Amended in Senate August 21, 2013

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.begin insert Existing law requires a community development financial institution to apply to the California Organized Investment Networkend insertbegin insert on behalf of the taxpayer for certification of the amount of the investment and the credit amount allocated to the taxpayer.end insert

The bill would increase the $10,000,000 limitation on the aggregate amount of qualified investments to $50,000,000.begin insert This bill would require a community development financial institution to provide in the application a detailed description of the intended use of the investment funds, as described, and to provide specified information about the taxpayer. This bill would require the California Organized Investment Network, when accepting and evaluating applications for certification from any community development financial institution on behalf of the taxpayer and issuing certificates, to grant highest priority to those applications where the intended use of the investments has the greatest aggregate benefit for low-to-moderate income areas or households or rural areas or households. This bill would require the Insurance Commissioner to establish tax credit issuance cycles throughout the year as necessary in order to issue tax credit certificates to those applications granted the highest priority.end insert 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.

begin insert

This bill would require, on or before June 30, 2016, the Legislative Analyst’s Office to submit a report to the Legislature on the effects of the tax credits allowed, with a focus on employment in low-to-moderate income and rural areas, and on the benefits of these tax credits to low-to-moderate income and rural persons.

end insert

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.

begin insert

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature.

end insert

This bill would take effect immediately as a tax levy.

Vote: begin deletemajority end deletebegin insert23end insert. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

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

P3    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,
26and in the form and manner requested by, the Department of
27Insurance, California Organized Investment Network, or any
28successor thereof, that the investment is a qualified investment as
29defined in paragraph (1) of subdivision (h).

30(3) (A) The aggregate amount of qualified investments made
31by all taxpayers pursuant to this section, Section 17053.57, and
32Section 23657 shall not exceed fifty million dollars ($50,000,000)
33for each calendar year. However, if the aggregate amount of
34qualified investments made in any calendar year is less than fifty
35million dollars ($50,000,000), the difference may be carried over
36to the next year, and any succeeding year during which this section
37remains in effect, and added to the aggregate amount authorized
38for those years.

P4    1(B) The total amount of qualified investments certified by the
2California Organized Investment Network in any calendar year to
3any one community development financial institution together
4with its affiliates, as defined in Section 1215 of the Insurance Code,
5shall not exceed 30 percent of the annual aggregate amount of
6qualified investments certified by the California Organized
7Investment Network.begin delete Ifend deletebegin insert If,end insert after October 1, the California Organized
8Investment Network has determined that the availability of tax
9credits exceed their demand, then a community development
10financial institution that has been allocated 30 percent of the annual
11aggregate amount of qualified investments shall become eligible
12to apply to be certified for any remaining tax credits in that calendar
13year.

14(C) Each year, 10 percent of the annual aggregate amount of
15qualified investments shall be reserved for investment amounts of
16less than or equal to two hundred thousand dollars ($200,000).begin delete Ifend delete
17begin insert If, end insert after October 1, there remains an unallocated portion of the
18amount reserved for investments of less than or equal to two
19hundred thousand dollars ($200,000), then qualified investments
20in excess of two hundred thousand dollars ($200,000) may be
21eligible for that remaining unallocated portion.

begin delete

22(4) If the California Organized Investment Network determines
23that total qualified investments will exceed the aggregate amount
24of qualified investments made by all taxpayers specified in
25paragraph (3), priority shall be granted to those applications that
26meet one or both of the following:

27(A) Directly benefit low-income persons.

28(B) Represent investments from insurance companies subject
29to tax under Section 12201 of this code or under Section 28 of
30Article XIII of the California Constitution.

31(5)

end delete

32begin insert(4)end insert Priority among housing applications shall be given to
33applications that support affordable rental housing, housing for
34veterans, mortgages for community-based residential programs,
35and self-help housing ahead of single-family owned housing.

36(d) The community development financial institution shall do
37all of the following:

38(1) Apply to the Department of Insurance, California Organized
39Investment Network, or its successor, for certification of its status
40as a community development financial institution.

P5    1(2) begin insert(A)end insertbegin insertend insert Apply to the Department of Insurance, California
2Organized Investment Network, or its successor, on behalf of the
3taxpayer for certification of the amount of the investment and the
4credit amount allocated to the taxpayer, obtain the certification,
5and retain a copy of the certification.

begin delete

6(3) Obtain the taxpayer’s California company identification
7number for tax administration purposes and provide this
8information to the Department of Insurance, California Organized
9Investment Network, or its successor, with the application required
10in paragraph (2).

end delete
begin insert

11(B) Provide in the application a detailed description of the
12intended use of the investment funds including, but not limited to,
13the following:

end insert
begin insert

14(i) All of the programs, projects, and services that would be
15funded.

end insert
begin insert

16(ii) The percentage of the intended use of the investment funds
17that would directly benefit low-to-moderate income households.

end insert
begin insert

18(iii) The percentage of the intended use of the investment funds
19that would directly benefit rural areas.

end insert
begin insert

20(iv) The percentage of the intended use of the investment funds
21that is a green investment as defined in Section 926.1 of the
22Insurance Code.

end insert
begin insert

23(3) (A) Provide in the application required in paragraph (2)
24the following information to the Department of Insurance,
25California Organized Investment Network, or its successor:

end insert
begin insert

26(i) Name of the taxpayer.

end insert
begin insert

27(ii) Postal address of the taxpayer, or residential address of the
28taxpayer if the taxpayer is an individual.

end insert
begin insert

29(iii) Phone number of the taxpayer.

end insert
begin insert

30(iv) E-mail address of the taxpayer.

end insert
begin insert

31(v) The taxpayer’s California company identification number
32for tax administration purposes.

end insert
begin insert

33(B) The information provided in subparagraph (A) shall be used
34only for internal purposes by the Department of Insurance,
35California Organized Investment Network, or its successor, and
36any public disclosure of that information shall be limited to the
37name of the taxpayer only.

end insert

38(4) Provide an annual listing to the State Board of Equalization,
39in the form and manner agreed upon by the State Board of
40Equalization and the Department of Insurance, California
P6    1Organized Investment Network, or its successor, of the names and
2taxpayer’s California company identification numbers of any
3taxpayer who makes any withdrawal or partial withdrawal of a
4qualified investment before the expiration of 60 months from the
5date of the qualified investment.

6(5) Submit reports to the department, California Organized
7Investment Network, or any successor thereof, as required pursuant
8to subdivision (a) of Section 12939.1 of the Insurance Code.

9(e) The California Organized Investment Network may certify
10investments for the credit allowed by this section on or before
11January 1, 2017, but not after that date.

12(f) The Insurance Commissioner may develop instructions,
13procedures, and standards for applications, and for administering
14the criteria for the evaluation of applications under this section.
15The Insurance Commissioner may, from time to time, issue
16regulations to implement the provisions of this section.

17(g) The Department of Insurance, California Organized
18Investment Network, or any successor thereof, shall do all of the
19following:

20(1) Accept and evaluate applications for certification from
21financial institutions and issue certificates that the applicant is a
22community development financial institution qualified to receive
23qualified investments. To receive a certificate, an applicant shall
24satisfy the Department of Insurance, California Organized
25Investment Network, or any successor thereof, that it meets the
26specific requirements to be a community development financial
27institution for this state program as defined in paragraph (2) of
28subdivision (h). The certificate may be issued for a specified period
29of time, and may include reasonable conditions to effectuate the
30intent of this section. The Insurance Commissioner may suspend
31or revoke a certification, after affording the institution notice and
32the opportunity to be heard, if the commissioner finds that an
33institution no longer meets the requirement for certification.

34(2) Accept and evaluate applications for certification from any
35community development financial institution on behalf of the
36taxpayer and issue certificates to taxpayers in an aggregate amount
37that shall not exceed the limit specified in subdivision (c)begin insert, with
38highest priority granted to those applications where the intended
39use of the investments has the greatest aggregate benefit for
40low-to-moderate income areas or households or rural areas or
P7    1householdsend insert
. The certificate shall include the amount eligible to be
2made as an investment that qualifies for the credit and the total
3amount of the credit to which the taxpayer is entitled for the year.
4Applications for tax credits shall be accepted and evaluated
5throughout the year.begin insert end insertbegin insertThe Insurance Commissioner shall establish
6tax credit issuance cycles throughout the year as necessary in
7order to issue tax credit certificates to those applications granted
8 the highest priority.end insert

9(3) Provide an annual listing to the State Board of Equalization,
10in the form or manner agreed upon by the State Board of
11Equalization and the Department of Insurance, California
12Organized Investment Network, or its successor, of the taxpayers
13who were issued certificates, their respective National Association
14of Insurance Commissioners company number and employer’s tax
15identification number, the amount of the qualified investment made
16by each taxpayer, and the total amount of qualified investments.

17(4) Include information specified pursuant to subdivision (b) of
18Section 12939.1 of the Insurance Code in the report required by
19Section 12922 of the Insurance Code.

20(h) For purposes of this section:

21(1) “Qualified investment” means an investment that is a deposit
22or loan that does not earn interest, or an equity investment, or an
23equity-like debt instrument that conforms to the specifications for
24these instruments as prescribed by the United States Department
25of the Treasury, Community Development Financial Institutions
26Fund, or its successor, or, in the absence of that prescription, as
27defined by the Insurance Commissioner. The investment must be
28equal to or greater than fifty thousand dollars ($50,000) and made
29for a minimum duration of 60 months. During that 60-month
30period, the community development financial institution shall have
31full use and control of the proceeds of the entire amount of the
32investment as well as any earnings on the investment for its
33community development purposes. The entire amount of the
34investment shall be received by the community development
35financial institution before the application for the tax credit is
36submitted. The community development financial institution shall
37use the proceeds of the investment for a purpose that is consistent
38with its community development mission and for the benefit of
39economically disadvantaged communities and low-income people
40in California.

P8    1(2) “Community development financial institution” means a
2private financial institution located in this state that is certified by
3the Department of Insurance, California Organized Investment
4Network, or its successor, that, consistent with the legislative
5findings, declarations, and intent set forth in Section 12939 of the
6Insurance Code, has community development as its primary
7mission, and that lends in urban, rural, or reservation-based
8communities in this state. A community development financial
9institution may include a community development bank, a
10community development loan fund, a community development
11credit union, a microenterprise fund, a community development
12corporation-based lender, or a community development venture
13fund.

14(i) (1) If a qualified investment is withdrawn before the end of
15the 60th month and not reinvested in another community
16development financial institution within 60 days, there shall be
17added to the “tax,” as defined in Section 28 of Article XIII of the
18California Constitution, for the year in which the withdrawal
19occurs, the entire amount of any credit previously allowed under
20this section.

21(2) If a qualified investment is reduced before the end of the
2260th month, but not below fifty thousand dollars ($50,000), there
23shall be added to the “tax,” as defined in Section 28 of Article XIII
24of the California Constitution, for the taxable year in which the
25reduction occurs, an amount equal to 20 percent of the total
26reduction for the year.

27(j) In the case where the credit allowed by this section exceeds
28the “tax,” the excess may be carried over to reduce the “tax” for
29the next four years, or until the credit has been exhausted,
30whichever occurs first.

31(k) The State Board of Equalization shall, as requested by the
32Department of Insurance, California Organized Investment
33Network, or its successor, advise and assist in the administration
34of this section.

begin insert

35(l) On or before June 30, 2016, the Legislative Analyst’s Office
36shall submit a report to the Legislature, in compliance with Section
379795 of the Government Code, on the effects of the tax credits
38allowed under this section, Section 17053.57, and Section 23657,
39with a focus on employment in low-to-moderate income and rural
P9    1areas, and on the benefits of these tax credits to low-to-moderate
2income and rural persons.

end insert
begin delete

3(l)

end delete

4begin insert(m)end insert This section shall remain in effect only until December 1,
52017, and as of that date is repealed.

6

SEC. 2.  

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

8

17053.57.  

(a) For each taxable year beginning on or after
9January 1, 1997, and before January 1, 2017, there shall be allowed
10as a credit against the amount of “net tax,” as defined in Section
1117039, an amount equal to 20 percent of the amount of each
12qualified investment made by a taxpayer during the taxable year
13into a community development financial institution that is certified
14by the Department of Insurance, California Organized Investment
15Network, or any successor thereof.

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

23(2) A credit shall not be allowed by this section unless the
24applicant and the taxpayer provide satisfactory substantiation to,
25and in the form and manner requested by, the Department of
26Insurance, California Organized Investment Network, or any
27successor thereof, that the investment is a qualified investment, as
28defined in paragraph (1) of subdivision (g).

29(3) (A) The aggregate amount of qualified investments made
30by all taxpayers pursuant to this section, Section 12209, and Section
3123657 shall not exceed fifty million dollars ($50,000,000) for each
32calendar year. However, if the aggregate amount of qualified
33investments made in any calendar year is less than fifty million
34dollars ($50,000,000), the difference may be carried over to the
35next year, and any succeeding year during which this section
36remains in effect, and added to the aggregate amount authorized
37for those years.

38(B) The total amount of qualified investments certified by the
39California Organized Investment Network in any calendar year to
40any one community development financial institution together
P10   1with its affiliates, as defined in Section 1215 of the Insurance Code,
2shall not exceed 30 percent of the annual aggregate amount of
3qualified investments certified by the California Organized
4Investment Network.begin delete Ifend deletebegin insert If,end insert after October 1, the California Organized
5Investment Network has determined that the availability of tax
6 credits exceed their demand, then a community development
7financial institution that has been allocated 30 percent of the annual
8aggregate amount of qualified investments shall become eligible
9to apply to be certified for any remaining tax credits in that calendar
10year.

11(C) Each year, 10 percent of the annual aggregate amount of
12qualified investments shall be reserved for investment amounts of
13less than or equal to two hundred thousand dollars ($200,000).begin delete Ifend delete
14begin insert If, end insert after October 1, there remains an unallocated portion of the
15amount reserved for investments of less than or equal to two
16hundred thousand dollars ($200,000), then qualified investments
17in excess of two hundred thousand dollars ($200,000) may be
18eligible for that remaining unallocated portion.

begin delete

19(4) If the California Organized Investment Network determines
20that total qualified investments will exceed the aggregate amount
21of qualified investments made by all taxpayers specified in
22paragraph (3), priority shall be granted to those applications that
23meet one or both of the following:

24(A) Directly benefit low-income persons.

25(B) Represent investments from insurance companies subject
26to tax under Section 12201 of this code or under Section 28 of
27Article XIII of the California Constitution.

28(5)

end delete

29begin insert(4)end insert Priority among housing applications shall be given to
30applications that support affordable rental housing, housing for
31veterans, mortgages for community-based residential programs,
32and self-help housing ahead of single-family owned housing.

33(c) The community development financial institution shall do
34all of the following:

35(1) Apply to the Department of Insurance, California Organized
36Investment Network, or its successor, for certification of its status
37as a community development financial institution.

38(2) begin insert(A)end insertbegin insertend insert Apply to the Department of Insurance, California
39Organized Investment Network, or its successor, on behalf of the
40taxpayer, for certification of the amount of the investment and the
P11   1credit amount allocated to the taxpayer, obtain the certification,
2and retain a copy of the certification.

begin delete

3(3) Obtain the taxpayer’s identification number, or in the case
4of a partnership, the taxpayer identification numbers of all the
5partners for tax administration purposes and provide this
6information to the Department of Insurance, California Organized
7Investment Network, or its successor, with the application required
8in paragraph (2).

end delete
begin insert

9(B) Provide in the application a detailed description of the
10intended use of the investment funds including, but not limited to,
11the following:

end insert
begin insert

12(i) All of the programs, projects, and services that would be
13funded.

end insert
begin insert

14(ii) The percentage of the intended use of the investment funds
15that would directly benefit low-to-moderate income households.

end insert
begin insert

16(iii) The percentage of the intended use of the investment funds
17that would directly benefit rural areas.

end insert
begin insert

18(iv) The percentage of the intended use of the investment funds
19that is a green investment as defined in Section 926.1 of the
20Insurance Code.

end insert
begin insert

21(3) (A) Provide in the application required in paragraph (2)
22the following information to the Department of Insurance,
23California Organized Investment Network, or its successor:

end insert
begin insert

24(i) Name of the taxpayer.

end insert
begin insert

25(ii) Postal address of the taxpayer, or residential address of the
26taxpayer if the taxpayer is an individual.

end insert
begin insert

27(iii) Phone number of the taxpayer.

end insert
begin insert

28(iv) E-mail address of the taxpayer.

end insert
begin insert

29(v) The taxpayer’s identification number, or in the case of a
30partnership, the taxpayer identification numbers of all the partners
31for tax administration purposes.

end insert
begin insert

32(B) The information provided in subparagraph (A) shall be used
33only for internal purposes by the Department of Insurance,
34California Organized Investment Network, or its successor, and
35any Network, or its successor shall limit all public disclosure of
36that information shall be limited to the name of the taxpayer only.

end insert

37(4) Provide an annual listing to the Franchise Tax Board, in the
38form and manner agreed upon by the Franchise Tax Board and the
39Department of Insurance, California Organized Investment
40Network, or its successor, of the names and taxpayer identification
P12   1numbers of any taxpayer who makes any withdrawal or partial
2withdrawal of a qualified investment before the expiration of 60
3months from the date of the qualified investment.

4(5) Submit reports to the department, California Organized
5Investment Network, or any successor thereof, as required pursuant
6to subdivision (a) of Section 12939.1 of the Insurance Code.

7(d) The Insurance Commissioner may develop instructions,
8procedures, and standards for applications, and for administering
9the criteria for the evaluation of applications under this section.
10The Insurance Commissioner may, from time to time, issue
11regulations to implement the provisions of this section.

12(e) The California Organized Investment Network may certify
13investments for the credit allowed by this section on or before
14January 1, 2017, but not after that date.

15(f) The Department of Insurance, California Organized
16Investment Network, or any successor thereof, shall do all of the
17following:

18(1) Accept and evaluate applications for certification from
19financial institutions and issue certificates that the applicant is a
20community development financial institution qualified to receive
21qualified investments. To receive a certificate, an applicant shall
22satisfy the Department of Insurance, California Organized
23Investment Network, or any successor thereof, that it meets the
24specific requirements to be a community development financial
25institution for this state program as defined in paragraph (2) of
26subdivision (g). The certificate may be issued for a specified period
27of time, and may include reasonable conditions to effectuate the
28intent of this section. The Insurance Commissioner may suspend
29 or revoke a certification, after affording the institution notice and
30the opportunity to be heard, if the commissioner finds that an
31institution no longer meets the requirement for certification.

32(2) Accept and evaluate applications for certification from any
33community development financial institution on behalf of the
34taxpayer and issue certificates to taxpayers in an aggregate amount
35that shall not exceed the limit specified in subdivision (b)begin insert, with
36highest priority granted to those applications where the intended
37use of the investments has the greatest aggregate benefit for
38low-to-moderate income areas or households or rural areas or
39householdsend insert
. The certificate shall include the amount eligible to be
40made as an investment that qualifies for the credit and the total
P13   1amount of the credit to which the taxpayer is entitled for the taxable
2year. Applications for tax credits shall be accepted and evaluated
3throughout the year.begin insert The Insurance Commissioner shall establish
4tax credit issuance cycles throughout the year as necessary in
5order to issue tax credit certificates to those applications granted
6the highest priority.end insert

7(3) Provide an annual listing to the Franchise Tax Board, in the
8form or manner agreed upon by the Franchise Tax Board and the
9Department of Insurance, California Organized Investment
10Network, or its successor, of the taxpayers who were issued
11certificates, their respective tax identification numbers, the amount
12of the qualified investment made by each taxpayer, and the total
13amount of qualified investments.

14(4) Include information specified pursuant to subdivision (b) of
15Section 12939.1 of the Insurance Code in the report required by
16Section 12922 of the Insurance Code.

17(g) For purposes of this section:

18(1) “Qualified investment” means an investment that is a deposit
19or loan that does not earn interest, or an equity investment, or an
20equity-like debt instrument that conforms to the specifications for
21these instruments as prescribed by the United States Department
22of the Treasury, Community Development Financial Institutions
23Fund, or its successor, or, in the absence of that prescription, as
24defined by the Insurance Commissioner. The investment must be
25equal to or greater than fifty thousand dollars ($50,000) and made
26for a minimum duration of 60 months. During that 60-month
27period, the community development financial institution shall have
28full use and control of the proceeds of the entire amount of the
29investment as well as any earnings on the investment for its
30community development purposes. The entire amount of the
31investment shall be received by the community development
32financial institution before the application for the tax credit is
33submitted. The community development financial institution shall
34use the proceeds of the investment for a purpose that is consistent
35with its community development mission and for the benefit of
36economically disadvantaged communities and low-income people
37in California.

38(2) “Community development financial institution” means a
39private financial institution located in this state that is certified by
40the Department of Insurance, California Organized Investment
P14   1Network, or its successor, that, consistent with the legislative
2findings, declarations, and intent set forth in Section 12939 of the
3Insurance Code, has community development as its primary
4mission, and that lends in urban, rural, or reservation-based
5communities in this state. A community development financial
6institution may include a community development bank, a
7community development loan fund, a community development
8credit union, a microenterprise fund, a community development
9corporation-based lender, or a community development venture
10fund.

11(h) (1) If a qualified investment is withdrawn before the end
12of the 60th month and not reinvested in another community
13development financial institution within 60 days, there shall be
14added to the “net tax,” as defined in Section 17039, for the taxable
15year in which the withdrawal occurs, the entire amount of any
16credit previously allowed under this section.

17(2) If a qualified investment is reduced before the end of the
1860th month, but not below fifty thousand dollars ($50,000), there
19shall be added to the “net tax,” as defined in Section 17039, for
20the taxable year in which the reduction occurs, an amount equal
21to 20 percent of the total reduction for the taxable year.

22(i) In the case where the credit allowed by this section exceeds
23the “net tax,” the excess may be carried over to reduce the “net
24tax” for the next four taxable years, or until the credit has been
25exhausted, whichever occurs first.

26(j) The Franchise Tax Board shall, as requested by the
27Department of Insurance, California Organized Investment
28Network, or its successor, advise and assist in the administration
29of this section.

begin insert

30(k) On or before June 30, 2016, the Legislative Analyst’s Office
31shall submit a report to the Legislature, in compliance with Section
329795 of the Government Code, on the effects of the tax credits
33allowed under this section, Section 12209, and Section 23657,
34with a focus on employment in low-to-moderate income and rural
35areas, and on the benefits of these tax credits to low-to-moderate
36income and rural persons.

end insert
begin delete

37(k)

end delete

38begin insert(l)end insert This section shall remain in effect only until December 1,
392017, and as of that date is repealed.

P15   1

SEC. 3.  

Section 23657 of the Revenue and Taxation Code is
2amended to read:

3

23657.  

(a) For each taxable year beginning on or after January
41, 1997, and before January 1, 2017, there shall be allowed as a
5credit against the amount of “tax,” as defined in Section 23036,
6an amount equal to 20 percent of the amount of each qualified
7investment made by a taxpayer during the taxable year into a
8community development financial institution that is certified by
9the Department of Insurance, California Organized Investment
10Network, or any successor thereof.

11(b) (1) Notwithstanding any other provision of this part, a credit
12shall not be allowed under this section unless the California
13Organized Investment Network, or its successor within the
14Department of Insurance, certifies that the investment described
15in subdivision (a) qualifies for the credit under this section and
16certifies the total amount of the credit allocated to the taxpayer
17pursuant to this section.

18(2) A credit shall not be allowed by this section unless the
19applicant and the taxpayer provide satisfactory substantiation to,
20and in the form and manner requested by, the Department of
21Insurance, California Organized Investment Network, or any
22successor thereof, that the investment is a qualified investment, as
23defined in paragraph (1) of subdivision (g).

24(3) (A) The aggregate amount of qualified investments made
25by all taxpayers pursuant to this section, Section 12209, and Section
2617053.57 shall not exceed fifty million dollars ($50,000,000) for
27 each calendar year. However, if the aggregate amount of qualified
28investments made in any calendar year is less than fifty million
29dollars ($50,000,000), the difference may be carried over to the
30next year, and any succeeding year during which this section
31remains in effect, and added to the aggregate amount authorized
32for those years.

33(B) The total amount of qualified investments certified by the
34California Organized Investment Network in any calendar year to
35any one community development financial institution together
36with its affiliates, as defined in Section 1215 of the Insurance Code,
37shall not exceed 30 percent of the annual aggregate amount of
38qualified investments certified by the California Organized
39Investment Network.begin delete Ifend deletebegin insert If,end insert after October 1, the California Organized
40Investment Network has determined that the availability of tax
P16   1 credits exceed their demand, then a community development
2financial institution that has been allocated 30 percent of the annual
3aggregate amount of qualified investments shall become eligible
4to apply to be certified for any remaining tax credits in that calendar
5year.

6(C) Each year, 10 percent of the annual aggregate amount of
7qualified investments shall be reserved for investment amounts of
8less than or equal to two hundred thousand dollars ($200,000).begin delete Ifend delete
9begin insert If, end insert after October 1, there remains an unallocated portion of the
10amount reserved for investments of less than or equal to two
11hundred thousand dollars ($200,000), then qualified investments
12in excess of two hundred thousand dollars ($200,000) may be
13eligible for that remaining unallocated portion.

begin delete

14(4) If the California Organized Investment Network determines
15that total qualified investments will exceed the aggregate amount
16of qualified investments made by all taxpayers specified in
17paragraph (3), priority shall be granted to those applications that
18meet one or both of the following:

19(A) Directly benefit low-income persons.

20(B) Represent investments from insurance companies subject
21to tax under Section 12201 of this code or under Section 28 of
22Article XIII of the California Constitution.

23(5)

end delete

24begin insert(4)end insert Priority among housing applications shall be given to
25applications that support affordable rental housing, housing for
26veterans, mortgages for community-based residential programs,
27and self-help housing ahead of single-family owned housing.

28(c) The community development financial institution shall do
29all of the following:

30(1) Apply to the Department of Insurance, California Organized
31Investment Network, or its successor, for certification of its status
32as a community development financial institution.

33(2) begin insert(A)end insertbegin insertend insert Apply to the Department of Insurance, California
34Organized Investment Network, or its successor, on behalf of the
35taxpayer, for certification of the amount of the investment and the
36credit amount allocated to the taxpayer, obtain the certification,
37and retain a copy of the certification.

begin delete

38(3) Obtain the taxpayer’s identification number, or in the case
39of an “S” corporation, the taxpayer identification numbers of all
40the shareholders for tax administration purposes and provide this
P17   1information to the Department of Insurance, California Organized
2Investment Network, or its successor, with the application required
3in paragraph (2).

end delete
begin insert

4(B) Provide in the application a detailed description of the
5intended use of the investment funds including, but not limited to,
6the following:

end insert
begin insert

7(i) All of the programs, projects, and services that would be
8funded.

end insert
begin insert

9(ii) The percentage of the intended use of the investment funds
10that would directly benefit low-to-moderate income households.

end insert
begin insert

11(iii) The percentage of the intended use of the investment funds
12that would directly benefit rural areas.

end insert
begin insert

13(iv) The percentage of the intended use of the investment funds
14that is a green investment as defined in Section 926.1 of the
15Insurance Code.

end insert
begin insert

16(3) (A) Provide in the application required in paragraph (2)
17the following information to the Department of Insurance,
18California Organized Investment Network, or its successor:

end insert
begin insert

19(i) Name of the taxpayer.

end insert
begin insert

20(ii) Postal address of the taxpayer, or residential address of the
21taxpayer if the taxpayer is an individual.

end insert
begin insert

22(iii) Phone number of the taxpayer.

end insert
begin insert

23(iv) E-mail address of the taxpayer.

end insert
begin insert

24(v) The taxpayer’s California company identification number
25for tax administration purposes, or in the case of an “S”
26corporation, the taxpayer identification numbers of all the
27shareholders for tax administration purposes.

end insert
begin insert

28(B) The information provided in subparagraph (A) shall be used
29only for internal purposes by the Department of Insurance,
30California Organized Investment Network, or its successor, and
31any public disclosure of that information shall be limited to the
32name of the taxpayer only.

end insert

33(4) Provide an annual listing to the Franchise Tax Board, in the
34form and manner agreed upon by the Franchise Tax Board and the
35Department of Insurance, California Organized Investment
36Network, or its successor, of the names and taxpayer identification
37numbers of any taxpayer who makes any withdrawal or partial
38withdrawal of a qualified investment before the expiration of 60
39months from the date of the qualified investment.

P18   1(5) Submit reports to the department, California Organized
2Investment Network, or any successor thereof, as required pursuant
3to subdivision (a) of Section 12939.1 of the Insurance Code.

4(d) The California Organized Investment Network may certify
5investments for the credit allowed by this section on or before
6January 1, 2017, but not after that date.

7(e) The Insurance Commissioner may develop instructions,
8procedures, and standards for applications, and for administering
9the criteria for the evaluation of applications under this section.
10The Insurance Commissioner may, from time to time, issue
11regulations to implement the provisions of this section.

12(f) The Department of Insurance, California Organized
13Investment Network, or any successor thereof, shall do all of the
14following:

15(1) Accept and evaluate applications for certification from
16financial institutions and issue certificates that the applicant is a
17community development financial institution qualified to receive
18qualified investments. To receive a certificate, an applicant shall
19satisfy the Department of Insurance, California Organized
20Investment Network, or any successor thereof, that it meets the
21specific requirements to be a community development financial
22institution for this state program as defined in paragraph (2) of
23subdivision (g). The certificate may be issued for a specified period
24of time, and may include reasonable conditions to effectuate the
25intent of this section. The Insurance Commissioner may suspend
26 or revoke a certification, after affording the institution notice and
27the opportunity to be heard, if the commissioner finds that an
28institution no longer meets the requirement for certification.

29(2) Accept and evaluate applications for certification from any
30community development financial institution on behalf of the
31taxpayer and issue certificates to taxpayers in an aggregate amount
32that shall not exceed the limit specified in subdivision (b)begin insert, with
33highest priority granted to those applications where the intended
34use of the investments has the greatest aggregate benefit for
35low-to-moderate income areas or households or rural areas or
36householdsend insert
. The certificate shall include the amount eligible to be
37made as an investment that qualifies for the credit and the total
38amount of the credit to which the taxpayer is entitled for the taxable
39year. Applications for tax credits shall be accepted and evaluated
40throughout the year.begin insert The Insurance Commissioner shall establish
P19   1tax credit issuance cycles throughout the year as necessary in
2order to issue tax credit certificates to those applications granted
3the highest priority.end insert

4(3) Provide an annual listing to the Franchise Tax Board, in the
5form or manner agreed upon by the Franchise Tax Board and the
6Department of Insurance, California Organized Investment
7Network, or its successor, of the taxpayers who were issued
8certificates, their respective tax identification numbers, the amount
9of the qualified investment made by each taxpayer, and the total
10amount of qualified investments.

11(4) Include information specified pursuant to subdivision (b) of
12Section 12939.1 of the Insurance Code in the report required by
13Section 12922 of the Insurance Code.

14(g) For purposes of this section:

15(1) “Qualified investment” means an investment that is a deposit
16or loan that does not earn interest, or an equity investment, or an
17equity-like debt instrument that conforms to the specifications for
18these instruments as prescribed by the United States Department
19of the Treasury, Community Development Financial Institutions
20Fund, or its successor, or, in the absence of that prescription, as
21defined by the Insurance Commissioner. The investment must be
22equal to or greater than fifty thousand dollars ($50,000) and made
23for a minimum duration of 60 months. During that 60-month
24period, the community development financial institution shall have
25full use and control of the proceeds of the entire amount of the
26investment as well as any earnings on the investment for its
27community development purposes. The entire amount of the
28investment shall be received by the community development
29financial institution before the application for the tax credit is
30submitted. The community development financial institution shall
31use the proceeds of the investment for a purpose that is consistent
32with its community development mission and for the benefit of
33economically disadvantaged communities and low-income people
34in California.

35(2) “Community development financial institution” means a
36private financial institution located in this state that is certified by
37the Department of Insurance, California Organized Investment
38Network, or its successor, that, consistent with the legislative
39findings, declarations, and intent set forth in Section 12939 of the
40Insurance Code, has community development as its primary
P20   1mission, and that lends in urban, rural, or reservation-based
2communities in this state. A community development financial
3institution may include a community development bank, a
4community development loan fund, a community development
5credit union, a microenterprise fund, a community development
6corporation-based lender, or a community development venture
7fund.

8(h) (1) If a qualified investment is withdrawn before the end
9of the 60th month and not reinvested in another community
10development financial institution within 60 days, there shall be
11added to the “tax,” as defined in Section 23036, for the taxable
12year in which the withdrawal occurs, the entire amount of any
13credit previously allowed under this section.

14(2) If a qualified investment is reduced before the end of the
1560th month, but not below fifty thousand dollars ($50,000), there
16shall be added to the “tax,” as defined in Section 23036, for the
17taxable year in which the reduction occurs, an amount equal to 20
18percent of the total reduction for the taxable year.

19(i) In the case where the credit allowed by this section exceeds
20the “tax,” the excess may be carried over to reduce the “tax” for
21the next four taxable years, or until the credit has been exhausted,
22whichever occurs first.

23(j) The Franchise Tax Board shall, as requested by the
24Department of Insurance, California Organized Investment
25Network, or its successor, advise and assist in the administration
26of this section.

begin insert

27(k) On or before June 30, 2016, the Legislative Analyst’s Office
28shall submit a report to the Legislature, in compliance with Section
299795 of the Government Code, on the effects of the tax credits
30allowed under this section, Section 12209, and Section 17053.57,
31with a focus on employment in low-to-moderate income and rural
32areas, and on the benefits of these tax credits to low-to-moderate
33income and rural persons.

end insert
begin delete

34(k)

end delete

35begin insert(l)end insert This section shall remain in effect only until December 1,
362017, and as of that date is repealed.

37

SEC. 4.  

This act provides for a tax levy within the meaning of
38Article IV of the Constitution and shall go into immediate effect.



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