Amended in Senate September 3, 2013

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

The bill would increase the $10,000,000 limitation on the aggregate amount of qualified investments to $50,000,000. 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. 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.

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.

begin insert

Existing law authorizes the Insurance Commissioner to issue regulations to implement the credit.

end insert
begin insert

This bill would instead authorize the Insurance Commissioner to adopt, amend, or repeal regulations to implement the credit, and would deem the initial adoption of the regulations to be emergency regulations, as specified.

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.

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.

This bill would take effect immediately as a tax levy.

Vote: 23. 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).

P4    1(3) (A) The aggregate amount of qualified investments made
2by all taxpayers pursuant to this section, Section 17053.57, and
3Section 23657 shall not exceed fifty million dollars ($50,000,000)
4for each calendar year. However, if the aggregate amount of
5qualified investments made in any calendar year is less than fifty
6million dollars ($50,000,000), the difference may be carried over
7to the next 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
18credits 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) Priority among housing applications shall be given to
32applications that support affordable rental housing, housing for
33veterans, mortgages for community-based residential programs,
34and self-help housing ahead of single-family owned housing.

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

37(1) Apply to the Department of Insurance, California Organized
38Investment Network, or its successor, for certification of its status
39as a community development financial institution.

P5    1(2) (A) 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.

6(B) Provide in the application a detailed description of the
7intended use of the investment funds including, but not limited to,
8the following:

9(i) All of the programs, projects, and services that would be
10funded.

11(ii) The percentage of the intended use of the investment funds
12that would directly benefit low-to-moderate income households.

13(iii) The percentage of the intended use of the investment funds
14that would directly benefit rural areas.

15(iv) The percentage of the intended use of the investment funds
16that is a green investment as defined in Section 926.1 of the
17Insurance Code.

18(3) (A) Provide in the application required in paragraph (2) the
19following information to the Department of Insurance, California
20Organized Investment Network, or its successor:

21(i) Name of the taxpayer.

22(ii) Postal address of the taxpayer, or residential address of the
23taxpayer if the taxpayer is an individual.

24(iii) Phone number of the taxpayer.

25(iv) Email address of the taxpayer.

26(v) The taxpayer’s California company identification number
27for tax administration purposes.

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.

33(4) Provide an annual listing to the State Board of Equalization,
34in the form and manner agreed upon by the State Board of
35Equalization and the Department of Insurance, California
36Organized Investment Network, or its successor, of the names and
37taxpayer’s California company identification numbers of any
38taxpayer who makes any withdrawal or partial withdrawal of a
39qualified investment before the expiration of 60 months from the
40date of the qualified investment.

P6    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(e) 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(f) begin insert(1)end insertbegin insertend insert 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,begin delete issueend deletebegin insert end insertbegin insertadopt,
11 amend, or repeal end insert
regulations to implement the provisions of this
12section.

begin insert

13(2) The initial adoption of the regulations implementing this
14section shall be deemed to be an emergency and necessary in order
15to address a situation calling for immediate action to avoid serious
16harm to the public peace, health, safety, or general welfare.

end insert
begin insert

17(3) Notwithstanding Chapter 3.5 (commencing with Section
1811340) of Part 1 of Division 3 of Title 2 of the Government Code,
19any emergency regulation adopted or amended by the Insurance
20Commissioner pursuant to this section shall remain in effect until
21amended or repealed by the department.

end insert

22(g) The Department of Insurance, California Organized
23Investment Network, or any successor thereof, shall do all of the
24following:

25(1) Accept and evaluate applications for certification from
26financial institutions and issue certificates that the applicant is a
27community development financial institution qualified to receive
28qualified investments. To receive a certificate, an applicant shall
29satisfy the Department of Insurance, California Organized
30Investment Network, or any successor thereof, that it meets the
31specific requirements to be a community development financial
32institution for this state program as defined in paragraph (2) of
33subdivision (h). The certificate may be issued for a specified period
34of time, and may include reasonable conditions to effectuate the
35intent of this section. The Insurance Commissioner may suspend
36or revoke a certification, after affording the institution notice and
37the opportunity to be heard, if the commissioner finds that an
38institution no longer meets the requirement for certification.

39(2) Accept and evaluate applications for certification from any
40community development financial institution on behalf of the
P7    1taxpayer and issue certificates to taxpayers in an aggregate amount
2that shall not exceed the limit specified in subdivision (c), with
3highest priority granted to those applications where the intended
4use of the investments has the greatest aggregate benefit for
5low-to-moderate income areas or households or rural areas or
6households. The certificate shall include the amount eligible to be
7made as an investment that qualifies for the credit and the total
8amount of the credit to which the taxpayer is entitled for the year.
9Applications for tax credits shall be accepted and evaluated
10throughout the year. The Insurance Commissioner shall establish
11tax credit issuance cycles throughout the year as necessary in order
12to issue tax credit certificates to those applications granted the
13highest priority.

14(3) Provide an annual listing to the State Board of Equalization,
15in the form or manner agreed upon by the State Board of
16Equalization and the Department of Insurance, California
17Organized Investment Network, or its successor, of the taxpayers
18who were issued certificates, their respective National Association
19of Insurance Commissioners company number and employer’s tax
20identification number, the amount of the qualified investment made
21by each taxpayer, and the total amount of qualified investments.

22(4) Include information specified pursuant to subdivision (b) of
23Section 12939.1 of the Insurance Code in the report required by
24Section 12922 of the Insurance Code.

25(h) For purposes of this section:

26(1) “Qualified investment” means an investment that is a deposit
27or loan that does not earn interest, or an equity investment, or an
28equity-like debt instrument that conforms to the specifications for
29these instruments as prescribed by the United States Department
30of the Treasury, Community Development Financial Institutions
31Fund, or its successor, or, in the absence of that prescription, as
32defined by the Insurance Commissioner. The investment must be
33equal to or greater than fifty thousand dollars ($50,000) and made
34for a minimum duration of 60 months. During that 60-month
35period, the community development financial institution shall have
36full use and control of the proceeds of the entire amount of the
37investment as well as any earnings on the investment for its
38community development purposes. The entire amount of the
39investment shall be received by the community development
40financial institution before the application for the tax credit is
P8    1submitted. The community development financial institution shall
2use the proceeds of the investment for a purpose that is consistent
3with its community development mission and for the benefit of
4economically disadvantaged communities and low-income people
5in California.

6(2) “Community development financial institution” means a
7private financial institution located in this state that is certified by
8the Department of Insurance, California Organized Investment
9Network, or its successor, that, consistent with the legislative
10findings, declarations, and intent set forth in Section 12939 of the
11Insurance Code, has community development as its primary
12mission, and that lends in urban, rural, or reservation-based
13communities in this state. A community development financial
14institution may include a community development bank, a
15community development loan fund, a community development
16credit union, a microenterprise fund, a community development
17corporation-based lender, or a community development venture
18fund.

19(i) (1) If a qualified investment is withdrawn before the end of
20the 60th month and not reinvested in another community
21development financial institution within 60 days, there shall be
22added to the “tax,” as defined in Section 28 of Article XIII of the
23California Constitution, for the year in which the withdrawal
24occurs, the entire amount of any credit previously allowed under
25this section.

26(2) If a qualified investment is reduced before the end of the
2760th month, but not below fifty thousand dollars ($50,000), there
28shall be added to the “tax,” as defined in Section 28 of Article XIII
29of the California Constitution, for the taxable year in which the
30reduction occurs, an amount equal to 20 percent of the total
31reduction for the year.

32(j) In the case where the credit allowed by this section exceeds
33the “tax,” the excess may be carried over to reduce the “tax” for
34the next four years, or until the credit has been exhausted,
35whichever occurs first.

36(k) The State Board of Equalization shall, as requested by the
37Department of Insurance, California Organized Investment
38Network, or its successor, advise and assist in the administration
39of this section.

P9    1(l) On or before June 30, 2016, the Legislative Analyst’s Office
2shall submit a report to the Legislature, in compliance with Section
39795 of the Government Code, on the effects of the tax credits
4allowed under this section, Section 17053.57, and Section 23657,
5with a focus on employment in low-to-moderate income and rural
6areas, and on the benefits of these tax credits to low-to-moderate
7income and rural persons.

8(m) This section shall remain in effect only until December 1,
92017, and as of that date is repealed.

10

SEC. 2.  

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

12

17053.57.  

(a) For each taxable year beginning on or after
13January 1, 1997, and before January 1, 2017, there shall be allowed
14as a credit against the amount of “net tax,” as defined in Section
1517039, an amount equal to 20 percent of the amount of each
16qualified investment made by a taxpayer during the taxable year
17into a community development financial institution that is certified
18by the Department of Insurance, California Organized Investment
19Network, or any successor thereof.

20(b) (1) Notwithstanding any other provision of this part, a credit
21shall not be allowed under this section unless the California
22Organized Investment Network, or its successor within the
23Department of Insurance, certifies that the investment described
24in subdivision (a) qualifies for the credit under this section and
25certifies the total amount of the credit allocated to the taxpayer
26pursuant to this section.

27(2) A credit shall not be allowed by this section unless the
28applicant and the taxpayer provide satisfactory substantiation to,
29and in the form and manner requested by, the Department of
30Insurance, California Organized Investment Network, or any
31successor thereof, that the investment is a qualified investment, as
32defined in paragraph (1) of subdivision (g).

33(3) (A) The aggregate amount of qualified investments made
34by all taxpayers pursuant to this section, Section 12209, and Section
3523657 shall not exceed fifty million dollars ($50,000,000) for each
36calendar year. However, if the aggregate amount of qualified
37investments made in any calendar year is less than fifty million
38dollars ($50,000,000), the difference may be carried over to the
39next year, and any succeeding year during which this section
P10   1remains in effect, and added to the aggregate amount authorized
2for those years.

3(B) The total amount of qualified investments certified by the
4California Organized Investment Network in any calendar year to
5any one community development financial institution together
6with its affiliates, as defined in Section 1215 of the Insurance Code,
7shall not exceed 30 percent of the annual aggregate amount of
8qualified investments certified by the California Organized
9Investment Network. If, after October 1, the California Organized
10Investment Network has determined that the availability of tax
11credits exceed their demand, then a community development
12financial institution that has been allocated 30 percent of the annual
13aggregate amount of qualified investments shall become eligible
14to apply to be certified for any remaining tax credits in that calendar
15year.

16(C) Each year, 10 percent of the annual aggregate amount of
17qualified investments shall be reserved for investment amounts of
18less than or equal to two hundred thousand dollars ($200,000). If,
19after October 1, there remains an unallocated portion of the amount
20reserved for investments of less than or equal to two hundred
21thousand dollars ($200,000), then qualified investments in excess
22of two hundred thousand dollars ($200,000) may be eligible for
23that remaining unallocated portion.

24(4) 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) (A) 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.

38(B) Provide in the application a detailed description of the
39intended use of the investment funds including, but not limited to,
40the following:

P11   1(i) All of the programs, projects, and services that would be
2funded.

3(ii) The percentage of the intended use of the investment funds
4that would directly benefit low-to-moderate income households.

5(iii) The percentage of the intended use of the investment funds
6that would directly benefit rural areas.

7(iv) The percentage of the intended use of the investment funds
8that is a green investment as defined in Section 926.1 of the
9Insurance Code.

10(3) (A) Provide in the application required in paragraph (2) the
11following information to the Department of Insurance, California
12Organized Investment Network, or its successor:

13(i) Name of the taxpayer.

14(ii) Postal address of the taxpayer, or residential address of the
15taxpayer if the taxpayer is an individual.

16(iii) Phone number of the taxpayer.

17(iv) Email address of the taxpayer.

18(v) The taxpayer’s identification number, or in the case of a
19partnership, the taxpayer identification numbers of all the partners
20for tax administration purposes.

21(B) The information provided in subparagraph (A) shall be used
22only for internal purposes by the Department of Insurance,
23California Organized Investment Network, or its successor, and
24any Network, or its successor shall limit all public disclosure of
25that information shall be limited to the name of the taxpayer only.

26(4) Provide an annual listing to the Franchise Tax Board, in the
27form and manner agreed upon by the Franchise Tax Board and the
28Department of Insurance, California Organized Investment
29Network, or its successor, of the names and taxpayer identification
30numbers of any taxpayer who makes any withdrawal or partial
31withdrawal of a qualified investment before the expiration of 60
32months from the date of the qualified investment.

33(5) Submit reports to the department, California Organized
34Investment Network, or any successor thereof, as required pursuant
35to subdivision (a) of Section 12939.1 of the Insurance Code.

36(d) begin insert(1)end insertbegin insertend insert The Insurance Commissioner may develop instructions,
37procedures, and standards for applications, and for administering
38the criteria for the evaluation of applications under this section.
39The Insurance Commissioner may, from time to time,begin delete issueend deletebegin insert adopt,
P12   1amend, or repeal end insert
regulations to implement the provisions of this
2section.

begin insert

3(2) The initial adoption of the regulations implementing this
4section shall be deemed to be an emergency and necessary in order
5to address a situation calling for immediate action to avoid serious
6harm to the public peace, health, safety, or general welfare.

end insert
begin insert

7(3) Notwithstanding Chapter 3.5 (commencing with Section
811340) of Part 1 of Division 3 of Title 2 of the Government Code,
9any emergency regulation adopted or amended by the Insurance
10Commissioner pursuant to this section shall remain in effect until
11amended or repealed by the department.

end insert

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
29or 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), 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
39households. The certificate shall include the amount eligible to be
40made as an investment that qualifies for the credit and the total
P13   1 amount 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. The Insurance Commissioner shall establish
4tax credit issuance cycles throughout the year as necessary in order
5to issue tax credit certificates to those applications granted the
6highest priority.

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.

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.

37(l) This section shall remain in effect only until December 1,
382017, and as of that date is repealed.

39

SEC. 3.  

Section 23657 of the Revenue and Taxation Code is
40amended to read:

P15   1

23657.  

(a) For each taxable year beginning on or after January
21, 1997, and before January 1, 2017, there shall be allowed as a
3credit against the amount of “tax,” as defined in Section 23036,
4an amount equal to 20 percent of the amount of each qualified
5investment made by a taxpayer during the taxable year into a
6community development financial institution that is certified by
7the Department of Insurance, California Organized Investment
8Network, or any successor thereof.

9(b) (1) Notwithstanding any other provision of this part, a credit
10shall not be allowed under this section unless the California
11Organized Investment Network, or its successor within the
12Department of Insurance, certifies that the investment described
13in subdivision (a) qualifies for the credit under this section and
14certifies the total amount of the credit allocated to the taxpayer
15pursuant to this section.

16(2) A credit shall not be allowed by this section unless the
17applicant and the taxpayer provide satisfactory substantiation to,
18and in the form and manner requested by, the Department of
19Insurance, California Organized Investment Network, or any
20successor thereof, that the investment is a qualified investment, as
21defined in paragraph (1) of subdivision (g).

22(3) (A) The aggregate amount of qualified investments made
23by all taxpayers pursuant to this section, Section 12209, and Section
2417053.57 shall not exceed fifty million dollars ($50,000,000) for
25each calendar year. However, if the aggregate amount of qualified
26investments made in any calendar year is less than fifty million
27dollars ($50,000,000), the difference may be carried over to the
28next year, and any succeeding year during which this section
29remains in effect, and added to the aggregate amount authorized
30for those years.

31(B) The total amount of qualified investments certified by the
32California Organized Investment Network in any calendar year to
33any one community development financial institution together
34with its affiliates, as defined in Section 1215 of the Insurance Code,
35shall not exceed 30 percent of the annual aggregate amount of
36qualified investments certified by the California Organized
37Investment Network. If, after October 1, the California Organized
38Investment Network has determined that the availability of tax
39credits exceed their demand, then a community development
40financial institution that has been allocated 30 percent of the annual
P16   1aggregate amount of qualified investments shall become eligible
2to apply to be certified for any remaining tax credits in that calendar
3year.

4(C) Each year, 10 percent of the annual aggregate amount of
5qualified investments shall be reserved for investment amounts of
6less than or equal to two hundred thousand dollars ($200,000). If,
7after October 1, there remains an unallocated portion of the amount
8reserved for investments of less than or equal to two hundred
9thousand dollars ($200,000), then qualified investments in excess
10of two hundred thousand dollars ($200,000) may be eligible for
11that remaining unallocated portion.

12(4) Priority among housing applications shall be given to
13applications that support affordable rental housing, housing for
14veterans, mortgages for community-based residential programs,
15and self-help housing ahead of single-family owned housing.

16(c) The community development financial institution shall do
17all of the following:

18(1) Apply to the Department of Insurance, California Organized
19Investment Network, or its successor, for certification of its status
20as a community development financial institution.

21(2) (A) Apply to the Department of Insurance, California
22Organized Investment Network, or its successor, on behalf of the
23taxpayer, for certification of the amount of the investment and the
24credit amount allocated to the taxpayer, obtain the certification,
25and retain a copy of the certification.

26(B) Provide in the application a detailed description of the
27intended use of the investment funds including, but not limited to,
28the following:

29(i) All of the programs, projects, and services that would be
30funded.

31(ii) The percentage of the intended use of the investment funds
32that would directly benefit low-to-moderate income households.

33(iii) The percentage of the intended use of the investment funds
34that would directly benefit rural areas.

35(iv) The percentage of the intended use of the investment funds
36that is a green investment as defined in Section 926.1 of the
37Insurance Code.

38(3) (A) Provide in the application required in paragraph (2) the
39following information to the Department of Insurance, California
40Organized Investment Network, or its successor:

P17   1(i) Name of the taxpayer.

2(ii) Postal address of the taxpayer, or residential address of the
3taxpayer if the taxpayer is an individual.

4(iii) Phone number of the taxpayer.

5(iv) E-mail address of the taxpayer.

6(v) The taxpayer’s California company identification number
7for tax administration purposes, or in the case of an “S”
8corporation, the taxpayer identification numbers of all the
9shareholders for tax administration purposes.

10(B) The information provided in subparagraph (A) shall be used
11only for internal purposes by the Department of Insurance,
12California Organized Investment Network, or its successor, and
13any public disclosure of that information shall be limited to the
14name of the taxpayer only.

15(4) Provide an annual listing to the Franchise Tax Board, in the
16form and manner agreed upon by the Franchise Tax Board and the
17Department of Insurance, California Organized Investment
18Network, or its successor, of the names and taxpayer identification
19numbers of any taxpayer who makes any withdrawal or partial
20withdrawal of a qualified investment before the expiration of 60
21months from the date of the qualified investment.

22(5) Submit reports to the department, California Organized
23Investment Network, or any successor thereof, as required pursuant
24to subdivision (a) of Section 12939.1 of the Insurance Code.

25(d) The California Organized Investment Network may certify
26investments for the credit allowed by this section on or before
27January 1, 2017, but not after that date.

28(e) begin insert(1)end insertbegin insertend insert The Insurance Commissioner may develop instructions,
29procedures, and standards for applications, and for administering
30the criteria for the evaluation of applications under this section.
31The Insurance Commissioner may, from time to time,begin delete issueend deletebegin insert adopt,
32amend, or repeal end insert
regulations to implement the provisions of this
33section.

begin insert

34(2) The initial adoption of the regulations implementing this
35section shall be deemed to be an emergency and necessary in order
36to address a situation calling for immediate action to avoid serious
37harm to the public peace, health, safety, or general welfare.

end insert
begin insert

38(3) Notwithstanding Chapter 3.5 (commencing with Section
3911340) of Part 1 of Division 3 of Title 2 of the Government Code,
40any emergency regulation adopted or amended by the Insurance
P18   1Commissioner pursuant to this section shall remain in effect until
2amended or repealed by the department.

end insert

3(f) 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 (g). 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 (b), with
24highest priority granted to those applications where the intended
25use of the investments has the greatest aggregate benefit for
26low-to-moderate income areas or households or rural areas or
27households. The certificate shall include the amount eligible to be
28made as an investment that qualifies for the credit and the total
29amount of the credit to which the taxpayer is entitled for the taxable
30year. Applications for tax credits shall be accepted and evaluated
31throughout the year. The Insurance Commissioner shall establish
32tax credit issuance cycles throughout the year as necessary in order
33to issue tax credit certificates to those applications granted the
34highest priority.

35(3) Provide an annual listing to the Franchise Tax Board, in the
36form or manner agreed upon by the Franchise Tax Board and the
37Department of Insurance, California Organized Investment
38Network, or its successor, of the taxpayers who were issued
39certificates, their respective tax identification numbers, the amount
P19   1of the qualified investment made by each taxpayer, and the total
2amount of qualified investments.

3(4) Include information specified pursuant to subdivision (b) of
4Section 12939.1 of the Insurance Code in the report required by
5Section 12922 of the Insurance Code.

6(g) For purposes of this section:

7(1) “Qualified investment” means an investment that is a deposit
8or loan that does not earn interest, or an equity investment, or an
9equity-like debt instrument that conforms to the specifications for
10these instruments as prescribed by the United States Department
11of the Treasury, Community Development Financial Institutions
12Fund, or its successor, or, in the absence of that prescription, as
13defined by the Insurance Commissioner. The investment must be
14equal to or greater than fifty thousand dollars ($50,000) and made
15for a minimum duration of 60 months. During that 60-month
16period, the community development financial institution shall have
17full use and control of the proceeds of the entire amount of the
18investment as well as any earnings on the investment for its
19community development purposes. The entire amount of the
20investment shall be received by the community development
21financial institution before the application for the tax credit is
22submitted. The community development financial institution shall
23use the proceeds of the investment for a purpose that is consistent
24with its community development mission and for the benefit of
25economically disadvantaged communities and low-income people
26in California.

27(2) “Community development financial institution” means a
28private financial institution located in this state that is certified by
29the Department of Insurance, California Organized Investment
30Network, or its successor, that, consistent with the legislative
31findings, declarations, and intent set forth in Section 12939 of the
32Insurance Code, has community development as its primary
33mission, and that lends in urban, rural, or reservation-based
34communities in this state. A community development financial
35institution may include a community development bank, a
36community development loan fund, a community development
37credit union, a microenterprise fund, a community development
38corporation-based lender, or a community development venture
39fund.

P20   1(h) (1) If a qualified investment is withdrawn before the end
2of the 60th month and not reinvested in another community
3development financial institution within 60 days, there shall be
4added to the “tax,” as defined in Section 23036, for the taxable
5year in which the withdrawal occurs, the entire amount of any
6credit previously allowed under this section.

7(2) If a qualified investment is reduced before the end of the
860th month, but not below fifty thousand dollars ($50,000), there
9shall be added to the “tax,” as defined in Section 23036, for the
10taxable year in which the reduction occurs, an amount equal to 20
11percent of the total reduction for the taxable year.

12(i) In the case where the credit allowed by this section exceeds
13the “tax,” the excess may be carried over to reduce the “tax” for
14the next four taxable years, or until the credit has been exhausted,
15whichever occurs first.

16(j) The Franchise Tax Board shall, as requested by the
17Department of Insurance, California Organized Investment
18Network, or its successor, advise and assist in the administration
19of this section.

20(k) On or before June 30, 2016, the Legislative Analyst’s Office
21shall submit a report to the Legislature, in compliance with Section
229795 of the Government Code, on the effects of the tax credits
23allowed under this section, Section 12209, and Section 17053.57,
24with a focus on employment in low-to-moderate income and rural
25areas, and on the benefits of these tax credits to low-to-moderate
26income and rural persons.

27(l) This section shall remain in effect only until December 1,
282017, and as of that date is repealed.

29

SEC. 4.  

This act provides for a tax levy within the meaning of
30Article IV of the Constitution and shall go into immediate effect.



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