BILL NUMBER: AB 35 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 2, 2015
INTRODUCED BY Assembly Member Chiu
Members Chiu and Atkins
DECEMBER 1, 2014
An act to add Sections 17059 and 23610.6 to the Revenue
and Taxation Code, relating to taxation, to take effect immediately,
tax levy. An act to amend Sections 12206, 17058, and
23610.5 of the Revenue and Taxation Code, relating to taxation, to
take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 35, as amended, Chiu. Taxation: income taxes: very-low
and extremely low-income housing credit. Income
taxes: credits: low-income housing: allocation increase.
Existing law establishes a low-income housing tax credit program
pursuant to which the California Tax Credit Allocation Committee
provides procedures and requirements for the allocation of state
insurance, income, and corporation tax credit amounts among
low-income housing projects based on federal law. Existing law limits
the total annual amount of the credit that the committee may
allocate to $70 million per year, as specified.
This bill, for calendar years beginning 2015, would increase the
aggregate housing credit dollar amount that may be allocated among
low-income housing projects by $300,000,000, as specified.
This bill would take effect immediately as a tax levy.
The Personal Income Tax Law and the Corporation Tax Law allow
various credits against the taxes imposed by those laws, including a
state low-income housing tax credit, administered by the California
Tax Credit Allocation Committee, which provides procedures and
requirements for the allocation of state tax credit amounts among
low-income housing projects based on federal law, which requires a 30
% present value credit for existing buildings, with the credit
claimed over a 10-year period, as modified. Existing law generally
requires the project's housing sponsor to have been allocated a
credit for federal income tax purposes, as specified.
This bill would allow a very low-income and extremely low-income
housing credit against those taxes for each taxable year on or after
January 1, 2015, in an amount computed and allowed in accordance with
a specified section of the Internal Revenue Code, as provided. The
bill would specify that a project is not required to have been
previously or currently allocated a credit for federal or state
income tax purposes, as specified. The bill would make the aggregate
housing credit dollar amount $40,000,000 to be allocated annually by
the committee on a first-come-first-served basis subject to certain
requirements being met, including that the project will be used
exclusively for the restructuring, including the acquisition and
substantial rehabilitation, of buildings at least 20 years old that
currently serve very low-income, extremely low-income, single room
occupancy (SRO) or rural area residents. The bill would authorize the
committee and the Franchise Tax Board to adopt regulations to carry
out the purposes of this section. The bill would make findings and
declarations in this regard.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 12206 of the Revenue
and Taxation Code is amended to read:
12206. (a) (1) There shall be allowed as a credit against the
"tax" (as "tax," as described by
Section 12201) 12201, a state
low-income housing tax credit in an amount equal to the amount
determined in subdivision (c), computed in accordance with Section 42
of the Internal Revenue Code, relating to low-income housing
credit, except as otherwise provided in this section.
(2) "Taxpayer," for purposes of this section, means the sole owner
in the case of a "C" corporation, the partners in the case of a
partnership, and the shareholders in the case of an "S" corporation.
(3) "Housing sponsor," for purposes of this section, means the
sole owner in the case of a "C" corporation, the partnership in the
case of a partnership, and the "S" corporation in the case of an "S"
corporation.
(b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
(A) Except for projects to provide farmworker housing, as defined
in subdivision (h) of Section 50199.7 of the Health and Safety Code,
that are allocated credits solely under the set-aside described in
subdivision (c) of Section 50199.20 of the Health and Safety Code,
the low-income housing project shall be located in California and
shall meet either of the following requirements:
(i) The project's housing sponsor shall have
has been allocated by the California Tax Credit Allocation
Committee a credit for federal income tax purposes under Section 42
of the Internal Revenue Code , relating to low-income housing
credit .
(ii) It shall qualify qualifies for
a credit under Section 42(h)(4)(B) of the Internal Revenue Code
, relating to special rule where 50 percent or more of building is
financed with tax-exempt bonds subject to volume cap .
(B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code , relating to low-income
housing credit . The committee may require a fee if the
application for the credit under this section is submitted in a
calendar year after the year the application is submitted for the
federal tax credit.
(C) (i) For a project that receives a preliminary reservation of
the state low-income housing tax credit, allowed pursuant to
subdivision (a), on or after January 1, 2009, and before January 1,
2016, the credit shall be allocated to the partners of a partnership
owning the project in accordance with the partnership agreement,
regardless of how the federal low-income housing tax credit with
respect to the project is allocated to the partners, or whether the
allocation of the credit under the terms of the agreement has
substantial economic effect, within the meaning of Section 704(b) of
the Internal Revenue Code , relating to determination of
distributive share .
(ii) This subparagraph shall not apply to a project that receives
a preliminary reservation of state low-income housing tax credits
under the set-aside described in subdivision (c) of Section 50199.20
of the Health and Safety Code unless the project also receives a
preliminary reservation of federal low-income housing tax credits.
(iii) This subparagraph shall cease to be operative with respect
to any project that receives a preliminary reservation of a credit on
or after January 1, 2016.
(2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
(B) In the case of a partnership or an "S" corporation, the
housing sponsor shall provide a copy of the California Tax Credit
Allocation Committee certification to the taxpayer.
(C) The taxpayer shall attach a copy of the certification to any
return upon which a tax credit is claimed under this section.
(D) In the case of a failure to attach a copy of the certification
for the year to the return in which a tax credit is claimed under
this section, no credit under this section shall be allowed for that
year until a copy of that certification is provided.
(E) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code , relating to low-income housing
credit, shall apply to this section.
(F) (i) Except as described in clause (ii), for buildings located
in designated difficult development areas (DDAs) or qualified census
tracts (QCTs), as defined in Section 42(d)(5)(B) of the Internal
Revenue Code, relating to increase in credit for buildings in
high-cost areas, credits may be allocated under this section in
the amounts prescribed in subdivision (c), provided that the amount
of credit allocated under Section 42 of the Internal Revenue Code
, relating to low-income housing credit, is computed on
100 percent of the qualified basis of the building.
(ii) Notwithstanding clause (i), the California Tax Credit
Allocation Committee may allocate the credit for buildings located in
DDAs or QCTs that are restricted to having 50 percent of its
occupants be special needs households, as defined in the California
Code of Regulations by the California Tax Credit Allocation
Committee, even if the taxpayer receives federal credits pursuant to
Section 42(d)(5)(B) of the Internal Revenue Code, relating to
increase in credit for buildings in high-cost areas,
provided that the credit allowed under this section shall not exceed
30 percent of the eligible basis of the building.
(G) (i) The California Tax Credit Allocation Committee may
allocate a credit under this section in exchange for a credit
allocated pursuant to Section 42(d)(5)(B) of the Internal Revenue
Code , relating to increa se in credit for buildings
in high-cost areas, in amounts up to 30 percent of the eligible
basis of a building if the credits allowed under Section 42 of the
Internal Revenue Code , relating to low-income nursing credit,
are reduced by an equivalent amount.
(ii) An equivalent amount shall be determined by the California
Tax Credit Allocation Committee based upon the relative amount
required to produce an equivalent state tax credit to the taxpayer.
(c) Section 42(b) of the Internal Revenue Code , relating to
applicable percentage, shall be modified as follows:
(1) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, relating to temporary minimum credit rate for non
federally subsidized new buildings, in lieu of the
percentage prescribed in Section 42(b)(1)(A) of the Internal Revenue
Code.
(B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
(2) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
(B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
(3) For purposes of this section, the term "at risk of conversion,"
with respect to an existing property means a property that satisfies
all of the following criteria:
(A) The property is a multifamily rental housing development in
which at least 50 percent of the units receive governmental
assistance pursuant to any of the following:
(i) New construction, substantial rehabilitation, moderate
rehabilitation, property disposition, and loan management set-aside
programs, or any other program providing project-based assistance
pursuant to Section 8 of the United States Housing Act of 1937,
Section 1437f of Title 42 of the United States Code, as amended.
(ii) The Below-Market-Interest-Rate Program pursuant to Section
221(d)(3) of the National Housing Act, Sections 1715 l (d)
(3) and (5) of Title 12 of the United States Code.
(iii) Section 236 of the National Housing Act, Section 1715z-1 of
Title 12 of the United States Code.
(iv) Programs for rent supplement assistance pursuant to Section
101 of the Housing and Urban Development Act of 1965, Section 1701s
of Title 12 of the United States Code, as amended.
(v) Programs pursuant to Section 515 of the Housing Act of 1949,
Section 1485 of Title 42 of the United States Code, as amended.
(vi) The low-income housing credit program set forth in Section 42
of the Internal Revenue Code , relating to low-income housing
credit .
(B) The restrictions on rent and income levels will terminate or
the federal insured mortgage on the property is eligible for
prepayment any time within five years before or after the date of
application to the California Tax Credit Allocation Committee.
(C) The entity acquiring the property enters into a regulatory
agreement that requires the property to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the property.
(D) The property satisfies the requirements of Section 42(e) of
the Internal Revenue Code , relating to
rehabilitation expenditures treated as separate new building,
regarding rehabilitation expenditures, except that the provisions of
Section 42(e)(3)(A)(ii)(I) shall not apply.
(d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code , relating to
qualified low-income building, is modified by adding the
following requirements:
(1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
which, that, at the election of the
taxpayer, is equal to:
(A) An amount not to exceed 8 percent of the lesser of:
(i) The owner equity which that
shall include the amount of the capital contributions actually paid
to the housing sponsor and shall not include any amounts until they
are paid on an investor note.
(ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.
(B) The amount of the cashflow from those units in the building
that are not low-income units. For purposes of computing cashflow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code , relating to low-income
housing credit .
(C) Any amount allowed to be distributed under subparagraph (A)
that is not available for distribution during the first five years of
the compliance period may accumulate and be distributed any time
during the first 15 years of the compliance period but not
thereafter.
(2) The limitation on return shall apply in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an "S" corporation.
(3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code , relating to in
general .
(e) The provisions of Section 42(f) of the Internal Revenue Code
, relating to definition and special rules relating to credit
period, shall be modified as follows:
(1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code , relating to credit period defined,
is modified by substituting "four taxable years" for "10
taxable years."
(2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code ,
relating to special rule for first year of credit period, shall
not apply to the tax credit under this section.
(3) Section 42(f)(3) of the Internal Revenue Code , relating
to determination of applicable percentage with respect to increases
in qualified basis after first year of credit period, is
modified to read:
If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the later of the taxable years in which the increase
in qualified basis occurs.
(f) The provisions of Section 42(h) of the Internal Revenue Code
, relating to limitation on aggregate credit allowable with
respect to projects located in a state, shall be modified as
follows:
(1) Section 42(h)(2) of the Internal Revenue Code , relating
to allocated credit amount to apply to all taxable years ending
during or after credit allocation year, shall not be
applicable and instead the following provisions shall be applicable:
The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which the
allocation is made.
(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code
, relating to limitation on aggregate credit allowable with respect
to projects located in a state, shall not be applicable.
(g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 17058, and Section 23610.5 shall be
an amount equal to the sum of all the following:
(1) (A) Seventy million dollars
($70,000,000) for the 2001 calendar year, and, for the 2002
calendar year and each calendar year thereafter,
calendar years 2002 to 2014, inclusive, seventy million dollars
($70,000,000) increased by the percentage, if any, by which the
Consumer Price Index for the preceding calendar year exceeds the
Consumer Price Index for the 2001 calendar year. For the purposes of
this paragraph, the term "Consumer Price Index" means the last
Consumer Price Index for All Urban Consumers published by the federal
Department of Labor.
(B) Three hundred seventy million dollars ($370,000,000) for the
2015 calendar year, and, for the 2016 calendar year and each calendar
year thereafter, three hundred seventy million dollars
($370,000,000) increased by the percentage, if any, by which the
Consumer Price Index for the preceding calendar year exceeds the
Consumer Price Index for the 2015 calendar year. For the purposes of
this paragraph, the term "Consumer Price Index" means the last
Consumer Price Index for All Urban Consumers published by the federal
Department of Labor.
(2) The unused housing credit ceiling, if any, for the preceding
calendar years.
(3) The amount of housing credit ceiling returned in the calendar
year. For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income housing project within the period
required by this section or to any project with respect to which an
allocation is canceled by mutual consent of the California Tax Credit
Allocation Committee and the allocation recipient.
(4) Five hundred thousand dollars ($500,000) per calendar year for
projects to provide farmworker housing, as defined in subdivision
(h) of Section 50199.7 of the Health and Safety Code.
(5) The amount of any unallocated or returned credits under former
Sections 17053.14, 23608.2, and 23608.3, as those sections read
prior to January 1, 2009, until fully exhausted for projects to
provide farmworker housing, as defined in subdivision (h) of Section
50199.7 of the Health and Safety Code.
(h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code , relating to compliance period,
is modified to mean, with respect to any building, the period
of 30 consecutive taxable years beginning with the first taxable year
of the credit period with respect thereto.
(i) (1) Section 42(j) of the Internal Revenue Code , relating
to recapture of credit, shall not be applicable and the
provisions in paragraph (2) shall be substituted in its place.
(2) The requirements of this section shall be set forth in a
regulatory agreement between the California Tax Credit Allocation
Committee and the housing sponsor, which and
this agreement shall be subordinated, when required, to any
lien or encumbrance of any banks or other institutional lenders to
the project. The regulatory agreement entered into pursuant to
subdivision (f) of Section 50199.14 of the Health and Safety Code,
shall apply, providing the agreement includes all of the following
provisions:
(A) A term not less than the compliance period.
(B) A requirement that the agreement be recorded in the official
records of the county in which the qualified low-income housing
project is located.
(C) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
(D) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto
and which that allows individuals,
whether prospective, present, or former occupants of the building,
who meet the income limitation applicable to the building, the right
to enforce the regulatory agreement in any state court.
(E) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code , relating to low-income housing
credit, as modified by this section.
(F) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee and the local agency
that can enforce the regulatory agreement if there is a determination
by the Internal Revenue Service that the project is not in
compliance with Section 42(g) of the Internal Revenue Code ,
relating to qualified low-income housing project .
(G) A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.
(H) The remedies available in the event of a default under the
regulatory agreement that is not cured within a reasonable cure
period, include, but are not limited to, allowing any of the parties
designated to enforce the regulatory agreement to collect all rents
with respect to the project; taking possession of the project and
operating the project in accordance with the regulatory agreement
until the enforcer determines the housing sponsor is in a position to
operate the project in accordance with the regulatory agreement;
applying to any court for specific performance; securing the
appointment of a receiver to operate the project; or any other relief
as may be appropriate.
(j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered. The committee
shall establish application filing deadlines, the maximum percentage
of federal and state low-income housing tax credit ceiling that may
be allocated by the committee in that period, and the approximate
date on which allocations shall be made. If the enactment of federal
or state law, the adoption of rules or regulations, or other similar
events prevent the use of two allocation periods, the committee may
reduce the number of periods and adjust the filing deadlines, maximum
percentage of credit allocated, and the allocation dates.
(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code ,
relating to plans for allocation of credit among projects . In
adopting this plan, the committee shall comply with the provisions of
Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code
, relating to qualified allocation plan and relating to certain
selection criteria must be used, respectively .
(3) Notwithstanding Section 42(m) of the Internal Revenue Code,
relating to responsibilities of housing credit agencies,
the California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
(A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
(i) The housing sponsor shall demonstrate there is a need and
demand for low-income housing in the community or region for which it
is proposed.
(ii) The project's proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and that the
proposed operating income shall be adequate to operate the project
for the extended use period.
(iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
(iv) The housing sponsor shall have and maintain control of the
site for the project.
(v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
(vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.
(vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies, and required equity, and a development fee that
does not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
(B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if
both of the following apply:
(i) The project serves the lowest income tenants at rents
affordable to those tenants.
(ii) The project is obligated to serve qualified tenants for the
longest period.
(C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
(i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units is comprised
of low-income units with three and more bedrooms.
(ii) Projects providing single-room occupancy units serving very
low income tenants.
(iii) Existing projects that are "at risk of conversion," as
defined by paragraph (3) of subdivision (c).
(iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
(v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
(4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application except to break a tie when
two or more of the projects have an equal rating.
(k) Section 42(l) of the Internal Revenue Code , relating to
certifications and other reports to secretary, shall be
modified as follows:
The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
( l ) In the case where the state
credit allowed under this section exceeds the "tax," the excess may
be carried over to reduce the "tax" in the following year, and
succeeding years if necessary, until the credit has been exhausted.
(m) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, shall apply to calendar years after 1993.
(n) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall not apply.
(o) This section shall remain in effect for as long as Section 42
of the Internal Revenue Code, relating to low-income housing
credits, credit, remains in effect.
SEC. 2. Section 17058 of the Revenue
and Taxation Code is amended to read:
17058. (a) (1) There shall be allowed as a credit against the
"net tax" (as tax," as defined in
Section 17039) 17039, a state
low-income housing tax credit in an amount equal to the
amount determined in subdivision (c), computed in accordance with
the provisions of Section 42 of the Internal
Revenue Code, relating
to low-income housing credit, except as otherwise provided in
this section.
(2) "Taxpayer" for purposes of this section means the sole owner
in the case of an individual, the partners in the case of a
partnership, and the shareholders in the case of an "S" corporation.
(3) "Housing sponsor" for purposes of this section means the sole
owner in the case of an individual, the partnership in the case of a
partnership, and the "S" corporation in the case of an "S"
corporation.
(b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
(A) The low-income housing project shall be located in California
and shall meet either of the following requirements:
(i) Except for projects to provide farmworker housing, as defined
in subdivision (h) of Section 50199.7 of the Health and Safety Code,
that are allocated credits solely under the set-aside described in
subdivision (c) of Section 50199.20 of the Health and Safety Code,
the project's housing sponsor has been allocated by the California
Tax Credit Allocation Committee a credit for federal income tax
purposes under Section 42 of the Internal Revenue Code ,
relating to low-income housing credit .
(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
Internal Revenue Code , relating to special rule
where 50 percent or more of building is financed with tax-exempt
bonds subject to volume cap .
(B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code , relating to low-income
housing credit . The committee may require a fee if the
application for the credit under this section is submitted in a
calendar year after the year the application is submitted for the
federal tax credit.
(C) (i) For a project that receives a preliminary reservation of
the state low-income housing tax credit, allowed pursuant to
subdivision (a), on or after January 1, 2009, and before January 1,
2016, the credit shall be allocated to the partners of a partnership
owning the project in accordance with the partnership agreement,
regardless of how the federal low-income housing tax credit with
respect to the project is allocated to the partners, or whether the
allocation of the credit under the terms of the agreement has
substantial economic effect, within the meaning of Section 704(b) of
the Internal Revenue Code , relating to determination of
distributive share .
(ii) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or
deduction otherwise allowable under this part that is attributable to
the sale or other disposition of that partner's partnership interest
made prior to the expiration of the federal credit shall not be
allowed in the taxable year in which the sale or other disposition
occurs, but shall instead be deferred until and treated as if it
occurred in the first taxable year immediately following the taxable
year in which the federal credit period expires for the project
described in clause (i).
(iii) This subparagraph shall not apply to a project that receives
a preliminary reservation of state low-income housing tax credits
under the set-aside described in subdivision (c) of Section 50199.20
of the Health and Safety Code unless the project also receives a
preliminary reservation of federal low-income housing tax credits.
(iv) This subparagraph shall cease to be operative with respect to
any project that receives a preliminary reservation of a credit on
or after January 1, 2016.
(2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
(B) In the case of a partnership or an "S" corporation, the
housing sponsor shall provide a copy of the California Tax Credit
Allocation Committee certification to the taxpayer.
(C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
(D) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code , relating to low-income housing
credit, shall apply to this section.
(E) (i) Except as described in clause (ii), for buildings located
in designated difficult development areas (DDAs) or qualified census
tracts (QCTs), as defined in Section 42(d)(5)(B) of the Internal
Revenue Code, relating to increase in credit for buildings in
high-cost areas, credits may be allocated under this section in
the amounts prescribed in subdivision (c), provided that the amount
of credit allocated under Section 42 of the Internal Revenue Code
, relating to low-income housing credit, is computed on
100 percent of the qualified basis of the building.
(ii) Notwithstanding clause (i), the California Tax Credit
Allocation Committee may allocate the credit for buildings located in
DDAs or QCTs that are restricted to having 50 percent of its
occupants be special needs households, as defined in the California
Code of Regulations by the California Tax Credit Allocation
Committee, even if the taxpayer receives federal credits pursuant to
Section 42(d)(5)(B) of the Internal Revenue Code, relating to
increase in credit for buildings in high-cost areas, provided
that the credit allowed under this section shall not exceed 30
percent of the eligible basis of the building.
(G) (i) The California Tax Credit Allocation Committee may
allocate a credit under this section in exchange for a credit
allocated pursuant to Section 42(d)(5)(B) of the Internal Revenue
Code , relating to increase in credit for buildings in high-cost
areas, in amounts up to 30 percent of the eligible basis of a
building if the credits allowed under Section 42 of the Internal
Revenue Code , relating to low-income nursing credit, are
reduced by an equivalent amount.
(ii) An equivalent amount shall be determined by the California
Tax Credit Allocation Committee based upon the relative amount
required to produce an equivalent state tax credit to the taxpayer.
(c) Section 42(b) of the Internal Revenue Code , relating to
applicable percentage, shall be modified as follows:
(1) In the case of any qualified low-income building placed in
service by the housing sponsor during 1987, the term "applicable
percentage" means 9 percent for each of the first three years and 3
percent for the fourth year for new buildings (whether or not the
building is federally subsidized) and for existing buildings.
(2) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, relating to temporary minimum credit rate for non
federally subsidized new buildings, in lieu of the
percentage prescribed in Section 42(b)(1)(A) of the Internal Revenue
Code.
(B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
(3) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
(B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
(4) For purposes of this section, the term "at risk of conversion,"
with respect to an existing property means a property that satisfies
all of the following criteria:
(A) The property is a multifamily rental housing development in
which at least 50 percent of the units receive governmental
assistance pursuant to any of the following:
(i) New construction, substantial rehabilitation, moderate
rehabilitation, property disposition, and loan management set-aside
programs, or any other program providing project-based assistance
pursuant to Section 8 of the United States Housing Act of 1937,
Section 1437f of Title 42 of the United States Code, as amended.
(ii) The Below-Market-Interest-Rate Program pursuant to Section
221(d)(3) of the National Housing Act, Sections 1715 l (d)
(3) and (5) of Title 12 of the United States Code.
(iii) Section 236 of the National Housing Act, Section 1715z-1 of
Title 12 of the United States Code.
(iv) Programs for rent supplement assistance pursuant to Section
101 of the Housing and Urban Development Act of 1965, Section 1701s
of Title 12 of the United States Code, as amended.
(v) Programs pursuant to Section 515 of the Housing Act of 1949,
Section 1485 of Title 42 of the United States Code, as amended.
(vi) The low-income housing credit program set forth in Section 42
of the Internal Revenue Code , relating to low-income housing
credit .
(B) The restrictions on rent and income levels will terminate or
the federal federally insured mortgage
on the property is eligible for prepayment any time within five years
before or after the date of application to the California Tax Credit
Allocation Committee.
(C) The entity acquiring the property enters into a regulatory
agreement that requires the property to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the property.
(D) The property satisfies the requirements of Section 42(e) of
the Internal Revenue Code , relating to rehabilitation
expenditures treated as separate new building, regarding
rehabilitation expenditures, except that the provisions of Section 42
(e)(3)(A)(ii)(I) shall not apply.
(d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code , relating to
qualified low-income building, is modified by adding the
following requirements:
(1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
that, at the election of the taxpayer, is equal to:
(A) An amount not to exceed 8 percent of the lesser of:
(i) The owner equity that shall include the amount of the capital
contributions actually paid to the housing sponsor and shall not
include any amounts until they are paid on an investor note.
(ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.
(B) The amount of the cashflow from those units in the building
that are not low-income units. For purposes of computing cashflow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code , relating to low-income
housing credit .
(C) Any amount allowed to be distributed under subparagraph (A)
that is not available for distribution during the first five years of
the compliance period may be accumulated and distributed any time
during the first 15 years of the compliance period but not
thereafter.
(2) The limitation on return shall apply in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an "S" corporation.
(3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code , relating to in
general .
(e) The provisions of Section 42(f) of the Internal Revenue Code
, relating to definition and special rules relating
to credit period, shall be modified as follows:
(1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code , relating to credit period defined,
is modified by substituting "four taxable years" for "10 taxable
years."
(2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code ,
relating to special rule for first year of credit period, shall
not apply to the tax credit under this section.
(3) Section 42(f)(3) of the Internal Revenue Code ,
relating to determination of applicable percentage with respect
to increases in qualified basis after first year of credit period,
is modified to read:
If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the taxable year in which the increase in qualified
basis occurs.
(f) The provisions of Section 42(h) of the Internal Revenue Code
, relating to limitation on aggregate credit
allowable with respect to projects located in a state,
shall be modified as follows:
(1) Section 42(h)(2) of the Internal Revenue Code , relating
to allocated credit amount to apply to all taxable years ending
during or after credit allocation year, shall not be applicable
and instead the following provisions shall be applicable:
The total amount for the four-year credit period of the
housing credit dollars allocated in a calendar year to any building
shall reduce the aggregate housing credit dollar amount of the
California Tax Credit Allocation Committee for the calendar year in
which the allocation is made.
(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code
, relating to limitation on aggregate credit allowable with respect
to projects located in a state, shall not be
applicable to this section. applicable.
(g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 12206, and Section 23610.5 shall be
an amount equal to the sum of all the following:
(1) (A) Seventy million dollars
($70,000,000) for the 2001 calendar year, and, for the 2002
calendar year and each calendar year thereafter,
calendar years 2002 to 2014, inclusive, seventy million dollars
($70,000,000) increased by the percentage, if any, by which the
Consumer Price Index for the preceding calendar year exceeds the
Consumer Price Index for the 2001 calendar year. For the purposes of
this paragraph, the term "Consumer Price Index" means the last
Consumer Price Index for All Urban Consumers published by the federal
Department of Labor.
(B) Three hundred seventy million dollars ($370,000,000) for the
2015 calendar year, and, for the 2016 calendar year and each calendar
year thereafter, three hundred seventy million dollars
($370,000,000) increased by the percentage, if any, by which the
Consumer Price Index for the preceding calendar year exceeds the
Consumer Price Index for the 2015 calendar year. For the purposes of
this paragraph, the term "Consumer Price Index" means the last
Consumer Price Index for All Urban Consumers published by the federal
Department of Labor.
(2) The unused housing credit ceiling, if any, for the preceding
calendar years.
(3) The amount of housing credit ceiling returned in the calendar
year. For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income housing project within the period
required by this section or to any project with respect to which an
allocation is canceled by mutual consent of the California Tax Credit
Allocation Committee and the allocation recipient.
(4) Five hundred thousand dollars ($500,000) per calendar year for
projects to provide farmworker housing, as defined in subdivision
(h) of Section 50199.7 of the Health and Safety Code.
(5) The amount of any unallocated or returned credits under former
Sections 17053.14, 23608.2, and 23608.3, as those sections read
prior to January 1, 2009, until fully exhausted for projects to
provide farmworker housing, as defined in subdivision (h) of Section
50199.7 of the Health and Safety Code.
(h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code , relating to compliance
period, is modified to mean, with respect to any building, the
period of 30 consecutive taxable years beginning with the first
taxable year of the credit period with respect thereto.
(i) Section 42(j) of the Internal Revenue Code , relating to
recapture of credit, shall not be applicable and the following
requirements of this section shall be set forth in a regulatory
agreement between the California Tax Credit Allocation Committee and
the housing sponsor, which and this
agreement shall be subordinated, when required, to any lien or
encumbrance of any banks or other institutional lenders to the
project. The regulatory agreement entered into pursuant to
subdivision (f) of Section 50199.14 of the Health and Safety Code
shall apply, provided that the agreement includes all of the
following provisions:
(1) A term not less than the compliance period.
(2) A requirement that the agreement be recorded in the official
records of the county in which the qualified low-income housing
project is located.
(3) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
(4) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto
and that allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation applicable
to the building, the right to enforce the regulatory agreement in any
state court.
(5) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code , relating to low-income housing
credit, as modified by this section.
(6) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee if there is a
determination by the Internal Revenue Service that the project is not
in compliance with Section 42(g) of the Internal Revenue Code ,
relating to qualified low-income housing project .
(7) A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.
(8) The remedies available in the event of a default under the
regulatory agreement that is not cured within a reasonable cure
period, include, but are not limited to, allowing any of the parties
designated to enforce the regulatory agreement to collect all rents
with respect to the project; taking possession of the project and
operating the project in accordance with the regulatory agreement
until the enforcer determines the housing sponsor is in a position to
operate the project in accordance with the regulatory agreement;
applying to any court for specific performance; securing the
appointment of a receiver to operate the project; or any other relief
as may be appropriate.
(j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered. The committee
shall establish application filing deadlines, the maximum percentage
of federal and state low-income housing tax credit ceiling that may
be allocated by the committee in that period, and the approximate
date on which allocations shall be made. If the enactment of federal
or state law, the adoption of rules or regulations, or other similar
events prevent the use of two allocation periods, the committee may
reduce the number of periods and adjust the filing deadlines, maximum
percentage of credit allocated, and the allocation dates.
(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code ,
relating to plans for allocation of credit among projects . In
adopting this plan, the committee shall comply with the provisions of
Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code
, relating to qualified allocation plan and relating to certain
selection criteria must be used, respectively .
(3) Notwithstanding Section 42(m) of the Internal Revenue Code,
relating to responsibilities of housing credit agencies,
the California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
(A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
(i) The housing sponsor shall demonstrate there is a need and
demand for low-income housing in the community or region for which it
is proposed.
(ii) The project's proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and that the
proposed operating income shall be adequate to operate the project
for the extended use period.
(iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
(iv) The housing sponsor shall have and maintain control of the
site for the project.
(v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
(vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.
(vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies and required equity, and a development fee that does
not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
(B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if
both of the following apply:
(i) The project serves the lowest income tenants at rents
affordable to those tenants.
(ii) The project is obligated to serve qualified tenants for the
longest period.
(C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
(i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units is
comprised of are low-income units with three and
more bedrooms.
(ii) Projects providing single-room occupancy units serving very
low income tenants.
(iii) Existing projects that are "at risk of conversion," as
defined by paragraph (4) of subdivision (c).
(iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
(v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
(4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application.
(k) Section 42( l ) of the Internal Revenue Code ,
relating to certifications and other reports to secretary,
shall be modified as follows:
The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
( l ) In the case where the credit allowed under this
section exceeds the net tax, the excess credit may
be carried over to reduce the net tax in the following year, and
succeeding taxable years, if necessary, until the credit has been
exhausted.
(m) A project that received an allocation of a 1989 federal
housing credit dollar amount shall be eligible to receive an
allocation of a 1990 state housing credit dollar amount, subject to
all of the following conditions:
(1) The project was not placed in service prior to 1990.
(2) To the extent the amendments made to this section by the
Statutes of 1990 conflict with any provisions existing in this
section prior to those amendments, the prior provisions of law shall
prevail.
(3) Notwithstanding paragraph (2), a project applying for an
allocation under this subdivision shall be subject to the
requirements of paragraph (3) of subdivision (j).
(n) The credit period with respect to an allocation of credit in
1989 by the California Tax Credit Allocation Committee of which any
amount is attributable to unallocated credit from 1987 or 1988 shall
not begin until after
December 31, 1989.
(o) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, shall apply to calendar years after 1989.
(p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall not apply.
(q) Any unused credit may continue to be carried forward, as
provided in subdivision ( l ), until the credit has been
exhausted.
This section shall remain in effect on and after December 1, 1990,
for as long as Section 42 of the Internal Revenue Code, relating to
low-income housing credits, credit,
remains in effect.
(r) The amendments to this section made by the act adding
this subdivision Chapter 1222 of the Statutes of 1993
shall apply only to taxable years beginning on or after
January 1, 1994.
SEC. 3. Section 23610.5 of the Revenue
and Taxation Code is amended to read:
23610.5. (a) (1) There shall be allowed as a credit against the
"tax" (as "tax," as defined by Section
23036) 23036, a state low-income
housing tax credit in an amount equal to the amount determined in
subdivision (c), computed in accordance with Section 42 of the
Internal Revenue Code of 1986, relating to low-income housing
credit, except as otherwise provided in this section.
(2) "Taxpayer," for purposes of this section, means the sole owner
in the case of a "C" corporation, the partners in the case of a
partnership, and the shareholders in the case of an "S" corporation.
(3) "Housing sponsor," for purposes of this section, means the
sole owner in the case of a "C" corporation, the partnership in the
case of a partnership, and the "S" corporation in the case of an "S"
corporation.
(b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
(A) The low-income housing project shall be located in California
and shall meet either of the following requirements:
(i) Except for projects to provide farmworker housing, as defined
in subdivision (h) of Section 50199.7 of the Health and Safety Code,
that are allocated credits solely under the set-aside described in
subdivision (c) of Section 50199.20 of the Health and Safety Code,
the project's housing sponsor has been allocated by the California
Tax Credit Allocation Committee a credit for federal income tax
purposes under Section 42 of the Internal Revenue Code ,
relating to low-income housing credit .
(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
Internal Revenue Code , relating to special rule
where 50 percent or more of building is financed with tax-exempt
bonds subject to volume cap .
(B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code , relating to low-
income housing credit . The committee may require a fee if the
application for the credit under this section is submitted in a
calendar year after the year the application is submitted for the
federal tax credit.
(C) (i) For a project that receives a preliminary reservation of
the state low-income housing tax credit, allowed pursuant to
subdivision (a), on or after January 1, 2009, and before January 1,
2016, the credit shall be allocated to the partners of a partnership
owning the project in accordance with the partnership agreement,
regardless of how the federal low-income housing tax credit with
respect to the project is allocated to the partners, or whether the
allocation of the credit under the terms of the agreement has
substantial economic effect, within the meaning of Section 704(b) of
the Internal Revenue Code , relating to determination of
distributive share .
(ii) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or
deduction otherwise allowable under this part that is attributable to
the sale or other disposition of that partner's partnership interest
made prior to the expiration of the federal credit shall not be
allowed in the taxable year in which the sale or other disposition
occurs, but shall instead be deferred until and treated as if it
occurred in the first taxable year immediately following the taxable
year in which the federal credit period expires for the project
described in clause (i).
(iii) This subparagraph shall not apply to a project that receives
a preliminary reservation of state low-income housing tax credits
under the set-aside described in subdivision (c) of Section 50199.20
of the Health and Safety Code unless the project also receives a
preliminary reservation of federal low-income housing tax credits.
(iv) This subparagraph shall cease to be operative with respect to
any project that receives a preliminary reservation of a credit on
or after January 1, 2016.
(2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
(B) In the case of a partnership or an "S" corporation, the
housing sponsor shall provide a copy of the California Tax Credit
Allocation Committee certification to the taxpayer.
(C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
(D) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code , relating to low-income housing
credit, shall apply to this section.
(E) (i) Except as described in clause (ii), for buildings located
in designated difficult development areas (DDAs) or qualified census
tracts (QCTs), as defined in Section 42(d)(5)(B) of the Internal
Revenue Code, relating to increase in credit for buildings in
high-cost areas, credits may be allocated under this section in
the amounts prescribed in subdivision (c), provided that the amount
of credit allocated under Section 42 of the Internal Revenue Code
, relating to low-income housing credit, is computed on
100 percent of the qualified basis of the building.
(ii) Notwithstanding clause (i), the California Tax Credit
Allocation Committee may allocate the credit for buildings located in
DDAs or QCTs that are restricted to having 50 percent of its
occupants be special needs households, as defined in the California
Code of Regulations by the California Tax Credit Allocation
Committee, even if the taxpayer receives federal credits pursuant to
Section 42(d)(5)(B) of the Internal Revenue Code, relating to
increase in credit for buildings in high-cost areas, provided
that the credit allowed under this section shall not exceed 30
percent of the eligible basis of the building.
(G) (i) The California Tax Credit Allocation Committee may
allocate a credit under this section in exchange for a credit
allocated pursuant to Section 42(d)(5)(B) of the Internal Revenue
Code , relating to increase in credit for buildings in high-cost
areas, in amounts up to 30 percent of the eligible basis of a
building if the credits allowed under Section 42 of the Internal
Revenue Code are reduced by an equivalent amount.
(ii) An equivalent amount shall be determined by the California
Tax Credit Allocation Committee based upon the relative amount
required to produce an equivalent state tax credit to the taxpayer.
(c) Section 42(b) of the Internal Revenue Code , relating to
applicable percentage, shall be modified as follows:
(1) In the case of any qualified low-income building placed in
service by the housing sponsor during 1987, the term "applicable
percentage" means 9 percent for each of the first three years and 3
percent for the fourth year for new buildings (whether or not the
building is federally subsidized) and for existing buildings.
(2) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, relating to temporary minimum credit rate for nonfederally
subsidized new buildings, in lieu of the percentage prescribed
in Section 42(b)(1)(A) of the Internal Revenue Code.
(B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
(3) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
(A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
(B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
(4) For purposes of this section, the term "at risk of conversion,"
with respect to an existing property means a property that satisfies
all of the following criteria:
(A) The property is a multifamily rental housing development in
which at least 50 percent of the units receive governmental
assistance pursuant to any of the following:
(i) New construction, substantial rehabilitation, moderate
rehabilitation, property disposition, and loan management set-aside
programs, or any other program providing project-based assistance
pursuant to Section 8 of the United States Housing Act of 1937,
Section 1437f of Title 42 of the United States Code, as amended.
(ii) The Below-Market-Interest-Rate Program pursuant to Section
221(d)(3) of the National Housing Act, Sections 1715 l (d)
(3) and (5) of Title 12 of the United States Code.
(iii) Section 236 of the National Housing Act, Section 1715z-1 of
Title 12 of the United States Code.
(iv) Programs for rent supplement assistance pursuant to Section
101 of the Housing and Urban Development Act of 1965, Section 1701s
of Title 12 of the United States Code, as amended.
(v) Programs pursuant to Section 515 of the Housing Act of 1949,
Section 1485 of Title 42 of the United States Code, as amended.
(vi) The low-income housing credit program set forth in Section 42
of the Internal Revenue Code , relating to low-income housing
credit .
(B) The restrictions on rent and income levels will terminate or
the federally insured mortgage on the property is eligible for
prepayment any time within five years before or after the date of
application to the California Tax Credit Allocation Committee.
(C) The entity acquiring the property enters into a regulatory
agreement that requires the property to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the property.
(D) The property satisfies the requirements of Section 42(e) of
the Internal Revenue Code , relating to rehabilitation
expenditures treated as separate new building, regarding
rehabilitation expenditures, except that the provisions of Section 42
(e)(3)(A)(ii)(I) shall not apply.
(d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code , relating to
qualified low-income building, is modified by adding the
following requirements:
(1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
that at the election of the taxpayer, is equal to:
(A) An amount not to exceed 8 percent of the lesser of:
(i) The owner equity, that shall include the amount of the capital
contributions actually paid to the housing sponsor and shall not
include any amounts until they are paid on an investor note.
(ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.
(B) The amount of the cashflow from those units in the building
that are not low-income units. For purposes of computing cashflow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code , relating to low-income
housing credit .
(C) Any amount allowed to be distributed under subparagraph (A)
that is not available for distribution during the first five years of
the compliance period may be accumulated and distributed any time
during the first 15 years of the compliance period but not
thereafter.
(2) The limitation on return shall apply in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an "S" corporation.
(3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code , relating to in
general .
(e) The provisions of Section 42(f) of the Internal Revenue Code
, relating to definition and special rules relating to credit
period, shall be modified as follows:
(1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code , relating to credit period defined,
is modified by substituting "four taxable years" for "10
taxable years."
(2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code ,
relating to special rule for first year of credit period, shall
not apply to the tax credit under this section.
(3) Section 42(f)(3) of the Internal Revenue Code , relating
to determination of applicable percentage with re spect to
increases in qualified basis after first year of credit
period, is modified to read:
If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the later of the taxable years in which the increase
in qualified basis occurs.
(f) The provisions of Section 42(h) of the Internal Revenue Code
, relating to limitation on aggregate credit allowable with
respect to projects located in a state, shall be modified as
follows:
(1) Section 42(h)(2) of the Internal Revenue Code , relating
to allocated credit amount to apply to all taxable years ending
during or after credit allocation year, shall not be applicable
and instead the following provisions shall be applicable:
The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which the
allocation is made.
(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code
, relating to limitation on aggregate credit allowable
with respect to projects located in a st ate, shall
not be applicable.
(g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 12206, and Section 17058 shall be
an amount equal to the sum of all the following:
(1) (A) Seventy million dollars
($70,000,000) for the 2001 calendar year, and, for the 2002
calendar year and each calendar year thereafter,
calendar years 2002 to 2014, inclusive, seventy million dollars
($70,000,000) increased by the percentage, if any, by which the
Consumer Price Index for the preceding calendar year exceeds the
Consumer Price Index for the 2001 calendar year. For the purposes of
this paragraph, the term "Consumer Price Index" means the last
Consumer Price Index for All Urban Consumers published by the federal
Department of Labor.
(B) Three hundred seventy million dollars ($370,000,000) for the
2015 calendar year, and, for the 2016 calendar year and each calendar
year thereafter, three hundred seventy million dollars
($370,000,000) increased by the percentage, if any, by which the
Consumer Price Index for the preceding calendar year exceeds the
Consumer Price Index for the 2015 calendar year. For the purposes of
this paragraph, the term "Consumer Price Index" means the last
Consumer Price Index for All Urban Consumers published by the federal
Department of Labor.
(2) The unused housing credit ceiling, if any, for the preceding
calendar years.
(3) The amount of housing credit ceiling returned in the calendar
year. For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income housing project within the period
required by this section or to any project with respect to which an
allocation is canceled by mutual consent of the California Tax Credit
Allocation Committee and the allocation recipient.
(4) Five hundred thousand dollars ($500,000) per calendar year for
projects to provide farmworker housing, as defined in subdivision
(h) of Section 50199.7 of the Health and Safety Code.
(5) The amount of any unallocated or returned credits under former
Sections 17053.14, 23608.2, and 23608.3, as those sections read
prior to January 1, 2009, until fully exhausted for projects to
provide farmworker housing, as defined in subdivision (h) of Section
50199.7 of the Health and Safety Code.
(h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code , relating to compliance period,
is modified to mean, with respect to any building, the period
of 30 consecutive taxable years beginning with the first taxable year
of the credit period with respect thereto.
(i) Section 42(j) of the Internal Revenue Code , relating to
recapture of credit, shall not be applicable and the following
shall be substituted in its place:
The requirements of this section shall be set forth in a
regulatory agreement between the California Tax Credit Allocation
Committee and the housing sponsor, and this agreement shall be
subordinated, when required, to any lien or encumbrance of any banks
or other institutional lenders to the project. The regulatory
agreement entered into pursuant to subdivision (f) of Section
50199.14 of the Health and Safety Code shall apply, provided that the
agreement includes all of the following provisions:
(1) A term not less than the compliance period.
(2) A requirement that the agreement be recorded in the official
records of the county in which the qualified low-income housing
project is located.
(3) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
(4) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto,
and that allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation applicable
to the building, the right to enforce the regulatory agreement in
any state court.
(5) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code , relating to low-income
housing credit, as modified by this section.
(6) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee if there is a
determination by the Internal Revenue Service that the project is not
in compliance with Section 42(g) of the Internal Revenue Code ,
relating to qualified low-income housing project .
(7) A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.
(8) A provision that the The
remedies available in the event of a default under the regulatory
agreement that is not cured within a reasonable cure period include,
but are not limited to, allowing any of the parties designated to
enforce the regulatory agreement to collect all rents with respect to
the project; taking possession of the project and operating the
project in accordance with the regulatory agreement until the
enforcer determines the housing sponsor is in a position to operate
the project in accordance with the regulatory agreement; applying to
any court for specific performance; securing the appointment of a
receiver to operate the project; or any other relief as may be
appropriate.
(j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered. The committee
shall establish application filing deadlines, the maximum percentage
of federal and state low-income housing tax credit ceiling that may
be allocated by the committee in that period, and the approximate
date on which allocations shall be made. If the enactment of federal
or state law, the adoption of rules or regulations, or other similar
events prevent the use of two allocation periods, the committee may
reduce the number of periods and adjust the filing deadlines, maximum
percentage of credit allocated, and allocation dates.
(2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code ,
relating to plans for allocation of credit among projects
. In adopting this plan, the committee shall comply with the
provisions of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal
Revenue Code , relating to qualified allocation plan and
relating to certain selection criteria must be used, respectively
.
(3) Notwithstanding Section 42(m) of the Internal Revenue Code,
relating to responsibilities of housing credit agencies,
the California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
(A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
(i) The housing sponsor shall demonstrate that
there is a need for low-income housing in the community or region for
which it is proposed.
(ii) The project's proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and shall be
adequate to operate the project for the extended use period.
(iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
(iv) The housing sponsor shall have and maintain control of the
site for the project.
(v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
(vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.
(vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies and required equity, and a development fee that does
not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
(B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if
both of the following apply:
(i) The project serves the lowest income tenants at rents
affordable to those tenants.
(ii) The project is obligated to serve qualified tenants for the
longest period.
(C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
(i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units are low-income
units with three and more bedrooms.
(ii) Projects providing single-room occupancy units serving very
low income tenants.
(iii) Existing projects that are "at risk of conversion," as
defined by paragraph (4) of subdivision (c).
(iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
(v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
(4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application except to break a tie when
two or more of the projects have an equal rating.
(5)
Not less than 20 percent of the low-income housing tax credits
available annually under this section, Section 12206, and Section
17058 shall be set aside for allocation to rural areas as defined in
Section 50199.21 of the Health and Safety Code. Any amount of credit
set aside for rural areas remaining on or after October 31 of any
calendar year shall be available for allocation to any eligible
project. No amount of credit set aside for rural areas shall be
considered available for any eligible project so long as there are
eligible rural applications pending on October 31.
(k) Section 42( l ) of the Internal Revenue Code ,
relating to certifications and other reports to secretary,
shall be modified as follows:
The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
( l ) In the case where the state
credit allowed under this section exceeds the "tax," the excess may
be carried over to reduce the "tax" in the following year, and
succeeding taxable years if necessary, until the credit
has been exhausted.
(m) A project that received an allocation of a 1989 federal
housing credit dollar amount shall be eligible to receive an
allocation of a 1990 state housing credit dollar amount, subject to
all of the following conditions:
(1) The project was not placed in service prior to 1990.
(2) To the extent the amendments made to this section by the
Statutes of 1990 conflict with any provisions existing in this
section prior to those amendments, the prior provisions of law shall
prevail.
(3) Notwithstanding paragraph (2), a project applying for an
allocation under this subdivision shall be subject to the
requirements of paragraph (3) of subdivision (j).
(n) The credit period with respect to an allocation of credit in
1989 by the California Tax Credit Allocation Committee of which any
amount is attributable to unallocated credit from 1987 or 1988 shall
not begin until after December 31, 1989.
(o) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, shall apply to calendar years after 1989.
(p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall not apply.
(q) (1) A corporation may elect to assign any portion of any
credit allowed under this section to one or more affiliated
corporations for each taxable year in which the credit is allowed.
For purposes of this subdivision, "affiliated corporation" has the
meaning provided in subdivision (b) of Section 25110, as that section
was amended by Chapter 881 of the Statutes of 1993, as of the last
day of the taxable year in which the credit is allowed, except that
"100 percent" is substituted for "more than 50 percent" wherever it
appears in the section, as that section was amended by Chapter 881 of
the Statutes of 1993, and "voting common stock" is substituted for
"voting stock" wherever it appears in the section, as that section
was amended by Chapter 881 of the Statutes of 1993.
(2) The election provided in paragraph (1):
(A) May be based on any method selected by the corporation that
originally receives the credit.
(B) Shall be irrevocable for the taxable year the credit is
allowed, once made.
(C) May be changed for any subsequent taxable year if the election
to make the assignment is expressly shown on each of the returns of
the affiliated corporations that assign and receive the credits.
(r) Any unused credit may continue to be carried forward, as
provided in subdivision ( l ), until the credit has been
exhausted.
This section shall remain in effect on and after December 1, 1990,
for as long as Section 42 of the Internal Revenue Code, relating to
low-income housing credits, credit,
remains in effect.
(s) The amendments to this section made by the act adding
this subdivision Chapter 1222 of the Statutes of 1993
shall apply only to taxable years beginning on or after
January 1, 1994, except that paragraph (1) of subdivision (q), as
amended, shall apply to taxable years beginning on or after January
1, 1993.
SEC. 4. This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.
SECTION 1. (a) The Legislature finds and
declares all of the following:
(1) The preservation and rehabilitation of existing affordable
housing stock initially created through public investment is a
critical strategy to address the affordable housing crisis in our
state.
(2) It is particularly important that older single room occupancy
(SRO), special needs, and other buildings with deeply income-targeted
rents be preserved and refurbished for low-income tenants and the
public investment protected.
(3) However, currently, most properties that are being
recapitalized and resyndicated through the California Tax Credit
Allocation Committee system for substantial rehabilitation tend to
have higher rents and shallower income targeting because they
appraise well and generate significant acquisition credits.
(4) Unfortunately, the deeply targeted mostly SRO, special needs,
and rural projects that very much need to capitalize are largely shut
out of this opportunity precisely because they have agreed to very
deep income-targeting which excludes them from acquisition credits.
(b) Therefore, it is the intent of the Legislature to create a new
source of investment and a pipeline for these older but very
valuable public assets, which are often in the greatest need of
rehabilitation.
SEC. 2. Section 17059 is added to the Revenue
and Taxation Code, to read:
17059. (a) For each taxable year beginning on or after January 1,
2015, there shall be allowed as a credit against the "net tax," as
defined in Section 17039, a very low-income and extremely low-income
housing credit in an amount computed in accordance with Section 42 of
the Internal Revenue Code, except as otherwise provided in this
section.
(b) For the purposes of this section, the following definitions
shall apply:
(1) "Taxpayer" means the sole owner in the case of an individual,
the partners in the case of a partnership, and the shareholders in
the case of an "S" corporation.
(2) "Housing sponsor" means the sole owner in the case of an
individual, the partnership in the case of a partnership, and the "S"
corporation in the case of an "S" corporation.
(3) "Very low-income" has the same meaning as in Section 50053 of
the Health and Safety Code.
(4) "Extremely low-income" has the same meaning as in Section
50053 of the Health and Safety Code.
(5) "SRO" means single room occupancy.
(6) "Rural area resident" means a resident of a rural area as
defined in Section 50199.21 of the Health and Safety Code.
(7) "Committee" means the California Tax Credit Allocation
Committee.
(c) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the committee, or any successor thereof, based
on a project's need for the credit in accordance with paragraph (2)
of subdivision (e).
(A) The very low-income or extremely low-income housing project
shall be located in California.
(B) Nothing in this section shall be construed to require a
housing sponsor to have been previously or currently allocated a
credit for federal income tax purposes under Section 42 of the
Internal Revenue Code or for state income tax purposes under Section
17058.
(2) (A) The committee shall certify to the housing sponsor the
amount of tax credit under this section allocated to the housing
sponsor for each credit period.
(B) In the case of a partnership or an "S" corporation, the
housing sponsor shall provide a copy of the committee certification
to the taxpayer.
(C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
(d) The aggregate housing credit dollar amount that may be
allocated annually by the committee pursuant to this section and
Section 23610.6 shall be an amount equal to the sum of all of the
following:
(1) Forty million dollars ($40,000,000).
(2) The unused allocation credit amount, if any, for the preceding
fiscal year.
(3) The amount of housing credits returned in the calendar year.
(e) (1) Subject to subdivision (c), the committee shall allocate
the housing credit on a regular basis consisting of two or more
periods in each calendar year during which applications may be filed
and considered. The committee shall establish application filing
deadlines, the maximum amounts of state very low-income and extremely
low-income housing tax credits that may be allocated by the
committee in that period, and the approximate date on which
allocations shall be made. If the enactment of federal or state law,
the adoption of rules or regulations, or other similar events prevent
the use of two allocation periods, the committee may reduce the
number of periods and adjust the filing deadlines, maximum percentage
of credit allocated, and the allocation dates.
(2) The committee shall, on a first-come-first-served basis,
allocate the very low-income and extremely low-income housing credit
in accordance with the following provisions:
(A) All housing sponsors shall demonstrate at the time the
application is filed with the committee that the project meets the
following threshold requirements:
(B) The housing sponsor shall demonstrate that the project will be
used exclusively for the restructuring, including the acquisition
and substantial rehabilitation, of buildings at least 20 years old
and that currently serve very low-income, extremely low-income, SRO,
or rural area residents. No new construction shall be eligible for a
credit under this section.
(C) The housing sponsor shall demonstrate that acquisition credits
that would be received as part of the restructuring through the
existing state credit program described in Section 17058 would be
insufficient to complete substantial rehabilitation due to a low
appraised fair market value.
(D) The housing sponsor shall demonstrate that the project is
currently subsidized, but may or may not currently be "at risk" for
conversion to market rate.
(E) There is no requirement that the project previously received
federal or state tax credits when originally constructed.
(f) In the case where the credit allowed under this section
exceeds the "net tax," the excess may be carried over to reduce the
"net tax" in the following year, and succeeding taxable years, if
necessary, until the credit is exhausted.
(g) A deduction otherwise allowed under this part for any amount
paid or incurred by the qualified taxpayer upon which the credit is
based shall be reduced by the amount of the credit allowed by this
section.
(h) Credit under this section shall be allowed only for credits
claimed on a timely filed original return of the qualified taxpayer.
(i) (1) The committee and the Franchise Tax Board may adopt
regulations, rules, guidelines, or procedures necessary or
appropriate to carry out the purposes of this section.
(2) The Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) shall apply to any regulation, rule, guideline, or procedure
adopted pursuant to this section.
SEC. 3. Section 23610.6 is added to the Revenue
and Taxation Code, to read:
23610.6. (a) For each taxable year beginning on or after January
1, 2015, there shall be allowed as a credit against the "tax," as
defined in Section 23036, a very low-income and extremely low-income
housing credit in an amount computed in accordance with Section 42 of
the Internal Revenue Code, except as otherwise provided in this
section.
(b) For the purposes of this section, the following definitions
shall apply:
(1) "Taxpayer" means the sole owner in the case of a "C"
corporation, the partners in the case of a partnership, and the
shareholders in the case of an "S" corporation.
(2) "Housing sponsor" means the sole owner in the case of a "C"
corporation, the partnership in the case of a partnership, and the "S"
corporation in the case of an "S" corporation.
(3) "Very low-income" has the same meaning as in Section 50053 of
the Health and Safety Code.
(4) "Extremely low-income" has the same meaning as in Section
50053 of the Health and Safety Code.
(5) "SRO" means single room occupancy.
(6) "Rural area resident" means a resident of a rural area as
defined in Section 50199.21 of the Health and Safety Code.
(7) "Committee" means the California Tax Credit Allocation
Committee.
(c) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the committee, or any successor thereof, based
on a project's need for the credit in accordance with paragraph (2)
of subdivision (e).
(A) The very low-income or extremely low-income housing project
shall be located in California.
(B) Nothing in this section shall be construed to require a
housing sponsor to have been previously or currently allocated a
credit for federal income tax purposes under Section 42 of the
Internal Revenue Code or for state income tax purposes under Section
23610.5.
(2) (A) The committee shall certify to the housing sponsor the
amount of tax credit under this section allocated to the housing
sponsor for each credit period.
(B) In the case of a partnership or an "S" corporation, the
housing sponsor shall provide a copy of the committee certification
to the taxpayer.
(C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
(d) (1) The aggregate housing credit dollar amount that may be
allocated annually by the committee pursuant to this section and
Section 17059 shall be an amount equal to the sum of all of the
following:
(1) Forty million dollars ($40,000,000).
(2) The unused allocation credit amount, if any, for the preceding
fiscal year.
(3) The amount of housing credits returned in the calendar year.
(e) (1) Subject to subdivision (c), the committee shall allocate
the housing credit on a regular basis consisting of two or more
periods in each calendar year during which applications may be filed
and considered. The committee shall establish application filing
deadlines, the maximum amounts of state very low-income and extremely
low-income housing tax credits that may be allocated by the
committee in that period, and the approximate date on which
allocations shall be made. If the enactment of federal or state law,
the adoption of rules or regulations, or other similar events prevent
the use of two allocation periods, the committee may reduce the
number of periods and adjust the filing deadlines, maximum percentage
of credit allocated, and the allocation dates.
(2) The committee shall, on a first-come-first-served basis,
allocate the very low-income and extremely low-income housing credit
in accordance with the following provisions:
(A) All housing sponsors shall demonstrate at the time the
application is filed with the committee that the project meets the
following threshold requirements:
(B) The housing sponsor shall demonstrate that the project will be
used exclusively for the restructuring, including the acquisition
and substantial rehabilitation, of buildings at least 20 years old
and that currently serve very low-income, extremely low-income, SRO,
or rural area residents. No new construction shall be eligible for a
credit under this section.
(C) The housing sponsor shall demonstrate that acquisition credits
that would be received as part of the restructuring through the
existing state credit program described in Section 23610.5 would be
insufficient to complete substantial rehabilitation due to a low
appraised fair market value.
(D) The housing sponsor shall demonstrate that the project is
currently subsidized, but may or may not currently be "at risk" for
conversion to market rate.
(E) There is no requirement that the project previously received
federal or state tax credits when originally constructed.
(f) (1) A corporation may elect to assign any portion of any
credit allowed under this section to one or more affiliated
corporations for each taxable year in which the credit is allowed.
For purposes of this subdivision, "affiliated corporation" has the
meaning provided in subdivision (b) of Section 25110, as of the last
day of the taxable year in which the credit is allowed, except that
"100 percent" is substituted for "more than 50 percent" wherever it
appears in the section, and "voting common stock" is substituted for
"voting stock" wherever it appears in the section.
(2) The election provided in paragraph (1):
(A) May be based on any method selected by the corporation that
originally receives the credit.
(B) Shall be irrevocable for the taxable year the credit is
allowed, once made.
(C) May be changed for any subsequent taxable year if the election
to make the assignment is expressly shown on each of the returns of
the affiliated corporations that assign and receive the credits.
(g) In the case where the credit allowed under this section
exceeds the "tax," the excess may be carried over to reduce the "tax"
in the following year, and succeeding taxable years, if necessary,
until the credit is exhausted.
(h) A deduction otherwise allowed under this part for any amount
paid or incurred by the qualified taxpayer upon which the credit is
based shall be reduced by the amount of the credit allowed by this
section.
(i) Credit under this section shall be allowed only for credits
claimed on a timely filed original return of the qualified taxpayer.
(j) (1) The committee and the Franchise Tax Board may adopt
regulations, rules, guidelines, or procedures necessary or
appropriate to carry out the purposes of this section.
(2) The Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) shall apply to any regulation, rule, guideline, or procedure
adopted pursuant to this section.
SEC. 4. In order to comply with the
requirements of Section 41 of the Revenue and Taxation Code, it is
the intent of the Legislature that the California Tax Credit
Allocation Committee provide the information required by that section
to the Legislature.
SEC. 5. This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.