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SB-1230 Community development financial institutions: grant program: income taxation: credits.(2019-2020)

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Date Published: 02/20/2020 09:00 PM
SB1230:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 1230


Introduced by Senators Umberg and Caballero

February 20, 2020


An act to add Article 8 (commencing with Section 12100.70) and Article 9 (commencing with Section 12100.80) to Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government Code, and to add and repeal Sections 12209.8, 17053.58. and 23658 of the Revenue and Taxation Code, relating to economic development.


LEGISLATIVE COUNSEL'S DIGEST


SB 1230, as introduced, Umberg. Community development financial institutions: grant program: income taxation: credits.
(1) Existing law establishes the Governor’s Office of Business and Economic Development, known as “GO-Biz,” within the Governor’s office to serve the Governor as the lead entity for economic strategy and the marketing of California on issues relating to business development, private sector investment, and economic growth. Existing federal law establishes the Capital Magnet Fund and makes moneys in that fund available to the United States Secretary of the Treasury to carry out a competitive grant program to attract private capital for, and increase investment in, certain affordable housing and economic development projects by providing grants, as provided, to Treasury-certified community development financial institutions or nonprofit organizations that meet specified criteria.
This bill would establish the Community Development Financial Institutions Grant Program, administered by GO-Biz, for the purpose of providing grants to qualified community development financial institutions. The bill would establish the Community Development Financial Institutions Grant Fund and, upon appropriation, require GO-Biz to award a grant to an eligible recipient, defined as a community development financial institution that meets specified criteria under the program, as provided. The bill would require, among other things, that an eligible recipient provide matching funds on a dollar-for-dollar basis with moneys received from private, nongovernmental sources. The bill would specify authorized uses of grant funds, including providing loans, grants, equity investments, or technical assistance within low-income communities or for purposes that have a direct and substantial benefit to lower income households.
(2) Previously existing law, until January 1, 2017, allowed 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. Previously existing law authorized the certification of investments for the credit until January 1, 2017. Previously existing law required that certification applications for which the intended use of the investments had the greatest aggregate benefit for low- to moderate-income or rural areas or households be given the highest priority. Credits that had been allowed were completely recaptured if the qualified investment was subsequently withdrawn and not similarly reinvested, and were partially recaptured if the qualified investment was subsequently reduced.
This bill would establish similar credits under the Personal Income Tax Law, the Corporation Tax Law, and the law governing the taxation of insurers, for taxable years beginning on or after January 1, 2021. The bill would require that the credit amount be equal to the applicable credit percentage of a qualified investment, as defined, made in a community development financial institution, as defined, certified as provided by GO-Biz, but would provide that the applicable credit percentage for each taxable year is 0% unless otherwise specified in the Budget Act or other act making an appropriation for these purposes. The bill would require GO-Biz to certify investments and community development financial institutions for these purposes and to allocate credits in a manner similar to the above-described previously allowed credits. In this regard, the bill would also authorize GO-Biz to allocate tax credits for the current year and reserve tax credits for subsequent years.
Existing law requires any bill introduced on or after January 1, 2020, that would authorize certain tax expenditures, as defined, to identify specific goals, purposes, and objectives that the expenditure will achieve, detailed performance indicators, and data collection requirements.
The bill would require a community development financial institution that receives a qualified investment for which a tax credit is allowed under the bill to submit a report to GO-Biz, as specified, on the use of that qualified investment. On or before January 1, 2025, the bill would require the Legislative Analyst to prepare an analysis, based on data provided by the California Department of Tax and Fee Administration, the Franchise Tax Board, and GO-Biz on or before September 30, 2024, of the tax credit investments provided for in the bill. The bill would require the Legislative Analyst to submit a report to the Legislature by June 30, 2025, on the effects of these tax credits that includes this analysis.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Article 8 (commencing with Section 12100.70) is added to Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government Code, to read:
Article  8. Community Development Financial Institutions Grant Program

12100.70.
 For purposes of this article:
(a) “Fund” means the Community Development Financial Institutions Grant Fund created in Section 12100.71.
(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) “Eligible recipient” means a community development financial institution for which either of the following applies:
(1) The community development financial institution has its headquarters in this state.
(2) The community development financial institution has a record of lending in this state, based on either of the following:
(A) At least 25 percent of the community development financial institution’s loan portfolio provides financial assistance to persons or projects located in this state.
(B) The community development financial institution has provided financing assistance in this state totaling at least five million dollars ($5,000,000) over the following time periods:
(i) If the community development financial institution is not a small and emerging community development financial institution, the three years preceding the date of its application for a grant under the program.
(ii) If the community development financial institution is a small and emerging community development financial institution, any time period.
(d) “Low-income communities” has the same meaning as defined in Section 39713 of the Health and Safety Code.
(e) “Lower income household” has the same meaning as defined in Section 50079.5 of the Health and Safety Code.
(f) “Program” means the Community Development Financial Institutions Grant Program established in Section 12100.71.
(g) “Small and emerging community development financial institution” means a community development financial institution that has less than ten million dollars ($10,000,000) in assets.

12100.71.
 (a) (1) The Community Development Financial Institutions Grant Program is hereby established for the purpose of providing grants to eligible recipients.
(2) The office shall administer the program.
(b) The Community Development Financial Institutions Grant Fund is created in the State Treasury. Upon appropriation by the Legislature, the office shall allocate moneys in the fund to eligible recipients in accordance with this article.

12100.72.
 In awarding grants pursuant to the program, the office shall do all of the following:
(a) Develop a competitive application process for awarding grants pursuant to the program and require each eligible recipient to submit an application in the form and manner prescribed by the office.
(b) Require an eligible recipient to provide matching funds on a dollar-for-dollar basis with moneys received from private, nongovernmental sources.
(c) Set aside at least 20 percent of any amount made available for purposes of the program for eligible recipients that are small and emerging community development financial institutions.
(d) Ensure that eligible recipients receiving grants pursuant to the program serve geographically diverse areas, both urban and rural, across this state.

12100.73.
 (a) An eligible recipient that receives grant funds under the program may use those funds for the following purposes:
(1) Providing loans, grants, equity investments, or technical assistance within low-income communities or for purposes that have a direct and substantial benefit to lower income households.
(2) Serving investment areas or targeted populations, as those terms are defined in Section 4702 of Title 12 of the United States Code, as that section read as of January 1, 2020, by developing or supporting any of the following:
(A) Commercial facilities that promote revitalization, community stability, or job creation or retention.
(B) Businesses that either provide jobs in low-income communities or enhance the availability of products and services to lower income households.
(C) Community facilities.
(D) The provision of basic financial services.
(E) Housing that is principally affordable to lower income households. Assistance used to facilitate homeownership pursuant to this subparagraph shall be limited to services and lending products that serve lower income households that either are not provided by other lenders in the area or complement the services and lending products provided by other lenders that serve the investment area or target population.
(F) Any other businesses or activities deemed appropriate by the office and consistent with the purposes of the program.
(b) An eligible recipient that provides loans with grant funds awarded under the program shall provide those loans on a revolving basis.

12100.74.
 The office may adopt guidelines for the operation of the program in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1.

SEC. 2.

 Article 9 (commencing with Section 12100.80) is added to Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government Code, to read:
Article  9. Community Development Financial Institution Tax Credits

12100.80.
 For purposes of this article:
(a) “Applicant” means a person who makes a qualified investment in a community development financial institution certified by the office for which that person applies for either of the following pursuant to this article:
(1) An allocation of a portion of the current CDFI tax credit ceiling.
(2) A reservation of a portion of the anticipated CDFI tax credit ceiling of a subsequent year.
(b) “CDFI tax credit” means a tax credit allowed for investments in community development financial institutions pursuant to Sections 12209.8, 17053.58, or 23658, as applicable, of the Revenue and Taxation Code.
(c) “CDFI tax credit ceiling” means the total aggregate amount of qualified investments for which CDFI tax credits are allowed for each calendar year pursuant to paragraph (3) of subdivision (c) of Section 12209.8 of the Revenue and Taxation Code, paragraph (3) of subdivision (b) of Section 17053.58 of the Revenue and Taxation Code, and paragraph (3) of subdivision (b) of Section 23658 of the Revenue and Taxation Code.
(d) “Community development financial institution” has the same meaning as defined in Sections 12209.8, 17053.58, and 23658 of the Revenue and Taxation Code.
(e) “Qualified investment” means a qualified investment, as defined in Sections 12209.8, 17053.58, and 23658 of the Revenue and Taxation Code, for which an applicant seeks an allocation or reservation of CDFI tax credits pursuant to this article.

12100.81.
 For purposes of allocating CDFI tax credits in accordance with this article and Sections 12209.8, 17053.58, and 23658 of the Revenue and Taxation Code, the office shall do all of the following:
(a) Develop and provide forms for, and establish uniform procedures for the submission and review of, applications for CDFI tax credits in accordance with this article.
(b) Allocate CDFI tax credits for the current calendar year and reserve anticipated CDFI tax credits for a subsequent year, subject to the CDFI tax credit ceiling.
(c) (1) Accept and evaluate applications for certification from financial institutions and issue certificates that the community development financial institution qualified to receive qualified investments.
(2) To receive certification pursuant to this subdivision, the community development financial institution shall provide information to the office sufficient to satisfy the office that it meets the specific requirements of a community development financial institution for purposes of the CDFI tax credit program.
(3) The office may issue a certification pursuant to this subdivision for a specified period of time and may include reasonable conditions to effectuate the intent of this article and Sections 12209.8, 17053.58 and 23658 of the Revenue and Taxation Code. The office may suspend or revoke a certification, after affording the institution notice and the opportunity to be heard, if the office finds that a community development financial institution no longer meets the requirement for certification.
(d) (1) Accept and evaluate applications for certification from any community development financial institution on behalf of the applicant and issue certificates for qualified investments to applicants in an aggregate amount that do not exceed the CDFI tax credit ceiling. The certificate shall specify the amount eligible to be made as a qualified investment, the total amount of the credit to which the applicant is entitled for the year, and whether the amount of qualified investment certified is an allocation for the current year or a reservation for a subsequent year.
(2) In evaluating applications pursuant to this subdivision, the office shall give the highest priority 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.
(3) The office shall accept and evaluate applications pursuant to this subdivision throughout the calendar year and establish CDFI tax credit cycles as necessary in order to issue certificates to applicants granted the highest priority.
(e) Provide an annual listing to the California Department of Tax and Fee Administration, in the form or manner agreed upon by the California Department of Tax and Fee Administration, and the office, of the following information:
(1) The applicants who were issued certificates.
(2) The employer’s tax identification number and, if applicable, National Association of Insurance Commissioners company number of each applicant issued a certificate.
(3) The amount of the qualified investment made by each applicant.
(4) The total amount of qualified investments for purposes of the CDFI tax credit program.

12100.82.
 (a) A community development financial institution that receives a qualified investment shall do all of the following:
(1) Apply to the office for certification of its status as a community development financial institution.
(2) Submit an application containing the information specified in subdivision (b) to the office on behalf of the applicant for certification of the amount of the qualified investment and the CDFI credit amount allocated to the applicant, obtain the certification, and retain a copy of the certification.
(3) Provide an annual listing to the California Department of Tax and Fee Administration, in the form and manner agreed upon by the California Department of Tax and Fee Administration and the office, 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.
(4) Submit reports to the office, in accordance with Section 12100.83.
(b) An application for certification of the amount of qualified investment pursuant to paragraph (2) of subdivision (a) shall include all of the following information:
(1) A detailed description of the intended use of the investment funds including, but not limited to, the following:
(A) All of the programs, projects, and services that would be funded.
(B) The percentage of the intended use of the investment funds that would directly benefit low-to-moderate income households.
(C) The percentage of the intended use of the investment funds that would directly benefit rural areas.
(D) 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.
(2) (A) The following identifying information:
(i) Name of the applicant.
(ii) Postal address of the applicant, or residential address of the applicant if the applicant is an individual.
(iii) Phone number of the applicant.
(iv) Email address of the applicant.
(v) The applicant’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 office, and any public disclosure of that information shall be limited to the name of the applicant only.
(3) Whether the applicant seeks an allocation of CDFI tax credit for the current year or a reservation of anticipated CDFI tax credits for a subsequent year.

12100.83.
 (a) No later than January 1 of the year following the year in which it receives a qualified investment, a community development financial institution shall submit a report to the office on the use of that qualified investment in the form and manner prescribed by the office.
(b) On or before January 1, 2025, the Legislative Analyst shall prepare an analysis, based upon data provided by the California Department of Tax and Fee Administration, the Franchise Tax Board, and the office on or before September 30, 2024, of the tax credit investments provided for in Sections 12209.8, 17053.58, and 23658 of the Revenue and Taxation Code, including, but not limited to, the fiscal impact of the CDFI tax credits, what programs, projects, and other uses were funded or carried out by the community financial institution that were supported in whole or in part by CDFI tax credit investments, and the resulting benefits to economically disadvantaged communities and lowincome people in this state.
(c) On or before June 30, 2025, the Legislative Analyst shall submit a report to the Legislature, in compliance with Section 9795, on the effects of CDFI tax credits that includes the following:
(1) The number of applicants that receive a CDFI tax credit.
(2) The total amount of qualified investments made in community development financial institutions for which credits are allocated.
(3) The analysis described in subdivision (b).

12100.84.
 (a) The office may develop instructions, procedures, and standards for applications, and for administering the criteria for the evaluation of applications, submitted pursuant to this article. The office may, from time to time, adopt, amend, or repeal regulations to implement the provisions of this article and Sections 12209.8, 17053.58, and 23658 of the Revenue and Taxation Code.
(b) 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.
(c) Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2, any emergency regulation adopted or amended by the office pursuant to this section shall remain in effect until amended or repealed by the office.

SEC. 3.

 Section 12209.8 is added to the Revenue and Taxation Code, to read:

12209.8.
 (a) (1) 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)
(2) 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 in a community development financial institution that is certified by GO-Biz pursuant to Article 9 (commencing with Section 12100.80) of Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government Code. Unless otherwise specified in the annual Budget Act or other act making an appropriation for purposes of this section, the applicable credit percentage for each taxable year beginning on or after January 1, 2021, shall be 0 percent.
(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 GO-Biz 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, GO-Biz, that the investment is a qualified investment as defined in paragraph (3) of subdivision (d).
(3) (A) The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 17053.58, and Section 23658 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 GO-Biz 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 GO-Biz. If, after October 1, GO-Biz 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.
(d) For purposes of this section:
(1) “Community development financial institution” means a community development financial institution certified by the federal Community Development Financial Institution Fund under Part 1805 (commencing with Section 1805.100) of Chapter XVIII of Title 12 of the Code of Federal Regulations for which either of the following applies:
(A) The community development financial institution has its headquarters in this state.
(B) The community development financial institution has a record of lending in this state, based on either of the following:
(i) At least 25 percent of the community development financial institution’s loan portfolio provides financial assistance to persons or projects located in this state.
(ii) The community development financial institution has provided financing assistance in this state totaling at least five million dollars ($5,000,000) over the following time periods:
(I) If the community development financial institution is not a small and emerging community development financial institution, the three years preceding the date of its application for a grant under the program.
(II) If the community development financial institution is a small and emerging community development financial institution, any time period.
(2) “GO-Biz” means the Governor’s Office of Business and Economic Development.
(3) “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 GO-Biz. 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 the activities described in Section 12343 of the Government Code.
(e) (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.
(f) 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.
(g) The California Department of Tax and Fee Administration shall, as requested by GO-Biz, advise and assist in the administration of this section.

SEC. 4.

 Section 17053.58 is added to the Revenue and Taxation Code, to read:

17053.58.
 (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).
(2) 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 in a community development financial institution that is certified by GO-Biz pursuant to Article 9 (commencing with Section 12100.80) of Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government Code. Unless otherwise specified in the annual Budget Act or other act making an appropriation for purposes of this section, the applicable credit percentage for each taxable year beginning on or after January 1, 2021, shall be 0 percent.
(b) (1) Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless GO-Biz 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, GO-Biz that the investment is a qualified investment, as defined in paragraph (3) of subdivision (c).
(3) (A) The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 12209.8, and Section 23658 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 GO-Biz 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 GO-Biz. If, after October 1, GO-Biz 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.
(c) For purposes of this section:
(1) “Community development financial institution” means a community development financial institution certified by the federal Community Development Financial Institution Fund under Part 1805 (commencing with Section 1805.100) of Chapter XVIII of Title 12 of the Code of Federal Regulations for which either of the following applies:
(A) The community development financial institution has its headquarters in this state.
(B) The community development financial institution has a record of lending in this state, based on either of the following:
(i) At least 25 percent of the community development financial institution’s loan portfolio provides financial assistance to persons or projects located in this state.
(ii) The community development financial institution has provided financing assistance in this state totaling at least five million dollars ($5,000,000) over the following time periods:
(I) If the community development financial institution is not a small and emerging community development financial institution, the three years preceding the date of its application for a grant under the program.
(II) If the community development financial institution is a small and emerging community development financial institution, any time period.
(2) “GO-Biz” means the Governor’s Office of Business and Economic Development.
(3) “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 GO-Biz. 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 the activities described in Section 12343 of the Government Code.
(d) (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.
(e) 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.
(f) The Franchise Tax Board shall, as requested by GO-Biz, advise and assist in the administration of this section.

SEC. 5.

 Section 23658 is added to the Revenue and Taxation Code, to read:

23658.
 (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).
(2) 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 in a community development financial institution that is certified by GO-Biz pursuant to Article 9 (commencing with Section 12100.80) of Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government Code. Unless otherwise specified in the annual Budget Act or other act making an appropriation for purposes of this section, the applicable credit percentage for each taxable year beginning on or after January 1, 2021, shall be 0 percent.
(b) (1) Notwithstanding any other provision of this part, a credit shall not be allowed under this section unless GO-Biz 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, GO-Biz that the investment is a qualified investment, as defined in paragraph (3) of subdivision (c).
(3) (A) The aggregate amount of qualified investments made by all taxpayers pursuant to this section, Section 12209.8, and Section 17053.58 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 GO-Biz 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 GO-Biz. If, after October 1, GO-Biz 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.
(c) For purposes of this section:
(1) “Community development financial institution” means a community development financial institution certified by the federal Community Development Financial Institution Fund under Part 1805 (commencing with Section 1805.100) of Chapter XVIII of Title 12 of the Code of Federal Regulations for which either of the following applies:
(A) The community development financial institution has its headquarters in this state.
(B) The community development financial institution has a record of lending in this state, based on either of the following:
(i) At least 25 percent of the community development financial institution’s loan portfolio provides financial assistance to persons or projects located in this state.
(ii) The community development financial institution has provided financing assistance in this state totaling at least five million dollars ($5,000,000) over the following time periods:
(I) If the community development financial institution is not a small and emerging community development financial institution, the three years preceding the date of its application for a grant under the program.
(II) If the community development financial institution is a small and emerging community development financial institution, any time period.
(2) “GO-Biz” means the Governor’s Office of Business and Economic Development.
(3) “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 GO-Biz. 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 the activities described in Section 12343 of the Government Code.
(d) (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.
(e) 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.
(f) The Franchise Tax Board shall, as requested by GO-Biz, advise and assist in the administration of this section.

SEC. 6.

 For purposes of complying with Section 41 of the Revenue and Taxation Code, the Legislature finds and declares all of the following with respect to the credits allowed by Sections 12209.8, 17053.58, and 23658 of the Revenue and Taxation Code, as added by this act:
(a) The specific goals, purposes, and objectives that the credits allowed by Sections 12209.8, 17053.58, and 23658 of the Revenue and Taxation Code are to encourage investment in community development financial institutions that will in turn bolster economic development in this state.
(b) Detailed performance indicators for the Legislature to use in determining whether the credits allowed by Sections 12209.8, 17053.8, and 23658 of the Revenue and Taxation Code meet the goals, purposes, and objectives described in subdivision (a) shall be the following:
(1) The total number of taxpayers that receive a credit.
(2) The total amount of investments made in community development financial institutions for which credits are allocated.
(3) The use and impact of investments for which credits are allocated.
(c) The data collection requirements that will enable the Legislature to determine whether the credits the credits allowed by Sections 12209.8, 17053.8, and 23658 of the Revenue and Taxation Code meet the goals, purposes, and objectives described in subdivision (a) shall be the report required to be prepared and submitted by the Legislative Analyst pursuant to Section 12100.83 of the Government Code.