BILL NUMBER: SB 73	ENROLLED
	BILL TEXT

	PASSED THE ASSEMBLY  SEPTEMBER 12, 2001
	PASSED THE SENATE  JULY 5, 2001
	AMENDED IN SENATE  JUNE 19, 2001
	AMENDED IN SENATE  MARCH 26, 2001

INTRODUCED BY   Senator Dunn
   (Principal coauthors:  Senators Scott and Torlakson)
   (Principal coauthors:  Assembly Members Diaz, Keeley, Lowenthal,
and Migden)
   (Coauthor:  Assembly Member Chan)

                        JANUARY 10, 2001

   An act to amend Sections 12206, 17058, and 23610.5 of the Revenue
and Taxation Code, relating to taxation, to take effect immediately,
tax levy.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 73, Dunn.  Taxation:  low-income housing.
   Existing insurance tax law and the Personal Income Tax Law and the
Bank and Corporation Tax Law authorize, for so long as corresponding
provisions of federal law are in effect, a credit against the taxes
imposed by those state laws for certain amounts with respect to the
provision of specified low-income housing.  Those laws generally
provide, subject to the addition of certain other amounts, that the
maximum aggregate dollar amount of the credits allowed in each
calendar year may not exceed $50,000,000 for the 1999 calendar year
and each year thereafter.
   This bill would, for purposes of existing low-income housing tax
credits, provide a $70,000,000 maximum aggregate dollar amount for
the 2001 calendar year and each calendar year thereafter.  In
addition, this bill would for the 2002 calendar year, and, each
calendar year thereafter, provide an adjustment for inflation
measured by an increase in the Consumer Price Index.  This bill would
require the California Tax Credit Allocation Committee to review and
evaluate the geographic apportionment methodology of the low-income
housing tax credit program, as provided, and to report back to the
Legislature no later than June 30, 2002.
   This bill would take effect immediately as a tax levy.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 12206 of the Revenue and Taxation Code is
amended to read:
   12206.  (a) (1) There shall be allowed as a credit against the
"tax" (as defined by Section 12201) a state low-income housing tax
credit in an amount equal to the amount determined in subdivision
(c), computed in accordance with Section 42 of the Internal Revenue
Code, except as otherwise provided in this section.
   (2) "Taxpayer," for purposes of this section, means the sole owner
in the case of a C corporation, the partners in the case of a
partnership, and the shareholders in the case of an S corporation.
   (3) "Housing sponsor," for purposes of this section, means the
sole owner in the case of a C corporation, the partnership in the
case of a partnership, and the S corporation in the case of an S
corporation.
   (b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
   (A) The low-income housing project shall be located in California
and shall meet either of the following requirements:
   (i) The project's housing sponsor shall have been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue Code.
   (ii) It shall qualify for a credit under Section 42(h)(4)(B) of
the Internal Revenue Code.
   (B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code.  The committee may require a fee if
the application for the credit under this section is submitted in a
calendar year after the year the application is submitted for the
federal tax credit.
   (2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
   (B) In the case of a partnership or an S corporation, the housing
sponsor shall provide a copy of the California Tax Credit Allocation
Committee certification to the taxpayer.
   (C) The taxpayer shall attach a copy of the certification to any
return upon which a tax credit is claimed under this section.
   (D) In the case of a failure to attach a copy of the certification
for the year to the return in which a tax credit is claimed under
this section, no credit under this section shall be allowed for that
year until a copy of that certification is provided.
   (E) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code shall apply to this section.
   (F) No credit shall be allocated under this section to buildings
located in a difficult development area or a qualified census tract
as defined in Section 42 of the Internal Revenue Code for which the
eligible basis of a new building or the rehabilitation expenditure of
an existing building is 130 percent of that amount pursuant to
Section 42(d)(5)(C) of the Internal Revenue Code, unless the
committee reduces the amount of federal credit, with the approval of
the applicant, so that the combined amount of federal and state
credit shall not exceed the total credit allowable pursuant to this
section and Section 42(b) of the Internal Revenue Code, computed
without regard to Section 42(d)(5)(C) of the Internal Revenue Code.
   (c) Section 42(b) of the Internal Revenue Code shall be modified
as follows:
   (1) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
   (A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, in lieu of the percentage prescribed in Section 42(b)(1)(A) of
the Internal Revenue Code.
   (B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
   (2) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
   (A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
   (B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
   (3) For purposes of this section, the term "at risk of conversion,"
with respect to an existing building means a building that satisfies
all of the following criteria:
   (A) The building is presently owned by a housing sponsor other
than a qualified nonprofit organization.
   (B) The building is a federally assisted building for which the
low-income use restrictions will terminate or the mortgage on the
building is eligible for incentives under Subtitle 13 of the
Emergency Low Income Housing Assistance Act of 1987 or under Section
502(c) of the Housing Act of 1949, anytime in the two calendar years
after the year of application to the California Tax Credit Allocation
Committee, and the purchaser has received preliminary approval from
the applicable federal agency for a maximum level of incentives
through a plan of action.
   (C) The person acquiring the building enters into a regulatory
agreement that requires the building to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the building.
   (D) The building satisfies the requirements of Section 42(e) of
the Internal Revenue Code regarding rehabilitation expenditures,
except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
apply.
   (d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code is modified by adding
the following requirements:
   (1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
which, at the election of the taxpayer, is equal to:
   (A) An amount not to exceed 8 percent of the lesser of:
   (i) The owner equity which shall include the amount of the capital
contributions actually paid to the housing sponsor and shall not
include any amounts until they are paid on an investor note.
   (ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.
   (B) The amount of the cash-flow from those units in the building
that are not low-income units.  For purposes of computing cash-flow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code.
   (C) Any amount allowed to be distributed under subparagraph (A)
that is not available for distribution during the first five years of
the compliance period may accumulate and be distributed any time
during the first 15 years of the compliance period but not
thereafter.
   (2) The limitation on return shall apply in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an S corporation.
   (3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code.
   (e) The provisions of Section 42(f) of the Internal Revenue Code
shall be modified as follows:
   (1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code is modified by substituting "four taxable
years" for "10 taxable years."
   (2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code shall not
apply to the tax credit under this section.
   (3) Section 42(f)(3) of the Internal Revenue Code is modified to
read:
   If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the later of the taxable years in which the increase
in qualified basis occurs.
   (f) The provisions of Section 42(h) of the Internal Revenue Code
shall be modified as follows:
   (1) Section 42(h)(2) of the Internal Revenue Code shall not be
applicable and instead the following provisions shall be applicable:

   The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which the
allocation is made.
   (2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code shall
not be applicable.
   (g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 17058, and Section 23610.5 shall be
an amount equal to the sum of all the following:
   (1) Seventy million dollars ($70,000,000) for the 2001 calendar
year, and, for the 2002 calendar year and each calendar year
thereafter, seventy million dollars ($70,000,000) increased by the
percentage, if any, by which the Consumer Price Index for the
preceding calendar year exceeds the Consumer Price Index for the 2001
calendar year.  For the purposes of this paragraph, the term
"Consumer Price Index" means the last Consumer Price Index for all
urban consumers published by the federal Department of Labor.
   (2) The unused housing credit ceiling, if any, for the preceding
calendar years.
   (3) The amount of housing credit ceiling returned in the calendar
year.  For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income housing project within the period
required by this section or to any project with respect to which an
allocation is canceled by mutual consent of the California Tax Credit
Allocation Committee and the allocation recipient.
   (h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code is modified to mean, with respect to any
building, the period of 30-consecutive taxable years beginning with
the first taxable year of the credit period with respect thereto.
   (i) (1) Section 42(j) of the Internal Revenue Code shall not be
applicable and the provisions in paragraph (2) shall be substituted
in its place.
   (2) The requirements of this section shall be set forth in a
regulatory agreement between the California Tax Credit Allocation
Committee and the housing sponsor, which agreement shall be
subordinated, when required, to any lien or encumbrance of any banks
or other institutional lenders to the project.  The regulatory
agreement entered into pursuant to subdivision (f) of Section
50199.14 of the Health and Safety Code, shall apply, providing the
agreement includes all of the following provisions:
   (A) A term not less than the compliance period.
   (B) A requirement that the agreement be filed in the official
records of the county in which the qualified low-income housing
project is located.
   (C) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
   (D) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto
and which allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation applicable
to the building, the right to enforce the regulatory agreement in
any state court.
   (E) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code as modified by this section.
   (F) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee and the local agency
that can enforce the regulatory agreement if there is a determination
by the Internal Revenue Service that the project is not in
compliance with Section 42(g) of the Internal Revenue Code.
   (G) A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.
   (H) The remedies available in the event of a default under the
regulatory agreement that is not cured within a reasonable cure
period, include, but are not limited to, allowing any of the parties
designated to enforce the regulatory agreement to collect all rents
with respect to the project; taking possession of the project and
operating the project in accordance with the regulatory agreement
until the enforcer determines the housing sponsor is in a position to
operate the project in accordance with the regulatory agreement;
applying to any court for specific performance; securing the
appointment of a receiver to operate the project; or any other relief
as may be appropriate.
   (j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered.  The
committee shall establish application filing deadlines, the maximum
percentage of federal and state low-income housing tax credit ceiling
which may be allocated by the committee in that period, and the
approximate date on which allocations shall be made.  If the
enactment of federal or state law, the adoption of rules or
regulations, or other similar events prevent the use of two
allocation periods, the committee may reduce the number of periods
and adjust the filing deadlines, maximum percentage of credit
allocated, and the allocation dates.
   (2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code.  In
adopting this plan, the committee shall comply with the provisions of
Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code.
   (3) Notwithstanding Section 42(m) of the Internal Revenue Code,
the California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
   (A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
   (i) The housing sponsor shall demonstrate there is a need and
demand for low-income housing in the community or region for which it
is proposed.
   (ii) The project's proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and that the
proposed operating income shall be adequate to operate the project
for the extended use period.
   (iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
   (iv) The housing sponsor shall have and maintain control of the
site for the project.
   (v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
   (vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.

   (vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies, and required equity, and a development fee that
does not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
   (B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if
both of the following apply:
   (i) The project serves the lowest income tenants at rents
affordable to those tenants.
   (ii) The project is obligated to serve qualified tenants for the
longest period.
   (C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
   (i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units is comprised
of low-income units with three and more bedrooms.
   (ii) Projects providing single room occupancy units serving very
low income tenants.
   (iii) Existing projects that are "at risk of conversion," as
defined by paragraph (4) of subdivision (c).
   (iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
   (v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
   (4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application except to break a tie when
two or more of the projects have an equal rating.
   (k) Section 42(l) of the Internal Revenue Code shall be modified
as follows:
   The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
   (l) In the case where the state credit allowed under this section
exceeds the "tax," the excess may be carried over to reduce the "tax"
in the following year, and succeeding years if necessary, until the
credit has been exhausted.
   (m) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, shall apply to calendar years after 1993.
   (n) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall not apply.
   (o) This section shall remain in effect for as long as Section 42
of the Internal Revenue Code, relating to low-income housing credits,
remains in effect.
  SEC. 2.  Section 17058 of the Revenue and Taxation Code is amended
to read:
   17058.  (a) (1) There shall be allowed as a credit against the
amount of net tax (as defined in Section 17039) a state low-income
housing credit in an amount equal to the amount determined in
subdivision (c), computed in accordance with the provisions of
Section 42 of the Internal Revenue Code, except as otherwise provided
in this section.
   (2) "Taxpayer" for purposes of this section means the sole owner
in the case of an individual, the partners in the case of a
partnership, and the shareholders in the case of an S corporation.
   (3) "Housing sponsor" for purposes of this section means the sole
owner in the case of an individual, the partnership in the case of a
partnership, and the S corporation in the case of an S corporation.
   (b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
   (A) The low-income housing project shall be located in California
and shall meet either of the following requirements:
   (i) The project's housing sponsor shall have been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue Code.
   (ii) It shall qualify for a credit under Section 42(h)(4)(B) of
the Internal Revenue Code.
   (B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code.  The committee may require a fee if
the application for the credit under this section is submitted in a
calendar year after the year the application is submitted for the
federal tax credit.
   (2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
   (B) In the case of a partnership or an S corporation, the housing
sponsor shall provide a copy of the California Tax Credit Allocation
Committee certification to the taxpayer.
   (C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
   (D) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code shall apply to this section.
   (E) For buildings located in designated difficult development
areas or qualified census tracts as defined in Section 42(d)(5)(C) of
the Internal Revenue Code, credits may be allocated under this
section in the amounts prescribed in subdivision (c), provided that
the amount of credit allocated under Section 42 of the Internal
Revenue Code is computed on 100 percent of the qualified basis of the
building.
   (c) Section 42(b) of the Internal Revenue Code shall be modified
as follows:
   (1) In the case of any qualified low-income building placed in
service by the housing sponsor during 1987, the term "applicable
percentage" means 9 percent for each of the first three years and 3
percent for the fourth year for new buildings (whether or not the
building is federally subsidized) and for existing buildings.
   (2) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
   (A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, in lieu of the percentage prescribed in Section 42(b)(1)(A) of
the Internal Revenue Code.
   (B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
   (3) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
   (A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
   (B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
   (4) For purposes of this section, the term "at risk of conversion,"
with respect to an existing building means a building that satisfies
all of the following criteria:
   (A) The building is presently owned by a housing sponsor other
than a qualified nonprofit organization.
   (B) The building is a federally assisted building for which the
low-income use restrictions will terminate or the building is
eligible for incentives under Subtitle 13 of the Emergency Low Income
Housing Preservation Act of 1987 or under Section 502(c) of the
Housing Act of 1949, anytime in the two calendar years after the year
of application to the California Tax Credit Allocation Committee,
and the purchaser has received preliminary approval from the
applicable federal agency for a maximum level of incentives through a
plan of action.
   (C) The person acquiring the building enters into a regulatory
agreement that requires the building to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the building.
   (D) The building satisfies the requirements of Section 42(e) of
the Internal Revenue Code regarding rehabilitation expenditures,
except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
apply.
   (d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code is modified by adding
the following requirements:
   (1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
that, at the election of the taxpayer, is equal to:
   (A) An amount not to exceed 8 percent of the lesser of:
   (i) The owner equity that shall include the amount of the capital
contributions actually paid to the housing sponsor and shall not
include any amounts until they are paid on an investor note.
   (ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.
   (B) The amount of the cash-flow from those units in the building
that are not low-income units.  For purposes of computing cash-flow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code.
                                               (C) Any amount allowed
to be distributed under subparagraph (A) that is not available for
distribution during the first five years of the compliance period may
be accumulated and distributed any time during the first 15 years of
the compliance period but not thereafter.
   (2) The limitation on return shall apply in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an S corporation.
   (3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code.
   (e) The provisions of Section 42(f) of the Internal Revenue Code
shall be modified as follows:
   (1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code is modified by substituting "four taxable
years" for "10 taxable years."
   (2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code shall not
apply to the tax credit under this section.
   (3) Section 42(f)(3) of the Internal Revenue Code is modified to
read:
   If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the taxable year in which the increase in qualified
basis occurs.
   (f) The provisions of Section 42(h) of the Internal Revenue Code
shall be modified as follows:
   (1) Section 42(h)(2) of the Internal Revenue Code shall not be
applicable and instead the following provisions shall be applicable:

   The total amount for the four-year period of the housing credit
dollars allocated in a calendar year to any building shall reduce the
aggregate housing credit dollar amount of the California Tax Credit
Allocation Committee for the calendar year in which the allocation is
made.
   (2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code shall
not be applicable to this section.
   (g) The aggregate housing credit dollar amount which may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 12206, and Section 23610.5 shall be
an amount equal to the sum of all the following:
   (1) Seventy million dollars ($70,000,000) for the 2001 calendar
year, and, for the 2002 calendar year and each calendar year
thereafter, seventy million dollars ($70,000,000)  increased by the
percentage, if any, by which the Consumer Price Index for the
preceding calendar year exceeds the Consumer Price Index for the 2001
calendar year.  For the purposes of this paragraph, the term
"Consumer Price Index" means the last Consumer Price Index for all
urban consumers published by the federal Department of Labor.
   (2) The unused housing credit ceiling, if any, for the preceding
calendar years.
   (3) The amount of housing credit ceiling returned in the calendar
year.  For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income housing project within the period
required by this section or to any project with respect to which an
allocation is canceled by mutual consent of the California Tax Credit
Allocation Committee and the allocation recipient.
   (h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code is modified to mean, with respect to any
building, the period of 30 consecutive taxable years beginning with
the first taxable year of the credit period with respect thereto.
   (i) Section 42(j) of the Internal Revenue Code shall not be
applicable and the following requirements of this section shall be
set forth in a regulatory agreement between the California Tax Credit
Allocation Committee and the housing sponsor, which agreement shall
be subordinated, when required, to any lien or encumbrance of any
banks or other institutional lenders to the project.  The regulatory
agreement entered into pursuant to subdivision (f) of Section
50199.14 of the Health and Safety Code shall apply, providing the
agreement includes all of the following provisions:
   (1) A term not less than the compliance period.
   (2) A requirement that the agreement be filed in the official
records of the county in which the qualified low-income housing
project is located.
   (3) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
   (4) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto
and which allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation applicable
to the building, the right to enforce the regulatory agreement in
any state court.
   (5) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code as modified by this section.
   (6)  A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee if there is a
determination by the Internal Revenue Service that the project is not
in compliance with Section 42(g) of the Internal Revenue Code.
   (7)  A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.
   (8)  The remedies available in the event of a default under the
regulatory agreement that is not cured within a reasonable cure
period, include, but are not limited to, allowing any of the parties
designated to enforce the regulatory agreement to collect all rents
with respect to the project; taking possession of the project and
operating the project in accordance with the regulatory agreement
until the enforcer determines the housing sponsor is in a position to
operate the project in accordance with the regulatory agreement;
applying to any court for specific performance; securing the
appointment of a receiver to operate the project; or any other relief
as may be appropriate.
   (j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered.  The
committee shall establish application filing deadlines, the maximum
percentage of federal and state low-income housing tax credit ceiling
that may be allocated by the committee in that period, and the
approximate date on which allocations shall be made.  If the
enactment of federal or state law, the adoption of rules or
regulations or other similar events prevent the use of two allocation
periods, the committee may reduce the number of periods and adjust
the filing deadlines, maximum percentage of credit allocated, and the
allocation dates.
   (2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code.  In
adopting this plan, the committee shall comply with the provisions of
Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code.
   (3) Notwithstanding Section 42(m) of the Internal Revenue Code,
the California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
   (A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
   (i) The housing sponsor shall demonstrate there is a need and
demand for low-income housing in the community or region for which it
is proposed.
   (ii) The project's proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and that the
proposed operating income shall be adequate to operate the project
for the extended use period.
   (iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
   (iv) The housing sponsor shall have and maintain control of the
site for the project.
   (v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
   (vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.

   (vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies, and required equity, and a development fee that
does not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
   (B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if
both of the following apply:
   (i) The project serves the lowest income tenants at rents
affordable to those tenants.
   (ii) The project is obligated to serve qualified tenants for the
longest period.
   (C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
   (i) Projects serving large families in which a substantial number,
as defined by the committee of all residential units is comprised of
low-income units with three and more bedrooms.
   (ii) Projects providing single room occupancy units serving very
low income tenants.
   (iii) Existing projects that are "at risk of conversion," as
defined by paragraph (4) of subdivision (c).
   (iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
   (v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
   (4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application.
   (k) Section 42(l) of the Internal Revenue Code shall be modified
as follows:
   The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
   (l) In the case where the credit allowed under this section
exceeds the net tax, the excess credit may be carried over to reduce
the net tax in the following year, and succeeding taxable years, if
necessary, until the credit has been exhausted.
   (m) A project that received an allocation of a 1989 federal
housing credit dollar amount shall be eligible to receive an
allocation of a 1990 state housing credit dollar amount, subject to
all of the following conditions:
   (1) The project was not placed in service prior to 1990.
   (2) To the extent the amendments made to this section by the
Statutes of 1990 conflict with any provisions existing in this
section prior to those amendments, the prior provisions of law shall
prevail.
   (3) Notwithstanding paragraph (2), a project applying for an
allocation under this subdivision shall be subject to the
requirements of paragraph (3) of subdivision (j).
   (n) The credit period with respect to an allocation of credit in
1989 by the California Tax Credit Allocation Committee of which any
amount is attributable to unallocated credit from 1987 or 1988 shall
not begin until after December 31, 1989.
   (o) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, shall apply to calendar years after 1989.
   (p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall not apply.
   (q) Any unused credit may continue to be carried forward, as
provided in subdivision (l), until the credit has been exhausted.
   This section shall remain in effect on and after December 1, 1990,
for as long as Section 42 of the Internal Revenue Code, relating to
low-income housing credits, remains in effect.
   (r) The amendments to this section by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 1994.
  SEC. 3.  Section 23610.5 of the Revenue and Taxation Code is
amended to read:
   23610.5.  (a) (1) There shall be allowed as a credit against the
"tax" (as defined by Section 23036) a state low-income housing tax
credit in an amount equal to the amount determined in subdivision
(c), computed in accordance with Section 42 of the Internal Revenue
Code of 1986, except as otherwise provided in this section.
   (2) "Taxpayer," for purposes of this section, means the sole owner
in the case of a C corporation, the partners in the case of a
partnership, and the shareholders in the case of an S corporation.
   (3) "Housing sponsor," for purposes of this section, means the
sole owner in the case of a C corporation, the partnership in the
case of a partnership, and the S corporation in the case of an S
corporation.
   (b) (1) The amount of the credit allocated to any housing sponsor
shall be authorized by the California Tax Credit Allocation
Committee, or any successor thereof, based on a project's need for
the credit for economic feasibility in accordance with the
requirements of this section.
   (A) The low-income housing project shall be located in California
and shall meet either of the following requirements:
   (i) The project's housing sponsor has been allocated by the
California Tax Credit Allocation Committee a credit for federal
income tax purposes under Section 42 of the Internal Revenue Code.
   (ii) It qualifies for a credit under Section 42(h)(4)(B) of the
Internal Revenue Code.
   (B) The California Tax Credit Allocation Committee shall not
require fees for the credit under this section in addition to those
fees required for applications for the tax credit pursuant to Section
42 of the Internal Revenue Code.  The committee may require a fee if
the application for the credit under this section is submitted in a
calendar year after the year the application is submitted for the
federal tax credit.
   (2) (A) The California Tax Credit Allocation Committee shall
certify to the housing sponsor the amount of tax credit under this
section allocated to the housing sponsor for each credit period.
   (B) In the case of a partnership or an S corporation, the housing
sponsor shall provide a copy of the California Tax Credit Allocation
Committee certification to the taxpayer.
   (C) The taxpayer shall, upon request, provide a copy of the
certification to the Franchise Tax Board.
   (D) All elections made by the taxpayer pursuant to Section 42 of
the Internal Revenue Code shall apply to this section.
   (E) For buildings located in designated difficult development
areas or qualified census tracts as defined in Section 42(d)(5)(C) of
the Internal Revenue Code, credits may be allocated under this
section in the amounts prescribed in subdivision (c), provided that
the amount of credit allocated under Section 42 of the Internal
Revenue Code is computed on 100 percent of the qualified basis of the
building.
   (c) Section 42(b) of the Internal Revenue Code shall be modified
as follows:
   (1) In the case of any qualified low-income building placed in
service by the housing sponsor during 1987, the term "applicable
percentage" means 9 percent for each of the first three years and 3
percent for the fourth year for new buildings (whether or not the
building is federally subsidized) and for existing buildings.
   (2) In the case of any qualified low-income building that receives
an allocation after 1989 and is a new building not federally
subsidized, the term "applicable percentage" means the following:
   (A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are not
federally subsidized for the taxable year, determined in accordance
with the requirements of Section 42(b)(2) of the Internal Revenue
Code, in lieu of the percentage prescribed in Section 42(b)(1)(A).
   (B) For the fourth year, the difference between 30 percent and the
sum of the applicable percentages for the first three years.
   (3) In the case of any qualified low-income building that receives
an allocation after 1989 and that is a new building that is
federally subsidized or that is an existing building that is "at risk
of conversion," the term "applicable percentage" means the
following:
   (A) For each of the first three years, the percentage prescribed
by the Secretary of the Treasury for new buildings that are federally
subsidized for the taxable year.
   (B) For the fourth year, the difference between 13 percent and the
sum of the applicable percentages for the first three years.
   (4) For purposes of this section, the term "at risk of conversion,"
with respect to an existing building means a building that satisfies
all of the following criteria:
   (A) The building is presently owned by a housing sponsor other
than a qualified nonprofit organization.
   (B) The building is a federally assisted building for which the
low-income use restrictions will terminate or the building is
eligible for prepayment under Subtitle 13 of the Emergency Low Income
Housing Assistance Act of 1987 or under Section 502(c) of the
Housing Act of 1949, anytime in the two calendar years after the year
of application to the California Tax Credit Allocation Committee,
and the purchaser has received preliminary approval from the
applicable federal agency for a maximum level of incentives through a
plan of action.
   (C) The person acquiring the building enters into a regulatory
agreement that requires the building to be operated in accordance
with the requirements of this section for a period equal to the
greater of 55 years or the life of the building.
   (D) The building satisfies the requirements of Section 42(e) of
the Internal Revenue Code regarding rehabilitation expenditures,
except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
apply.
   (d) The term "qualified low-income housing project" as defined in
Section 42(c)(2) of the Internal Revenue Code is modified by adding
the following requirements:
   (1) The taxpayer shall be entitled to receive a cash distribution
from the operations of the project, after funding required reserves,
which, at the election of the taxpayer, shall be equal to:
   (A) An amount not to exceed 8 percent of the lesser of:
   (i) The owner equity, which shall include the amount of the
capital contributions actually paid to the housing sponsor and shall
not include any amounts until they are paid on an investor note.
   (ii) Twenty percent of the adjusted basis of the building as of
the close of the first taxable year of the credit period.
   (B) The amount of the cash-flow from those units in the building
that are not low-income units.  For purposes of computing cash-flow
under this subparagraph, operating costs shall be allocated to the
low-income units using the "floor space fraction," as defined in
Section 42 of the Internal Revenue Code.
   (C) Any amount allowed to be distributed under subparagraph (A)
that is not available for distribution during the first five years of
the compliance period may accumulate and be distributed at any time
during the first 15 years of the compliance period but not
thereafter.
   (2) The limitation on return shall apply in the aggregate to the
partners if the housing sponsor is a partnership and in the aggregate
to the shareholders if the housing sponsor is an S corporation.
   (3) The housing sponsor shall apply any cash available for
distribution in excess of the amount eligible to be distributed under
paragraph (1) to reduce the rent on rent-restricted units or to
increase the number of rent-restricted units subject to the tests of
Section 42(g)(1) of the Internal Revenue Code.
   (e) The provisions of Section 42(f) of the Internal Revenue Code
shall be modified as follows:
   (1) The term "credit period" as defined in Section 42(f)(1) of the
Internal Revenue Code is modified by substituting "four taxable
years" for "10 taxable years."
   (2) The special rule for the first taxable year of the credit
period under Section 42(f)(2) of the Internal Revenue Code shall not
apply to the tax credit under this section.
   (3) Section 42(f)(3) of the Internal Revenue Code is modified to
read:
   If, as of the close of any taxable year in the compliance period,
after the first year of the credit period, the qualified basis of any
building exceeds the qualified basis of that building as of the
close of the first year of the credit period, the housing sponsor, to
the extent of its tax credit allocation, shall be eligible for a
credit on the excess in an amount equal to the applicable percentage
determined pursuant to subdivision (c) for the four-year period
beginning with the later of the taxable years in which the increase
in qualified basis occurs.
   (f) The provisions of Section 42(h) of the Internal Revenue Code
shall be modified as follows:
   (1) Section 42(h)(2) of the Internal Revenue Code shall not be
applicable and instead the following provisions shall be applicable:

   The total amount for the four-year credit period of the housing
credit dollars allocated in a calendar year to any building shall
reduce the aggregate housing credit dollar amount of the California
Tax Credit Allocation Committee for the calendar year in which the
allocation is made.
   (2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)
(I), (7), and (8) of Section 42(h) of the Internal Revenue Code shall
not be applicable.
   (g) The aggregate housing credit dollar amount that may be
allocated annually by the California Tax Credit Allocation Committee
pursuant to this section, Section 12206, and Section 17058 shall be
an amount equal to the sum of all the following:
   (1) Seventy million dollars ($70,000,000) for the 2001 calendar
year, and, for the 2002 calendar year and each calendar year
thereafter, seventy million dollars ($70,000,000) increased by the
percentage, if any, by which the Consumer Price Index for the
preceding calendar year exceeds the Consumer Price Index for the 2001
calendar year.  For the purposes of this paragraph, the term
"Consumer Price Index" means the last Consumer Price Index for all
urban consumers published by the federal Department of Labor.
   (2) The unused housing credit ceiling, if any, for the preceding
calendar years.
   (3) The amount of housing credit ceiling returned in the calendar
year.  For purposes of this paragraph, the amount of housing credit
dollar amount returned in the calendar year equals the housing credit
dollar amount previously allocated to any project that does not
become a qualified low-income housing project within the period
required by this section or to any project with respect to which an
allocation is canceled by mutual consent of the California Tax Credit
Allocation Committee and the allocation recipient.
   (h) The term "compliance period" as defined in Section 42(i)(1) of
the Internal Revenue Code is modified to mean, with respect to any
building, the period of 30 consecutive taxable years beginning with
the first taxable year of the credit period with respect thereto.
   (i) Section 42(j) of the Internal Revenue Code shall not be
applicable and the following shall be substituted in its place:
   The requirements of this section shall be set forth in a
regulatory agreement between the California Tax Credit Allocation
Committee and the housing sponsor, and this agreement shall be
subordinated, when required, to any lien or encumbrance of any banks
or other institutional lenders to the project.  The regulatory
agreement entered into pursuant to subdivision (f) of Section
50199.14 of the Health and Safety Code shall apply, provided that the
agreement includes all of the following provisions:
   (1) A term not less than the compliance period.
   (2) A requirement that the agreement be filed in the official
records of the county in which the qualified low-income housing
project is located.
   (3) A provision stating which state and local agencies can enforce
the regulatory agreement in the event the housing sponsor fails to
satisfy any of the requirements of this section.
   (4) A provision that the regulatory agreement shall be deemed a
contract enforceable by tenants as third-party beneficiaries thereto,
and that allows individuals, whether prospective, present, or former
occupants of the building, who meet the income limitation applicable
to the building the right to enforce the regulatory agreement in any
state court.
   (5) A provision incorporating the requirements of Section 42 of
the Internal Revenue Code as modified by this section.
   (6) A requirement that the housing sponsor notify the California
Tax Credit Allocation Committee or its designee if there is a
determination by the Internal Revenue Service that the project is not
in compliance with Section 42(g) of the Internal Revenue Code.
   (7) A requirement that the housing sponsor, as security for the
performance of the housing sponsor's obligations under the regulatory
agreement, assign the housing sponsor's interest in rents that it
receives from the project, provided that until there is a default
under the regulatory agreement, the housing sponsor is entitled to
collect and retain the rents.

  (8) A provision that the remedies available in the event of a
default under the regulatory agreement that is not cured within a
reasonable cure period include, but are not limited to, allowing any
of the parties designated to enforce the regulatory agreement to
collect all rents with respect to the project; taking possession of
the project and operating the project in accordance with the
regulatory agreement until the enforcer determines the housing
sponsor is in a position to operate the project in accordance with
the regulatory agreement; applying to any court for specific
performance; securing the appointment of a receiver to operate the
project; or any other relief as may be appropriate.
   (j) (1) The committee shall allocate the housing credit on a
regular basis consisting of two or more periods in each calendar year
during which applications may be filed and considered.  The
committee shall establish application filing deadlines, the maximum
percentage of federal and state low-income housing tax credit ceiling
that may be allocated by the committee in that period, and the
approximate date on which allocations shall be made.  If the
enactment of federal or state law, the adoption of rules or
regulations, or other similar events prevent the use of two
allocation periods, the committee may reduce the number of periods
and adjust the filing deadlines, maximum percentage of credit
allocated, and allocation dates.
   (2) The committee shall adopt a qualified allocation plan, as
provided in Section 42(m)(1) of the Internal Revenue Code.  In
adopting this plan, the committee shall comply with the provisions of
Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue Code.
   (3) Notwithstanding Section 42(m) of the Internal Revenue Code,
the California Tax Credit Allocation Committee shall allocate housing
credits in accordance with the qualified allocation plan and
regulations, which shall include the following provisions:
   (A) All housing sponsors, as defined by paragraph (3) of
subdivision (a), shall demonstrate at the time the application is
filed with the committee that the project meets the following
threshold requirements:
   (i) The housing sponsor shall demonstrate that there is a need for
low-income housing in the community or region for which it is
proposed.
   (ii) The project's proposed financing, including tax credit
proceeds, shall be sufficient to complete the project and shall be
adequate to operate the project for the extended use period.
   (iii) The project shall have enforceable financing commitments,
either construction or permanent financing, for at least 50 percent
of the total estimated financing of the project.
   (iv) The housing sponsor shall have and maintain control of the
site for the project.
   (v) The housing sponsor shall demonstrate that the project
complies with all applicable local land use and zoning ordinances.
   (vi) The housing sponsor shall demonstrate that the project
development team has the experience and the financial capacity to
ensure project completion and operation for the extended use period.

   (vii) The housing sponsor shall demonstrate the amount of tax
credit that is necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the extended use period, taking into account operating
expenses, a supportable debt service, reserves, funds set aside for
rental subsidies, and required equity, and a development fee that
does not exceed a specified percentage of the eligible basis of the
project prior to inclusion of the development fee in the eligible
basis, as determined by the committee.
   (B) The committee shall give a preference to those projects
satisfying all of the threshold requirements of subparagraph (A) if
both of the following apply:
   (i) The project serves the lowest income tenants at rents
affordable to those tenants.
   (ii) The project is obligated to serve qualified tenants for the
longest period.
   (C) In addition to the provisions of subparagraphs (A) and (B),
the committee shall use the following criteria in allocating housing
credits:
   (i) Projects serving large families in which a substantial number,
as defined by the committee, of all residential units are low-income
units with three and more bedrooms.
   (ii) Projects providing single-room occupancy units serving very
low income tenants.
   (iii) Existing projects that are "at risk of conversion," as
defined by paragraph (4) of subdivision (c).
   (iv) Projects for which a public agency provides direct or
indirect long-term financial support for at least 15 percent of the
total project development costs or projects for which the owner's
equity constitutes at least 30 percent of the total project
development costs.
   (v) Projects that provide tenant amenities not generally available
to residents of low-income housing projects.
   (4) For purposes of allocating credits pursuant to this section,
the committee shall not give preference to any project by virtue of
the date of submission of its application except to break a tie when
two or more of the projects have an equal rating.
   (5) Not less than 20 percent of the low-income housing tax credits
available annually under this section, Section 12206, and Section
17058 shall be set aside for allocation to rural areas as defined in
Section 50199.21 of the Health and Safety Code.  Any amount of credit
set aside for rural areas remaining on or after October 31 of any
calendar year shall be available for allocation to any eligible
project.  No amount of credit set aside for rural areas shall be
considered available for any eligible project so long as there are
eligible rural applications pending on October 31.
   (k) Section 42(l) of the Internal Revenue Code shall be modified
as follows:
   The term "secretary" shall be replaced by the term "California
Franchise Tax Board."
   (l) In the case where the state credit allowed under this section
exceeds the "tax," the excess may be carried over to reduce the "tax"
in the following year, and succeeding years if necessary, until the
credit has been exhausted.
   (m) A project that received an allocation of a 1989 federal
housing credit dollar amount shall be eligible to receive an
allocation of a 1990 state housing credit dollar amount, subject to
all of the following conditions:
   (1) The project was not placed in service prior to 1990.
   (2) To the extent the amendments made to this section by the
Statutes of 1990 conflict with any provisions existing in this
section prior to those amendments, the prior provisions of law shall
prevail.
   (3) Notwithstanding paragraph (2), a project applying for an
allocation under this subdivision shall be subject to the
requirements of paragraph (3) of subdivision (j).
   (n) The credit period with respect to an allocation of credit in
1989 by the California Tax Credit Allocation Committee of which any
amount is attributable to unallocated credit from 1987 or 1988 shall
not begin until after December 31, 1989.
   (o) The provisions of Section 11407(a) of Public Law 101-508,
relating to the effective date of the extension of the low-income
housing credit, shall apply to calendar years after 1989.
   (p) The provisions of Section 11407(c) of Public Law 101-508,
relating to election to accelerate credit, shall not apply.
   (q) (1) A corporation may elect to assign any portion of any
credit allowed under this section to one or more affiliated
corporations for each taxable year in which the credit is allowed.
For purposes of this subdivision, "affiliated corporation" has the
meaning provided in subdivision (b) of Section 25110, as that section
was amended by Chapter 881 of the Statutes of 1993, as of the last
day of the taxable year in which the credit is allowed, except that
"100 percent" is substituted for "more than 50 percent" wherever it
appears in the section, as that section was amended by Chapter 881 of
the Statutes of 1993, and "voting common stock" is substituted for
"voting stock" wherever it appears in the section, as that section
was amended by Chapter 881 of the Statutes of 1993.
   (2) The election provided in paragraph (1):
   (A) May be based on any method selected by the corporation that
originally receives the credit.
   (B) Shall be irrevocable for the taxable year the credit is
allowed, once made.
   (C) May be changed for any subsequent taxable year if the election
to make the assignment is expressly shown on each of the returns of
the affiliated corporations that assign and receive the credits.
   (r) Any unused credit may continue to be carried forward, as
provided in subdivision (k), until the credit has been exhausted.
   This section shall remain in effect on or after December 1, 1990,
for as long as Section 42 of the Internal Revenue Code, relating to
low-income housing credits, remains in effect.
   (s) The amendments to this section made by the act adding this
subdivision shall apply only to taxable years beginning on or after
January 1, 1994, except that paragraph (1) of subdivision (q), as
amended, shall apply to taxable years beginning on or after January
1, 1993.
  SEC. 4.  The California Tax Credit Allocation Committee shall
review and evaluate the geographic apportionment methodology of the
low-income housing tax credit program, taking into account, among
other things, an equitable distribution of tax credits in accordance
with regional and local housing needs, and shall report back to the
Legislature no later than June 30, 2002.
  SEC. 5.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.