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SB-325 Pilot Program for Increased Access to Responsible Small Dollar Loans.(2017-2018)

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Date Published: 06/15/2017 09:00 PM
SB325:v97#DOCUMENT

Amended  IN  Assembly  June 15, 2017
Amended  IN  Senate  March 20, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 325


Introduced by Senator Mendoza
(Principal coauthor: Assembly Member Dababneh)

February 13, 2017


An act to amend Sections 926.2 and 12939.1 of the Insurance Code, and to amend Sections 12209, 17053.57, and 23657 of the Revenue and Taxation Code, relating to insurance, and declaring the urgency thereof, to take effect immediately. An act to amend Sections 22251, 22337, 22365, 22370, 22371, 22372, 22373, 22374, 22375, 22376, 22377, and 22380 of the Financial Code, relating to consumer loans.


LEGISLATIVE COUNSEL'S DIGEST


SB 325, as amended, Mendoza. Insurance: community development investments.Pilot Program for Increased Access to Responsible Small Dollar Loans.
(1) Existing law, the California Finance Lenders Law, generally provides for the licensure and regulation of finance lenders and brokers by the Commissioner of Business Oversight and makes a willful violation of its provisions a crime. That law, until January 1, 2023, establishes the Pilot Program for Increased Access to Responsible Small Dollar Loans, which requires licensees and other entities that wish to participate in the program to file an application and pay a specified fee to the commissioner to participate in the program. The program authorizes a licensee approved by the commissioner to participate in the program to impose specified alternative interest rates and charges, including an administrative fee and delinquency fees, on unsecured loans of at least $300 and less than $2,500, subject to certain requirements. The program permits a licensee to use a finder, which is defined as an entity that, at its physical location for business, brings together a borrower and a licensee to negotiate a loan under the program. The program requires the commissioner, annually until July 1, 2021, as specified, to post a report on his or her Internet Web site summarizing utilization of the program. Existing law requires licensed finance lenders to perform specified actions when a loan is repaid, including providing a borrower with certain documents marked paid or an optical reproduction of them.
This bill would permit a licensee that consummates electronically an unsecured loan under the Pilot Program for Increased Access to Responsible Small Dollar Loans to satisfy the requirements to provide a borrower with documents marked “paid” by providing the borrower or person making final payment with a receipt, as specified. The bill would eliminate the upper limit on the amount of a permissible loan under the pilot program and make corresponding changes. The bill would revise the statement of legislative findings for the program and specify the applicability of certain pilot program requirements on licensees and specified associates, when making loans above $2,500. The bill would revise the term finder to instead be referral partner and would make various conforming changes in this regard. The bill would revise the conditions under which a licensee may refinance a loan under the pilot program to apply to borrowers who have been current on their loans for a minimum of 8 consecutive months. The bill would permit a referral agent’s activities to be done through other means and not necessarily at his or her physical business location. The bill would delete other provisions connected to an entity who uses an electronic access point, as specified, or personally contacts a borrower at a physical business location, among other things. The bill would prohibit a referral partner from performing unsolicited door-to-door or telephonic solicitation. The bill would require licensees who that use referral agents to provide them training, as specified, and to implement procedures to ensure that referral partners act in compliance with the law. The bill would also eliminate the requirement that a licensee provide a borrower of a consummated loan a written copy of a specified disclosure notice within 2 weeks of consummation. The bill would revise requirements on compensating finders by eliminating a limit on total compensation paid over the life of a loan and would prescribe limits on compensation with reference to the contractual lengths of loans. The bill would revise the content of the report that the Commissioner of Business Oversight is required to provide to include certain information on loan applicants who were denied loans and for borrowers who did and did not have credit scores when they obtained loans, among other things. By expanding the definition of a crime, this bill would impose a state-mandated local program.
(2) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law imposes an annual tax on the gross premiums of an insurer, as defined, doing business in this state at specified rates. Existing law, until January 1, 2017, allows a credit under the Personal Income Tax Law, the Corporation Tax Law, and a credit against the tax imposed on an insurer in an amount equal to 20% of a qualified investment, as defined, made in a community development financial institution, as defined, but not to exceed, in the aggregate amount under all those laws, $50,000,000 per year and authorizes the California Organized Investment Network to certify investments for the credit until January 1, 2017. Existing law provides that if a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, the entire amount of any credit previously allowed for that taxable year is required to be added to the tax imposed on the taxpayer. Existing law also provides that if a qualified investment is reduced before the end of the 60th month, but not below $50,000, an amount equal to 20% of the total reduction for the year shall be added to the tax imposed on the taxpayer. These provisions are repealed as of December 1, 2017.

This bill would extend the repeal date of these provisions from December 1, 2017, to January 1, 2022.

The bill would also make conforming changes and delete obsolete provisions.

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: TWO_THIRDSMAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NOYES  

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


SECTION 1.

 Section 22251 of the Financial Code is amended to read:

22251.
 Any section that refers to this section does not apply to any loan of the bona fide principal amount specified in the regulatory ceiling provision of that section or more if that provision is not used for the purpose of evading this division. In determining under Section 22250, 22303, or 22304 or any section that refers to this section whether a loan is a loan of a bona fide principal amount of the amount specified in that section or more and whether the regulatory ceiling provision of that section is used for the purpose of evading this division, the following principles apply:
(a) If a borrower applies for a loan in a bona fide principal amount of less than the specified amount and a loan to that borrower of a bona fide principal amount of the specified amount or more if made by a licensed finance lender, no adequate economic reason for the increase in the size of the loan exists, and by prearrangement or understanding between the borrower and the licensee a substantial payment is to be made upon the loan with the effect of reducing the bona fide principal amount of the loan to less than the specified amount within a short time after the making of the loan other than by reason of a requirement that the loan be paid in substantially equal periodical installments, then the loan shall not be deemed to be a loan of the bona fide principal amount of the specified amount or more and the regulatory ceiling provisions shall be deemed to be used for the purpose of evading this division unless the loan complies with the other provisions of the section that includes the regulatory ceiling provisions.
(b) If a loan made by a licensed finance lender is in a bona fide principal amount of the specified amount or more, the fact that the transaction is in the form of a sale of accounts, chattel paper, goods, or instruments or a lease of goods, or in the form of an advance on the purchase price of any of the foregoing, shall not be deemed to affect the loan or the bona fides of the amount thereof or to indicate that the regulatory ceiling provisions are used for the purpose of evading this division.
(c) For the purposes of determining whether the loan amount exceeds a regulatory ceiling, the “bona fide principal amount” shall not be comprised of any charges or any other fees or recompense specified in Sections 22200, 22201 (including, but not limited to, amounts paid for insurance of the types specified in Sections 22313 and 22314), 22202, 22305, 22316, 22317, 22318, 22319, 22320, 22320.5, and 22336. 22336, and 22370. Nothing in this subdivision shall be construed to prevent those specified charges, fees, and recompense that have been earned and remain unpaid in an existing loan from being considered as part of the bona fide principal amount of a new loan to refinance that existing loan, provided the new loan is not made for the purpose of circumventing a regulatory ceiling provision. This subdivision is intended to define the meaning of “bona fide principal amount” as used in this division solely for the purposes of determining whether the loan amount exceeds a regulatory ceiling, and is not intended to affect the meaning of “principal” for any other purpose.

SEC. 2.

 Section 22337 of the Financial Code is amended to read:

22337.
 Each licensed finance lender shall:
(a) Deliver or cause to be delivered to the borrower, or any one thereof, at the time the loan is made, a statement showing in clear and distinct terms the name, address, and license number of the finance lender and the broker, if any. The statement shall show the date, amount, and maturity of the loan contract, how and when repayable, the nature of the security for the loan, if any, and the agreed rate of charge or the annual percentage rate pursuant to Regulation Z promulgated by the Consumer Financial Protection Bureau (12 C.F.R. 1026).
(b) Obtain from the borrower a signed statement as to whether any person has performed any act as a broker in connection with the making of the loan. If the statement discloses that a broker or other person has participated, then the finance lender shall obtain a full statement of all sums paid or payable to the broker or other person. The finance lender shall keep these statements for a period of three years from and after the date the loan has been paid in full, or has matured according to its terms, or has been charged off.
(c) Permit payment to be made in advance in any amount on any contract of loan at any time. The licensee may apply the payment first to any agreed prepayment penalty, then to all charges due, including charges at the agreed rate or rates up to the date of payment, not to exceed the applicable maximum rate permitted by this article.
(d) Deliver or cause to be delivered to the person making any cash payment, or to the person who requests a receipt at the time of making any payment, at the time payment is made on account of any loan, a plain and complete receipt showing the total amount received and identifying the loan contract upon which the payment is applied.
(e) (1) Upon repayment of any loan in full, release all security for the loan, endorse and return any certificate of ownership, and cancel or plainly mark “paid” and return to the borrower or person making final payment, any note, mortgage, security agreement, trust deed, assignment, or order signed by the borrower, or an optical image reproduction thereof, except those documents that are a part of the court record in any action, or that have been delivered to a third person for the purpose of carrying out their terms, or a security agreement that secures any other indebtedness of a borrower to the licensee, or original documents otherwise required by law. When a trust deed on real property has been taken as security for a loan that has been subsequently paid in full, a duly executed request for reconveyance shall be delivered to the trustor or trustee for the purpose of recording a reconveyance. A termination statement, furnished to the borrower as provided for in Sections 9512 and 9513 of the Commercial Code, shall be deemed a release of the security when a financing statement has been filed pursuant to Section 9501 of the Commercial Code.
For purposes of this subdivision, an optical image reproduction shall meet all of the following requirements:

(1)

(A) The optical image storage media used to store the document shall be nonerasable write once, read many (WORM) optical image media that does not allow changes to the stored document.

(2)

(B) The optical image reproduction shall be made consistent with the minimum standards of quality approved by either the National Institute of Standards and Technology or the Association for Information and Image Management.

(3)

(C) Written authentication identifying the optical image reproduction as an exact unaltered copy of the note, trust deed, mortgage, security agreement, assignment or order shall be stamped or printed on the optical image reproduction.
(2) Notwithstanding paragraph (1), if an unsecured loan subject to Article 3.6 (commencing with Section 22365) is consummated electronically, a licensee may comply with the requirement to plainly mark “paid” and return to the borrower or person making final payment the note or an optical image reproduction thereof, by providing the borrower or person making final payment with a receipt that contains the words “paid in full” and that show a balance due of zero dollars and zero cents ($0.00).
(f) Deliver or cause to be delivered to the potential borrower, or any one thereof, at the time the licensee first requires or accepts any signed instrument or the payment of any fee, a statement showing in clear and distinct terms the name, address, and license number of the finance lender and the broker, if any.

SEC. 3.

 Section 22365 of the Financial Code is amended to read:

22365.
 (a) The Pilot Program for Increased Access to Responsible Small Dollar Loans is hereby established.
(b) The Legislature finds and declares that consumer demand for responsible installment loans in principal amounts of at least three hundred dollars ($300) but less than two thousand five hundred dollars ($2,500) exceeds the supply of these loans. In 2010, the Legislature enacted the Pilot Program for Affordable Credit-Building Opportunities, as a first step toward addressing this gap. California’s experience to date with that pilot program has identified several improvements that could be made, which would allow more Californians to access responsible installment loans of at least three hundred dollars ($300) but less than two thousand five hundred dollars ($2,500). This new Pilot Program for Increased Access to Responsible Small Dollar Loans is intended to implement those improvements.
(c) For purposes of this article:
(1) “Commissioner” means the Commissioner of Business Oversight.
(2) “Program” means the Pilot Program for Increased Access to Responsible Small Dollar Loans.
(3) Pursuant to Section 22380.5, “licensee” also includes a licensee approved to participate in the former Pilot Program for Affordable Credit-Building Opportunities as described in Article 3.5 (commencing with Section 22348).
(4) A licensee that makes loans in amounts below two thousand five hundred dollars ($2,500) in accordance with the provisions of this article may opt to use the flexibility provided under this article on loans with higher principal amounts, if that licensee and, if applicable, its referral partners, comply with all of the provisions of this article that impose requirements and limitations on the actions of that licensee and its referral partners.

SEC. 4.

 Section 22370 of the Financial Code is amended to read:

22370.
 (a) Any loan made pursuant to this section shall comply with the following requirements:
(1) The loan shall be unsecured.
(2) Interest on the loan shall accrue on a simple-interest basis, through the application of a daily periodic rate to the actual unpaid principal balance each day.
(3) The licensee shall disclose the following to the consumer in writing, in a typeface no smaller than 12-point type, at the time of application:
(A) The amount borrowed; the total dollar cost of the loan to the consumer if the loan is paid back on time, including the sum of the administrative fee, principal amount borrowed, and interest payments; the corresponding annual percentage rate, calculated in accordance with Federal Reserve Board Regulation Z (12 C.F.R. 226); the periodic payment amount; the delinquency fee schedule; and the following statement: “Repaying your loan early will lower your borrowing costs by reducing the amount of interest you will pay. This loan has no prepayment penalty.”
(B) A statement that the consumer has the right to rescind the loan by notifying the licensee of the consumer’s intent to rescind the loan and returning the principal advanced by the end of the business day following the date the loan is consummated.
(4) A licensee may provide the borrower with the disclosures required by paragraph (3) in a mobile or other electronic application, on which the size of the typeface of the disclosure can be manually modified by a prospective borrower, if the prospective borrower is given the option to print the disclosure in a typeface of at least 12-point size or is provided by the licensee with a hardcopy of the disclosure in a typeface of at least 12-point size before the loan is consummated.
(5) The loan shall have a minimum principal amount upon origination of three hundred dollars ($300) and a term of not less than the following:
(A) Ninety days for loans whose principal balance upon origination is less than five hundred dollars ($500).
(B) One hundred twenty days for loans whose principal balance upon origination is at least five hundred dollars ($500), but is less than one thousand five hundred dollars ($1,500).
(C) One hundred eighty days for loans whose principal balance upon origination is at least one thousand five hundred dollars ($1,500).
(b) As an alternative to the charges authorized by Section 22303 or 22304, a licensee approved by the commissioner to participate in the program may contract for and receive charges for a loan made pursuant to this section at an annual simple interest rate not to exceed the following:
(1) The lesser of 36 percent or the sum of 32.75 percent plus the United States prime lending rate, as of the date of loan origination, on that portion of the unpaid principal balance of the loan up to and including, but not in excess of, one thousand dollars ($1,000). The interest rate calculated as of the date of loan origination shall be fixed for the life of the loan.
(2) The lesser of 35 percent or the sum of 28.75 percent plus the United States prime lending rate, as of the date of loan origination, on that portion of the unpaid principal balance of the loan in excess of one thousand dollars ($1,000), but less than two thousand five hundred dollars ($2,500). ($1,000). The interest rate calculated as of the date of loan origination shall be fixed for the life of the loan.
(c) (1) As to any loan made under this section, a licensee approved by the commissioner to participate in the program may contract for and receive an administrative fee, which shall be fully earned immediately upon making the loan, in an amount not to exceed the applicable of the following:
(A) Seven percent of the principal amount, exclusive of the administrative fee, or ninety dollars ($90), whichever is less, on the first loan made to a borrower.
(B) Six percent of the principal amount, exclusive of the administrative fee, or seventy-five dollars ($75), whichever is less, on the second and subsequent loans made to that borrower.
(2) A licensee shall not charge the same borrower an administrative fee more than once in any four-month period.
(3) For purposes of this section, “refinance” means the replacement or revision of an existing loan contract with a borrower that results in an extension of additional principal to that borrower. A licensee shall not refinance a loan made under this section, unless all of the following conditions are met at the time the borrower submits an application to refinance:
(A) The borrower has repaid at least 60 percent of the outstanding principal remaining on his or her loan. loan or has been current on his or her loan for a minimum of eight consecutive months.
(B) The borrower is current on his or her outstanding loan.
(C) The licensee underwrites the new loan in accordance with paragraph (4) of subdivision (g).
(D) If the loan proceeds of both the original loan and the refinance loan are to be used for personal, family, or household purposes, the borrower has not previously refinanced the outstanding loan more than once.
(4) Notwithstanding paragraph (3), an administrative fee shall not be contracted for or received in connection with the refinancing of a loan unless at least eight months have elapsed since the receipt of a previous administrative fee paid by the borrower. With the exception of a loan that is refinanced, only one administrative fee may be contracted for or received until the loan has been repaid in full. Section 22305 shall not apply to any loan made under this section.
(d) Notwithstanding subdivision (a) of Section 22320.5, a licensee approved by the commissioner to participate in the program may require reimbursement from a borrower for the actual insufficient funds fees incurred by that licensee due to actions of the borrower, and may contract for and receive a delinquency fee that is one of the following amounts:
(1) For a period of delinquency of not less than seven days, an amount not in excess of fourteen dollars ($14).
(2) For a period of delinquency of not less than 14 days, an amount not in excess of twenty dollars ($20).
(e) If a licensee opts to impose a delinquency fee, it shall use the delinquency fee schedule described in subdivision (d), subject to all of the following:
(1) No more than one delinquency fee may be imposed per delinquent payment.
(2) No more than two delinquency fees may be imposed during any period of 30 consecutive days.
(3) No delinquency fee may be imposed on a borrower who is 180 days or more past due if that fee would result in the sum of the borrower’s remaining unpaid principal balance, accrued interest, and delinquency fees exceeding 180 percent of the original principal amount of the borrower’s loan.
(4) The licensee or any of its wholly owned subsidiaries shall attempt to collect a delinquent payment for a period of at least 30 days following the start of the delinquency before selling or assigning that unpaid debt to an independent party for collection.
(f) The licensee shall develop and implement policies and procedures designed to respond to questions raised by applicants and borrowers regarding their loans, including those involving finders, referral partners, and to address customer complaints as soon as reasonably practicable.
(g) The following shall apply to a loan made by a licensee pursuant to this section:
(1) Prior to disbursement of loan proceeds, the licensee shall either (A) offer a credit education program or seminar to the borrower that has been previously reviewed and approved by the commissioner for use in complying with this section; or (B) invite the borrower to a credit education program or seminar offered by an independent third party that has been previously reviewed and approved by the commissioner for use in complying with this section. The borrower shall not be required to participate in either of these education programs or seminars. A credit education program or seminar offered pursuant to this paragraph shall be provided at no cost to the borrower.
(2) The licensee shall report each borrower’s payment performance to at least one consumer reporting agency that compiles and maintains files on consumers on a nationwide basis, upon acceptance as a data furnisher by that consumer reporting agency. For purposes of this section, a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis is one that meets the definition in Section 603(p) of the federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681a(p)). Any licensee that is accepted as a data furnisher after admittance into the program must report all borrower payment performance since its inception of lending under the program, as soon as practicable after its acceptance into the program, but in no event more than six months after its acceptance into the program.
(A) The commissioner may approve a licensee for the program, before that licensee has been accepted as a data furnisher by a consumer reporting agency, if the commissioner has a reasonable expectation, based on information supplied by the licensee, of both of the following:
(i) The licensee will be accepted as a data furnisher, once it achieves a lending volume required of data furnishers of its type by a consumer reporting agency.
(ii) That lending volume will be achieved within the first six months of the licensee commencing lending.
(B) Notwithstanding subparagraph (A), the commissioner shall withdraw approval for pilot program participation from any licensee that fails to become accepted as a data furnisher by a consumer reporting agency within six months of commencing lending under the pilot program.
(3) The licensee shall provide each borrower with the name of the consumer reporting agency or agencies to which it will report the borrower’s payment history. A licensee that is accepted as a data furnisher after admittance into the program shall notify its borrowers, as soon as practicable following acceptance as a data furnisher, regarding the name of the consumer reporting agency or agencies to which it will report that borrower’s payment history.
(4) (A) The licensee shall underwrite each loan to determine a borrower’s ability and willingness to repay the loan pursuant to the loan terms, and shall not make a loan if it determines, through its underwriting, that the borrower’s total monthly debt service payments, at the time of origination, including the loan for which the borrower is being considered, and across all outstanding forms of credit that can be independently verified by the licensee, exceed 50 percent of   the borrower’s gross monthly income.
(B) (i) The licensee shall seek information and documentation pertaining to all of a borrower’s outstanding debt obligations during the loan application and underwriting process, including loans that are self-reported by the borrower but not available through independent verification. The licensee shall verify that information using a credit report from at least one consumer reporting agency that compiles and maintains files on consumers on a nationwide basis or through other available electronic debt verification services that provide reliable evidence of a borrower’s outstanding debt obligations.
(ii) Notwithstanding the verification requirement in subparagraph (A), the licensee shall request from the borrower and include all information obtained from the borrower regarding outstanding deferred deposit transactions in the calculation of the borrower’s outstanding debt obligations.
(iii) The licensee shall not be required to consider, for purposes of debt-to-income ratio evaluation, loans from friends or family.
(C) The licensee shall also verify the borrower’s income that the licensee relies on to determine the borrower’s debt-to-income ratio using information from either of the following:
(i) Electronic means or services that provide reliable evidence of the borrower’s actual income.
(ii) Internal Revenue Service Form W-2, tax returns, payroll receipts, bank statements, or other third-party documents that provide reasonably reliable evidence of the borrower’s actual income.
(5) The licensee shall notify each borrower, at least two days prior to each payment due date, informing the borrower of the amount due, and the payment due date. Notification may be provided by any means mutually acceptable to the borrower and the licensee. A borrower shall have the right to opt out of this notification at any time, upon electronic or written request to the licensee. The licensee shall notify each borrower of this right prior to disbursing loan proceeds.
(h) (1) Notwithstanding Sections 22311 to 22315, inclusive, no person, in connection with, or incidental to, the making of any loan made pursuant to this article, may offer, sell, or require the borrower to contract for “credit insurance” as defined in paragraph (1) of subdivision (a) of Section 22314 or insurance on tangible personal or real property of the type specified in Section 22313.
(2) Notwithstanding Sections 22311 to 22315, inclusive, no licensee, finder, referral partner, or any other person that participates in the origination of a loan under this article shall refer a borrower to any other person for the purchase of “credit insurance” as defined in paragraph (1) of subdivision (a) of Section 22314 or insurance on tangible personal or real property of the type specified in Section 22313.
(i) (1) No licensee shall require, as a condition of providing the loan, that the borrower waive any right, penalty, remedy, forum, or procedure provided for in any law applicable to the loan, including the right to file and pursue a civil action or file a complaint with or otherwise communicate with the commissioner or any court or other public entity, or that the borrower agree to resolve disputes in a jurisdiction outside of California or to the application of laws other than those of California, as provided by law. Any waiver by a borrower must be knowing, voluntary, and in writing, and expressly not made a condition of doing business with the licensee. Any waiver that is required as a condition of doing business with the licensee shall be presumed involuntary, unconscionable, against public policy, and unenforceable. The licensee has the burden of proving that a waiver of any rights, penalties, forums, or procedures was knowing, voluntary, and not made a condition of the contract with the borrower.
(2) No licensee shall refuse to do business with or discriminate against a borrower or applicant on the basis that the borrower or applicant refuses to waive any right, penalty, remedy, forum, or procedure, including the right to file and pursue a civil action or complaint with, or otherwise notify, the commissioner or any court or other public entity. The exercise of a person’s right to refuse to waive any right, penalty, remedy, forum, or procedure, including a rejection of a contract requiring a waiver, shall not affect any otherwise legal terms of a contract or an agreement.
(3) This subdivision shall not apply to any agreement to waive any right, penalty, remedy, forum, or procedure, including any agreement to arbitrate a claim or dispute, after a claim or dispute has arisen. Nothing in this subdivision shall affect the enforceability or validity of any other provision of the contract.

(j)This section shall not apply to any loan of a bona fide principal amount of two thousand five hundred dollars ($2,500) or more as determined in accordance with Section 22251. For purposes of this subdivision, “bona fide principal amount” shall be determined in accordance with Section 22251.

SEC. 5.

 Section 22371 of the Financial Code is amended to read:

22371.
 (a) A licensee who is approved by the commissioner to participate in the program may use the services of one or more finders referral partners as provided in this article.
(b) For purposes of this article, a “finder” “referral partner” means an entity that, at the finder’s referral partner’s physical location for business, business or through online, mobile telephone direct mail, or in-person marketing channels, brings a licensee and a prospective borrower together for the purpose of negotiating a loan contract.

(c)An entity, whose sole means of bringing a licensee and a prospective borrower together at that entity’s physical location for business is via an electronic access point through which a prospective borrower may directly access the Internet Web site of a licensee is not a “finder” for purposes of this article.

SEC. 6.

 Section 22372 of the Financial Code is amended to read:

22372.
 (a) A finder referral partner may perform one or more of the following services for a licensee at the finder’s physical location for business: licensee:
(1) Distributing, circulating, using, or publishing preprinted brochures, flyers, factsheets, or other written materials relating to loans that the licensee may make or negotiate and that have been reviewed and approved in writing by the licensee prior to their being distributed, circulated, or published.
(2) Providing written factual information about loan terms, conditions, or qualification requirements to a prospective borrower that has been either prepared by the licensee or reviewed and approved in writing by the licensee. A finder referral partner may discuss that information with a prospective borrower in general terms, but may not provide counseling or advice to a prospective borrower.
(3) Notifying a prospective borrower of the information needed in order to complete a loan application without providing counseling or advice to a prospective borrower.
(4) Entering information provided by the prospective borrower on a preprinted or electronic application form or onto a preformatted computer database without providing counseling or advice to a prospective borrower.
(5) Assembling credit applications and other materials obtained in the course of a credit application transaction for submission to the licensee.
(6) Contacting the licensee to determine the status of a loan application.
(7) Communicating a response that is returned by the licensee’s automated underwriting system to a borrower or a prospective borrower.
(8) Obtaining a borrower’s signature on documents prepared by the licensee and delivering final copies of the documents to the borrower.
(b) A finder referral partner that is licensed or regulated pursuant to this division, Division 1.1 (commencing with Section 1000), Division 1.2 (commencing with Section 2000), Division 3 (commencing with Section 12000), Division 5 (commencing with Section 14000), Division 6 (commencing with Section 17000), Division 7 (commencing with Section 18000), Division 8 (commencing with Section 21000), Division 10 (commencing with Section 23000), or Division 20 (commencing with Section 50000) of this code; Chapter 5 (commencing with Section 1621) of Part 2 of Division 1 of the Insurance Code; Chapter 1 (commencing with Section 5000) of Division 3 of the Business and Professions Code; is an approved agent of a person licensed pursuant to Division 1.2 (commencing with Section 2000) of this code; or is a federally regulated bank, thrift, or credit union, may additionally provide any of the following services on behalf of the licensee for any loan for which the finder referral partner performed finding activities:
(1) Disbursing loan proceeds to a borrower, if this method of disbursement is acceptable to the borrower.
(A) Any loan disbursement made by a finder referral partner under this subdivision shall be deemed made by the licensee on the date the funds are disbursed or otherwise made available by the finder referral partner to the borrower.
(B) A finder referral partner that disburses loan proceeds to a borrower shall deliver or cause to be delivered to the borrower at the time loan proceeds are disbursed a plain and complete receipt showing all of the following:
(i) The date of disbursement.
(ii) The total amount disbursed.
(iii) The corresponding loan account identification.
(iv) The following statement, prominently displayed in a type size equal to or greater than the type size used to display the other items on the receipt: “If you have any questions about your loan, now or in the future, you should direct those questions to [name of licensee] by [insert at least two different ways in which a borrower may contact the licensee].”
(2) Receiving loan payment or payments from the borrower, if this method of payment is acceptable to the borrower.
(A) Any loan payment made by a borrower to a finder referral partner under this subdivision shall be applied to the borrower’s loan and deemed received by the licensee as of the date the payment is received by the finder. referral partner.
(B) A finder referral partner that receives loan payments under this subdivision shall deliver or cause to be delivered to the borrower at the time that the payment is made by the borrower, a plain and complete receipt showing all of the following:
(i) The name of the finder. referral partner.
(ii) The total payment amount received.
(iii) The date of payment.
(iv) The corresponding loan account identification upon which the payment is being applied.
(v) The loan balance prior to and following application of the payment.
(vi) The amount of the payment that was applied to principal, interest, and fees.
(vii) The type of payment, such as cash, automated clearing house (ACH) transfer, check, money order, or debit card.
(viii) The following statement, prominently displayed in a type size equal to or greater than the type size used to display the other items on the receipt: “If you have any questions about your loan, now or in the future, you should direct those questions to [name of licensee] by [insert at least two different ways in which a borrower may contact the licensee].”
(C) A borrower who submits a loan payment to a finder referral partner under this subdivision shall not be liable for any failure or delay by the finder referral partner in transmitting the payment to the licensee.
(D) A finder referral partner that disburses or receives loan payments pursuant to this subdivision shall maintain records of all disbursements made and loan payments received for a period of at least two years or until one month following the completion of an examination of the licensee by the commissioner, whichever is later. The commissioner shall determine when an examination is complete.
(3) Providing any notice or disclosure required to be provided to the borrower by the licensee, other than the notice required to be provided by the licensee to the borrower pursuant to subdivision (d) of Section 22373. A licensee that uses a finder referral partner to provide notices or disclosures to borrowers shall maintain a record of which notices and disclosures each finder referral partner provides to borrowers on its behalf, for the purpose of facilitating the commissioner’s examination of the licensee.
(c) A finder referral partner shall not engage in either any of the following activities:
(1) Providing counseling or advice to a borrower or prospective borrower.
(2) Providing loan-related marketing material that has not previously been approved by the licensee to a borrower or a prospective borrower.
(3) Performing unsolicited door-to-door or telephonic solicitation of borrowers or prospective borrowers.
(d) Any person who performs one or more of the following activities is a broker within the meaning of Section 22004 rather than a finder referral partner within the meaning of this section:
(1) Negotiating the price, length, or any other loan term between a licensee and a prospective borrower.
(2) Advising either a prospective borrower or a licensee as to any loan term.
(3) Offering information pertaining to a single prospective borrower to more than one licensee, except that, if a licensee has declined to offer a loan to a prospective borrower and has so notified that prospective borrower in writing, the person may then offer information pertaining to a single prospective borrower to another licensee with which it has a finder’s referral partner’s agreement.

(4)Personally contacting or providing services to a borrower or prospective borrower at any place other than the finder’s physical location for business.

(e) A finder referral partner shall comply with all laws applicable to the licensee that impose requirements upon the licensee for safeguards for information security.
(f) A licensee that uses the services of one or more referral partners shall train each referral partner to ensure that the partner understands the applicable requirements of this article, the permitted and prohibited acts of this article, and other relevant state and federal laws.
(g) A licensee that uses the services of one or more referral partners shall develop and implement policies and procedures reasonably intended to ensure each referral partner’s compliance with the provisions of this article and other relevant state and federal laws.

SEC. 7.

 Section 22373 of the Financial Code is amended to read:

22373.
 (a) At the time the finder referral partner receives or processes an application for a program loan, the finder referral partner shall provide the following statement to the applicant, on behalf of the licensee, in no smaller than 10-point type, and shall ask the applicant to acknowledge receipt of the statement in writing:
 
“Your loan application has been referred to us by [Name of Finder]. Referral Partner]. We may pay a fee to [Name of Finder] Referral Partner] for the successful referral of your loan application. IF YOU ARE APPROVED FOR THE LOAN, [NAME OF LICENSEE] WILL BECOME YOUR LENDER, AND YOU WILL BE BUILDING A RELATIONSHIP WITH [NAME OF LICENSEE]. If you have any questions about your loan, now or in the future, you should direct those questions to [name of licensee] by [insert at least two different ways in which a borrower may contact the licensee]. If you wish to report a complaint about [Name of Finder] Referral Partner] or [Name of Licensee] regarding this loan transaction, you may contact the Department of Business Oversight at 866-275-2677, or file your complaint online at www.dbo.ca.gov.”

(b) If the loan applicant has questions about the loan that the finder referral partner is not permitted to answer, the finder referral partner shall make a good faith effort to assist the applicant in making direct contact with the lender before the loan is consummated. This good faith effort shall, at a minimum, consist of assisting the applicant in communicating with the licensee as soon as reasonably practicable, which shall at a minimum include a “two-way communication.” For purposes of this section, “two-way communication” includes telephone, electronic mail, or another form of communication that allows the applicant to communicate with the licensee.
(c) Using the policies developed pursuant to subdivision (f) of Section 22370, the licensee shall ensure that a loan is not consummated until the licensee has completed a “two-way communication” with the applicant. Sending a voicemail or electronic message to the applicant, without a prior or subsequent response from the applicant, shall not constitute a “two-way communication.”

(d)If the loan is consummated, the licensee shall provide the borrower a written copy of the disclosure notice within two weeks following the date of the loan consummation. A licensee may include the disclosure within its loan contract, or may provide it as a separate document to the borrower, via any means acceptable to the borrower.

SEC. 8.

 Section 22374 of the Financial Code is amended to read:

22374.
 (a) A finder referral partner may be compensated by the licensee pursuant to the written agreement between the licensee and the finder, referral partner, as described in Section 22376. Compensation may be paid in accordance with a compensation schedule that is mutually agreed to by the licensee and the finder. referral partner.
(b) Notwithstanding subdivision (a), the compensation of a finder referral partner by a licensee shall be subject to all of the following requirements:
(1) No compensation shall be paid to a finder referral partner in connection with a loan application unless that loan is consummated.
(2) No compensation shall be paid to a finder referral partner based upon the principal amount of the loan.

(3)The total compensation paid by a licensee to a finder over the life of a loan shall not exceed the sum of the origination fee and interest charges paid by the borrower in connection with that loan.

(4)

(3) Subject to the limitations set forth in paragraphs (1) to (3), inclusive, and (2), and exclusive of servicing fees, the total compensation paid by a licensee to a finder for the services set forth in subdivision (a) of Section 22372 referral partner shall not exceed sixty-five dollars ($65) per loan, the following, whether paid at the time of consummation, over installments, or in a manner otherwise agreed upon by the licensee and the finder, plus referral partner:
(A) Sixty-five dollars ($65) on each loan with a contractual loan length of 18 months or less, the amount to be calculated as an average across all loans with contractual lengths of 18 months or less.
(B) One hundred dollars ($100) on each loan with a contractual loan length of more than 18 months, the amount to be calculated as an average across all loans with contractual lengths of more than 18 months.
(4) A licensee may also pay a referral partner up to two dollars ($2) per payment received by the finder referral partner on behalf of the licensee for the duration of the loan, when the finder referral partner receives borrower loan payments on the licensee’s behalf in accordance with subdivision (b) of Section 22372.
(5) The finder’s referral partner’s location for services under this article and other information required by Section 22375 has been reported to the commissioner and the finder referral partner has not been barred from providing services at that location by the commissioner.
(c) No licensee shall, directly or indirectly, pass on to a borrower any fee or other compensation, or any portion of any fee or other compensation, that the licensee pays to a finder referral partner in connection with that borrower’s loan.

SEC. 9.

 Section 22375 of the Financial Code is amended to read:

22375.
 A licensee that utilizes the service of a finder referral partner shall do all of the following:
(a) Notify the commissioner within 15 days of entering into a contract with a finder, referral partner, on a form acceptable to the commissioner, regarding all of the following:
(1) The name, business address, and licensing details of the finder referral partner and all locations at which the finder referral partner will perform services under this article.
(2) The name and contact information for an employee of the finder referral partner who is knowledgeable about, and has the authority to execute, the contract governing the business relationship between the finder referral partner and the licensee.
(3) The name and contact information for one or more employees of the finder referral partner who are responsible for that finder’s referral partner’s finding activities on behalf of the licensee.
(4) A list of the activities the finder referral partner shall perform on behalf of the licensee.
(5) Any other information requested by the commissioner.
(b) Pay an annual finder referral partner registration fee to the commissioner in an amount to be established by the commissioner by regulation for each finder referral partner utilized by the licensee.
(c) Submit an annual report to the commissioner including, for each finder, referral partner, the information listed in paragraph (12) (13) and subparagraph (A) of paragraph (13) (14) of subdivision (d) of Section 22380, and any other information pertaining to each finder referral partner and the licensee’s relationship and business arrangements with each finder referral partner as the commissioner may by regulation require. The information disclosed to the commissioner for the report described in this subdivision is exempted from any requirement of public disclosure by paragraph (2) of subdivision (d) of Section 6254 of the Government Code.

SEC. 10.

 Section 22376 of the Financial Code is amended to read:

22376.
 All arrangements between a licensee and a finder referral partner shall be set forth in a written agreement between the parties. The agreement shall contain a provision establishing that the finder referral partner agrees to comply with all regulations that are established by the commissioner pursuant to this article regarding the activities of finders referral partners and that the commissioner shall have access to all of the finder’s referral partner’s books and records that pertain to the finder’s referral partner’s operations under the agreement with the licensee.

SEC. 11.

 Section 22377 of the Financial Code is amended to read:

22377.
 (a) The commissioner may examine the operations of each licensee and each finder referral partner to ensure that the activities of the licensee and the finder referral partner are in compliance with this article. The costs of the commissioner’s examination of each finder referral partner shall be attributed to the commissioner’s examination of the licensee. Any violation of this article by a finder referral partner or a finder’s referral partner’s employee shall be attributed to the finance lender with whom it the referral partner has entered into an agreement for purposes of determining the licensee’s compliance with this division.
(b) Upon a determination that a finder referral partner has acted in violation of this article, or any implementing regulation, or upon a determination that it would be warranted by the data reported to the commissioner pursuant to subdivision (c) of Section 22375 for any finder, referral partner, the commissioner may disqualify a finder referral partner from performing services under this article, bar a finder referral partner from performing services at one or more specific locations of that finder, referral partner, terminate a written agreement between a finder referral partner and a licensee, and, if the commissioner deems that action in the public interest, prohibit the use of that finder referral partner by all licensees accepted to participate in the pilot program.
(c) In addition to any other penalty allowed by law, the commissioner may impose an administrative penalty up to two thousand five hundred dollars ($2,500) for violations of this article committed by a finder. referral partner.

SEC. 12.

 Section 22380 of the Financial Code is amended to read:

22380.
 (a) On or before July 1, 2015, and annually on or before July 1, 2017, to July 1, 2021, inclusive, the commissioner shall post a report on his or her Internet Web site summarizing utilization of the Pilot Program for Increased Access to Responsible Small Dollar Loans. The report required to be submitted on or before July 1, 2015, shall additionally include the information required by former Section 22361, summarizing utilization of the Pilot Program for Affordable Credit-Building Opportunities, which was created by Chapter 640 of the Statutes of 2010.
(b) The information disclosed to the commissioner for the commissioner’s use in preparing the reports described in this section is exempted from any requirement of public disclosure by paragraph (2) of subdivision (d) of Section 6254 of the Government Code.
(c) If there is more than one licensee approved to participate in the program under this article, the reports required pursuant to subdivision (a) shall state information in aggregate so as not to identify data by specific licensee.
(d) Each report required pursuant to this section shall specify the time period to which the report corresponds, and shall include, but not be limited to, the following for that time period:
(1) The number of entities that applied to participate in the program.
(2) The number of entities accepted to participate in the program.
(3) The reason or reasons for rejecting applications for participation, if applicable. This information shall be provided in a manner that does not identify the entity or entities rejected.
(4) The number of program loan applications received by lenders participating in the program, the number of loans made pursuant to the program, the total amount loaned, the distribution of loan lengths upon origination, and the distribution of interest rates and principal amounts upon origination among those loans.
(5) The number of borrowers who obtained more than one program loan and the distribution of the number of loans per borrower.

(6)Of the number of borrowers who obtained more than one program loan, the percentage of those borrowers whose credit scores increased between successive loans, based on information from at least one major credit bureau, and the average size of the increase.

(6) (A) The number and percentage of loan applicants who are denied for loans with bona fide principal amounts under one thousand dollars ($1,000) and the reasons for denial, including, for example, insufficient income, insufficient creditworthiness, both insufficient income and insufficient creditworthiness, and any other reasons, including, but not limited to, suspected fraud.
(B) The number and percentage of loan applicants who are denied for loans with bona fide principal amounts of one thousand dollars ($1,000) or more and the reasons for denial, including, for example, insufficient income, insufficient creditworthiness, both insufficient income and insufficient creditworthiness, and any other reasons, including, but not limited to, suspected fraud.
(7) (A) (i) The number of borrowers who lacked a credit score when they obtained their first program loan.
(ii) Among those borrowers who lacked a credit score when they obtained their first program loan, the percentage of those borrowers who did not have a credit score when they obtained a subsequent program loan.
(iii) Among those borrowers who lacked a credit score when they obtained their first program loan, the percentage of those borrowers who established a credit score on the subsequent loan and the average credit score established by those borrowers between subsequent loans.
(iv) Among those borrowers who did have a credit score when they obtained their first program loan, the percentage of those borrowers who increased their credit score when they obtained a subsequent loan and the average credit score increase of those borrowers between successive loans.
(B) In each applicable instance described in subparagraph (A), the licensee shall identify the name of the credit score used.

(7)

(8) The income distribution of borrowers upon loan origination, including the number of borrowers who obtained at least one program loan and who resided in a low-to-moderate-income census tract at the time of their loan application.

(8)

(9) The number of borrowers who obtained loans for the following purposes, based on borrower responses at the time of their loan applications indicating the primary purpose for which the loan was obtained:
(A) Medical.
(B) Other emergency.
(C) Vehicle repair.
(D) Vehicle purchase.
(E) To pay bills.
(F) To consolidate debt.
(G) To build or repair credit history.
(H) To finance a purchase of goods or services other than a vehicle.
(I) For other than personal, family, or household purposes.
(J) Other.

(9)

(10) The number of borrowers who self-report that they had a bank account at the time of their loan application, the number of borrowers who self-report that they had a bank account and used check-cashing services, and the number of borrowers who self-report that they did not have a bank account at the time of their loan application.

(10)

(11) With respect to refinance loans, each report shall specifically include the following information:
(A) The number and percentage of borrowers who applied for a refinance loan.
(B) Of those borrowers who applied for a refinance loan, the number and percentage of borrowers who obtained a refinance loan.
(C) Of those borrowers who obtained a refinance loan:
(i) The percentage of borrowers who refinanced once.
(ii) The percentage of borrowers who refinanced twice.
(iii) The percentage of borrowers who refinanced more than twice.
(D) Of those borrowers who obtained a refinance loan, the average percentage of principal paid down before obtaining a refinance loan.
(E) Of those borrowers who obtained a refinance loan, the average amount of additional principal extended.
(F) Of those borrowers who obtained a refinance loan, the average number of late payments made on the loan that was refinanced.

(11)

(12) The number and type of finders referral partners used by licensees and the relative performance of loans consummated by finders referral partners compared to the performance of loans consummated without a finder. referral partner.

(12)

(13) The number and percentage of borrowers who obtained one or more program loans on which late fees were assessed, the total amount of late fees assessed, and the average late fee assessed by dollar amount and as a percentage of the principal amount loaned.

(13)

(14) (A) The performance of loans under this article, as reflected by all of the following:
(i) The number and percentage of program borrowers who experienced at least one delinquency lasting between 7 seven and 29 days, and the distribution of principal loan amounts corresponding to those delinquencies.
(ii) The number and percentage of program borrowers who experienced at least one delinquency lasting between 30 and 59 days, and the distribution of principal loan amounts corresponding to those delinquencies.
(iii) The number and percentage of program borrowers who experienced at least one delinquency lasting 60 days or more, and the distribution of principal loan amounts corresponding to those delinquencies.
(iv) The number and percentage of program borrowers who experienced at least one delinquency of greater than 7 seven days and who did not subsequently bring their loan current.
(v) Among loans that were ever delinquent for 7 seven days or more, the average number of times borrowers experienced a delinquency of 7 seven days or more.
(vi) The number and percentage of program borrowers who defaulted after having made three payments or fewer.
(B) To the extent data are readily available to the commissioner, the commissioner shall include in each report comparable delinquency data for unsecured loans made by persons licensed under Chapter 2 (commencing with Section 22365) of Division 9 in principal amounts between two thousand five hundred dollars ($2,500) and four thousand nine hundred ninety-nine dollars ($4,999), and in principal amounts between five thousand dollars ($5,000) and nine thousand nine hundred ninety-nine dollars ($9,999), and for unsecured extensions of credit made by state-chartered banks and credit unions under the commissioner’s jurisdiction, in principal amounts between two thousand five hundred dollars ($2,500) and four thousand nine hundred ninety-nine dollars ($4,999), and in principal amounts between five thousand dollars ($5,000) and nine thousand nine hundred ninety-nine dollars ($9,999).

(14)

(15) The number and types of violations of this article by finders, which referral partners that were documented by the commissioner.

(15)

(16) The number and types of violations of this article by licensees, which licensees that were documented by the commissioner.

(16)

(17) The number of times that the commissioner disqualified a finder referral partner from performing services, barred a finder referral partner from performing services at one or more specific locations of the finder, referral partner, terminated a written agreement between a finder referral partner and a licensee, or imposed an administrative penalty.

(17)

(18) The number of complaints received by the commissioner about a licensee or a finder, referral partner, and the nature of those complaints.

(18)

(19) Recommendations for improving the program.

(19)

(20) Recommendations regarding whether the program should be continued after January 1, 2023.

SEC. 13.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.
SECTION 1.Section 926.2 of the Insurance Code is amended to read:
926.2.

(a)(1)Each admitted insurer with annual premiums written in California equal to or in excess of one hundred million dollars ($100,000,000) for any reporting year shall provide information to the commissioner on all of its community development investments, community development infrastructure investments, and green investments in California. This information shall be reported by July 1, 2016, on investments made or held during the calendar years 2013, 2014, and 2015 and list, if applicable, investments that are high-impact, green, or rural. The information reported by insurers may include investments both held and originated, the percentage of any investment that qualifies, and why an investment qualifies. This information shall be provided as part of the required filing pursuant to Section 900 or 11131, or through a data call, or by other means as determined by the commissioner. The California Organized Investment Network (COIN) shall provide insurers with information on why investments, if any, were found not to be qualified by the commissioner.

(2)This subdivision does not preclude an insurer that is a member of an insurance holding company system, as defined in Article 4.7 (commencing with Section 1215) of Chapter 2, from complying with paragraph (1) through a single filing on behalf of the entire group of affiliated companies, provided that the data so filed accurately reflects the investments made by each of the affiliates, and accurately attributes, by National Association of Insurance Commissioners (NAIC) number or other identifier required by the commissioner, which of the investments were made by each affiliated company.

(3)This subdivision does not preclude an insurer from satisfying the requirements of paragraph (1) through a filing made by a community development financial institution, provided all of the following conditions are met:

(A)The insurer has no less than a 10-percent ownership interest in a COIN-certified community development financial institution.

(B)The insurer makes community development investments and community development infrastructure investments in and through the community development financial institution.

(C)The community development financial institution accurately files the information required by paragraph (1) with the commissioner on behalf of the insurer and accurately attributes, by NAIC number or other identifier required by the commissioner, which investments, including the dollar amounts of the investments, were made by each insurer on whose behalf the community development financial institution is reporting.

(b)The commissioner shall, by December 31, 2016, provide all of the following:

(1)Information on the department’s Internet Web site on the aggregate insurer community development investments and community development infrastructure investments. Insurers that make high-impact investments that are defined as innovative, responsive to community needs, not routinely provided by insurers, or have a high degree of positive impact on the economic welfare of low- or moderate-income individuals, families, or communities in urban or rural areas of California shall be identified.

(2)Information on the department’s Internet Web site on the actions taken by COIN to analyze the data by insurers for the purpose of creating and identifying potential investment opportunities, including the development of investment opportunity bulletins. This information shall state the efforts made by COIN to market and expand outreach to communities.

(c)The department shall also, by December 31, 2016, provide information on the department’s Internet Web site regarding the aggregate amount of California public debt (including all debt issued by the State of California or a California state or local government agency) purchased by insurers as reported to the department in their NAIC annual statement filing pursuant to Section 900 or 11131.

(d)The department shall also, by December 31, 2016, provide on its Internet Web site the aggregate amount of identified California investments, as reported to the NAIC in the annual statement filed pursuant to Section 900 or 11131.

(e)The department shall also by December 31, 2016, provide information on its Internet Web site regarding the aggregate amount of identified California insurer investments in green investments.

(f)This article shall remain in effect only until January 1, 2021, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2021, deletes or extends that date.

SEC. 2.Section 12939.1 of the Insurance Code is amended to read:
12939.1.

(a)The department, California Organized Investment Network (COIN), or any successor thereof, shall require the community development financial institutions (CDFIs) receiving tax credit investments pursuant to Sections 12209, 17053.57, and 23657 of the Revenue and Taxation Code to submit reports to the department, COIN, or any successor thereof, on their use of the program and may specify by notice to those CDFIs the form, content, and manner of the reports.

(b)Biennially, the department, COIN, or any successor thereof, shall include in the report required by Section 12922, information on the CDFI tax credit program based on the reports submitted by the CDFIs pursuant to subdivision (a).

SEC. 3.Section 12209 of the Revenue and Taxation Code is amended to read:
12209.

(a)For each taxable year beginning on or after January 1, 1999, and before January 1, 2017, there shall be allowed as a credit against the amount of tax, as defined in Section 28 of Article XIII of the California Constitution, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.

(b)For purposes of determining any tax that may be imposed under Section 685 of the Insurance Code on a taxpayer not organized under the laws of this state, the amount of the credit allowed by subdivision (a) shall be treated as a tax paid under Section 12201 or Section 28 of Article XIII of the California Constitution.

(c)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.

(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment as defined in paragraph (1) of subdivision (h).

(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 17053.57, and Section 23657 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.

(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.

(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.

(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.

(d)The community development financial institution shall do all of the following:

(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.

(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.

(B)Provide in the application a detailed description of the intended use of the investment funds, including, but not limited to, the following:

(i)All of the programs, projects, and services that would be funded.

(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.

(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.

(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.

(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:

(i)Name of the taxpayer.

(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.

(iii)Telephone number of the taxpayer.

(iv)Email address of the taxpayer.

(v)The taxpayer’s California company identification number for tax administration purposes.

(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any public disclosure of that information shall be limited to the name of the taxpayer only.

(4)Provide an annual listing to the State Board of Equalization, in the form and manner agreed upon by the State Board of Equalization and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayer’s California company identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.

(5)Submit reports to the department, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.

(e)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2017, but not after that date.

(f)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.

(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.

(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.

(g)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:

(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (h). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.

(2)Accept and evaluate applications for certification from any community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (c), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.

(3)Provide an annual listing to the State Board of Equalization, in the form or manner agreed upon by the State Board of Equalization and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective National Association of Insurance Commissioners company number and employer’s tax identification number, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.

(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.

(h)For purposes of this section:

(1)“Qualified investment” means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.

(2)“Community development financial institution” means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.

(i)(1)If a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the “tax,” as defined in Section 28 of Article XIII of the California Constitution, for the year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.

(2)If a qualified investment is reduced before the end of the 60th month, but not below fifty thousand dollars ($50,000), there shall be added to the “tax,” as defined in Section 28 of Article XIII of the California Constitution, for the taxable year in which the reduction occurs, an amount equal to 20 percent of the total reduction for the year.

(j)In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” for the next four years, or until the credit has been exhausted, whichever occurs first.

(k)The State Board of Equalization shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.

(l)On or before June 30, 2016, the Legislative Analyst’s Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 17053.57, and Section 23657, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.

(m)This section shall remain in effect only until January 1, 2022, and as of that date is repealed.

SEC. 4.Section 17053.57 of the Revenue and Taxation Code is amended to read:
17053.57.

(a)For each taxable year beginning on or after January 1, 1997, and before January 1, 2017, there shall be allowed as a credit against the amount of “net tax,” as defined in Section 17039, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.

(b)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.

(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment, as defined in paragraph (1) of subdivision (g).

(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 12209, and Section 23657 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.

(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.

(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.

(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.

(c)The community development financial institution shall do all of the following:

(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.

(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer, for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.

(B)Provide in the application a detailed description of the intended use of the investment funds, including, but not limited to, the following:

(i)All of the programs, projects, and services that would be funded.

(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.

(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.

(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.

(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:

(i)Name of the taxpayer.

(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.

(iii)Telephone number of the taxpayer.

(iv)Email address of the taxpayer.

(v)The taxpayer’s identification number, or in the case of a partnership, the taxpayer identification numbers of all the partners for tax administration purposes.

(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any network or its successor shall limit all public disclosure of that information to the name of the taxpayer only.

(4)Provide an annual listing to the Franchise Tax Board, in the form and manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayer identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.

(5)Submit reports to the Department of Insurance, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.

(d)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.

(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.

(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.

(e)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2017, but not after that date.

(f)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:

(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (g). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.

(2)Accept and evaluate applications for certification from a community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (b), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the taxable year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.

(3)Provide an annual listing to the Franchise Tax Board, in the form or manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective tax identification numbers, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.

(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.

(g)For purposes of this section:

(1)“Qualified investment” means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.

(2)“Community development financial institution” means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.

(h)(1)If a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the “net tax,” as defined in Section 17039, for the taxable year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.

(2)If a qualified investment is reduced before the end of the 60th month, but not below fifty thousand dollars ($50,000), there shall be added to the “net tax,” as defined in Section 17039, for the taxable year in which the reduction occurs, an amount equal to 20 percent of the total reduction for the taxable year.

(i)In the case where the credit allowed by this section exceeds the “net tax,” the excess may be carried over to reduce the “net tax” for the next four taxable years, or until the credit has been exhausted, whichever occurs first.

(j)The Franchise Tax Board shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.

(k)On or before June 30, 2016, the Legislative Analyst’s Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 12209, and Section 23657, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.

(l)This section shall remain in effect only until January 1, 2022, and as of that date is repealed.

SEC. 5.Section 23657 of the Revenue and Taxation Code is amended to read:
23657.

(a)For each taxable year beginning on or after January 1, 1997, and before January 1, 2017, there shall be allowed as a credit against the amount of “tax,” as defined in Section 23036, an amount equal to 20 percent of the amount of each qualified investment made by a taxpayer during the taxable year into a community development financial institution that is certified by the Department of Insurance, California Organized Investment Network, or any successor thereof.

(b)(1)Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless the California Organized Investment Network, or its successor within the Department of Insurance, certifies that the investment described in subdivision (a) qualifies for the credit under this section and certifies the total amount of the credit allocated to the taxpayer pursuant to this section.

(2)A credit shall not be allowed by this section unless the applicant and the taxpayer provide satisfactory substantiation to, and in the form and manner requested by, the Department of Insurance, California Organized Investment Network, or any successor thereof, that the investment is a qualified investment, as defined in paragraph (1) of subdivision (g).

(3)(A)The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 12209, and Section 17053.57 shall not exceed fifty million dollars ($50,000,000) for each calendar year. However, if the aggregate amount of qualified investments made in any calendar year is less than fifty million dollars ($50,000,000), the difference may be carried over to the next year, and any succeeding year during which this section remains in effect, and added to the aggregate amount authorized for those years.

(B)The total amount of qualified investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution together with its affiliates, as defined in Section 1215 of the Insurance Code, shall not exceed 30 percent of the annual aggregate amount of qualified investments certified by the California Organized Investment Network. If, after October 1, the California Organized Investment Network has determined that the availability of tax credits exceed their demand, then a community development financial institution that has been allocated 30 percent of the annual aggregate amount of qualified investments shall become eligible to apply to be certified for any remaining tax credits in that calendar year.

(C)Each year, 10 percent of the annual aggregate amount of qualified investments shall be reserved for investment amounts of less than or equal to two hundred thousand dollars ($200,000). If, after October 1, there remains an unallocated portion of the amount reserved for investments of less than or equal to two hundred thousand dollars ($200,000), then qualified investments in excess of two hundred thousand dollars ($200,000) may be eligible for that remaining unallocated portion.

(4)Priority among housing applications shall be given to applications that support affordable rental housing, housing for veterans, mortgages for community-based residential programs, and self-help housing ahead of single-family owned housing.

(c)The community development financial institution shall do all of the following:

(1)Apply to the Department of Insurance, California Organized Investment Network, or its successor, for certification of its status as a community development financial institution.

(2)(A)Apply to the Department of Insurance, California Organized Investment Network, or its successor, on behalf of the taxpayer, for certification of the amount of the investment and the credit amount allocated to the taxpayer, obtain the certification, and retain a copy of the certification.

(B)Provide in the application a detailed description of the intended use of the investment funds, including, but not limited to, the following:

(i)All of the programs, projects, and services that would be funded.

(ii)The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.

(iii)The percentage of the intended use of the investment funds that would directly benefit rural areas.

(iv)The percentage of the intended use of the investment funds that is a green investment as defined in Section 926.1 of the Insurance Code.

(3)(A)Provide in the application required in paragraph (2) the following information to the Department of Insurance, California Organized Investment Network, or its successor:

(i)Name of the taxpayer.

(ii)Postal address of the taxpayer, or residential address of the taxpayer if the taxpayer is an individual.

(iii)Telephone number of the taxpayer.

(iv)Email address of the taxpayer.

(v)The taxpayer’s California company identification number for tax administration purposes, or in the case of an “S” corporation, the taxpayer identification numbers of all the shareholders for tax administration purposes.

(B)The information provided in subparagraph (A) shall be used only for internal purposes by the Department of Insurance, California Organized Investment Network, or its successor, and any public disclosure of that information shall be limited to the name of the taxpayer only.

(4)Provide an annual listing to the Franchise Tax Board, in the form and manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the names and taxpayer identification numbers of any taxpayer who makes any withdrawal or partial withdrawal of a qualified investment before the expiration of 60 months from the date of the qualified investment.

(5)Submit reports to the department, California Organized Investment Network, or any successor thereof, as required pursuant to subdivision (a) of Section 12939.1 of the Insurance Code.

(d)The California Organized Investment Network may certify investments for the credit allowed by this section on or before January 1, 2017, but not after that date.

(e)(1)The Insurance Commissioner may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications under this section. The Insurance Commissioner may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this section.

(2)The initial adoption of the regulations implementing this section shall be deemed to be an emergency and necessary in order to address a situation calling for immediate action to avoid serious harm to the public peace, health, safety, or general welfare.

(3)Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, any emergency regulation adopted or amended by the Insurance Commissioner pursuant to this section shall remain in effect until amended or repealed by the department.

(f)The Department of Insurance, California Organized Investment Network, or any successor thereof, shall do all of the following:

(1)Accept and evaluate applications for certification from financial institutions and issue certificates that the applicant is a community development financial institution qualified to receive qualified investments. To receive a certificate, an applicant shall satisfy the Department of Insurance, California Organized Investment Network, or any successor thereof, that it meets the specific requirements to be a community development financial institution for this state program as defined in paragraph (2) of subdivision (g). The certificate may be issued for a specified period of time, and may include reasonable conditions to effectuate the intent of this section. The Insurance Commissioner may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the commissioner finds that an institution no longer meets the requirement for certification.

(2)Accept and evaluate applications for certification from any community development financial institution on behalf of the taxpayer and issue certificates to taxpayers in an aggregate amount that shall not exceed the limit specified in subdivision (b), with highest priority granted to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. The certificate shall include the amount eligible to be made as an investment that qualifies for the credit and the total amount of the credit to which the taxpayer is entitled for the taxable year. Applications for tax credits shall be accepted and evaluated throughout the year. The Insurance Commissioner shall establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.

(3)Provide an annual listing to the Franchise Tax Board, in the form or manner agreed upon by the Franchise Tax Board and the Department of Insurance, California Organized Investment Network, or its successor, of the taxpayers who were issued certificates, their respective tax identification numbers, the amount of the qualified investment made by each taxpayer, and the total amount of qualified investments.

(4)Include information specified pursuant to subdivision (b) of Section 12939.1 of the Insurance Code in the report required by Section 12922 of the Insurance Code.

(g)For purposes of this section:

(1)“Qualified investment” means an investment that is a deposit or loan that does not earn interest, or an equity investment, or an equity-like debt instrument that conforms to the specifications for these instruments as prescribed by the United States Department of the Treasury, Community Development Financial Institutions Fund, or its successor, or, in the absence of that prescription, as defined by the Insurance Commissioner. The investment must be equal to or greater than fifty thousand dollars ($50,000) and made for a minimum duration of 60 months. During that 60-month period, the community development financial institution shall have full use and control of the proceeds of the entire amount of the investment as well as any earnings on the investment for its community development purposes. The entire amount of the investment shall be received by the community development financial institution before the application for the tax credit is submitted. The community development financial institution shall use the proceeds of the investment for a purpose that is consistent with its community development mission and for the benefit of economically disadvantaged communities and low-income people in California.

(2)“Community development financial institution” means a private financial institution located in this state that is certified by the Department of Insurance, California Organized Investment Network, or its successor, that, consistent with the legislative findings, declarations, and intent set forth in Section 12939 of the Insurance Code, has community development as its primary mission, and that lends in urban, rural, or reservation-based communities in this state. A community development financial institution may include a community development bank, a community development loan fund, a community development credit union, a microenterprise fund, a community development corporation-based lender, or a community development venture fund.

(h)(1)If a qualified investment is withdrawn before the end of the 60th month and not reinvested in another community development financial institution within 60 days, there shall be added to the “tax,” as defined in Section 23036, for the taxable year in which the withdrawal occurs, the entire amount of any credit previously allowed under this section.

(2)If a qualified investment is reduced before the end of the 60th month, but not below fifty thousand dollars ($50,000), there shall be added to the “tax,” as defined in Section 23036, for the taxable year in which the reduction occurs, an amount equal to 20 percent of the total reduction for the taxable year.

(i)In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” for the next four taxable years, or until the credit has been exhausted, whichever occurs first.

(j)The Franchise Tax Board shall, as requested by the Department of Insurance, California Organized Investment Network, or its successor, advise and assist in the administration of this section.

(k)On or before June 30, 2016, the Legislative Analyst’s Office shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, on the effects of the tax credits allowed under this section, Section 12209, and Section 17053.57, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.

(l)This section shall remain in effect only until January 1, 2022, and as of that date is repealed.

SEC. 6.

This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:

In order to preserve, at the earliest possible time, the enforcement of the tax credit provisions that spur investment in, and positive impact on, economically vulnerable individuals, families, and communities in this state, it is necessary that this act take effect immediately.