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AB-2058 Income taxes: credits: low-income housing.(2019-2020)

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Date Published: 02/04/2020 09:00 PM
AB2058:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 2058


Introduced by Assembly Members Gabriel and Friedman
(Coauthors: Assembly Members Bauer-Kahan, Bloom, Bonta, Carrillo, Gallagher, Eduardo Garcia, Gipson, Gloria, Jones-Sawyer, Kamlager, Lackey, Low, O’Donnell, Robert Rivas, Santiago, Wicks, and Wood)

February 04, 2020


An act to add and repeal Sections 17057.7 and 23610.6 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 2058, as introduced, Gabriel. Income taxes: credits: low-income housing.
(1) The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.
This bill, for taxable years beginning on or after January 1, 2021, and before January 1, 2026, would allow a credit against those taxes to a taxpayer that is transferred, and allocated, credits pursuant to the sale of a multifamily rental housing development or mobilehome park to a qualified developer, as defined, that has received a credit reservation from the California Tax Credit Allocation Committee, in specified amounts. The bill would limit the aggregate amount of credit that may be allocated by the committee to $500,000,000. The bill would require the credits to be reserved on a first-come-first-served basis.
(2) Existing law requires any bill authorizing a new tax credit to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
This bill would include additional information required for any bill authorizing a new income tax credit.
(3) This bill would take effect immediately as a tax levy.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 17057.7 is added to the Revenue and Taxation Code, to read:

17057.7.
 (a) (1) For taxable years beginning on or after January 1, 2021, and before January 1, 2026, there shall be allowed to a taxpayer a credit against the “net tax,” as defined in Section 17039, pursuant to a credit reservation made by the committee for a qualified developer and a credit transfer to the taxpayer by the qualified developer, in an amount determined pursuant to paragraph (2).
(2) (A) The credit shall not exceed one million dollars ($1,000,000) or the sum of both of the following, whichever is less:
(i) Fifty percent of the federal capital gains taxes to be paid by the taxpayer based on the gains recognized for the sale of property to the qualified developer.
(ii) Fifty percent of the state income taxes paid by the taxpayer derived from the capital gains recognized for the sale of the property to the qualified developer.
(B) (i) Fifty percent of the estimated credit amount shall be allocated to the taxpayer in the taxable year in which the sale of the property is made to the qualified developer.
(ii) The remainder of the estimated credit amount shall be allocated to the taxpayer in the taxable year following the sale of the property. The taxpayer shall demonstrate to the committee the actual amount of federal and state income taxes paid that were derived from the sale of the property to the qualified developer and the credit amount allocated to the taxpayer pursuant to this clause shall be reduced if the actual taxes paid are less than the estimated taxes paid.
(b) The qualified developer shall apply for a credit reservation of up to one million dollars ($1,000,000).
(c) The estimated amount of credit transferred to the taxpayer from a qualified developer shall be established at the close of escrow and included in the closing or transaction documents.
(d) In the case where the credit allowed by subparagraph (A) of paragraph (2) of subdivision (a) exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following taxable year, and succeeding years if necessary, until the credit is exhausted.
(e) For purposes of this section, the committee shall do all of the following:
(1) Establish a procedure for a qualified developer to file with the committee a written application for the reservation of a credit.
(2) Establish criteria for approving an application to reserve tax credits, including, but not limited to, all of the following:
(A) Whether the qualified developer has a successful record of using tax credits or other public funding sources to preserve or acquire affordable housing in the state.
(B) The number of units on the property to maximize the number of units of affordable housing preserved and developed through the credit.
(C) Whether the credit will be used to acquire an assisted housing development, as defined in Section 65863.10 of the Government Code. The committee shall not approve an application to reserve tax credits if the credit will be used to acquire an assisted housing development and the development’s rent and income level restrictions will terminate or the federally insured mortgage or rent subsidy contract on the property is eligible for prepayment or termination more than five years after the date of acquisition.
(D) Whether the qualified developer has other tax credit reservations pursuant to this section and Section 23610.6. A qualified developer shall not hold more than three reservations under this section and Section 23610.6 at any time. Once the qualified developer transfers a credit to a taxpayer, the qualified developer does not hold that tax credit reservation.
(3) Enter into credit reservation agreements with qualified developers. The committee shall reserve credits on a first-come-first-served basis to qualified developers who meet the threshold criteria established by the committee. Credit reservation agreements shall include the amount of credit reserved to the qualified developer and the amount of time, based on criteria adopted by the committee, in which the qualified developer shall transfer the credit to a taxpayer. The criteria to determine a timeline in which a credit must be transferred shall take into account market conditions in the state.
(4) Allocate tax credits to taxpayers and establish a procedure, in consultation with the Franchise Tax Board, to confirm the credit amount allocated to a taxpayer.
(5) Adopt all other rules and regulations necessary to implement this section.
(f) A taxpayer that receives a credit allocation shall provide the committee with the taxpayer’s tax returns for the taxable year in which the taxpayer received the credit allocation and for the subsequent four taxable years.
(g) The aggregate amount of credits that may be allocated pursuant to this section and Section 23610.6 is five hundred million dollars ($500,000,000). Any remaining credits following the reduction made pursuant to clause (ii) of subparagraph (B) of paragraph (2) of subdivision (a) shall be available for rereservation and reallocation by the committee.
(h) For purposes of this section, the following terms are defined as follows:
(1) “Committee” means the California Tax Credit Allocation Committee.
(2) “Eligible nonprofit corporation” means a California nonprofit corporation whose primary activity is the development and preservation of affordable rental housing, as determined by the committee.
(3) “Qualified developer” means a local public entity, as defined in Section 50079 of the Health and Safety Code, an eligible nonprofit corporation, a limited partnership in which the managing general partner is an eligible nonprofit corporation, or a limited liability company in which the managing member is an eligible nonprofit corporation, acquiring a mobilehome park or multifamily rental housing development of five or more dwelling units in the state and entering into a regulatory agreement, with the committee for that development or mobilehome park, that requires, for a minimum of 55 years, that all vacant housing meet both of the following requirements:
(A) Be rented to low-income households, so no household earns more than 80 percent of the area median income at initial occupancy and the average income limit is no more than 60 percent of the area median income.
(B) Be rented to low-income households at affordable rents that do not exceed maximum rent limits established by the committee at 80 percent of the area median income. The average affordable rent shall not exceed 60 percent of the area median income.
(4) “Vacant housing” means dwelling units, mobilehomes, or mobilehome spaces that are vacant at the time the property is sold to the qualified developer and dwelling units, mobilehomes, or mobilehome spaces that become vacant after the property has been sold to the qualified developer.
(i) Rules and regulations adopted by the committee to implement this section are exempt from the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(j) This section shall remain in effect only until December 31, 2026, and as of that date is repealed.

SEC. 2.

 Section 23610.6 is added to the Revenue and Taxation Code, to read:

23610.6.
 (a) (1) For taxable years beginning on or after January 1, 2021, and before January 1, 2026, there shall be allowed to a taxpayer a credit against the “tax,” as defined in Section 23036, pursuant to a credit reservation made by the committee for a qualified developer and a credit transfer to the taxpayer by the qualified developer, in an amount determined pursuant to paragraph (2).
(2) (A) The credit shall not exceed one million dollars ($1,000,000) or the sum of both of the following, whichever is less:
(i) Fifty percent of the federal capital gains taxes to be paid by the taxpayer based on the gains recognized for the sale of property to the qualified developer.
(ii) Fifty percent of the state income taxes paid by the taxpayer derived from the capital gains recognized for the sale of the property to the qualified developer.
(B) (i) Fifty percent of the estimated credit amount shall be allocated to the taxpayer in the taxable year in which the sale of the property is made to the qualified developer.
(ii) The remainder of the estimated credit amount shall be allocated to the taxpayer in the taxable year following the sale of the property. The taxpayer shall demonstrate to the committee the actual amount of federal and state income taxes paid that were derived from the sale of the property to the qualified developer and the credit amount allocated to the taxpayer pursuant to this clause shall be reduced if the actual taxes paid are less than the estimated taxes paid.
(b) The qualified developer shall apply for a credit reservation of up to one million dollars ($1,000,000).
(c) The estimated amount of credit transferred to the taxpayer from a qualified developer shall be established at the close of escrow and included in the closing or transaction documents.
(d) In the case where the credit allowed by subparagraph (A) of paragraph (2) of subdivision (a) exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following taxable year, and succeeding years if necessary, until the credit is exhausted.
(e) For purposes of this section, the committee shall do all of the following:
(1) Establish a procedure for a qualified developer to file with the committee a written application for the reservation of a credit.
(2) Establish criteria for approving an application to reserve tax credits, including, but not limited to, all of the following:
(A) Whether the qualified developer has a successful record of using tax credits or other public funding sources to preserve or acquire affordable housing in the state.
(B) The number of units on the property to maximize the number of units of affordable housing preserved and developed through the credit.
(C) Whether the credit will be used to acquire an assisted housing development, as defined in Section 65863.10 of the Government Code. The committee shall not approve an application to reserve tax credits if the credit will be used to acquire an assisted housing development and the development’s rent and income level restrictions will terminate or the federally insured mortgage or rent subsidy contract on the property is eligible for prepayment or termination more than five years after the date of acquisition.
(D) Whether the qualified developer has other tax credit reservations pursuant to this section and Section 17057.7. A qualified developer shall not hold more than three reservations under this section and Section 17057.7 at any time. Once the qualified developer transfers a credit to a taxpayer, the qualified developer does not hold that tax credit reservation.
(3) Enter into credit reservation agreements with qualified developers. The committee shall reserve credits on a first-come-first-served basis to qualified developers who meet the threshold criteria established by the committee. Credit reservation agreements shall include the amount of credit reserved to the qualified developer and the amount of time, based on criteria adopted by the committee, in which the qualified developer shall transfer the credit to a taxpayer. The criteria to determine a timeline in which a credit must be transferred shall take into account market conditions in the state.
(4) Allocate tax credits to taxpayers and establish a procedure, in consultation with the Franchise Tax Board, to confirm the credit amount allocated to a taxpayer.
(5) Adopt all other rules and regulations necessary to implement this section.
(f) A taxpayer that receives a credit allocation shall provide the committee with the taxpayer’s tax returns for the taxable year in which the taxpayer received the credit allocation and for the subsequent four taxable years.
(g) The aggregate amount of credits that may be allocated pursuant to this section and Section 17057.7 is five hundred million dollars ($500,000,000). Any remaining credits following the reduction made pursuant to clause (ii) of subparagraph (B) of paragraph (2) of subdivision (a) shall be available for rereservation and reallocation by the committee.
(h) For purposes of this section, the following terms are defined as follows:
(1) “Committee” means the California Tax Credit Allocation Committee.
(2) “Eligible nonprofit corporation” means a California nonprofit corporation whose primary activity is the development and preservation of affordable rental housing, as determined by the committee.
(3) “Qualified developer” means a local public entity, as defined in Section 50079 of the Health and Safety Code, an eligible nonprofit corporation, a limited partnership in which the managing general partner is an eligible nonprofit corporation, or a limited liability company in which the managing member is an eligible nonprofit corporation, acquiring a mobilehome park or multifamily rental housing development of five or more dwelling units in the state and entering into a regulatory agreement, with the committee for that development or mobilehome park, that requires, for a minimum of 55 years, that all vacant housing meet both of the following requirements:
(A) Be rented to low-income households, so no household earns more than 80 percent of the area median income at initial occupancy and the average income limit is no more than 60 percent of the area median income.
(B) Be rented to low-income households at affordable rents that do not exceed maximum rent limits established by the committee at 80 percent of the area median income. The average affordable rent shall not exceed 60 percent of the area median income.
(4) “Vacant housing” means dwelling units, mobilehomes, or mobilehome spaces that are vacant at the time the property is sold to the qualified developer and dwelling units, mobilehomes, or mobilehome spaces that become vacant after the property has been sold to the qualified developer.
(i) Rules and regulations adopted by the committee to implement this section are exempt from the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(j) This section shall remain in effect only until December 31, 2026, and as of that date is repealed.

SEC. 3.

 For purposes of complying with Section 41 of the Revenue and Taxation Code, the Legislature finds and declares the following with respect to Sections 17057.7 and 23610.6 of the Revenue and Taxation Code, as added by this act, hereafter referred to as “the tax credits”:
(a) The specific goals, purposes, and objectives that the tax credits will achieve are as follows:
(1) Preserving the affordability of existing affordable housing and mobilehome parks at risk of converting to market-rate housing as subsidies are set to expire.
(2) Preserving the affordability of unrestricted, naturally occurring affordable housing and mobilehome parks where market pressures threaten to make housing costs unaffordable to low-income households.
(3) Preventing the displacement of low-income households that would otherwise be caused by the loss of affordability in at-risk restricted or in unrestricted housing and mobilehome parks.
(b) Detailed performance indicators for the Legislature to use in determining whether the tax credits allowed by this act meet those goals, purposes, and objectives are as follows:
(1) The number of developers allowed a tax credit pursuant to Sections 17057.7 and 23610.6 of the Revenue and Taxation Code, as added by this act.
(2) The number of homes remaining affordable to low-income households as a result of a sales transaction involving a tax credit pursuant to Sections 17057.7 and 23610.6 of the Revenue and Taxation Code, as added by this act.
(c) The Legislative Analyst’s Office shall, on an annual basis beginning January 1, 2022, and each January 1 thereafter until January 1, 2027, collaborate with the California Tax Credit Allocation Committee to review the effectiveness of the tax credits. The review shall include, but not be limited to, the metrics described above.
(d) The data collection requirements for determining whether the tax credits are meeting, failing to meet, or exceeding those specific goals, purposes, and objectives are as follows:
(1) To assist the Legislature in determining whether the tax credits allowed by this act meet the goals, purposes, and objectives specified in subdivision (a), and in carrying out their duties under subdivision (c), the Legislative Analyst’s Office may request information from the California Tax Credit Allocation Committee.
(2) The California Tax Credit Allocation Committee shall provide any data requested by the Legislative Analyst’s Office pursuant to this subdivision.

SEC. 4.

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