Amended in Assembly April 17, 2013

Amended in Assembly March 4, 2013

California Legislature—2013–14 Regular Session

Assembly BillNo. 32


Introduced by Assembly Member John A. Pérez

December 3, 2012


An act to amend Sections 12209, 17053.57, and 23657 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 32, as amended, John A. Pérez. Insurance taxes: income taxes: credits: community development financial institution investments.

Existing laws governing the taxation of insurers, the Personal Income Tax Law, and the Corporation Tax Law, authorize, until January 1, 2017, a credit in an amount equal to 20% of a qualified investment, as defined, made into a community development financial institution, as defined, but not to exceed, in the aggregate amount under all those laws, $10,000,000 per year. Existing law provides that a credit shall not be allowed under those laws unless the California Organized Investment Network certifies that the investment made by the taxpayer is a qualified investment, as defined.

The bill would increase the $10,000,000 limitation on the aggregate amount of qualified investments to $50,000,000. This bill would prohibit the total amount of investments certified by the California Organized Investment Network in any calendar year to any one community development financial institution from exceeding 30% of the annual aggregate amount of qualified investments, except as specified. This bill would require that each year 10% of the annual aggregate amount of qualified investments be reserved for investment amounts of less than or equal to $200,000, as specified. This bill would also allow the California Organized Investment Network to certify investments for the credit until January 1, 2017.

Existing law authorizes the California Organized Investment Network, in allocating qualified investment credits, when certain conditions are met, to prioritize applications for those credits, as specified.

This bill would revise those conditions.

This bill would take effect immediately as a tax levy.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

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

P2    1

SECTION 1.  

Section 12209 of the Revenue and Taxation Code
2 is amended to read:

3

12209.  

(a) For each year beginning on or after January 1, 1999,
4and before January 1, 2017, there shall be allowed as a credit
5against the amount of tax, as defined in Section 28 of Article XIII
6of the California Constitution, an amount equal to 20 percent of
7the amount of each qualified investment made by a taxpayer during
8the taxable year into a community development financial institution
9that is certified by the Department of Insurance, California
10Organized Investment Network, or any successor thereof.

11(b) For purposes of determining any tax that may be imposed
12under Section 685 of the Insurance Code on a taxpayer not
13organized under the laws of this state, the amount of the credit
14allowed by subdivision (a) shall be treated as a tax paid under
15Section 12201 or Section 28 of Article XIII of the California
16Constitution.

17(c) (1) Notwithstanding any other provision of this part, a credit
18shall not be allowed under this section unless the California
19Organized Investment Network, or its successor within the
20Department of Insurance, certifies that the investment described
21in subdivision (a) qualifies for the credit under this section and
22certifies the total amount of the credit allocated to the taxpayer
23pursuant to this section.

24(2) A credit shall not be allowed by this section unless the
25applicant and the taxpayer provide satisfactory substantiation to,
P3    1and in the form and manner requested by, the Department of
2Insurance, California Organized Investment Network, or any
3successor thereof, that the investment is a qualified investment as
4defined in paragraph (1) of subdivision (h).

5(3) (A) The aggregate amount of qualified investments made
6by all taxpayers pursuant to this section, Section 17053.57, and
7Section 23657 shall not exceed fifty million dollars ($50,000,000)
8for each calendar year. However, if the aggregate amount of
9qualified investments made in any calendar year is less than fifty
10million dollars ($50,000,000), the difference may be carried over
11to the next year, and any succeeding year during which this section
12remains in effect, and added to the aggregate amount authorized
13for those years.

14(B) The total amount of qualified investments certified by the
15California Organized Investment Network in any calendar year to
16any one community development financial institution together
17with its affiliates, as defined in Section 1215 of the Insurance Code,
18shall not exceed 30 percent of the annual aggregate amount of
19qualified investments certified by the California Organized
20Investment Network. If after October 1, the California Organized
21Investment Network has determined that the availability of tax
22credits exceed their demand, then a community development
23financial institution that has been allocated 30 percent of the annual
24aggregate amount of qualified investments shall become eligible
25to apply to be certified for any remaining tax credits in that calendar
26year.

27(C) Each year, 10 percent of the annual aggregate amount of
28qualified investments shall be reserved for investment amounts of
29less than or equal to two hundred thousand dollars ($200,000). If
30after October 1, there remains an unallocated portion of the amount
31reserved for investments of less than or equal to two hundred
32thousand dollars ($200,000), then qualified investments in excess
33of two hundred thousand dollars ($200,000) may be eligible for
34that remaining unallocated portion.

35(4) If the California Organized Investment Network determines
36that total qualified investments will exceed the aggregate amount
37of qualified investments made by all taxpayers specified in
38paragraph (3), priority shall be granted to those applications that
39meet one or both of the following:

40(A) Directly benefit low-income persons.

P4    1(B) Represent investments from insurance companies subject
2to tax under Section 12201 of this code or under Section 28 of
3Article XIII of the California Constitution.

4(5) begin deleteIf the application would support housing, priority end deletebegin insertPriority
5among housing applications end insert
shall be given to applications that
6support affordable rental housing, housing for veterans, mortgages
7 for community-based residential programs, and self-help housing
8ahead of single-family owned housing.

9(d) The community development financial institution shall do
10all of the following:

11(1) Apply to the Department of Insurance, California Organized
12Investment Network, or its successor, for certification of its status
13as a community development financial institution.

14(2) Apply to the Department of Insurance, California Organized
15Investment Network, or its successor, on behalf of the taxpayer
16for certification of the amount of the investment and the credit
17amount allocated to the taxpayer, obtain the certification, and retain
18a copy of the certification.

19(3) Obtain the taxpayer’s California company identification
20number for tax administration purposes and provide this
21information to the Department of Insurance, California Organized
22Investment Network, or its successor, with the application required
23in paragraph (2).

24(4) Provide an annual listing to the State Board of Equalization,
25in the form and manner agreed upon by the State Board of
26Equalization and the Department of Insurance, California
27Organized Investment Network, or its successor, of the names and
28taxpayer’s California company identification numbers of any
29taxpayer who makes any withdrawal or partial withdrawal of a
30qualified investment before the expiration of 60 months from the
31date of the qualified investment.

32(5) Submit reports to the department, California Organized
33Investment Network, or any successor thereof, as required pursuant
34to subdivision (a) of Section 12939.1 of the Insurance Code.

35(e) The California Organized Investment Network may certify
36investments for the credit allowed by this section on or before
37January 1, 2017, but not after that date.

38(f) The Insurance Commissioner may develop instructions,
39procedures, and standards for applications, and for administering
40the criteria for the evaluation of applications under this section.
P5    1The Insurance Commissioner may, from time to time, issue
2regulations to implement the provisions of this section.

3(g) The Department of Insurance, California Organized
4Investment Network, or any successor thereof, shall do all of the
5following:

6(1) Accept and evaluate applications for certification from
7financial institutions and issue certificates that the applicant is a
8community development financial institution qualified to receive
9qualified investments. To receive a certificate, an applicant shall
10satisfy the Department of Insurance, California Organized
11Investment Network, or any successor thereof, that it meets the
12specific requirements to be a community development financial
13institution for this state program as defined in paragraph (2) of
14subdivision (h). The certificate may be issued for a specified period
15of time, and may include reasonable conditions to effectuate the
16intent of this section. The Insurance Commissioner may suspend
17or revoke a certification, after affording the institution notice and
18the opportunity to be heard, if the commissioner finds that an
19institution no longer meets the requirement for certification.

20(2) Accept and evaluate applications for certification from any
21community development financial institution on behalf of the
22taxpayer and issue certificates to taxpayers in an aggregate amount
23that shall not exceed the limit specified in subdivision (c). The
24certificate shall include the amount eligible to be made as an
25investment that qualifies for the credit and the total amount of the
26credit to which the taxpayer is entitled for the year. Applications
27for tax credits shall be accepted and evaluated throughout the year.

28(3) Provide an annual listing to the State Board of Equalization,
29in the form or manner agreed upon by the State Board of
30Equalization and the Department of Insurance, California
31Organized Investment Network, or its successor, of the taxpayers
32who were issued certificates, their respective National Association
33of Insurance Commissioners company number and employer’s tax
34identification number, the amount of the qualified investment made
35by each taxpayer, and the total amount of qualified investments.

36(4) Include information specified pursuant to subdivision (b) of
37Section 12939.1 of the Insurance Code in the report required by
38Section 12922 of the Insurance Code.

39(h) For purposes of this section:

P6    1(1) “Qualified investment” means an investment that is a deposit
2or loan that does not earn interest, or an equity investment, or an
3equity-like debt instrument that conforms to the specifications for
4these instruments as prescribed by the United States Department
5of the Treasury, Community Development Financial Institutions
6Fund, or its successor, or, in the absence of that prescription, as
7defined by the Insurance Commissioner. The investment must be
8equal to or greater than fifty thousand dollars ($50,000) and made
9for a minimum duration of 60 months. During that 60-month
10period, the community development financial institution shall have
11full use and control of the proceeds of the entire amount of the
12investment as well as any earnings on the investment for its
13community development purposes. The entire amount of the
14investment shall be received by the community development
15financial institution before the application for the tax credit is
16submitted. The community development financial institution shall
17use the proceeds of the investment for a purpose that is consistent
18with its community development mission and for the benefit of
19economically disadvantaged communities and low-income people
20in California.

21(2) “Community development financial institution” means a
22private financial institution located in this state that is certified by
23the Department of Insurance, California Organized Investment
24Network, or its successor, that, consistent with the legislative
25findings, declarations, and intent set forth in Section 12939 of the
26Insurance Code, has community development as its primary
27mission, and that lends in urban, rural, or reservation-based
28communities in this state. A community development financial
29institution may include a community development bank, a
30community development loan fund, a community development
31credit union, a microenterprise fund, a community development
32corporation-based lender, or a community development venture
33fund.

34(i) (1) If a qualified investment is withdrawn before the end of
35the 60th month and not reinvested in another community
36development financial institution within 60 days, there shall be
37added to the “tax,” as defined in Section 28 of Article XIII of the
38California Constitution, for the year in which the withdrawal
39occurs, the entire amount of any credit previously allowed under
40this section.

P7    1(2) If a qualified investment is reduced before the end of the
260th month, but not below fifty thousand dollars ($50,000), there
3shall be added to the “tax,” as defined in Section 28 of Article XIII
4of the California Constitution, for the taxable year in which the
5reduction occurs, an amount equal to 20 percent of the total
6reduction for the year.

7(j) In the case where the credit allowed by this section exceeds
8the “tax,” the excess may be carried over to reduce the “tax” for
9the next four years, or until the credit has been exhausted,
10whichever occurs first.

11(k) The State Board of Equalization shall, as requested by the
12Department of Insurance, California Organized Investment
13Network, or its successor, advise and assist in the administration
14of this section.

15(l) This section shall remain in effect only until December 1,
162017, and as of that date is repealed.

17

SEC. 2.  

Section 17053.57 of the Revenue and Taxation Code
18 is amended to read:

19

17053.57.  

(a) For each taxable year beginning on or after
20January 1, 1997, and before January 1, 2017, there shall be allowed
21as a credit against the amount of “net tax,” as defined in Section
2217039, an amount equal to 20 percent of the amount of each
23qualified investment made by a taxpayer during the taxable year
24into a community development financial institution that is certified
25by the Department of Insurance, California Organized Investment
26Network, or any successor thereof.

27(b) (1) Notwithstanding any other provision of this part, a credit
28shall not be allowed under this section unless the California
29Organized Investment Network, or its successor within the
30Department of Insurance, certifies that the investment described
31in subdivision (a) qualifies for the credit under this section and
32certifies the total amount of the credit allocated to the taxpayer
33pursuant to this section.

34(2) A credit shall not be allowed by this section unless the
35applicant and the taxpayer provide satisfactory substantiation to,
36and in the form and manner requested by, the Department of
37Insurance, California Organized Investment Network, or any
38successor thereof, that the investment is a qualified investment, as
39defined in paragraph (1) of subdivision (g).

P8    1(3) (A) The aggregate amount of qualified investments made
2by all taxpayers pursuant to this section, Section 12209, and Section
323657 shall not exceed fifty million dollars ($50,000,000) for each
4calendar year. However, if the aggregate amount of qualified
5investments made in any calendar year is less than fifty million
6dollars ($50,000,000), the difference may be carried over to the
7next year, and any succeeding year during which this section
8remains in effect, and added to the aggregate amount authorized
9for those years.

10(B) The total amount of qualified investments certified by the
11California Organized Investment Network in any calendar year to
12any one community development financial institution together
13with its affiliates, as defined in Section 1215 of the Insurance Code,
14shall not exceed 30 percent of the annual aggregate amount of
15qualified investments certified by the California Organized
16Investment Network. If after October 1, the California Organized
17Investment Network has determined that the availability of tax
18 credits exceed their demand, then a community development
19financial institution that has been allocated 30 percent of the annual
20aggregate amount of qualified investments shall become eligible
21to apply to be certified for any remaining tax credits in that calendar
22year.

23(C) Each year, 10 percent of the annual aggregate amount of
24qualified investments shall be reserved for investment amounts of
25less than or equal to two hundred thousand dollars ($200,000). If
26after October 1, there remains an unallocated portion of the amount
27reserved for investments of less than or equal to two hundred
28thousand dollars ($200,000), then qualified investments in excess
29of two hundred thousand dollars ($200,000) may be eligible for
30that remaining unallocated portion.

31(4) If the California Organized Investment Network determines
32that total qualified investments will exceed the aggregate amount
33of qualified investments made by all taxpayers specified in
34paragraph (3), priority shall be granted to those applications that
35meet one or both of the following:

36(A) Directly benefit low-income persons.

37(B) Represent investments from insurance companies subject
38to tax under Section 12201 of this code or under Section 28 of
39Article XIII of the California Constitution.

P9    1(5) begin deleteIf the application would support housing, priority end deletebegin insertPriority
2among housing applications end insert
shall be given to applications that
3support affordable rental housing, housing for veterans, mortgages
4for community-based residential programs, and self-help housing
5ahead of single-family owned housing.

6(c) The community development financial institution shall do
7all of the following:

8(1) Apply to the Department of Insurance, California Organized
9Investment Network, or its successor, for certification of its status
10as a community development financial institution.

11(2) Apply to the Department of Insurance, California Organized
12Investment Network, or its successor, on behalf of the taxpayer,
13for certification of the amount of the investment and the credit
14amount allocated to the taxpayer, obtain the certification, and retain
15a copy of the certification.

16(3) Obtain the taxpayer’s identification number, or in the case
17of a partnership, the taxpayer identification numbers of all the
18partners for tax administration purposes and provide this
19information to the Department of Insurance, California Organized
20Investment Network, or its successor, with the application required
21in paragraph (2).

22(4) Provide an annual listing to the Franchise Tax Board, in the
23form and manner agreed upon by the Franchise Tax Board and the
24Department of Insurance, California Organized Investment
25Network, or its successor, of the names and taxpayer identification
26numbers of any taxpayer who makes any withdrawal or partial
27withdrawal of a qualified investment before the expiration of 60
28months from the date of the qualified investment.

29(5) Submit reports to the department, California Organized
30Investment Network, or any successor thereof, as required pursuant
31to subdivision (a) of Section 12939.1 of the Insurance Code.

32(d) The Insurance Commissioner may develop instructions,
33procedures, and standards for applications, and for administering
34the criteria for the evaluation of applications under this section.
35The Insurance Commissioner may, from time to time, issue
36regulations to implement the provisions of this section.

37(e) The California Organized Investment Network may certify
38investments for the credit allowed by this section on or before
39January 1, 2017, but not after that date.

P10   1(f) The Department of Insurance, California Organized
2Investment Network, or any successor thereof, shall do all of the
3following:

4(1) Accept and evaluate applications for certification from
5financial institutions and issue certificates that the applicant is a
6community development financial institution qualified to receive
7qualified investments. To receive a certificate, an applicant shall
8satisfy the Department of Insurance, California Organized
9Investment Network, or any successor thereof, that it meets the
10specific requirements to be a community development financial
11institution for this state program as defined in paragraph (2) of
12subdivision (g). The certificate may be issued for a specified period
13of time, and may include reasonable conditions to effectuate the
14intent of this section. The Insurance Commissioner may suspend
15 or revoke a certification, after affording the institution notice and
16the opportunity to be heard, if the commissioner finds that an
17institution no longer meets the requirement for certification.

18(2) Accept and evaluate applications for certification from any
19community development financial institution on behalf of the
20taxpayer and issue certificates to taxpayers in an aggregate amount
21that shall not exceed the limit specified in subdivision (b). The
22certificate shall include the amount eligible to be made as an
23investment that qualifies for the credit and the total amount of the
24credit to which the taxpayer is entitled for the taxable year.
25Applications for tax credits shall be accepted and evaluated
26throughout the year.

27(3) Provide an annual listing to the Franchise Tax Board, in the
28form or manner agreed upon by the Franchise Tax Board and the
29Department of Insurance, California Organized Investment
30Network, or its successor, of the taxpayers who were issued
31certificates, their respective tax identification numbers, the amount
32of the qualified investment made by each taxpayer, and the total
33amount of qualified investments.

34(4) Include information specified pursuant to subdivision (b) of
35Section 12939.1 of the Insurance Code in the report required by
36Section 12922 of the Insurance Code.

37(g) For purposes of this section:

38(1) “Qualified investment” means an investment that is a deposit
39or loan that does not earn interest, or an equity investment, or an
40equity-like debt instrument that conforms to the specifications for
P11   1these instruments as prescribed by the United States Department
2of the Treasury, Community Development Financial Institutions
3Fund, or its successor, or, in the absence of that prescription, as
4defined by the Insurance Commissioner. The investment must be
5equal to or greater than fifty thousand dollars ($50,000) and made
6for a minimum duration of 60 months. During that 60-month
7period, the community development financial institution shall have
8full use and control of the proceeds of the entire amount of the
9investment as well as any earnings on the investment for its
10community development purposes. The entire amount of the
11investment shall be received by the community development
12financial institution before the application for the tax credit is
13submitted. The community development financial institution shall
14use the proceeds of the investment for a purpose that is consistent
15with its community development mission and for the benefit of
16economically disadvantaged communities and low-income people
17in California.

18(2) “Community development financial institution” means a
19private financial institution located in this state that is certified by
20the Department of Insurance, California Organized Investment
21Network, or its successor, that, consistent with the legislative
22findings, declarations, and intent set forth in Section 12939 of the
23Insurance Code, has community development as its primary
24mission, and that lends in urban, rural, or reservation-based
25communities in this state. A community development financial
26institution may include a community development bank, a
27community development loan fund, a community development
28credit union, a microenterprise fund, a community development
29corporation-based lender, or a community development venture
30fund.

31(h) (1) If a qualified investment is withdrawn before the end
32of the 60th month and not reinvested in another community
33development financial institution within 60 days, there shall be
34added to the “net tax,” as defined in Section 17039, for the taxable
35year in which the withdrawal occurs, the entire amount of any
36credit previously allowed under this section.

37(2) If a qualified investment is reduced before the end of the
3860th month, but not below fifty thousand dollars ($50,000), there
39shall be added to the “net tax,” as defined in Section 17039, for
P12   1the taxable year in which the reduction occurs, an amount equal
2to 20 percent of the total reduction for the taxable year.

3(i) In the case where the credit allowed by this section exceeds
4the “net tax,” the excess may be carried over to reduce the “net
5tax” for the next four taxable years, or until the credit has been
6exhausted, whichever occurs first.

7(j) The Franchise Tax Board shall, as requested by the
8Department of Insurance, California Organized Investment
9Network, or its successor, advise and assist in the administration
10of this section.

11(k) This section shall remain in effect only until December 1,
122017, and as of that date is repealed.

13

SEC. 3.  

Section 23657 of the Revenue and Taxation Code is
14amended to read:

15

23657.  

(a) For each taxable year beginning on or after January
161, 1997, and before January 1, 2017, there shall be allowed as a
17credit against the amount of “tax,” as defined in Section 23036,
18an amount equal to 20 percent of the amount of each qualified
19investment made by a taxpayer during the taxable year into a
20community development financial institution that is certified by
21the Department of Insurance, California Organized Investment
22Network, or any successor thereof.

23(b) (1) Notwithstanding any other provision of this part, a credit
24shall not be allowed under this section unless the California
25Organized Investment Network, or its successor within the
26Department of Insurance, certifies that the investment described
27in subdivision (a) qualifies for the credit under this section and
28certifies the total amount of the credit allocated to the taxpayer
29pursuant to this section.

30(2) A credit shall not be allowed by this section unless the
31applicant and the taxpayer provide satisfactory substantiation to,
32and in the form and manner requested by, the Department of
33Insurance, California Organized Investment Network, or any
34successor thereof, that the investment is a qualified investment, as
35defined in paragraph (1) of subdivision (g).

36(3) (A) The aggregate amount of qualified investments made
37by all taxpayers pursuant to this section, Section 12209, and Section
3817053.57 shall not exceed fifty million dollars ($50,000,000) for
39 each calendar year. However, if the aggregate amount of qualified
40investments made in any calendar year is less than fifty million
P13   1dollars ($50,000,000), the difference may be carried over to the
2next year, and any succeeding year during which this section
3remains in effect, and added to the aggregate amount authorized
4for those years.

5(B) The total amount of qualified investments certified by the
6California Organized Investment Network in any calendar year to
7any one community development financial institution together
8with its affiliates, as defined in Section 1215 of the Insurance Code,
9shall not exceed 30 percent of the annual aggregate amount of
10qualified investments certified by the California Organized
11Investment Network. If after October 1, the California Organized
12Investment Network has determined that the availability of tax
13 credits exceed their demand, then a community development
14financial institution that has been allocated 30 percent of the annual
15aggregate amount of qualified investments shall become eligible
16to apply to be certified for any remaining tax credits in that calendar
17year.

18(C) Each year, 10 percent of the annual aggregate amount of
19qualified investments shall be reserved for investment amounts of
20less than or equal to two hundred thousand dollars ($200,000). If
21after October 1, there remains an unallocated portion of the amount
22reserved for investments of less than or equal to two hundred
23thousand dollars ($200,000), then qualified investments in excess
24of two hundred thousand dollars ($200,000) may be eligible for
25that remaining unallocated portion.

26(4) If the California Organized Investment Network determines
27that total qualified investments will exceed the aggregate amount
28of qualified investments made by all taxpayers specified in
29paragraph (3), priority shall be granted to those applications that
30meet one or both of the following:

31(A) Directly benefit low-income persons.

32(B) Represent investments from insurance companies subject
33to tax under Section 12201 of this code or under Section 28 of
34Article XIII of the California Constitution.

35(5) begin deleteIf the application would support housing, priority end deletebegin insertPriority
36among housing applications end insert
shall be given to applications that
37support affordable rental housing, housing for veterans, mortgages
38for community-based residential programs, and self-help housing
39ahead of single-family owned housing.

P14   1(c) The community development financial institution shall do
2all of the following:

3(1) Apply to the Department of Insurance, California Organized
4Investment Network, or its successor, for certification of its status
5as a community development financial institution.

6(2) Apply to the Department of Insurance, California Organized
7Investment Network, or its successor, on behalf of the taxpayer,
8for certification of the amount of the investment and the credit
9amount allocated to the taxpayer, obtain the certification, and retain
10a copy of the certification.

11(3) Obtain the taxpayer’s identification number, or in the case
12of an “S” corporation, the taxpayer identification numbers of all
13the shareholders for tax administration purposes and provide this
14information to the Department of Insurance, California Organized
15Investment Network, or its successor, with the application required
16in paragraph (2).

17(4) Provide an annual listing to the Franchise Tax Board, in the
18form and manner agreed upon by the Franchise Tax Board and the
19Department of Insurance, California Organized Investment
20Network, or its successor, of the names and taxpayer identification
21numbers of any taxpayer who makes any withdrawal or partial
22withdrawal of a qualified investment before the expiration of 60
23months from the date of the qualified investment.

24(5) Submit reports to the department, California Organized
25Investment Network, or any successor thereof, as required pursuant
26to subdivision (a) of Section 12939.1 of the Insurance Code.

27(d) The California Organized Investment Network may certify
28investments for the credit allowed by this section on or before
29January 1, 2017, but not after that date.

30(e) The Insurance Commissioner may develop instructions,
31procedures, and standards for applications, and for administering
32the criteria for the evaluation of applications under this section.
33The Insurance Commissioner may, from time to time, issue
34regulations to implement the provisions of this section.

35(f) The Department of Insurance, California Organized
36Investment Network, or any successor thereof, shall do all of the
37following:

38(1) Accept and evaluate applications for certification from
39financial institutions and issue certificates that the applicant is a
40community development financial institution qualified to receive
P15   1qualified investments. To receive a certificate, an applicant shall
2satisfy the Department of Insurance, California Organized
3Investment Network, or any successor thereof, that it meets the
4specific requirements to be a community development financial
5institution for this state program as defined in paragraph (2) of
6subdivision (g). The certificate may be issued for a specified period
7of time, and may include reasonable conditions to effectuate the
8intent of this section. The Insurance Commissioner may suspend
9 or revoke a certification, after affording the institution notice and
10the opportunity to be heard, if the commissioner finds that an
11institution no longer meets the requirement for certification.

12(2) Accept and evaluate applications for certification from any
13community development financial institution on behalf of the
14taxpayer and issue certificates to taxpayers in an aggregate amount
15that shall not exceed the limit specified in subdivision (b). The
16certificate shall include the amount eligible to be made as an
17investment that qualifies for the credit and the total amount of the
18credit to which the taxpayer is entitled for the taxable year.
19Applications for tax credits shall be accepted and evaluated
20throughout the year.

21(3) Provide an annual listing to the Franchise Tax Board, in the
22form or manner agreed upon by the Franchise Tax Board and the
23Department of Insurance, California Organized Investment
24Network, or its successor, of the taxpayers who were issued
25certificates, their respective tax identification numbers, the amount
26of the qualified investment made by each taxpayer, and the total
27amount of qualified investments.

28(4) Include information specified pursuant to subdivision (b) of
29Section 12939.1 of the Insurance Code in the report required by
30Section 12922 of the Insurance Code.

31(g) For purposes of this section:

32(1) “Qualified investment” means an investment that is a deposit
33or loan that does not earn interest, or an equity investment, or an
34equity-like debt instrument that conforms to the specifications for
35these instruments as prescribed by the United States Department
36of the Treasury, Community Development Financial Institutions
37Fund, or its successor, or, in the absence of that prescription, as
38defined by the Insurance Commissioner. The investment must be
39equal to or greater than fifty thousand dollars ($50,000) and made
40for a minimum duration of 60 months. During that 60-month
P16   1period, the community development financial institution shall have
2full use and control of the proceeds of the entire amount of the
3investment as well as any earnings on the investment for its
4community development purposes. The entire amount of the
5investment shall be received by the community development
6financial institution before the application for the tax credit is
7submitted. The community development financial institution shall
8use the proceeds of the investment for a purpose that is consistent
9with its community development mission and for the benefit of
10economically disadvantaged communities and low-income people
11in California.

12(2) “Community development financial institution” means a
13private financial institution located in this state that is certified by
14the Department of Insurance, California Organized Investment
15Network, or its successor, that, consistent with the legislative
16findings, declarations, and intent set forth in Section 12939 of the
17Insurance Code, has community development as its primary
18mission, and that lends in urban, rural, or reservation-based
19communities in this state. A community development financial
20institution may include a community development bank, a
21community development loan fund, a community development
22credit union, a microenterprise fund, a community development
23corporation-based lender, or a community development venture
24fund.

25(h) (1) If a qualified investment is withdrawn before the end
26of the 60th month and not reinvested in another community
27development financial institution within 60 days, there shall be
28added to the “tax,” as defined in Section 23036, for the taxable
29year in which the withdrawal occurs, the entire amount of any
30credit previously allowed under this section.

31(2) If a qualified investment is reduced before the end of the
3260th month, but not below fifty thousand dollars ($50,000), there
33shall be added to the “tax,” as defined in Section 23036, for the
34taxable year in which the reduction occurs, an amount equal to 20
35percent of the total reduction for the taxable year.

36(i) In the case where the credit allowed by this section exceeds
37the “tax,” the excess may be carried over to reduce the “tax” for
38the next four taxable years, or until the credit has been exhausted,
39whichever occurs first.

P17   1(j) The Franchise Tax Board shall, as requested by the
2Department of Insurance, California Organized Investment
3Network, or its successor, advise and assist in the administration
4of this section.

5(k) This section shall remain in effect only until December 1,
62017, and as of that date is repealed.

7

SEC. 4.  

This act provides for a tax levy within the meaning of
8Article IV of the Constitution and shall go into immediate effect.



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