(1) of the
Internal Revenue Code, relating to qualified community development
entities, is modified to additionally include: 
   (A) 
    (i)  A subsidiary community development entity of any
such qualified community development entity. 
   (B) 
    (ii)  A nonprofit organization, pursuant to Section
23701, certified by the committee as having a primary mission of
serving or providing investment capital in low-income communities and
the entity maintains accountability to residents of low-income
communities through their representation on any governing board of
the entity or on an advisory board of the entity. The committee shall
establish guidelines for certifying nonprofit organizations pursuant
to this subparagraph. The committee may include reasonable
conditions on the certification to effectuate the intent of this
section and may suspend or revoke a certification, after affording
the nonprofit organization notice and the opportunity to be heard, if
the committee finds that the nonprofit organization no longer meets
the requirements for certification.  Such nonprofit organization
is not subject to the requirement of subparagraph (B).  
   (B) Section 45D(c)(1) of the Internal Revenue Code, relating to a
qualified community development entity, is modified to only include a
qualified community development entity that has entered into an
allocation agreement with the Community Development Financial
Institutions Fund of the United States Treasury Department, with
respect to credits authorized by Section 45D of the Internal Revenue
Code, that includes California within the service area and is dated
on or after January 1, 2012. 
   (5)  Section 45D(d)(1)(A) of the Internal Revenue Code, relating
to qualified low-income community investments, is modified to only
include any capital or equity investment in, or loan to, a qualified
active low-income community business.
   (6) The term "qualified active low-income community business," as
defined in Section 45D(d)(2) of the Internal Revenue Code, is
modified as follows:
   (A) Section 45D(d)(2)(A)(i) of the Internal Revenue Code, relating
to qualified active low-income community businesses, is modified by
substituting "any low-income community in California" for "any
low-income community."
   (B) Section 45D(d)(2)(A)(ii) of the Internal Revenue Code,
relating to qualified active low-income community businesses, is
modified as follows:
   (i) Substituting "any low-income community in California" for "any
low-income community."
   (ii) In determining whether the qualified active low-income
community business uses a substantial portion of its tangible
personal property within any low-income community, the term
"substantial portion" shall mean "at least 40 percent" as calculated
by the average value of the tangible property owned or leased and
used within a California low-income community by the entity divided
by the average value of the total tangible property owned or leased
and used by the entity in California during the taxable year. The
value assigned to the leased property by the entity must be
reasonable.
   (iii) Adding the provision that if the business meets the
requirements of a qualified low-income community business at the time
the investment is made, the business shall continue to satisfy the
requirements of Section 45D(d)(2)(A)(ii) for the duration of the
investment.
   (C) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code,
relating to qualified active low-income community  businesses
which limits the services of employees to substantially those
performed within the   business, a substantial portion
of the services of which are performed in a  low-income
community,  shall not apply to a qualified community
development entity that does not hold a federal new markets tax
credit   is modified to allow the   services of
employees of a service-based qualified business to be performed
outside the low-income community. A service-based qualified business
is a business that primarily earns revenue through providing
intangible products and services  .
   (D) An entity complies with Section 45D(d)(2)(A)(i) of the
Internal Revenue Code, relating to qualified active low-income
community business, if, as calculated in subparagraph (B), it uses 50
percent of its tangible property, whether owned or leased, within
any low-income community for any taxable year.
   (E) (i) A qualified active low-income community business shall
exclude any business that derives, or projects to derive, 15 percent
or more of its annual revenue from the rental or sale of real estate.
This exclusion does not apply to a business that is controlled by,
or under common control with, another business if the second
business: (I) does not derive or project to derive 15 percent or more
of its annual revenue from the rental or sale of real estate; and
(II) is the primary tenant of the real estate leased from the first
business.
   (ii) A qualified active low-income community business shall only
include a business that, at the time the initial investment is made,
has 250 or fewer employees and is located in a California low-income
community. The operating business shall meet all other conditions of
a qualified active low-income business, except as modified by this
paragraph and paragraph (7). 
   (iii) A qualified active low-income community business shall only
include a business located in census tracts with a poverty rate
greater than 30 percent, or census tracts, if located within a
non-metropolitan area, with a median family income that does not
exceed 60 percent of median family income for the State of
California, or census tracts, if located within a metropolitan area,
with a median family income that does not exceed 60 percent of the
greater of the California median family income or the metropolitan
area median family income, or census tracts with unemployment rates
at least 1.5 times the national average. 
   (7) Section 45D(e)(1) of the Internal Revenue Code, relating to
determining the eligible low-income community, is modified to add the
following: "When the United States Census Bureau discontinues using
the decennial census to report median family income on a census tract
basis, census block group data shall be used based on the American
Community Survey."
   (8) The following shall apply in lieu of the provisions of Section
45D(f)(1) of the Internal Revenue Code, relating to national
limitation on amount of investments designated: "The aggregate amount
of credit that may be allocated in any calendar year pursuant to
this section, Section 17053.9, and Section 23622.9 shall be an amount
equal to any unused portion of the one hundred million dollars
($100,000,000) in exclusions, authorized pursuant to Section 6010.8,
as determined by the California Alternative Energy and Advanced
Transportation Financing Authority and reported to the committee, not
to exceed forty million dollars ($40,000,000). The committee shall
limit the allocation of credits permitted under this section, Section
17053.9, and Section 23622.9 to a cumulative total of no more than
two hundred million dollars ($200,000,000). Any unused credits shall
be returned to the committee on March 1 of the year following
allocation and the value of the unused credit shall be available for
allocation in the following calendar years in accordance with the
application process. Any recaptured credits shall be returned to the
committee by March 1 of the year following recapture and the value of
the recaptured credit shall be available for allocation in the
following calendar years in accordance with subparagraph (B) of
paragraph (9).Reallocation credits shall not count against the forty
million dollars ($40,000,000) annual limit or the two hundred million
dollars ($200,000,000) cumulative limit."
   (9) Section 45D(g)(3) of the Internal Revenue Code, relating to
recapture event, does not apply and is replaced with the following:
   (A) The committee shall recapture, from the entity that claimed
the credit on a return, the tax credit allowed under this section if
any of the following:
   (i) Any amount of a federal tax credit available with respect to a
qualified equity investment that is eligible for a credit under this
section is recaptured under Section 45D of the Internal Revenue
Code. In such case the committee's recapture shall be proportionate
to the federal recapture with respect to such qualified equity
investment.
   (ii) The qualified community development entity redeems or makes
principal repayment with respect to a qualified equity investment
prior to the seventh anniversary of the issuance of such qualified
equity investment. In such case the committee's recapture shall be
proportionate to the amount of the redemption or repayment with
respect to such qualified equity investment.
   (iii) The qualified community development entity fails to invest
an amount equal to at least 85 percent of the purchase price of the
qualified equity investment in qualified low-income community
investments in California within 12 months of the issuance of the
qualified equity investment and maintain at least 85 percent of such
level of investment in qualified low-income community investments in
California until the last credit allowance date for the qualified
equity investment. For purposes of this section, an investment shall
be considered held by a qualified community development entity even
if the investment has been sold or repaid if the qualified community
development entity reinvests an amount equal to the capital returned
to, or recovered by, the qualified community development entity from
the original investment, exclusive of any profits realized, in
another qualified low-income community investment within 12 months of
the receipt of such capital. Periodic amounts received as repayment
of principal pursuant to regularly scheduled amortization payments on
a loan that is a qualified low-income community investment shall be
treated as continuously invested in a qualified low-income community
investment if the amounts are reinvested in one or more qualified
low-income community investments by the end of the following calendar
year. A qualified community development entity shall not be required
to reinvest capital returned from qualified low-income community
investments after the sixth anniversary of the issuance of the
qualified equity investment, and the qualified low-income community
investment shall be considered held by the qualified community
development entity through the seventh anniversary of the qualified
equity investment's issuance.
   (B) Recaptured tax credits and the related qualified equity
investment authority revert back to the committee and shall be
reissued in the following order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B) of
paragraph (5) of subdivision (d) by the allocation limitation of
forty million dollars ($40,000,000) in paragraph (8) of subdivision
(c).
   (ii) Thereafter, in accordance with the application process.
   (C) Enforcement of each of the recapture provisions shall be
subject to a six-month cure period. No recapture shall occur until
the qualified community development entity shall have been given
notice of noncompliance and afforded six months from the date of such
notice to cure the noncompliance.
   (10) Section 45D(i) of the Internal Revenue Code, relating to
regulations, shall not apply.
   (11) Section 45D(h) of the Internal Revenue Code, relating to
basis, shall not apply.
   (12)  If a qualified community development entity makes a capital
or equity investment or a loan with respect to a qualified low-income
building under the state Low-Income Tax Credit Program, the
investment or loan is not a qualified low-income community investment
under this section.
   (d) (1) The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section. The guidelines
shall not disqualify a low-income community investment for the
single reason that public or private incentives, loans, equity
investments, technical assistance, or other forms of support have
been or continue to be provided. The adoption of the guidelines shall
not be subject to the rulemaking provisions of the Administrative
Procedure Act of Chapter 3.5 (commencing with Section 11340) of Part
1 of Division 3 of Title 2 of the Government Code.
   (2) The committee shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
and use the revenue to defray the cost of administering the program.
The committee shall establish the fees in a manner that ensures that
(A) the total amount collected equals the amount reasonably necessary
to defray the committee's costs in performing its administrative
duties under this section, and (B) the amount paid by each entity
reasonably corresponds with the value of the services provided to the
entity.
   (3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:
   (A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.
   (B) Sets minimum organizational capacity standards that applicants
must meet in order to receive an allocation of credits including,
but not limited to, its business strategy, community outcomes,
capitalization strategy, and management capacity. 
   (C) Provides for the annual return of unused credits by March 1 of
year following the year the credits are awarded so that they may be
reallocated to other community development entities. 
   (4) (A) The committee shall begin accepting applications on March
15, 2015, and shall award credits at least two times a year at dates
set annually by the committee through 2019, to the extent that
allocations are available pursuant to Section 26011.9 of the Public
Resources Code.  To the extent reasonable and consistent in
carrying out the purposes of this section, the committee shall
consider how the timing of the state allocation rounds correspond
with the allocation schedule of the federal New Markets Tax Credit
Program.
   (B) Within 20 calendar days after receipt of an application the
committee shall determine whether the application is complete or
whether additional information is necessary in order to fully
evaluate the application. If additional information is requested and
the qualified community development entity provides that information
within five business days, the application shall be considered
completed as of the original date of receipt. If the qualified
community development entity fails to provide the information within
the five-business-day period, the application shall be denied and
must be resubmitted in full with a new receipt date.
   (C) Within 20 calendar days after receipt of an application
determined to be complete by the committee, the committee shall grant
or deny the application in full or in part. If the committee denies
any part of the application, it shall inform the qualified community
development entity of the grounds for the denial.
   (5) (A) The committee shall award tax credits to 
applicants with federal new markets tax credits  
qualified community development entities described in subparagraph
(B) of paragraph (4)   of subdivision (c)  in the order
applications are received by the committee. Applications received on
the same day shall be deemed to have been received simultaneously.
   (i) In 2015, the committee shall only award tax credits to a
qualified community development  entity that also has federal
new markets tax credits, that will be used for projects and
activities in California   entity, exclusive of an
entity described in clause (ii) of subparagraph (A) of paragraph (4)
of subdivision (c)  . In the 2016 to 2019 award cycles,
inclusive, at least 60 percent of the credit allocation shall be
awarded to a qualified community development  entity with an
allocation of federal new markets tax credits   entity,
exclusive of an entity described in   clause (ii) of
subparagraph (A) of paragraph (4) of subdivision (c)  . At the
committee's discretion, a higher percentage of credits may be
targeted to applicants  with federal new markets tax credits
  exclusive of an entity described in clause (ii) of
subparagraph (A) of paragraph (4) of subdivision (c)  .
   (ii) The committee shall award  credits   up
to 40 percent of the credit   allocation in the 2016 to
2019, inclusive, award cycles,  to a qualified community
development  entity without federal new markets tax credits
  entity, as described in clause (ii) of subparagraph
(A) of paragraph (4) of subdivision (c) and subparagraph (B) of
paragraph (4) of subdivision (c),  on a competitive basis
 with priority   using blind scoring and a
review committee that is comprised of at least a majority of
community development finance practitioners. A member of the review
committee shall not have a financial interest, which includes, but is
not limited to, asking, consenting, or agreeing to receive any
commission, emolument, gratuity, money, property, or thing of value
for his or her own use, benefit, or personal advantage for procuring
or endeavoring to procure for any person, partnership, joint venture,
association, or corporation any tax credit or other assistance from
any applicant. Priority shall  given to  rural, urban,
and suburban  applications that can demonstrate that the
credits will allow the entity to undertake qualified low-income
community investments in  an   a rural,
suburban, or urban  area that has been historically 
underserved,   underserved or in  newly established
 businesses, and real estate development  
businesses  that results in the greatest benefit to the largest
number of lower income individuals.
   (B)  In   For applications described in
clause (i) of subparagraph (A), in  the event tax credit
requests exceed the  applicable annual  allocation
limitation of  up to  forty million dollars ($40,000,000) in
paragraph (8) of subdivision (c), the committee shall certify,
consistent with remaining qualified equity investment capacity,
qualified equity investments of applicants in proportionate
percentages based upon the ratio of the amount of qualified equity
investments requested in such applications to the total amount of
qualified equity investments requested in all such applications
received on the same day.
   (C) If a pending request cannot be fully certified due to this
limit, the committee shall certify the portion that may be certified
unless the qualified community development entity elects to withdraw
its request rather than receive partial certification.
   (D) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity of
the controlling entity, provided that the applicant and the
transferee notify the committee of such transfer and include the
information required in the application with respect to such
transferee with such notice.
   (E) Within 60 calendar days of the committee sending notice of
certification, the qualified community development entity or any
transferee, under subparagraph (D), shall issue the qualified equity
 investment,   investment and  receive cash
in the amount of the certified  amount, and, if applicable,
designate the required amount of qualified equity investment
                                          authority as federal
qualified equity investments   amount  . The
qualified community development entity or transferee, under
subparagraph (D), must provide the committee with evidence of the
receipt of the cash investment  and designation of the
qualified equity investment as a federal qualified equity investment
 within 65 days of the applicant receiving notice of
certification. If the qualified community development entity or any
transferee, under subparagraph (D), does not receive the cash
 investment,   investment  and issue the
qualified equity investment  and, if applicable, designate
the required amount of qualified equity investment authority as
federal qualified equity investments  within 60 calendar
days of the committee sending the certification notice, the
certification shall lapse and the entity may not issue the qualified
equity investment without reapplying to the committee for
certification.  Only applicants that state in their
applications that the entity has been awarded a federal new markets
tax credit shall be required to show evidence, as determined by the
committee, that the qualified equity investment authority qualifies
as a federal qualified equity investment.  Lapsed
certifications revert back to the committee and shall be reissued in
the following order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B) of
paragraph (5) under the  annual  allocation limitation of
forty million dollars ($40,000,000) in paragraph (8) of subdivision
(c).
   (ii) Thereafter, in accordance with the application process.
   (F) A qualified community development entity that issues qualified
equity investments must notify the committee of the names of the
entities that are eligible to utilize tax credits under paragraph (3)
of subdivision (b) pursuant to an allocation of tax credits or
change in allocation of tax credits or due to a transfer of a
qualified equity investment.
   (6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to the committee
within the first five business days after the first anniversary of
the initial credit allowance date that provides documentation as to
the investment of at least 85 percent of the purchase price in
qualified low-income community investments in qualified active
low-income community businesses located in California. Such report
shall include all of the following:
   (i) A bank statement of such qualified community development
entity evidencing each qualified low-income community investment.
   (ii) Evidence that such business was a qualified active low-income
community business at the time of such qualified low-income
community investment.
   (iii) Any other information required by the committee.
   (B) Thereafter, the qualified community development entity shall
submit an annual report to the committee within 60 days of the
beginning of the calendar year during the seven years following
submittal of the report, pursuant to subparagraph (A). No annual
report shall be due prior to the first anniversary of the initial
credit allowance date. The report shall include, but is not limited
to, the following:
   (i) The impact the credit had on the low-income community.
   (ii) The amount of moneys used for qualified low-income
investments in qualified low-income community businesses.
   (iii) The number of employment positions created and retained as a
result of qualified low-income community investments and the average
annual salary of such positions.
   (iv) The number of operating businesses assisted as a result of
qualified low-income community investments, by industry and number of
employees.
   (v) Number of  real estate projects and type of community
development facilities that resulted   owner-occupied
real estate projects described in subparagraph (E) of paragraph (6)
of subdivision (c)  . 
   (vi) Location of the qualified low-income community businesses.

   (e) In the case where the credit allowed by this section exceeds
the tax described in Sections 12201, 12204, 12206, and 12209, the
excess may be carried over to reduce that tax in the following year,
and the six succeeding years if necessary, until the credit is
exhausted.
   (f) The committee shall annually report on its Internet Web site
the information provided by low-income community development entities
and on the geographic distribution of the credits.
   (g) (1) The Franchise Tax Board may prescribe any rules or
regulations that may be necessary or appropriate to implement this
section. The Franchise Tax Board shall have access to any
documentation held by the committee relative to the application and
reporting of a qualified community development entity.
   (2) A qualifying community development entity shall provide the
committee with the name, address, and tax identification number of
each investor and entity for which a credit was allocated by the
qualifying community development entity, pursuant to paragraph (3) of
subdivision (b). The committee shall provide this information to the
Franchise Tax Board in a manner determined by the Franchise Tax
Board.
   (h) This section shall remain in effect only until December 1,
2028, and as of that date is repealed.
  SEC. 4.  Section 17053.9 is added to the Revenue and Taxation Code,
to read:
   17053.9.  (a) There is hereby created the California New Markets
Tax Credit Program as provided in this section, Section 12283, and
Section 23622.9. The purpose of this program is to stimulate private
sector investment in lower income communities by providing a tax
incentive to qualified community and economic development entities
that can be leveraged by the entity to attract private sector
investment that in turn will be deployed by providing financing and
technical assistance to small and medium size  
small- and medium-size  businesses and the development of
commercial,  industrial   industrial,  and
community development projects, including, but not limited to,
facilities for nonprofit service organizations, light manufacturing,
and mixed-use and transit-oriented development. The California
Competes Tax Credit Committee shall administer this program as
provided in this section, Section 12283, and Section 23622.9.
   (b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, 2027, there shall be allowed as a credit
against the "net tax," as defined in Section 17039, an amount
determined in accordance with Section 45D of the Internal Revenue
Code, as amended by Public Law 111-5, Public Law 111-312, and Public
Law 112-240, as modified as set forth in this section.
   (2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment, or has been allocated a credit pursuant
to paragraph (3), on the credit allowance date and each of the six
following anniversary dates of that date.
   (3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed or allocated to a
partnership, limited liability company, or "S" corporation may be
allocated to the partners, members, managers, or shareholders of such
entity for their use in accordance with the provisions of any
agreement among such partners, members, managers, or shareholders.
Such allocations shall not be considered a sale for the purposes of
this section.
   (c) Section 45D of the Internal Revenue Code is modified as
follows:
   (1) (A) The references to "the Secretary" in Section 45D of the
Internal Revenue Code are modified to read "the committee."
   (B) For purposes of this section, "committee" means the California
Competes Tax Credit Committee established under Section 18410.2.
   (2) Section 45D(a)(2) of the Internal Revenue Code, relating to
applicable percentage, is modified by substituting for "(A) 5 percent
with respect to the first 3 credit allowance dates, and (B) 6
percent with respect to the remainder of the credit allowance dates"
with the following:
   (A) Zero percent with respect to the first two credit allowance
dates.
   (B) Seven percent with respect to the third credit allowance date.

   (C) Eight percent with respect to the remainder of the credit
allowance dates.
   (3) Section 45D(b)(3) of the Internal Revenue Code, relating to
safe harbor for determining use of cash, is modified by substituting
"qualified low-income community investments in California" for
"qualified low-income community investments." 
   (4) 
    (4)   (A)    Section 45D(c)(1) of the
Internal Revenue Code, relating to qualified community development
entities, is modified to additionally include: 
   (A) 
    (i)  A subsidiary community development entity of any
such qualified community development entity. 
   (B) 
    (ii)  A nonprofit organization, pursuant to Section
23701, certified by the committee as having a primary mission of
serving or providing investment capital in low-income communities and
the entity maintains accountability to residents of low-income
communities through their representation on any governing board of
the entity or on an advisory board of the entity. The committee shall
establish guidelines for certifying nonprofit organizations pursuant
to this subparagraph. The committee may include reasonable
conditions on the certification to effectuate the intent of this
section and may suspend or revoke a certification, after affording
the nonprofit organization notice and the opportunity to be heard, if
the committee finds that the nonprofit organization no longer meets
the requirements for certification.  Such nonprofit organization
is not   subject to the requirement of subparagraph (B).
 
   (B) Section 45D(c)(1) of the Internal Revenue Code, relating to a
qualified community development entity, is modified to only include a
qualified community development entity that has entered into an
allocation agreement with the Community Development Financial
Institutions Fund of the United States Treasury Department, with
respect to credits authorized by Section 45D of the Internal Revenue
Code, that includes California within the service area and is dated
on or after January 1, 2012. 
   (5) Section 45D(d)(1)(A) of the Internal Revenue Code, relating to
qualified low-income community investments, is modified to only
include any capital or equity investment in, or loan to, a qualified
active low-income community business.
   (6) The term "qualified active low-income community business," as
defined in Section 45D(d)(2) of the Internal Revenue Code is modified
as follows:
   (A) Section 45D(d)(2)(A)(i) of the Internal Revenue Code, relating
to qualified active low-income community businesses, is modified by
substituting "any low-income community in California" for "any
low-income community."
   (B) Section 45D(d)(2)(A)(ii) of the Internal Revenue Code,
relating to qualified active low-income community businesses, is
modified as follows:
   (i) Substituting "any low-income community in California" for "any
low-income community."
   (ii) In determining whether the qualified active low-income
community business uses a substantial portion of its tangible
personal property within any low-income community, the term
"substantial portion" shall mean "at least 40 percent" as calculated
by the average value of the tangible property owned or leased and
used within a California low-income community by the entity divided
by the average value of the total tangible property owned or leased
and used by the entity in California during the taxable year. The
value assigned to the leased property by the entity must be
reasonable.
   (iii) Adding the provision that if the business meets the
requirements of a qualified low-income community business at the time
the investment is made, the business shall continue to satisfy the
requirements of Section 45D(d)(2)(A)(ii) for the duration of the
investment.
   (C) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code,
relating to qualified active low-income community  businesses
  which limits the services of employees to
substantially those performed within the   business, a
substantial portion of the services of which are performed in a 
low-income community,  shall not apply to a qualified
community development entity that does not hold a federal new markets
tax credit   is modified to allow the services of
employees of a service-based quali   fied business to be
performed outside the low-income community. A service-based qualified
business is a business that primarily earns revenue through
providing intangible products and services  .
   (D) An entity complies with Section 45D(d)(2)(A)(i) of the
Internal Revenue Code, relating to qualified active low-income
community business, if, as calculated in subparagraph (B), it uses 50
percent of its tangible property, whether owned or leased, within
any low-income community for any taxable year.
   (E) (i) A qualified active low-income community business shall
exclude any business that derives, or projects to derive, 15 percent
or more of its annual revenue from the rental or sale of real estate.
This exclusion does not apply to a business that is controlled by,
or under common control with, another business if the second
business: (I) does not derive or project to derive 15 percent or more
of its annual revenue from the rental or sale of real estate; and
(II) is the primary tenant of the real estate leased from the first
business.
   (ii) A qualified active low-income community business shall only
include a business that, at the time the initial investment is made,
has 250 or fewer employees and is located in a California low-income
community. The operating business shall meet all other conditions of
a qualified active low-income business, except as modified by this
paragraph and paragraph (7). 
   (iii) A qualified active low-income community business shall only
include a business located in census tracts with a poverty rate
greater than 30 percent, or census tracts, if located within a
non-metropolitan area, with a median family income that does not
exceed 60 percent of median family income for the State of
California, or census tracts, if located within a metropolitan area,
with a median family income that does not exceed 60 percent of the
greater of the California median family income or the metropolitan
area median family income, or census tracts with unemployment rates
at least 1.5 times the national average. 
   (7) Section 45D(e)(1) of the Internal Revenue Code, relating to
determining the eligible low-income community, is modified to add the
following: "When the United States Census Bureau discontinues using
the decennial census to report median family income on a census tract
basis, census block group data shall be used based on the American
Community Survey."
   (8) The following shall apply in lieu of the provisions of Section
45D(f)(1) of the Internal Revenue Code, relating to national
limitation on amount of investments designated: "The aggregate amount
of credit that may be allocated in any calendar year pursuant to
this section, Section 12283, and Section 23622.9 shall be an amount
equal to any unused portion of the one hundred million dollars
($100,000,000) in exclusions, authorized pursuant to Section 6010.8,
as determined by the California Alternative Energy and Advanced
Transportation Financing Authority and reported to the committee, not
to exceed forty million dollars ($40,000,000). The committee shall
limit the allocation of credits permitted under this section, Section
12283, and Section 23622.9 to a cumulative total of no more than two
hundred million dollars ($200,000,000). Any unused credits shall be
returned to the committee on March 1 of the year following allocation
and the value of the unused credit shall be available for allocation
in the following calendar years in accordance with the application
process. Any recaptured credits shall be returned to the committee by
March 1 of the year following recapture and the value of the
recaptured credit shall be available for allocation in the following
calendar years in accordance with clause (ii) of subparagraph (B) of
paragraph (9). Reallocation credits shall not count against the forty
million dollars ($40,000,000) annual limit or the two hundred
million dollars ($200,000,000) cumulative limit."
   (9) (A) Section 45D(g)(2)(B) of the Internal Revenue Code,
relating to credit recapture amount, is modified to substitute
"Section 19101 of this code" for "section 6621".
   (B) Section 45D(g)(3) of the Internal Revenue Code, relating to
recapture event, does not apply and is replaced with the following:
   (i) The committee shall recapture, from the entity that claimed
the credit on a return, the tax credit allowed under this section if
any of the following:
   (I)  Any amount of a federal tax credit available with respect to
a qualified equity investment that is eligible for a credit under
this section is recaptured under Section 45D of the Internal Revenue
Code. In such case the committee's recapture shall be proportionate
to the federal recapture with respect to such qualified equity
investment.
   (II)  The qualified community development entity redeems or makes
principal repayment with respect to a qualified equity investment
prior to the seventh anniversary of the issuance of such qualified
equity investment. In such case the committee's recapture shall be
proportionate to the amount of the redemption or repayment with
respect to such qualified equity investment.
   (III)  The qualified community development entity fails to invest
an amount equal to at least 85 percent of the purchase price of the
qualified equity investment in qualified low-income community
investments in California within 12 months of the issuance of the
qualified equity investment and maintain at least 85 percent of such
level of investment in qualified low-income community investments in
California until the last credit allowance date for the qualified
equity investment. For purposes of this section, an investment shall
be considered held by a qualified community development entity even
if the investment has been sold or repaid if the qualified community
development entity reinvests an amount equal to the capital returned
to, or recovered by, the qualified community development entity from
the original investment, exclusive of any profits realized, in
another qualified low-income community investment within 12 months of
the receipt of such capital. Periodic amounts received as repayment
of principal pursuant to regularly scheduled amortization payments on
a loan that is a qualified low-income community investment shall be
treated as continuously invested in a qualified low-income community
investment if the amounts are reinvested in one or more qualified
low-income community investments by the end of the following calendar
year. A qualified community development entity shall not be required
to reinvest capital returned from qualified low-income community
investments after the sixth anniversary of the issuance of the
qualified equity investment, and the qualified low-income community
investment shall be considered held by the qualified community
development entity through the seventh anniversary of the qualified
equity investment's issuance.
   (ii)  Recaptured tax credits and the related qualified equity
investment authority revert back to the committee and shall be
reissued in the following order:
   (I)  First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B) of
paragraph (5) of subdivision (d) by the allocation limitation of
forty million dollars ($40,000,000) in paragraph (8) of subdivision
(c).
   (II)  Thereafter, in accordance with the application process.
   (iii)  Enforcement of each of the recapture provisions shall be
subject to a six-month cure period. No recapture shall occur until
the qualified community development entity shall have been given
notice of noncompliance and afforded six months from the date of such
notice to cure the noncompliance.
   (10) Section 45D(i) of the Internal Revenue Code, relating to
regulations, shall not apply. 
   (11) Section 45D(h) of the Internal Revenue Code, relating to
basis, shall not apply.  
   (12) 
    (11)  If a qualified community development entity makes
a capital or equity investment or a loan with respect to a qualified
low-income building under the state Low-Income Tax Credit Program,
the investment or loan is not a qualified low-income community
investment under this section.
   (d) (1) The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section. The guidelines
shall not disqualify a low-income community investment for the
single reason that public or private incentives, loans, equity
investments, technical assistance, or other forms of support have
been or continue to be provided. The adoption of the guidelines shall
not be subject to the rulemaking provisions of the Administrative
Procedure Act of Chapter 3.5 (commencing with Section 11340) of Part
1 of Division 3 of Title 2 of the Government Code.
   (2) The committee shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
and use the revenue to defray the cost of administering the program.
The committee shall establish the fees in a manner that ensures that
(A) the total amount collected equals the amount reasonably necessary
to defray the committee's costs in performing its administrative
duties under this section, and (B) the amount paid by each entity
reasonably corresponds with the value of the services provided to the
entity.
   (3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:
   (A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.
   (B) Sets minimum organizational capacity standards that applicants
must meet in order to receive an allocation of credits including,
but not limited to, its business strategy, community outcomes,
capitalization strategy, and management capacity. 
   (C) Provides for the annual return of unused credits by March 1 of
the year following the year the credits are awarded so that they may
be reallocated to other community development entities. 
   (4) (A) The committee shall begin accepting applications on March
15, 2015, and shall award credits at least two times a year at dates
set annually by the committee through 2019, to the extent that
allocations are available pursuant to Section 26011.9 of the Public
Resources Code.  To the extent reasonable and consistent in
carryin   g out the purposes of this section, the committee
shall consider how the timing of the state allocation rounds
correspond with the allocation schedule of the federal New Markets
Tax Credit Program. 
   (B) Within 20 calendar days after receipt of an application the
committee shall determine whether the application is complete or
whether additional information is necessary in order to fully
evaluate the application. If additional information is requested and
the qualified community development entity provides that information
within five business days, the application shall be considered
completed as of the original date of receipt. If the qualified
community development entity fails to provide the information within
the five-business-day period, the application shall be denied and
must be resubmitted in full with a new receipt date.
   (C) Within 20 calendar days after receipt of an application
determined to be complete by the committee, the committee shall grant
or deny the application in full or in part. If the committee denies
any part of the application, it shall inform the qualified community
development entity of the grounds for the denial.
   (5) (A) The committee shall award tax credits to 
applicants with federal new markets tax credits  
qualified community development entities described in subparagraph
(B) of paragraph (4) of subdivision (c)  in the order
applications are received by the committee. Applications received on
the same day shall be deemed to have been received simultaneously.
   (i) In 2015, the committee shall only award tax credits to a
qualified community development  entity that also has federal
new markets tax credits, that will be used for projects and
activities in California   entity, exclusive of an
entity described in clause (ii) of subparagraph (A) of paragraph (4)
of subdivision (c)  . In the 2016 to 2019 award cycles,
inclusive, at least 60 percent of the credit allocation shall be
awarded to a qualified community development  entity with an
allocation of federal new markets tax credits   
 entity, exclusive of an entity described in clause (ii) of
subparagraph (A) of paragraph (4) of subdivision (c)  . At the
committee's discretion, a higher percentage of credits may be
targeted to applicants  with federal new markets tax credits
  exclusive of an entity described in clause (ii) of
subparagraph (A) of paragraph (4) of subdivision (c)  .
   (ii) The committee shall award  credits   up
to 40 percent of the credit allocation in the 2016 to 2019,
inclusive, award cycles,  to a qualified community development
 entity without federal new markets tax credits 
 entity, as described in clause (ii) of subparagraph  
(A) of paragraph (4) of subdivision (c) and subparagraph (B) of
paragraph (4) of subdivision (c),  on a competitive basis
 with priority   using blind scoring and a
review committee that is comprised of at least a majority of
community development finance practitioners. A member of the review
committee shall not have a financial interest, which includes, but is
not limited to, asking, consenting, or agreeing to receive any
commission, emolument, gratuity, money, property, or thing of value
for his or her own use, benefit, or personal advantage for procuring
or endeavoring to procure for any person, partnership, joint venture,
association, or corporation any tax credit
                or other assistance from any applicant. Priority
shall  given to  rural, urban, and suburban 
applications that can demonstrate that the credits will allow the
entity to undertake qualified low-income community investments in
 an   a rural, suburban, or urban  area
that has been historically  underserved,  
underserved or in  newly established  businesses, and
real estate development   businesses  that results
in the greatest benefit to the largest number of lower income
individuals.
   (B)  In   For applications described in
clause (i) of subparagraph (A), in  the event tax credit
requests exceed the  applicable annual  allocation
limitation of  up to  forty million dollars ($40,000,000) in
paragraph (8) of subdivision (c), the committee shall certify,
consistent with remaining qualified equity investment capacity,
qualified equity investments of applicants in proportionate
percentages based upon the ratio of the amount of qualified equity
investments requested in such applications to the total amount of
qualified equity investments requested in all such applications
received on the same day.
   (C) If a pending request cannot be fully certified due to this
limit, the committee shall certify the portion that may be certified
unless the qualified community development entity elects to withdraw
its request rather than receive partial certification.
   (D) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity of
the controlling entity, provided that the applicant and the
transferee notify the committee of such transfer and include the
information required in the application with respect to such
transferee with such notice.
   (E) Within 60 calendar days of the committee sending notice of
certification, the qualified community development entity or any
transferee, under subparagraph (D), shall issue the qualified equity
 investment,   investment and  receive cash
in the amount of the certified  amount, and, if applicable,
designate the required amount of qualified equity investment
authority as federal qualified equity investments  
amount  . The qualified community development entity or
transferee, under subparagraph (D), must provide the committee with
evidence of the receipt of the cash investment  and
designation of the qualified equity investment as a federal qualified
equity investment  within 65 days of the applicant
receiving notice of certification. If the qualified community
development entity or any transferee, under subparagraph (D), does
not receive the cash  investment,   investment
 and issue the qualified equity investment  and, if
applicable, designate the required amount of qualified equity
investment authority as federal qualified equity investments
 within 60 calendar days of the committee sending the
certification notice, the certification shall lapse and the entity
may not issue the qualified equity investment without reapplying to
the committee for certification.  Only applicants that state
in their applications that the entity has been awarded a federal new
markets tax credit shall be required to show evidence, as determined
by the committee, that the qualified equity investment authority
qualifies as a federal qualified equity investment.  Lapsed
certifications revert back to the committee and shall be reissued in
the following order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B) of
paragraph (5) under the  annual  allocation limitation of
forty million dollars ($40,000,000) in paragraph (8) of subdivision
(c).
   (ii) Thereafter, in accordance with the application process.
   (F) A qualified community development entity that issues qualified
equity investments must notify the committee of the names of the
entities that are eligible to utilize tax credits under paragraph (3)
of subdivision (b) pursuant to an allocation of tax credits or
change in allocation of tax credits or due to a transfer of a
qualified equity investment.
   (6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to the committee
within the first five business days after the first anniversary of
the initial credit allowance date that provides documentation as to
the investment of at least 85 percent of the purchase price in
qualified low-income community investments in qualified active
low-income community businesses located in California. Such report
shall include all of the following:
   (i) A bank statement of such qualified community development
entity evidencing each qualified low-income community investment.
   (ii) Evidence that such business was a qualified active low-income
community business at the time of such qualified low-income
community investment.
   (iii) Any other information required by the committee.
   (B) Thereafter, the qualified community development entity shall
submit an annual report to the committee within 60 days of the
beginning of the calendar year during the seven years following
submittal of the report, pursuant to subparagraph (A). No annual
report shall be due prior to the first anniversary of the initial
credit allowance date. The report shall include, but is not limited
to, the following:
   (i) The impact the credit had on the low-income community.
   (ii) The amount of moneys used for qualified low-income
investments in qualified low-income community businesses.
   (iii) The number of employment positions created and retained as a
result of qualified low-income community investments and the average
annual salary of such positions.
   (iv) The number of operating businesses assisted as a result of
qualified low-income community investments, by industry and number of
employees.
   (v) Number of  real estate projects and type of community
development facilities that resulted   owner-occupied
real estate projects described in subparagraph (E) of paragraph (6)
of subdivision (c)  . 
   (vi) Location of the qualified low-income community businesses.

   (e) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and the six succeeding years if necessary,
until the credit is exhausted.
   (f) The committee shall annually report on its Internet Web site
the information provided by low-income community development entities
and on the geographic distribution of the credits.
   (g) (1) The Franchise Tax Board may prescribe any rules or
regulations that may be necessary or appropriate to implement this
section. The Franchise Tax Board shall have access to any
documentation held by the committee relative to the application and
reporting of a qualified community development entity.
   (2) A qualifying community development entity shall provide the
committee with the name, address, and tax identification number of
each investor and entity for which a credit was allocated by the
qualifying community development entity, pursuant to paragraph (3) of
subdivision (b). The committee shall provide this information to the
Franchise Tax Board in a manner determined by the Franchise Tax
Board.
   (h) This section shall remain in effect only until December 1,
2028, and as of that date is repealed.
  SEC. 5.  Section 18410.2 of the Revenue and Taxation Code is
amended to read:
   18410.2.  (a) The California Competes Tax Credit Committee is
hereby established. The committee shall consist of the Treasurer, the
Director of Finance, and the Director of the Governor's Office of
Business and Economic Development, who shall serve as chair of the
committee, or their designated representatives, and one appointee
each by the Speaker of the Assembly and the Senate Committee on
Rules. A Member of the Legislature shall not be appointed.
   (b) For purposes of Sections 12283, 17053.9, 17059.2, 23622.9, and
23689 the California Competes Tax Credit Committee shall do all of
the following:
   (1) Approve or reject any written agreement for a tax credit
allocation by resolution at a duly noticed public meeting held in
accordance with the Bagley-Keene Open Meeting Act (Article 9
(commencing with Section 11120) of Chapter 1 of Part 1 of Division 3
of Title 2 of the Government Code), but only after receipt of the
fully executed written agreement between the taxpayer and the
Governor's Office of Business and Economic Development.
   (2) Approve or reject any recommendation to recapture, in whole or
in part, a tax credit allocation by resolution at a duly noticed
public meeting held in accordance with the Bagley-Keene Open Meeting
Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1
of Division 3 of Title 2 of the Government Code), but only after
receipt of the recommendation from the Governor's Office of Business
and Economic Development pursuant to the terms of the fully executed
written agreement.
  SEC. 6.  Section 23622.9 is added to the Revenue and Taxation Code,
to read:
   23622.9.  (a) There is hereby created the California New Markets
Tax Credit Program as provided in this section, Section 12283, and
Section 17053.9. The purpose of this program is to stimulate private
sector investment in lower income communities by providing a tax
incentive to qualified community and economic development entities
that can be leveraged by the entity to attract private sector
investment that in turn will be deployed by providing financing and
technical assistance to small- and medium-size businesses and the
development of commercial,  industrial  
industrial,  and community development projects, including, but
not limited to, facilities for nonprofit service organizations, light
manufacturing, and mixed-use and transit-oriented development. The
California Competes Tax Credit Committee shall administer this
program as provided in this section, Section 12283, and Section
17053.9.
   (b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, 2027, there shall be allowed as a credit
against the "tax," as defined in Section 23036, an amount determined
in accordance with Section 45D of the Internal Revenue Code, as
amended by Public Law 111-5, Public Law 111-312, and Public Law
112-240, as modified as set forth in this section.
   (2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment, or has been allocated a credit pursuant
to paragraph (3), on the credit allowance date and each of the six
following anniversary dates of that date.
   (3) A tax credit allowed under this section shall not be sold and
is not a refundable credit. Tax credits allowed or allocated to a
partnership, limited liability company, or "S" corporation may be
allocated to the partners, members, managers, or shareholders of such
entity for their use in accordance with the provisions of any
agreement among such partners, members, managers, or shareholders.
Such allocations shall not be considered a sale for the purposes of
this section.
   (c) Section 45D of the Internal Revenue Code is modified as
follows:
   (1) (A) The references to "the Secretary" in Section 45D of the
Internal Revenue Code are modified to read "the committee."
   (B) For purposes of this section, "committee" means the California
Competes Tax Credit Committee established under Section 18410.2.
   (2) Section 45D(a)(2) of the Internal Revenue Code, relating to
applicable percentage, is modified by substituting for "(A) 5 percent
with respect to the first 3 credit allowance dates, and (B) 6
percent with respect to the remainder of the credit allowance dates"
with the following:
   (A) Zero percent with respect to the first two credit allowance
dates.
   (B) Seven percent with respect to the third credit allowance date.

   (C) Eight percent with respect to the remainder of the credit
allowance dates.
   (3) Section 45D(b)(3) of the Internal Revenue Code, relating to
safe harbor for determining use of cash, is modified by substituting
"qualified low-income community investments in California" for
"qualified low-income community investments." 
   (4) 
    (4)   (A)    Section 45D(c)(1) of the
Internal Revenue Code, relating to qualified community development
entities, is modified to additionally include: 
   (A) 
    (i)  A subsidiary community development entity of any
such qualified community development entity. 
   (B) 
    (ii)  A nonprofit organization, pursuant to Section
23701, certified by the committee as having a primary mission of
serving or providing investment capital in low-income communities and
the entity maintains accountability to residents of low-income
communities through their representation on any governing board of
the entity or on an advisory board of the entity. The committee shall
establish guidelines for certifying nonprofit organizations pursuant
to this subparagraph. The committee may include reasonable
conditions on the certification to effectuate the intent of this
section and may suspend or revoke a certification, after affording
the nonprofit organization notice and the opportunity to be heard, if
the committee finds that the nonprofit organization no longer meets
the requirements for certification.  Such nonprofit organization
is not subject to the requirement of subparagraph (B).  
   (B) Section 45D(c)(1) of the Internal Revenue Code, relating to a
qualified community development entity, is modified to only include a
qualified community development entity that has entered into an
allocation agreement with the Community Development Financial
Institutions Fund of the United States Treasury Department, with
respect to credits authorized by Section 45D of the Internal Revenue
Code, that includes California within the service area and is dated
on or after January 1, 2012. 
   (5) Section 45D(d)(1)(A) of the Internal Revenue Code, relating to
qualified low-income community investments, is modified to only
include any capital or equity investment in, or loan to, a qualified
active low-income community business.
   (6) The term "qualified active low-income community business," as
defined in Section 45D(d)(2) of the Internal Revenue Code is modified
as follows:
   (A) Section 45D(d)(2)(A)(i) of the Internal Revenue Code, relating
to qualified active low-income community businesses, is modified by
substituting "any low-income community in California" for "any
low-income community."
   (B) Section 45D(d)(2)(A)(ii) of the Internal Revenue Code,
relating to qualified active low-income community businesses, is
modified as follows:
   (i) Substituting "any low-income community in California" for "any
low-income community."
   (ii) In determining whether the qualified active low-income
community business uses a substantial portion of its tangible
personal property within any low-income community, the term
"substantial portion" shall mean "at least 40 percent" as calculated
by the average value of the tangible property owned or leased and
used within a California low-income community by the entity divided
by the average value of the total tangible property owned or leased
and used by the entity in California during the taxable year. The
value assigned to the leased property by the entity must be
reasonable.
   (iii) Adding the provision that if the business meets the
requirements of a qualified low-income community business at the time
the investment is made, the business shall continue to satisfy the
requirements of Section 45D(d)(2)(A)(ii) for the duration of the
investment.
   (C) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code,
relating to qualified active low-income community  businesses
which limits the services of employees to substantially those
performed within the   business, a substantial portion
of the services of which are performed in a  low-income
community,  shall not apply to a qualified community
development entity that does not hold a federal new markets tax
credit   is modified to allow the services of employees
of a service-based qualified business to be performed outside the
low-income community. A service-based qualified business is a
business that primarily earns revenue through providing intangible
products and services  .
   (D) An entity complies with Section 45D(d)(2)(A)(i) of the
Internal Revenue Code, relating to qualified active low-income
community business, if, as calculated in subparagraph (B), it uses 50
percent of its tangible property, whether owned or leased, within
any low-income community for any taxable year.
   (E) (i) A qualified active low-income community business shall
exclude any business that derives, or projects to derive, 15 percent
or more of its annual revenue from the rental or sale of real estate.
This exclusion does not apply to a business that is controlled by,
or under common control with, another business if the second
business: (I) does not derive or project to derive 15 percent or more
of its annual revenue from the rental or sale of real estate; and
(II) is the primary tenant of the real estate leased from the first
business.
   (ii) A qualified active low-income community business shall only
include a business that, at the time the initial investment is made,
has 250 or fewer employees and is located in a California low-income
community. The operating business shall meet all other conditions of
a qualified active low-income business, except as modified by this
paragraph and paragraph (7). 
   (iii) A qualified active low-income community business shall only
include a business located in census tracts with a poverty rate
greater than 30 percent, or census tracts, if located within a
non-metropolitan area, with a median family income that does not
exceed 60 percent of median family income for the State of
California, or census tracts, if located within a metropolitan area,
with a median family income that does not exceed 60 percent of the
greater of the California median family income or the metropolitan
area median family income, or census tracts with unemployment rates
at least 1.5 times the national average. 
   (7) Section 45D(e)(1) of the Internal Revenue Code, relating to
determining the eligible low-income community is modified to add the
following: "When the United States Census Bureau discontinues using
the decennial census to report median family income on a census tract
basis, census block group data shall be used based on the American
Community Survey."
   (8) The following shall apply in lieu of the provisions of Section
 45(D)(f)(1)   45D(f)(1)  of the Internal
Revenue Code, relating to national limitation on amount of
investments designated: "The aggregate amount of credit that may be
allocated in any calendar year pursuant to this section, Section
12283, and Section 17053.9 shall be an amount equal to any unused
portion of the one hundred million dollars ($100,000,000) in
exclusions, authorized pursuant to Section 6010.8, as determined by
the California Alternative Energy and Advanced Transportation
Financing Authority and reported to the committee, not to exceed
forty million dollars ($40,000,000). The committee shall limit the
allocation of credits permitted under this section, Section 12283,
and Section 17053.9 to a cumulative total of no more than two hundred
million dollars ($200,000,000). Any unused credits shall be returned
to the committee on March 1 of the year following allocation and the
value of the unused credit shall be available for allocation in the
following calendar years in accordance with the application process.
Any recaptured credits shall be returned to the committee by March 1
of the year following recapture and the value of the recaptured
credit shall be available for allocation in the following calendar
years in accordance with clause (ii) of subparagraph (B) of paragraph
(9). Reallocation credits shall not count against the forty million
dollars ($40,000,000) annual limit or the two hundred million dollars
($200,000,000) cumulative limit."
   (9) (A) Section 45D(g)(2)(B) of the Internal Revenue Code,
relating to credit recapture amount, is modified to substitute
"Section 19101 of this code" for "section 6621".
   (B) Section 45D(g)(3) of the Internal Revenue Code, relating to
recapture event, does not apply and is replaced with the following:
   (i) The committee shall recapture, from the entity that claimed
the credit on a return, the tax credit allowed under this section if
any of the following:
   (I) Any amount of a federal tax credit available with respect to a
qualified equity investment that is eligible for a credit under this
section is recaptured under Section 45D of the Internal Revenue
Code. In such case the committee's recapture shall be proportionate
to the federal recapture with respect to such qualified equity
investment.
   (II) The qualified community development entity redeems or makes
principal repayment with respect to a qualified equity investment
prior to the seventh anniversary of the issuance of such qualified
equity investment. In such case the committee's recapture shall be
proportionate to the amount of the redemption or repayment with
respect to such qualified equity investment.
   (III) The qualified community development entity fails to invest
an amount equal to at least 85 percent of the purchase price of the
qualified equity investment in qualified low-income community
investments in California within 12 months of the issuance of the
qualified equity investment and maintain at least 85 percent of such
level of investment in qualified low-income community investments in
California until the last credit allowance date for the qualified
equity investment. For purposes of this section, an investment shall
be considered held by a qualified community development entity even
if the investment has been sold or repaid if the qualified community
development entity reinvests an amount equal to the capital returned
to, or recovered by, the qualified community development entity from
the original investment, exclusive of any profits realized, in
another qualified low-income community investment within 12 months of
the receipt of such capital. Periodic amounts received as repayment
of principal pursuant to regularly scheduled amortization payments on
a loan that is a qualified low-income community investment shall be
treated as continuously invested in a qualified low-income community
investment if the amounts are reinvested in one or more qualified
low-income community investments by the end of the following calendar
year. A qualified community development entity shall not be required
to reinvest capital returned from qualified low-income community
investments after the sixth anniversary of the issuance of the
qualified equity investment, and the qualified low-income community
investment shall be considered held by the qualified community
development entity through the seventh anniversary of the qualified
equity investment's issuance.
   (ii) Recaptured tax credits and the related qualified equity
investment authority revert back to the committee and shall be
reissued in the following order:
   (I) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B) of
paragraph (5) of subdivision (d) by the allocation limitation of
forty million dollars ($40,000,000) in paragraph (8) of subdivision
(c).
   (II) Thereafter, in accordance with the application process.
   (iii) Enforcement of each of the recapture provisions shall be
subject to a six month cure period. No recapture shall occur until
the qualified community development entity shall have been given
notice of noncompliance and afforded six months from the date of such
notice to cure the noncompliance.
   (10) Section 45D(i) of the Internal Revenue Code, relating to
regulations, shall not apply. 
   (11) Section 45D(h) of the Internal Revenue Code, relating to
basis, shall not apply.  
   (12) 
    (11)  If a qualified community development entity makes
a capital or equity investment or a loan with respect to a qualified
low-income building under the state Low-Income Tax Credit Program,
the investment or loan is not a qualified low-income community
investment under this section.
   (d) (1) The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section. The guidelines
shall not disqualify a low-income community investment for the
single reason that public or private incentives, loans, equity
investments, technical assistance, or other forms of support have
been or continue to be provided. The adoption of the guidelines shall
not be subject to the rulemaking provisions of the Administrative
Procedure Act of Chapter 3.5 (commencing with Section 11340) of Part
1 of Division 3 of Title 2 of the Government Code.
   (2) The committee shall establish and impose reasonable fees upon
entities that apply for the allocation pursuant to this subdivision
and use the revenue to defray the cost of administering the program.
The committee shall establish the fees in a manner that ensures that
(A) the total amount collected equals the amount reasonably necessary
to defray the committee's costs in performing its administrative
duties under this section, and (B) the amount paid by each entity
reasonably corresponds with the value of the services provided to the
entity.
   (3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:
   (A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.
   (B) Sets minimum organizational capacity standards that applicants
must meet in order to receive an allocation of credits including,
but not limited to, its business strategy, community outcomes,
capitalization strategy, and management capacity. 
   (C) Provides for the annual return of unused credits by March 1 of
the year following the year the credits are awarded so that they may
be reallocated to other community development entities. 
   (4) (A) The committee shall begin accepting applications on March
15, 2015, and shall award credits at least two times a year at dates
set annually by the committee through 2019, to the extent that
allocations are                                            available
pursuant to Section 26011.9 of the Public Resources Code.  To the
extent reasonable and consistent in carrying out the purposes of
this section, the committee shall consider how the timing of the
state allocation rounds correspond with the allocation schedule of
the federal New Markets Tax Credit Program. 
   (B) Within 20 calendar days after receipt of an application the
committee shall determine whether the application is complete or
whether additional information is necessary in order to fully
evaluate the application. If additional information is requested and
the qualified community development entity provides that information
within five business days, the application shall be considered
completed as of the original date of receipt. If the qualified
community development entity fails to provide the information within
the five-business-day period, the application shall be denied and
must be resubmitted in full with a new receipt date.
   (C) Within 20 calendar days after receipt of an application
determined to be complete by the committee, the committee shall grant
or deny the application in full or in part. If the committee denies
any part of the application, it shall inform the qualified community
development entity of the grounds for the denial.
   (5) (A) The committee shall award tax credits to 
applicants with federal new markets tax credits  
qualified community development entities described in subparagraph
(B) of paragraph (4) of subdivision (c)  in the order
applications are received by the committee. Applications received on
the same day shall be deemed to have been received simultaneously.
   (i) In 2015, the committee shall only award tax credits to a
qualified community development  entity that also has federal
new markets tax credits, that will be used for projects and
activities in California   entity, exclusive of an
entity described in clause (ii) of subparagraph (A) of paragraph (4)
of subdivision (c)  . In the 2016 to 2019 award cycles,
inclusive, at least 60 percent of the credit allocation shall be
awarded to a qualified community development  entity with an
allocation of federal new markets tax credits   
 entity, exclusive of an entity described in clause (ii) of
subparagraph (A) of paragraph (4) of subdivision (c)  . At the
committee's discretion, a higher percentage of credits may be
targeted to applicants  with federal new markets tax credits
  exclusive of an entity described in clause (ii) of
subparagraph (A) of paragraph (4) of subdivision (c)  .
   (ii) The committee shall award  credits to  
up to 40 percent of the credit allocation in the 2016 to 2019 award
cycles, inclusive, to  a qualified community development
entity without federal new markets tax credits  
entity, as described in clause (ii) of subparagraph (A) of paragraph
(4) of subdivision (c) and subparagraph (B) of paragraph (4) of
subdivision (c),  on a competitive basis  with priority
  using blind scoring and a review committee that is
comprised of at least a majority of community development finance
practitioners. A member of the review committee shall not have a
financial interest, which includes, but is not limited to, asking,
consenting, or agreeing to receive any commission, emolument,
gratuity, money, property, or thing of value for his or her own use,
benefit, or personal advantage for procuring or endeavoring to
procure for any person, partnership, joint venture, association, or
corporation any tax credit or other assistance from any applicant.
Priority shall  given to  rural, urban, and suburban
 applications that can demonstrate that the credits will
allow the entity to undertake qualified low-income community
investments in  an   a rural, suburban, or urban
 area that has been historically  underserved,
  underserved or in  newly established 
businesses, and real estate development   businesses
 that results in the greatest benefit to the largest number of
lower income individuals.
   (B)  In   For applications described in
clause (i) of subparagraph (A), in  the event tax credit
requests exceed the  applicable annual  allocation
limitation of  up to  forty million dollars ($40,000,000) in
paragraph (8) of subdivision (c), the committee shall certify,
consistent with remaining qualified equity investment capacity,
qualified equity investments of applicants in proportionate
percentages based upon the ratio of the amount of qualified equity
investments requested in such applications to the total amount of
qualified equity investments requested in all such applications
received on the same day.
   (C) If a pending request cannot be fully certified due to this
limit, the committee shall certify the portion that may be certified
unless the qualified community development entity elects to withdraw
its request rather than receive partial certification.
   (D) An approved applicant may transfer all or a portion of its
certified qualified equity investment authority to its controlling
entity or any subsidiary qualified community development entity of
the controlling entity, provided that the applicant and the
transferee notify the committee of such transfer and include the
information required in the application with respect to such
transferee with such notice.
   (E) Within 60 calendar days of the committee sending notice of
certification, the qualified community development entity or any
transferee, under subparagraph (D), shall issue the qualified equity
 investment,   investment and  receive cash
in the amount of the certified  amount, and, if applicable,
designate the required amount of qualified equity investment
authority as federal qualified equity investments  
amount  . The qualified community development entity or
transferee, under subparagraph (D), must provide the committee with
evidence of the receipt of the cash investment  and
designation of the qualified equity investment as a federal qualified
equity investment within 65 days of the applicant receiving
notice of certification. If the qualified community development
entity or any transferee, under subparagraph (D), does not receive
the cash  investment,   investment  and
issue the qualified equity investment  and, if applicable,
designate the required amount of qualified equity investment
authority as federal qualified equity investments  within 60
calendar days of the committee sending the certification notice, the
certification shall lapse and the entity may not issue the qualified
equity investment without reapplying to the committee for
certification.  Only applicants that state in their
applications that the entity has been awarded a federal new markets
tax credit shall be required to show evidence, as determined by the
committee, that the qualified equity investment authority qualifies
as a federal qualified equity investment.  Lapsed
certifications revert back to the committee and shall be reissued in
the following order:
   (i) First, pro rata to applicants whose qualified equity
investment allocations were reduced pursuant to subparagraph (B) of
paragraph (5) under the  annual  allocation limitation of
forty million dollars ($40,000,000) in paragraph (8) of subdivision
(c).
   (ii) Thereafter, in accordance with the application process.
   (F) A qualified community development entity that issues qualified
equity investments must notify the committee of the names of the
entities that are eligible to utilize tax credits under paragraph (3)
of subdivision (b) pursuant to an allocation of tax credits or
change in allocation of tax credits or due to a transfer of a
qualified equity investment.
   (6) (A) A qualified community development entity that issues
qualified equity investments shall submit a report to the committee
within the first five business days after the first anniversary of
the initial credit allowance date that provides documentation as to
the investment of at least 85 percent of the purchase price in
qualified low-income community investments in qualified active
low-income community businesses located in California. Such report
shall include all of the following:
   (i) A bank statement of such qualified community development
entity evidencing each qualified low-income community investment.
   (ii) Evidence that such business was a qualified active low-income
community business at the time of such qualified low-income
community investment.
   (iii) Any other information required by the committee.
   (B) Thereafter, the qualified community development entity shall
submit an annual report to the committee within 60 days of the
beginning of the calendar year during the seven years following
submittal of the report, pursuant to subparagraph (A). No annual
report shall be due prior to the first anniversary of the initial
credit allowance date. The report shall include, but is not limited
to, the following:
   (i) The impact the credit had on the low-income community.
   (ii) The amount of moneys used for qualified low-income
investments in qualified low-income community businesses.
   (iii) The number of employment positions created and retained as a
result of qualified low-income community investments and the average
annual salary of such positions.
   (iv) The number of operating businesses assisted as a result of
qualified low-income community investments, by industry and number of
employees.
   (v) Number of  real estate projects and type of community
development facilities that resulted   owner-occupied
real estate projects described in subparagraph (E) of paragraph (6)
of subdivision (c)  . 
   (vi) Location of the qualified low-income community businesses.

   (e) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and the six succeeding years if necessary, until the
credit is exhausted.
   (f) The committee shall annually report on its Internet Web site
the information provided by low-income community development entities
and on the geographic distribution of the credits.
   (g) (1) The Franchise Tax Board may prescribe any rules or
regulations that may be necessary or appropriate to implement this
section. The Franchise Tax Board shall have access to any
documentation held by the committee relative to the application and
reporting of a qualified community development entity.
   (2) A qualifying community development entity shall provide the
committee with the name, address, and tax identification number of
each investor and entity for which a credit was allocated by the
qualifying community development entity, pursuant to paragraph (3) of
subdivision (b). The committee shall provide this information to the
Franchise Tax Board in a manner determined by the Franchise Tax
Board.
   (h) This section shall remain in effect only until December 1,
2028, and as of that date is repealed.
  SEC. 7.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.