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AB-1923 Income and bank and corporation taxes: credit: child care facilities.(1999-2000)

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AB1923:v97#DOCUMENT

Amended  IN  Assembly  March 27, 2000
Amended  IN  Assembly  May 17, 2000

CALIFORNIA LEGISLATURE— 1999–2000 REGULAR SESSION

Assembly Bill
No. 1923

Introduced  by  Assembly Member Cardenas
 (Coauthor(s): Assembly Member Bates, Cunneen, Honda, Kuehl, Leach, Longville, Maldonado, Runner, Washington, Zettel)
 (Coauthor(s): Senator Alarcon, Rainey)

February 15, 2000

An act to amend Sections 17039 and 23036 of, and to add and repeal Sections 17052.19, 23618, and 23619 of, the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 1923, as amended, Cardenas. Income and bank and corporation taxes: credit: child care facilities.
The Personal Income Tax Law and the Bank and Corporation Tax Law authorize various credits against the taxes imposed by those laws.
This bill would, under both laws, allow a credit in an amount equal to 50%, not to exceed certain limits, of qualified expenditures with respect to qualified child care facilities. This bill would, under the Bank and Corporation Tax Law, allow a credit for a bank or financial corporation for an amount equal to the qualified amount in connection with loans used in connection with a qualified child care or development facility, as provided.
This bill would take effect immediately as a tax levy.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 17039 of the Revenue and Taxation Code is amended to read:

17039.
 (a) Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term “net tax” means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the “net tax” shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against “net tax” in the following order:
(1) Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5).
(2) Credits that contain carryover provisions but do not contain refundable provisions.
(3) Credits that contain both carryover and refundable provisions.
(4) The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax).
(5) Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(6) Credits that contain refundable provisions but do not contain carryover provisions.
The order within each paragraph shall be determined by the Franchise Tax Board.
(b) Notwithstanding the provisions of Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding), the credits provided in those sections shall be allowed in the order provided in paragraph (6) of subdivision (a).
(c) (1) Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits, but only after allowance of the credit allowed by Section 17063:
(A) The credit allowed by former Section 17052.4 (relating to solar energy).
(B) The credit allowed by former Section 17052.5 (relating to solar energy).
(C) The credit allowed by Section 17052.5 (relating to solar energy).
(D) The credit allowed by Section 17052.12 (relating to research expenses).
(E) The credit allowed by former Section 17052.13 (relating to sales and use tax credit).
(F) The credit allowed by Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit).
(G) The credit allowed by Section 17052.19 (relating to the child care credit).
(H) The credit allowed by Section 17053.5 (relating to renter’s credit).
(I) The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit).
(J) The credit allowed by Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit).
(K) The credit allowed by former Section 17053.11 (relating to program area hiring credit).
(L) For each taxable year beginning on or after January 1, 1994, the credit allowed by Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit).
(M) The credit allowed by Section 17053.33 (relating to targeted tax area sales or use tax credit).
(N) The credit allowed by Section 17053.34 (relating to targeted tax area hiring credit).
(O) The credit allowed by Section 17053.49 (relating to qualified property).
(P) The credit allowed by Section 17053.70 (relating to enterprise zone sales or use tax credit).
(Q) The credit allowed by Section 17053.74 (relating to enterprise zone hiring credit).
(R) The credit allowed by Section 17054 (relating to credits for personal exemption).
(S) The credit allowed by Section 17057 (relating to clinical testing expenses).
(T) The credit allowed by Section 17058 (relating to low-income housing).
(U) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(V) Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(W) The credit allowed by Section 19002 (relating to tax withholding).
(2) Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.
(d) Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(e) (1) Unless otherwise provided, if two or more taxpayers (other than husband and wife) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to his or her respective share of the costs paid or incurred.
(2) In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partner’s distributive share.
(3) In the case of a husband and wife who file separate returns, the credit may be taken by either or equally divided between them.
(f) Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner.
(g) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).
(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayer’s “net tax,” as defined in subdivision (a), for the taxable year shall be limited to an amount equal to the excess of the taxpayer’s regular tax (as defined in Section 17062), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayer’s regular tax (as defined in Section 17062), determined by excluding the income attributable to that disregarded business entity. No credit shall be allowed if the taxpayer’s regular tax (as defined in Section 17062), determined by including the income attributable to the disregarded business entity, is less than the taxpayer’s regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.
(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (c) and (d).

SEC. 2.

 Section 17052.19 is added to the Revenue and Taxation Code, to read:

17052.19.
 (a) For each taxable year beginning on or after January 1, 2000, and before January 1, 2005, there shall be allowed to a qualified taxpayer (as defined in subdivision (b)) a qualified child care facility credit against the “net tax,” as defined by Section 17039, in an amount equal to 50 percent of qualified expenditures as defined in subdivision (c).
(b) For purposes of this section, “qualified taxpayer” means any taxpayer, except for a child care provider (as defined in paragraph (3) of subdivision (g)), that has paid or incurred qualified expenditures (as defined in subdivision (c)) in excess of four thousand dollars ($4,000) during the taxable year.
(c) For purposes of this section, “qualified expenditures” include only monetary contributions paid or incurred during the taxable year by a qualified taxpayer with respect to a qualified child care facility that do not exceed either of the following limitations:
(1) In the case of a single qualified child care facility, four hundred thousand dollars ($400,000) in total qualified expenditures by the qualified taxpayer and any party related to the taxpayer (within the meaning of Section 267 or 318 or described in Section 707(b) of the Internal Revenue Code) with respect to that facility, computed by taking into account all qualified expenditures made in prior years with respect to that facility.
(2) In the case of any qualified taxpayer, two million dollars ($2,000,000) in total qualified expenditures by that qualified taxpayer and any party related to the taxpayer (within the meaning of Section 267 or 318 or described in Section 707(b) of the Internal Revenue Code) with respect to multiple qualified child care facilities, computed by taking into account all qualified expenditures made in prior years with respect to each facility in an amount up to four hundred thousand dollars ($400,000) in total expenditures for each qualified child care facility in which the qualified taxpayer and any related party have paid or incurred expenditures.
In the case of any expenditures which are in excess of either of the limitations specified in this subdivision, those expenditures shall not be taken into account as qualified expenditures for purposes of computing this credit in any subsequent taxable year.
(d) (1) The amount of the credit allowed by this section shall not exceed one hundred fifty thousand dollars ($150,000) for any taxable year.
(2) In the case where the credit allowed and limited under subdivision (c) exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following year, and five succeeding years if necessary, until the credit has been exhausted. Excess carryovers shall reduce the “net tax” in the order in which the excess carryover arose and before the applicable amount under subdivision (c) reduces the “net tax” for the taxable year.
(3) If the credit carryovers from preceding taxable years allowed under paragraph (2) plus the credit allowed for the taxable year under subdivision (c) would exceed an aggregate total of one hundred fifty thousand ($150,000), the credit allowed to reduce the “net tax” under this section for the taxable year shall be limited to one hundred fifty thousand dollars ($150,000) and the amount in excess of the one hundred fifty thousand dollar ($150,000) limit may be carried over and applied against the “net tax” in the following year, and succeeding five years if necessary, in an amount which, when added to the credit allowed under subdivision (c) for that succeeding taxable year, does not exceed one hundred fifty thousand dollars ($150,000).
(4) The aggregate “allowable child care facility credit” for each qualified taxpayer and any party related to the taxpayer for the taxable years beginning on or after January 1, 2000, and before January 1, 2005, shall not exceed a total of one million dollars ($1,000,000).
(e) For purposes of this section, a “qualified child care facility” means any new licensed child care facility or expanded existing child care facility located in California, but does not include in-home family child care or licensed exempt care.

(f)A qualified child care provider shall certify that a written plan has been developed and maintained reflecting the child care provider’s ability to recruit children from low-income families and that one of the following requirements has been met:

(1)The child care provider has applied or received approval to accept children from families qualifying for child care subsidies.

(2)The child care provider certifies that the facility or proposed facility is geographically located in or within one mile of a low-income area as defined by the Community Reinvestment Act of 1977 (Public Law 95-128), as amended.

(f) A qualified child care provider shall provide to the State Department of Social Services and the qualified taxpayer the following:
(1) A written plan reflecting the child care provider’s ability to recruit children from low-income families and that the facility will be operated as a child care facility for a minimum of five years.
(2) An agreement that the monetary contribution received from the qualified taxpayer will be used to construct or expand a child care facility in California.
(3) A receipt for any monetary contribution received from a qualified taxpayer.
(4) An agreement that both of the following will be completed within a one-year period beginning on the day the qualified taxpayer paid or incurred the expenditure described in subdivision (c):
(A) The construction or expansion and commencement of operation of the child care facility.
(B) If the child care facility is not geographically located in or within one mile of a low-income area as defined by the Community Reinvestment Act of 1977 (Public Law 95-128), as amended, the child care provider obtaining approval to accept children from families qualifying for child care subsidies.
(5) The child care provider’s taxpayer identification number.
(g) For purposes of this section, the following definitions apply:
(1) “Construct” and “expand” include, but are not limited to, feasibility studies, site preparation, construction, renovation, or acquisition of facilities for purposes of establishing a new licensed child care facility or expanding an existing licensed child care facility that adds new child care capacity by at least 10 percent. For purposes of this section, a licensed child care facility shall not include a facility located in or on an occupied personal residence.
(2) “Low-income families” are households that have incomes below 75 percent of the local area median income, as published by the United States Department of Housing and Urban Development or as defined in regulations implemented by the State Department of Education after January 1, 2000.
(3) “Child care provider” means the licensed owner or operator receiving the benefit of any cost paid, incurred, or contributed and claimed by a taxpayer pursuant to this section.
(h) No deduction shall be allowed as otherwise provided in this part for that portion of expenses qualified expenditures paid or incurred for the taxable year which is equal to the amount of the credit allowed under this section attributable to those expenses qualified expenditures.
(i) No credit shall be allowed under subdivision (a) in the case of any taxpayer that is required by any local ordinance or regulation to provide a child care facility.

(j)In order to be eligible for the credit allowed under subdivision (a), the taxpayer shall submit to the Franchise Tax Board upon request, both of the following:

(1)The certification from the child care provider described in subdivision (f).

(2)A statement from the child care provider certifying that the costs for which the credit is claimed are incurred with respect to constructing or expanding a child care facility in California to be used as certified by the child care provider.

(k)This section shall remain in effect only until

(j) (1) In the event the qualified child care facility is not operated as a child care facility for 60 consecutive months, the taxpayer shall recapture the credit allowed by subdivision (a) in the year the qualified child care facility ceases to be operated.
(2) The 60-month period in paragraph (1) shall be suspended for any period that the child care provider uses to replace the property under an involuntary conversion, as described in Section 1033(a) of the Internal Revenue Code, relating to involuntary conversions.
(3) No credit shall be allowed to a taxpayer for a child care facility that has not been certified by the State Department of Social Services as provided in subdivision (k).
(k) The State Department of Social Services shall do all of the following:
(1) Within a one-year period from the date the taxpayer makes a qualified expenditure to a qualified child care provider:
(A) Certify that the taxpayer’s monetary contribution was used to construct or expand a qualified child care facility.
(B) Certify that the qualified child care provider has received approval to accept children from low-income families or that the qualified child care facility is geographically located in or within one mile of a low-income area as defined by the Community Reinvestment Act of 1977 (Public Law 95-128), as amended.
(C) Certify that the qualified child care facility began operating as a child care facility.
(2) For six years, on an annual basis, certify the number of months the qualified child care facility operated as a child care facility.
(3) Provide an annual listing to the Franchise Tax Board (in a form, manner, and time agreed upon by the Franchise Tax Board and the State Department of Social Services) of all of the following:
(A) For taxpayers making monetary contributions during the previous calendar year, the taxpayer’s name, taxpayer identification number, and the date and amount of monetary contributions made.
(B) For child care providers receiving monetary contributions during the six preceding calendar years, the qualified child care provider’s taxpayer identification number and the number of months the qualified child care facility was operated as a child care facility.
(C) The information contained in the certifications described in paragraph (1).
(l) This section shall remain in effect only until December 1, 2005, and as of that date is repealed.

SEC. 3.

 Section 23036 of the Revenue and Taxation Code is amended to read:

23036.
 (a) (1) The term “tax” includes any of the following:
(A) The tax imposed under Chapter 2 (commencing with Section 23101).
(B) The tax imposed under Chapter 3 (commencing with Section 23501).
(C) The tax on unrelated business taxable income, imposed under Section 23731.
(D) The tax on S corporations imposed under Section 23802.
(2) The term “tax” does not include any amount imposed under paragraph (1) of subdivision (e) of Section 24667 or paragraph (2) of subdivision (f) of Section 24667.
(b) For purposes of Article 5 (commencing with Section 18661) of Chapter 2, Article 3 (commencing with Section 19031) of Chapter 4, Article 6 (commencing with Section 19101) of Chapter 4, and Chapter 7 (commencing with Section 19501) of Part 10.2, and for purposes of Sections 18601, 19001, and 19005, the term “tax” shall also include all of the following:
(1) The tax on limited partnerships, imposed under Section 17935 or Section 23081, the tax on limited liability companies, imposed under Section 17941 or Section 23091, and the tax on registered limited liability partnerships and foreign limited liability partnerships imposed under Section 17948 or Section 23097.
(2) The alternative minimum tax imposed under Chapter 2.5 (commencing with Section 23400).
(3) The tax on built-in gains of S corporations, imposed under Section 23809.
(4) The tax on excess passive investment income of S corporations, imposed under Section 23811.
(c) Notwithstanding any other provision of this part, credits shall be allowed against the “tax” in the following order:
(1) Credits that do not contain carryover provisions.
(2) Credits that, when the credit exceeds the “tax,” allow the excess to be carried over to offset the “tax” in succeeding taxable years. The order of credits within this paragraph shall be determined by the Franchise Tax Board.
(3) The minimum tax credit allowed by Section 23453.
(4) Credits for taxes withheld under Section 18662.
(d) Notwithstanding any other provision of this part, each of the following shall be applicable:
(1) No credit shall reduce the “tax” below the tentative minimum tax (as defined by paragraph (1) of subdivision (a) of Section 23455), except the following credits, but only after allowance of the credit allowed by Section 23453:
(A) The credit allowed by former Section 23601 (relating to solar energy).
(B) The credit allowed by former Section 23601.4 (relating to solar energy).
(C) The credit allowed by Section 23601.5 (relating to solar energy).
(D) The credit allowed by Section 23609 (relating to research expenditures).
(E) The credit allowed by Section 23609.5 (relating to clinical testing expenses).
(F) The credit allowed by Section 23610.5 (relating to low-income housing).
(G) The credit allowed by former Section 23612 (relating to sales and use tax credit).
(H) The credit allowed by Section 23612.2 (relating to enterprise zone sales or use tax credit).
(I) The credit allowed by Section 23618 (relating to child care).
(J) The credit allowed by Section 23612.6 (relating to Los Angeles Revitalization Zone sales tax credit).
(K) The credit allowed by former Section 23622 (relating to enterprise zone hiring credit).
(L) The credit allowed by Section 23622.7 (relating to enterprise zone hiring credit).
(M) The credit allowed by former Section 23623 (relating to program area hiring credit).
(N) For each income year beginning on or after January 1, 1994, the credit allowed by Section 23623.5 (relating to Los Angeles Revitalization Zone hiring credit).
(O) The credit allowed by Section 23625 (relating to Los Angeles Revitalization Zone hiring credit).
(P) The credit allowed by Section 23633 (relating to targeted tax area sales or use tax credit).
(Q) The credit allowed by Section 23634 (relating to targeted tax area hiring credit).
(R) The credit allowed by Section 23649 (relating to qualified property).
(2) No credit against the tax shall reduce the minimum franchise tax imposed under Chapter 2 (commencing with Section 23101).
(e) Any credit which is partially or totally denied under subdivision (d) shall be allowed to be carried over to reduce the “tax” in the following year, and succeeding years if necessary, if the provisions relating to that credit include a provision to allow a carryover of the unused portion of that credit.
(f) Unless otherwise provided, any remaining carryover from a credit that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(g) Unless otherwise provided, if two or more taxpayers share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to its respective share of the costs paid or incurred.
(h) Unless otherwise provided, in the case of an S corporation, any credit allowed by this part shall be computed at the S corporation level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the S corporation and to each shareholder.
(i) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any income year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).
(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayer’s “tax,” as defined in subdivision (a), for the income year shall be limited to an amount equal to the excess of the taxpayer’s regular tax (as defined in Section 23455), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayer’s regular tax (as defined in Section 23455), determined by excluding the income attributable to that disregarded business entity. No credit shall be allowed if the taxpayer’s regular tax (as defined in Section 23455), determined by including the income attributable to the disregarded business entity is less than the taxpayer’s regular tax (as defined in Section 23455), determined by excluding the income attributable to the disregarded business entity.
(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any income year, the excess amount may be carried over to subsequent income years pursuant to subdivisions (d), (e), and (f).

SEC. 4.

 Section 23618 is added to the Revenue and Taxation Code, to read:

23618.
 (a) For each income year beginning on or after January 1, 2000, and before January 1, 2005, there shall be allowed to a qualified taxpayer as defined in subdivision (b) a qualified child care facility credit against the “tax,” as defined by Section 23036, in an amount equal to 50 percent of qualified expenditures as defined in subdivision (c).
(b) For purposes of this section, “qualified taxpayer” means any taxpayer, except for a child care provider (as defined in paragraph (3) of subdivision (g)), that has paid or incurred qualified expenditures (as defined in subdivision (c)) in excess of four thousand dollars ($4,000) during the income year.
(c) For purposes of this section, “qualified expenditures” include only monetary contributions paid or incurred during the income year by a qualified taxpayer with respect to a qualified child care facility that do not exceed either of the following limitations:
(1) In the case of a single qualified child care facility, four hundred thousand dollars ($400,000) in total qualified expenditures by the qualified taxpayer and any party related to the taxpayer (within the meaning of Section 267 or 318 or described in Section 707(b) of the Internal Revenue Code) with respect to that facility, computed by taking into account all qualified expenditures made in prior years with respect to that facility.
(2) In the case of any qualified taxpayer, two million dollars ($2,000,000) in total qualified expenditures by that qualified taxpayer and any party related to the taxpayer (within the meaning of Section 267 or 318 or described in Section 707(b) of the Internal Revenue Code) with respect to multiple qualified child care facilities, computed by taking into account all qualified expenditures made in prior years with respect to each facility in an amount up to four hundred thousand dollars ($400,000) in total expenditures for each qualified child care facility in which the qualified taxpayer and any related party have paid or incurred expenditures.
In the case of any expenditures which are in excess of either of the limitations specified in this subdivision, those expenditures shall not be taken into account as qualified expenditures for purposes of computing this credit in any subsequent income year.
(d) (1) The amount of the credit allowed by this section shall not exceed one hundred fifty thousand dollars ($150,000) for any income year.
(2) In the case where the credit allowed and limited under subdivision (c) exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and five succeeding years if necessary, until the credit has been exhausted. Excess carryovers shall reduce the “tax” in the order in which the excess carryover arose and before the applicable amount under subdivision (c) reduces the “tax” for the income year.
(3) If the credit carryovers from preceding income years allowed under paragraph (2) plus the credit allowed for the income year under subdivision (c) would exceed an aggregate total of one hundred fifty thousand dollars ($150,000), then the credit allowed to reduce the “tax” under this section for the income year shall be limited to one hundred fifty thousand dollars ($150,000) and the amount in excess of the one hundred fifty thousand dollar ($150,000) limit may be carried over and applied against the “tax” in the following year, and succeeding five years if necessary, in an amount which, when added to the credit allowed under subdivision (c) for that succeeding income year, does not exceed one hundred fifty thousand dollars ($150,000).
(4) The aggregate “allowable child care facility credit” for each qualified taxpayer and any party related to the taxpayer for the income years beginning on or after January 1, 2000, and before January 1, 2005, shall not exceed a total of one million dollars ($1,000,000).
(e) For purposes of this section, a “qualified child care facility facility” means any new licensed child care facility or expanded existing child care facility located in California, but does not include in-home family child care or licensed exempt care.

(f)A qualified child care provider shall certify that a written plan has been developed and maintained reflecting the child care provider’s ability to recruit children from low-income families and that one of the following requirements has been met:

(1)The child care provider has applied or received approval to accept children from families qualifying for child care subsidies.

(2)The child care provider certifies that the facility or proposed facility is geographically located in or within one mile of a low-income area as defined by the Community Reinvestment Act of 1977 (Public Law 95-128), as amended.

(f) A qualified child care provider shall provide to the State Department of Social Services and the qualified taxpayer the following:
(1) A written plan reflecting the child care provider’s ability to recruit children from low-income families and that the facility will be operated as a child care facility for a minimum of five years.
(2) An agreement that the monetary contribution received from the qualified taxpayer will be used to construct or expand a child care facility in California.
(3) A receipt for any monetary contribution received from a qualified taxpayer.
(4) An agreement that both of the following will be completed within a one-year period beginning on the day the qualified taxpayer paid or incurred the expenditure described in subdivision (c):
(A) The construction or expansion and commencement of operation of the child care facility.
(B) If the child care facility is not geographically located in or within one mile of a low-income area as defined by the Community Reinvestment Act of 1977 (Public Law 95-128), as amended, the child care provider obtaining approval to accept children from families qualifying for child care subsidies.
(5) The child care provider’s taxpayer identification number.
(g) For purposes of this section, the following definitions apply:
(1) “Construct” and “expand” include, but are not limited to, feasibility studies, site preparation, construction, renovation, or acquisition of facilities for purposes of establishing a new licensed child care facility or expanding an existing licensed child care facility that adds new child care capacity by at least 10 percent. For purposes of this section, a licensed child care facility shall not include a facility located in or on an occupied personal residence.
(2) “Low-income families” are households that have incomes below 75 percent of the local area median income, as published by the United States Department of Housing and Urban Development or as defined in regulations implemented by the State Department of Education after January 1, 2000.
(3) “Child care provider” means the licensed owner or operator receiving the benefit of any cost paid, incurred, or contributed and claimed by a taxpayer pursuant to this section.
(h) No deduction shall be allowed as otherwise provided in this part for that portion of expenses qualified expenditures paid or incurred for the income year which is equal to the amount of the credit allowed under this section attributable to those expenses qualified expenditures.
(i) No credit shall be allowed under subdivision (a) in the case of any taxpayer that is required by any local ordinance or regulation to provide a child care facility.

(j)In order to be eligible for the credit allowed under subdivision (a), the taxpayer shall submit to the Franchise Tax Board upon request, both of the following:

(1)The certification from the child care provider described in subdivision (f).

(2)A statement from the child care provider certifying that the costs for which the credit is claimed are incurred with respect to constructing or expanding a child care facility in California to be used as certified by the child care provider.

(k)This section shall remain in effect only until

(j) (1) In the event the qualified child care facility is not operated as a child care facility for 60 consecutive months, the taxpayer shall recapture the credit allowed by subdivision (a) in the year the qualified child care facility ceases to be operated.
(2) The 60-month period in paragraph (1) shall be suspended for any period that the child care provider uses to replace the property under an involuntary conversion, as described in Section 1033(a) of the Internal Revenue Code, relating to involuntary conversions.
(3) No credit shall be allowed to a taxpayer for a child care facility that has not been certified by the State Department of Social Services as provided in subdivision (k).
(k) The State Department of Social Services shall do all of the following:
(1) Within a one-year period from the date the taxpayer makes a qualified expenditure to a qualified child care provider:
(A) Certify that the taxpayer’s monetary contribution was used to construct or expand a qualified child care facility.
(B) Certify that the qualified child care provider has received approval to accept children from low-income families or that the qualified child care facility is geographically located in or within one mile of a low-income area as defined by the Community Reinvestment Act of 1977 (Public Law 95-128), as amended.
(C) Certify that the qualified child care facility began operating as a child care facility.
(2) For six years, on an annual basis, certify the number of months the qualified child care facility operated as a child care facility.
(3) Provide an annual listing to the Franchise Tax Board (in a form, manner, and time agreed upon by the Franchise Tax Board and the State Department of Social Services) of all of the following:
(A) For taxpayers making monetary contributions during the previous calendar year, the taxpayer’s name, taxpayer identification number, and the date and amount of monetary contributions made.
(B) For child care providers receiving monetary contributions during the six preceding calendar years, the qualified child care provider’s taxpayer identification number and the number of months the qualified child care facility was operated as a child care facility.
(C) The information contained in the certifications described in paragraph (1).
(l) This section shall remain in effect only until December 1, 2005, and as of that date is repealed.

SEC. 5.

 Section 23619 is added to the Revenue and Taxation Code, to read:

23619.
 (a) For each income year beginning on or after January 1, 2000, and before January 1, 2010, there shall be allowed as a credit against the “tax,” as defined in Section 23036, for a bank or financial corporation for an amount equal to the qualified amount as determined in subdivision (b).
(b) (1) For purposes of this section, the “qualified amount” shall be equal to 50 percent of the difference between the amount of interest income that the bank or financial corporation could have collected had the loan rate been one point above prime and the lesser amount of interest income actually due for the term of the loan to the bank or financial corporation on those portions of loans used to finance expenditures actually paid or incurred to purchase, construct, expand, or rehabilitate a qualified child care or development facility.
(2) The credit allowed under this section shall be taken in equal installments over a period equal to the lesser of 10 years or the term of the loan, beginning in the taxpayer’s income year during which the qualified child care or development facility is purchased or construction, expansion, or rehabilitation of the facility is completed and there is initial enrollment of children by the child care provider or child development program. In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and succeeding years if necessary, until the credit is exhausted.
(3) The credit shall not apply to loans with a term of less than three years or to loans funded prior to January 1, 2000. The credit shall apply only to interest income from the loan and shall not apply to any other loan fees or other charges collected by the bank or financial corporation with respect to the loan.
(c) For purposes of this section:
(1) A “qualified child care or development facility” means a licensed child care or development facility that meets both of the following requirements:
(A) Is operated by child care providers who covenant to a bank or financial institution to provide child care services for the entire term of the loan.
(B) Meets one of the following requirements:
(i) Is located in low- or moderate-income areas as defined by the Community Reinvestment Act of 1977 (Public Law 95-128), as amended.
(ii) Is operated by child care providers whose loan covenant with the banking or financial institution provides that not less than 30 percent of the children served by the facility will be from households with incomes at or below 75 percent of the local median income, as published by the United States Department of Housing and Urban Development.
(2) Family day care centers are not qualified facilities.
(3) This credit shall not apply to loans for purchasing land or for refinancing existing loans.
(d) (1) Upon the occurrence of a disallowing event, no installment of the credit shall be allowed under this section for the income year of the disallowing event and any subsequent income year of the period provided in paragraph (2) of subdivision (b).
(2) For purposes of this subdivision, a “disallowing event” means any of the following:
(A) The child care provider is in default under the loan agreement for more than 90 days.
(B) The child care provider ceases providing child care services in the facility for which the loan was made for more than 90 days.
(C) In the case of a credit based on loan covenants described in clause (ii) of subparagraph (B) of paragraph (1) of subdivision (c), the child care provider ceases providing child care services in compliance with that loan covenant for more than 90 days.
(e) This credit shall not be claimed for any project receiving funding or subsidy from the Child Care and Development Facilities Loan Guaranty or Direct Loan Funds, as contained in Sections 8277.5 and 8277.6 of the Education Code.
(f) (1) Except as provided in paragraph (2), if the bank or financial corporation sells the loan to another bank or financial corporation, the balance of the credit, if any, shall be transferred to the assignee or transferee of the loan, subject to the same conditions and limitations as set forth in this section.
(2) A bank or financial corporation may assign, sell, or otherwise transfer the loan to another person or entity and retain the right to claim the credit granted under this section if the bank or financial corporation retains responsibility for servicing the loan.
(g) The Franchise Tax Board shall report, upon the request of a committee appointed by either the Assembly or the Senate, or both, the total amount of tax credits claimed under this section, and the number, type, and income level of taxpayers claiming the credits. The Franchise Tax Board shall also report the industry classification of corporate taxpayers claiming the credits.
(h) This section shall remain in effect only until December 1, 2010, and as of that date is repealed.

SEC. 6.

 This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.