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AB-2922 Community Development Tax Credit Program: community development corporations: allocations: income taxation: credits.(2019-2020)

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Date Published: 02/21/2020 09:00 PM
AB2922:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 2922


Introduced by Assembly Member Gray

February 21, 2020


An act to add Article 2.5 (commencing with Section 12335) to Chapter 4 of Part 2 of Division 3 of Title 2 of the Government Code, and to add Sections 12209.60, 17053.60, and 23660 to the Revenue and Taxation Code, relating to community development, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 2922, as introduced, Gray. Community Development Tax Credit Program: community development corporations: allocations: income taxation: credits.
Existing state constitutional law governing insurance taxation imposes an annual tax on the gross premiums of an insurer, as defined, doing business in this state at specified rates. The Personal Income Tax Law and the Corporation Tax Law impose taxes upon taxable income for the taxable year, as specified. The Personal Income Tax Law, the Corporation Tax Law, and the law governing the taxation of insurers allow various credits against the taxes imposed by those laws, including a low-income housing tax credit allocated by the California Tax Credit Allocation Committee.
This bill would allow a credit against the taxes imposed under the Personal Income Tax Law, the Corporation Tax Law, and the law governing the taxation of insurers (CDC tax credit) for taxable years beginning on or after January 1, 2021, in an amount equal to the applicable credit percentage of the amount of each qualified investment made by the taxpayer during the taxable year to an eligible community development corporation that is certified by the Treasurer to receive an allocation of tax credit pursuant to the Community Development Tax Credit Program established by this bill, not to exceed $20,000,000, if the aggregate amount of qualified investments made by the taxpayer in the taxable year is at least $100,000.
This bill would establish the Community Development Tax Credit Program, which would be administered by the Treasurer in collaboration with the Department of Community Services and Development for the purpose of certifying CDC tax credit allocations to eligible community development corporations. The bill would allow an eligible community development corporation that is issued a certification to transfer its allocation of CDC tax credits to taxpayers who make qualified investments to that eligible community development corporation. The bill would require, on or before July 1, 2021, the Department of Community Services and Development to develop and provide forms for, and establish uniform procedures for the submission and review of, applications for an allocation of CDC tax credits to eligible community development corporations. The bill would require the Treasurer, among other things, to accept and evaluate applications in order to certify an allocation of CDC tax credits to an eligible community development corporation, and, beginning with the 2021 calendar year, allocate the CDC tax credits for a current calendar year, in an amount not to exceed $50,000,000 per calendar year, among eligible community development corporations pursuant to specified criteria.
This bill would provide that CDC tax credit allocations are to be made by the Treasurer only for those calendar years in which the Legislature increases the aggregate credit amount that may be allocated annually by the California Tax Credit Allocation Committee for the low-income housing tax credits by $50,000,000 or more for the calendar year by legislation enacted after January 1, 2020, and reserves that additional allocation amount for CDC tax credits. The bill would provide that the CDC tax credits allowed for a taxable year is zero unless the Legislature acts in the above-described manner.
Existing law requires any bill authorizing a new tax expenditure, including a tax credit under the Personal Income Tax Law or the Corporation Tax Law, to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would state the intent of the Legislature to enact legislation that would comply with those new tax expenditure requirements.
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.

 Article 2.5 (commencing with Section 12335) is added to Chapter 4 of Part 2 of Division 3 of Title 2 of the Government Code, to read:
Article  2.5. Community Development Tax Credit Program

12335.
 (a) This article shall be known and may be cited as the Community Development Tax Credit Program.
(b) The Legislature finds and declares that the purpose of this article is to enable local residents and stakeholders to work with and through community development corporations to partner with nonprofit, public, and private entities to improve economic opportunities for low- and moderate-income households and other residents in urban, rural, and suburban communities across the state.

12335.2.
 For purposes of this article, the following definitions shall apply:
(a) “CDC tax credit” means a tax credit allowed pursuant to Section 12209.60, 17053.60, or 23660 of the Revenue and Taxation Code.
(b) “Community development financial institution” means any community development financial institution certified by the federal Community Development Financial Institutions Fund under Part 1805 (commencing with Section 1805.100) of Chapter XVIII of Title 12 of the Code of Federal Regulations.
(c) (1) “Eligible community development corporation” means a nonprofit corporation in good standing, as determined by the Secretary of State, that is created for the purpose of supporting and revitalizing communities and that meets all of the following requirements:
(A) It focuses a substantial majority of its efforts on serving one or more specific neighborhoods, municipalities, a region of the state, or a constituency that is economically disadvantaged.
(B) Its stated purpose in its articles of incorporation and bylaws is to engage local residents and businesses to work together to undertake community development programs, projects, and activities that develop and improve urban, rural, and suburban communities in sustainable ways that create and expand economic opportunities for low- and moderate-income people.
(C) It demonstrates that the members of its board of directors are a meaningful representation of the community the corporation intends to serve, including, but not limited to, the percentage of board members that reside in the area, and the racial and ethnic composition of the board in comparison with the area being served.
(2) “Eligible community development corporation” includes a community development financial institution or a community action agency if that entity meets the requirements specified in subparagraphs (A), (B), and (C) of paragraph (1).
(d) “Qualified investment” means a grant, donation equity investment, or charitable contribution made by a taxpayer, that does not require repayment, interest payment, or financial return back to the taxpayer. “Qualified investment” does not include loans or equity equivalent investments.

12335.4.
 (a) The Treasurer shall collaborate with the Department of Community Services and Development to administer this article.
(b) (1) On or before July 1, 2021, the Department of Community Services and Development shall develop and provide forms for, and establish uniform procedures for the submission and review of, applications for an allocation of CDC tax credits in accordance with this article.
(2) The procedure shall include a process to determine whether the applicant is an eligible community development corporation as defined in Section 12335.2.
(3) The procedure shall include the requirement that the applicant submit a community investment plan. The community investment plan required shall be an organizational business plan that details the applicant’s goals, outcomes, strategies, programs, and activities for a three- to five-year period and its financial plans for supporting its strategy. A community investment plan shall be designed to engage local residents and businesses to work together to undertake community development programs, projects, and activities that develop and improve urban, rural, or suburban communities in sustainable ways that create and expand economic opportunities for low- and moderate-income households. Any community investment plan shall be valid, for application purposes, for three years beginning January 1 of the year for which the CDC tax credits are being applied.
(c) The Department of Community Services and Development shall certify that an applicant for an allocation of CDC tax credits is an eligible community development corporation as defined in Section 12335.2 before that applicant may be allocated a CDC tax credit by the Treasurer pursuant to Section 12335.6.
(d) A fee may be imposed on each applicant that does not exceed the reasonable administrative costs for the Treasurer and the Department of Community Services and Development in developing and evaluating the applications pursuant to this article. Any fee imposed pursuant to this section may not exceed ____.

12335.6.
 For purposes of allocating CDC tax credits in accordance with this article, the Treasurer shall do all of the following:
(a) Accept and evaluate applications in order to certify an allocation of CDC tax credits to an eligible community development corporation.
(b) Except as provided in Section 12335.14, beginning with the 2021 calendar year, allocate the CDC tax credits for a current calendar year, in an amount not to exceed fifty million dollars ($50,000,000) per calendar year, among eligible community development corporations pursuant to the following criteria:
(1) The determination by the Treasurer of the amount of the CDC tax credit allocated to any eligible community development corporation shall be based on the quality of that eligible community development corporation’s community investment plan.
(2) The allocation process shall prioritize allocations to community development corporations with the highest quality community investment plans and strong track records and shall strive to ensure that all regions of the state are able to fairly compete for allocations, including gateway municipalities, rural areas, and suburban areas.
(3) In an allocation period, at least 30 percent of the eligible community development corporations that are allocated a CDC tax credit shall be located in or serving gateway municipalities and at least 20 percent of the eligible community development corporations that are allocated a CDC tax credit shall be located in or serving rural areas, as defined by the Treasurer, unless the Treasurer finds that there are not a sufficient number of applicants for the CDC tax credits from those areas.
(4) In an allocation period, not more than 50 percent of the total number of eligible community development corporations that are allocated a CDC tax credit may be community development financial institutions.
(5) If an eligible community development corporation is allocated a CDC tax credit, the amount of CDC tax credit that is allocated shall be at least one hundred thousand dollars ($100,000), but shall not exceed five hundred thousand dollars ($500,000), in any one fiscal year.
(6) An allocation of CDC tax credits shall be valid for a period of three years from the date of allocation, subject to revocation or extension pursuant to Section 12335.8.
(7) No eligible community development corporation shall receive a subsequent allocation of CDC tax credits until it has received amounts in qualified investments for which a CDC tax credit has been transferred in exchange that equal 95 percent of the total amount of CDC tax credits it has been allocated in the three-year period.
(c) Issue to an eligible community development corporation that has been allocated a CDC tax credit a certification of CDC tax credit allocation. The certification shall identify the name of the eligible community development corporation, the amount of CDC tax credit that has been allocated, the date of allocation, and any other necessary information as may be determined by the Treasurer. An eligible community development corporation that is issued a certification pursuant to this section may transfer its allocation of CDC tax credits, or a portion thereof, to taxpayers who make qualified investments to that eligible community development corporation.
(d) (1) Create a CDC investor tax credit certificate that shall be given by an eligible community development corporation to a person who makes a qualified investment in the eligible community development corporation upon receipt of that qualified investment. The CDC investor tax credit certificate shall require the identification of the name of the person who made the qualified investment, the amount of the qualified investment, the date the qualified investment was made, and any other necessary information as may be determined by the Treasurer.
(2) The CDC investor tax credit certificate shall be acceptable as proof that the person has made qualified investments in an eligible community development corporation, the amount of which could be taken into account in calculating the tax credits allowed pursuant to Sections 12209.60, 17053.60, and 23660 of the Revenue and Taxation Code.
(e) Maintain a list on its internet website of all eligible community development corporations as certified by the Department of Community Services and Development.

12335.8.
 The Treasurer may revoke a certification of allocation of CDC tax credits to an eligible community development corporation after two years from the date of the allocation, after affording the corporation notice and the opportunity to be heard, if the Treasurer finds any of the following:
(a) The amount of qualified investments in the eligible community development corporation for which a CDC tax credit has been transferred in exchange in that two-year period is less than 50 percent of the total amount of CDC tax credits allocated to the eligible community development corporation.
(b) The entity is no longer is an eligible community development corporation, as defined in this article or any regulations promulgated hereunder, or is not in compliance with the requirements of Section 12335.12 or any regulations promulgated hereunder.
(c) The eligible community development corporation is not making adequate progress on its community investment plan.
(d) Other good cause for revocation, as determined by the Treasurer.

12335.10.
 An eligible community development corporation that has received a certification of an allocation of CDC tax credits shall do both of the following:
(a) Receive qualified investments directly from one or more taxpayers and, in exchange, transfer a portion of its allocation of CDC tax credits equivalent to the amount of the qualified investment and issue a CDC tax credit certificate in that amount to that taxpayer.
(b) Commencing with the calendar year after an allocation has been made, submit an annual report to the Treasurer regarding outcomes achieved during the prior calendar year. The Treasurer may require any other information they deem necessary for them to determine whether the eligible community development corporation is making adequate progress on the corporation’s community investment plan. These reports shall be made available to the public by the Treasurer.

12335.12.
 The Treasurer may prescribe rules and regulations to carry out the purposes of this article, including any rules and regulations necessary to establish procedures, processes, and requirements that are necessary to implement this article.

12335.14.
 The allocations required to be made by the Treasurer in this article shall only be operative for those calendar years in which the Legislature increases the aggregate housing credit dollar amount that may be allocated annually by the California Tax Credit Allocation Committee pursuant to Sections 12206, 17058, and 23610.5 of the Revenue and Taxation Code by fifty million dollars ($50,000,000) or more for the calendar year by legislation enacted after January 1, 2020, and reserves that additional allocation amount for tax credits allowed by Sections 12209.60, 17053.60, and 23660 of the Revenue and Taxation Code.

SEC. 2.

 Section 12209.60 is added to the Revenue and Taxation Code, to read:

12209.60.
 (a) (1) (A) For each year beginning on or after January 1, 2021, there shall be allowed as a credit against the amount of tax, as defined in Section 28 of Article XIII of the California Constitution, in the amount specified in paragraph (2), not to exceed twenty million dollars ($20,000,000) per taxable year.
(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 subparagraph (A) shall be treated as a tax paid under Section 12201 or Section 28 of Article XIII of the California Constitution.
(2) (A) The amount of credit shall be the applicable credit percentage of the amount of each qualified investment made by the taxpayer during the taxable year to an eligible community development corporation that is certified by the Treasurer to receive an allocation of tax credit pursuant to the Community Development Tax Credit Program. A credit shall only be allowed by this section if the aggregate amount of qualified investments made by the taxpayer in the taxable year is in an amount equal to or more than one hundred thousand dollars ($100,000).
(B) Unless the Legislature increases the aggregate housing credit dollar amount that may be allocated annually by the California Tax Credit Allocation Committee pursuant to Sections 12206, 17058, and 23610.5 by fifty million dollars ($50,000,000) or more for the calendar year by legislation enacted after January 1, 2020, and reserves that additional allocation amount for tax credits allowed by this section and Sections 17053.60 and 23660, the applicable credit percentage for each taxable year beginning on or after January 1, 2021, shall be 0 percent.
(C) If the applicable credit percentage for a taxable year is not 0 percent as described in subparagraph (B), then it shall be 50 percent.
(3) A credit shall not be allowed by this section unless the eligible community development corporation and the taxpayer provide satisfactory substantiation to, and in the manner requested by, the Franchise Tax Board that the eligible community development corporation has received an allocation of tax credit by the Treasurer pursuant to Community Development Tax Credit Program, and the taxpayer has made a qualified investment in that eligible community development corporation in exchange for a tax credit allowed under this section. Satisfactory substantiation means a certification of CDC tax credit allocation and a CDC investor tax credit certificate.
(b) For purposes of this section, all of the following definitions shall apply:
(1) “CDC investor tax credit certificate” means the CDC investor tax credit certificate issued by the eligible community development corporation pursuant to the Community Development Tax Credit Program.
(2) “Certification of CDC tax credit allocation” means the certification of CDC tax credit allocation issued by the Treasurer pursuant to the Community Development Tax Credit Program.
(3) “Community Development Tax Credit Program” means the Community Development Tax Credit Program established in Article 2.5 (commencing with Section 12335) of Chapter 4 of Part 2 of Division 3 of Title 2 of the Government Code.
(4) “Eligible community development corporation” has the same meaning as that term is defined in Section 12335.2 of the Government Code that has been issued a certification of CDC tax credit allocation.
(5) “Qualified investment” has the same meaning as that term is defined in Section 12335.2 of the Government Code for which, in exchange, the taxpayer has received a CDC investor tax credit certificate.
(c) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and the next two succeeding years after that if necessary, until the credit has been exhausted.

SEC. 3.

 Section 17053.60 is added to the Revenue and Taxation Code, to read:

17053.60.
 (a) (1) For each taxable year beginning on or after January 1, 2021, there shall be allowed as a credit against the amount of “net tax,” as defined in Section 17039, in the amount specified in paragraph (2), not to exceed twenty million dollars ($20,000,000) per taxable year.
(2) (A) The amount of credit shall be the applicable credit percentage of the amount of each qualified investment made by the taxpayer during the taxable year to an eligible community development corporation that is certified by the Treasurer to receive an allocation of tax credit pursuant to the Community Development Tax Credit Program. A credit shall only be allowed by this section if the aggregate amount of qualified investments made by the taxpayer in the taxable year is in an amount equal to or more than one hundred thousand dollars ($100,000).
(B) Unless the Legislature increases the aggregate housing credit dollar amount that may be allocated annually by the California Tax Credit Allocation Committee pursuant to Sections 12206, 17058, and 23610.5 by fifty million dollars ($50,000,000) or more for the calendar year by legislation enacted after January 1, 2020, and reserves that additional allocation amount for tax credits allowed by this section and Sections 12209.60 and 23660, the applicable credit percentage for each taxable year beginning on or after January 1, 2021, shall be 0 percent.
(C) If the applicable credit percentage for a taxable year is not 0 percent as described in subparagraph (B), then it shall be 50 percent.
(3) A credit shall not be allowed by this section unless the eligible community development corporation and the taxpayer provide satisfactory substantiation to, and in the manner requested by, the Franchise Tax Board that the eligible community development corporation has received an allocation of tax credit by the Treasurer pursuant to Community Development Tax Credit Program, and the taxpayer has made a qualified investment in that eligible community development corporation in exchange for a tax credit allowed under this section. Satisfactory substantiation means a certification of CDC tax credit allocation and a CDC investor tax credit certificate.
(b) For purposes of this section, all of the following definitions shall apply:
(1) “CDC investor tax credit certificate” means the CDC investor tax credit certificate issued by the eligible community development corporation pursuant to the Community Development Tax Credit Program.
(2) “Certification of CDC tax credit allocation” means the certification of CDC tax credit allocation issued by the Treasurer pursuant to the Community Development Tax Credit Program.
(3) “Community Development Tax Credit Program” means the Community Development Tax Credit Program established in Article 2.5 (commencing with Section 12335) of Chapter 4 of Part 2 of Division 3 of Title 2 of the Government Code.
(4) “Eligible community development corporation” has the same meaning as that term is defined in Section 12335.2 of the Government Code that has been issued a certification of CDC tax credit allocation.
(5) “Qualified investment” has the same meaning as that term is defined in Section 12335.2 of the Government Code for which, in exchange, the taxpayer has received a CDC investor tax credit certificate.
(c) In the case where the credit allowed by this section exceeds the “net tax,” the excess may be carried over to reduce the “tax” in the following year, and the next two succeeding years after that if necessary, until the credit has been exhausted.

SEC. 4.

 Section 23660 is added to the Revenue and Taxation Code, to read:

23660.
 (a) (1) For each taxable year beginning on or after January 1, 2021, there shall be allowed as a credit against the amount of “tax,” as defined in Section 23036, in the amount specified in paragraph (2), not to exceed twenty million dollars ($20,000,000) per taxable year.
(2) (A) The amount of credit shall be the applicable credit percentage of the amount of each qualified investment made by the taxpayer during the taxable year to an eligible community development corporation that is certified by the Treasurer to receive an allocation of tax credit pursuant to the Community Development Tax Credit Program. A credit shall only be allowed by this section if the aggregate amount of qualified investments made by the taxpayer in the taxable year is in an amount equal to or more than one hundred thousand dollars ($100,000).
(B) Unless the Legislature increases the aggregate housing credit dollar amount that may be allocated annually by the California Tax Credit Allocation Committee pursuant to Sections 12206, 17058, and 23610.5 by fifty million dollars ($50,000,000) or more for the calendar year by legislation enacted after January 1, 2020, and reserves that additional allocation amount for tax credits allowed by this section and Sections 12209.60 and 17053.60, the applicable credit percentage for each taxable year beginning on or after January 1, 2021, shall be 0 percent.
(C) If the applicable credit percentage for a taxable year is not 0 percent as described in subparagraph (B), then it shall be 50 percent.
(3) A credit shall not be allowed by this section unless the eligible community development corporation and the taxpayer provide satisfactory substantiation to, and in the manner requested by, the Franchise Tax Board that the eligible community development corporation has received an allocation of tax credit by the Treasurer pursuant to Community Development Tax Credit Program, and the taxpayer has made a qualified investment in that eligible community development corporation in exchange for a tax credit allowed under this section. Satisfactory substantiation means a certification of CDC tax credit allocation and a CDC investor tax credit certificate.
(b) For purposes of this section, all of the following definitions shall apply:
(1) “CDC investor tax credit certificate” means the CDC investor tax credit certificate issued by the eligible community development corporation pursuant to the Community Development Tax Credit Program.
(2) “Certification of CDC tax credit allocation” means the certification of CDC tax credit allocation issued by the Treasurer pursuant to the Community Development Tax Credit Program.
(3) “Community Development Tax Credit Program” means the Community Development Tax Credit Program established in Article 2.5 (commencing with Section 12335) of Chapter 4 of Part 2 of Division 3 of Title 2 of the Government Code.
(4) “Eligible community development corporation” has the same meaning as that term is defined in Section 12335.2 of the Government Code that has been issued a certification of CDC tax credit allocation.
(5) “Qualified investment” has the same meaning as that term is defined in Section 12335.2 of the Government Code for which, in exchange, the taxpayer has received a CDC investor tax credit certificate.
(c) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and the next two succeeding years after that if necessary, until the credit has been exhausted.

SEC. 5.

 It is the intent of the Legislature to enact legislation to comply with the requirements of Section 41 of the Revenue and Taxation Code.

SEC. 6.

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