AB 952, as amended, Atkins. Low-income housing tax credits.
Existing law establishes a low-income housing tax credit program, administered by the California Tax Credit Allocation Committee, which provides procedures and requirements for the allocation of state tax credit amounts among low-income housing projects based on federal law, as modified. Existing law, among other things, allows the credit based on the applicable percentage, as defined.
Existing insurance taxation law prohibits a credit from being allocated under this law to buildings located in a difficult development area or a qualified census tract, as defined, for which the eligible basis of a new building or the rehabilitation expenditure of an existing building is 130% of a specified amount, unless the committee reduces the amount of federal credit, with the approval of the applicant, so that the combined amount of federal and state credit does not exceed the total credit allowable pursuant to this section and the Internal Revenue Code.
The Personal Income Tax Law and the Corporation Tax Law allow a credit for buildings located in designated difficult development areas or qualified census tracts, as defined, allocated in specified amounts, provided that the amount of credit allocated under the Section 42 of the Internal Revenue Code is computed on 100% of the qualified basis of the building.
This bill would, under the insurance taxation law, allow a credit for buildings located in designated difficult development areas or qualified census tracts allocated in the specified amounts, provided that the amount of credit allocated under Section 42 of the Internal Revenue Code is computed on 100% of the qualified basis of the building.
This bill would, under the insurance taxation law, the Personal Income Tax Law, and the Corporation Tax Law, authorize the California Tax Credit Allocation Committee to allocate a credit for buildings located in designated difficult development areas or qualified census tracts that are restricted to having 50% of its occupants be special needs households, as defined, even if the taxpayer receives specified federal credits, if the credit allowed under this section does not exceed 30% of the eligible basis of that building. This bill would, for purposes of all 3 laws, allow the California Tax Credit Allocation Committee to exchange federal low-income housing credits for state low-income housing credits, as specified.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 12206 of the Revenue and Taxation Code
2 is amended to read:
(a) (1) There shall be allowed as a credit against the
4“tax” (as described by Section 12201) a state low-income housing
5tax credit in an amount equal to the amount determined in
6subdivision (c), computed in accordance with Section 42 of the
7Internal Revenue Code, except as otherwise provided in this
8 section.
9(2) “Taxpayer,” for purposes of this section, means the sole
10owner in the case of a “C” corporation, the partners in the case of
11a partnership, and the shareholders in the case of an “S”
12corporation.
13(3) “Housing sponsor,” for purposes of this section, means the
14sole owner in the case of a “C” corporation, the partnership in the
P3 1case of a partnership, and the “S” corporation
in the case of an “S”
2corporation.
3(b) (1) The amount of the credit allocated to any housing
4sponsor shall be authorized by the California Tax Credit Allocation
5Committee, or any successor thereof, based on a project’s need
6for the credit for economic feasibility in accordance with the
7requirements of this section.
8(A) Except for projects to provide farmworker housing, as
9defined in subdivision (h) of Section 50199.7 of the Health and
10Safety Code, that are allocated credits solely under the set-aside
11described in subdivision (c) of Section 50199.20 of the Health and
12Safety Code, the low-income housing project shall be located in
13California and shall meet either of the following requirements:
14(i) The project’s housing sponsor shall have been allocated by
15the California Tax Credit Allocation
Committee a credit for federal
16income tax purposes under Section 42 of the Internal Revenue
17Code.
18(ii) It shall qualify for a credit under Section 42(h)(4)(B) of the
19Internal Revenue Code.
20(B) The California Tax Credit Allocation Committee shall not
21require fees for the credit under this section in addition to those
22fees required for applications for the tax credit pursuant to Section
2342 of the Internal Revenue Code. The committee may require a
24fee if the application for the credit under this section is submitted
25in a calendar year after the year the application is submitted for
26the federal tax credit.
27(C) (i) For a project that receives a preliminary reservation of
28the state low-income housing tax credit, allowed pursuant to
29subdivision (a), on or after January 1, 2009, and before January 1,
30
2016, the credit shall be allocated to the partners of a partnership
31owning the project in accordance with the partnership agreement,
32regardless of how the federal low-income housing tax credit with
33respect to the project is allocated to the partners, or whether the
34allocation of the credit under the terms of the agreement has
35substantial economic effect, within the meaning of Section 704(b)
36of the Internal Revenue Code.
37(ii) This subparagraph shall not apply to a project that receives
38a preliminary reservation of state low-income housing tax credits
39under the set-aside described in subdivision (c) of Section 50199.20
P4 1of the Health and Safety Code unless the project also receives a
2preliminary reservation of federal low-income housing tax credits.
3(iii) This subparagraph shall cease to be operative with respect
4to any project that receives a preliminary reservation of a credit
5on
or after January 1, 2016.
6(2) (A) The California Tax Credit Allocation Committee shall
7certify to the housing sponsor the amount of tax credit under this
8section allocated to the housing sponsor for each credit period.
9(B) In the case of a partnership or an “S” corporation, the
10housing sponsor shall provide a copy of the California Tax Credit
11Allocation Committee certification to the taxpayer.
12(C) The taxpayer shall attach a copy of the certification to any
13return upon which a tax credit is claimed under this section.
14(D) In the case of a failure to attach a copy of the certification
15for the year to the return in which a tax credit is claimed under this
16section, no credit under this section shall be allowed for that year
17until a
copy of that certification is provided.
18(E) All elections made by the taxpayer pursuant to Section 42
19of the Internal Revenue Code shall apply to this section.
20(F) (i) Except as described in clause (ii), for buildings located
21in designated difficult development areas (DDAs) or qualified
22census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
23Internal Revenue Code, credits may be allocated under this section
24in the amounts prescribed in subdivision (c), provided that the
25amount of credit allocated under Section 42 of the Internal Revenue
26Code is computed on 100 percent of the qualified basis of the
27building.
28(ii) Notwithstanding clause (i), the California Tax Credit
29Allocation Committee may allocate the credit for buildings located
30in DDAs or QCTs that are restricted to having 50 percent
of its
31occupants be special needs households, as defined in the California
32Code of Regulations by the California Tax Credit Allocation
33Committee, even if the taxpayer receives federal credits pursuant
34to Section 42(d)(5)(B) of the Internal Revenue Code, provided
35that the credit allowed under this section shall not exceed 30
36percent of the eligible basis of the building.
37(iii) (I) The California Tax Credit Allocation Committee may
38allocate a credit under this section in exchange for a credit allocated
39pursuant to Section 42(d)(5)(B) of the Internal Revenue Code in
40amounts up to 30 percent of the eligible basis of a building if the
P5 1credits allowed under Section 42 of the Internal Revenue Code are
2reduced by an equivalent amount.
3(II) An equivalent amount shall be determined by the California
4Tax Credit Allocation Committee based upon the relative amount
5
required to produce an equivalent state tax credit to the taxpayer.
6(c) Section 42(b) of the Internal Revenue Code shall be modified
7as follows:
8(1) In the case of any qualified low-income building that receives
9an allocation after 1989 and is a new building not federally
10subsidized, the term “applicable percentage” means the following:
11(A) For each of the first three years, the percentage prescribed
12by the Secretary of the Treasury for new buildings that are not
13federally subsidized for the taxable year, determined in accordance
14with the requirements of Section 42(b)(2) of the Internal Revenue
15Code, in lieu of the percentage prescribed in Section 42(b)(1)(A)
16of the Internal Revenue Code.
17(B) For the fourth year, the difference between 30 percent and
18
the sum of the applicable percentages for the first three years.
19(2) In the case of any qualified low-income building that receives
20an allocation after 1989 and that is a new building that is federally
21subsidized or that is an existing building that is “at risk of
22conversion,” the term “applicable percentage” means the following:
23(A) For each of the first three years, the percentage prescribed
24by the Secretary of the Treasury for new buildings that are federally
25subsidized for the taxable year.
26(B) For the fourth year, the difference between 13 percent and
27the sum of the applicable percentages for the first three years.
28(3) For purposes of this section, the term “at risk of conversion,”
29with respect to an existing property means a property that
satisfies
30all of the following criteria:
31(A) The property is a multifamily rental housing development
32in which at least 50 percent of the units receive governmental
33assistance pursuant to any of the following:
34(i) New construction, substantial rehabilitation, moderate
35rehabilitation, property disposition, and loan management set-aside
36programs, or any other program providing project-based assistance
37pursuant to Section 8 of the United States Housing Act of 1937,
38Section 1437f of Title 42 of the United States Code, as amended.
P6 1(ii) The Below-Market-Interest-Rate Program pursuant to
2Section 221(d)(3) of the National Housing Act, Sections
31715l(d)(3) and (5) of Title 12 of the United States Code.
4(iii) Section 236 of the National Housing Act,
Section 1715z-1
5of Title 12 of the United States Code.
6(iv) Programs for rent supplement assistance pursuant to Section
7101 of the Housing and Urban Development Act of 1965, Section
81701s of Title 12 of the United States Code, as amended.
9(v) Programs pursuant to Section 515 of the Housing Act of
101949, Section 1485 of Title 42 of the United States Code, as
11amended.
12(vi) The low-income housing credit program set forth in Section
1342 of the Internal Revenue Code.
14(B) The restrictions on rent and income levels will terminate or
15the federal insured mortgage on the property is eligible for
16prepayment any time within five years before or after the date of
17application to the California Tax Credit Allocation Committee.
18(C) The entity acquiring the property enters into a regulatory
19agreement that requires the property to be operated in accordance
20with the requirements of this section for a period equal to the
21greater of 55 years or the life of the property.
22(D) The property satisfies the requirements of Section 42(e) of
23the Internal Revenue Code regarding rehabilitation expenditures,
24except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
25apply.
26(d) The term “qualified low-income housing project” as defined
27in Section 42(c)(2) of the Internal Revenue Code is modified by
28adding the following requirements:
29(1) The taxpayer shall be entitled to receive a cash distribution
30from the operations of the project, after funding required reserves,
31which, at the election of
the taxpayer, is equal to:
32(A) An amount not to exceed 8 percent of the lesser of:
33(i) The owner equity which shall include the amount of the
34capital contributions actually paid to the housing sponsor and shall
35not include any amounts until they are paid on an investor note.
36(ii) Twenty percent of the adjusted basis of the building as of
37the close of the first taxable year of the credit period.
38(B) The amount of the cashflow from those units in the building
39that are not low-income units. For purposes of computing cashflow
40under this subparagraph, operating costs shall be allocated to the
P7 1low-income units using the “floor space fraction,” as defined in
2Section 42 of the Internal Revenue Code.
3(C) Any amount allowed to be distributed under subparagraph
4(A) that is not available for distribution during the first five years
5of the compliance period may accumulate and be distributed any
6time during the first 15 years of the compliance period but not
7thereafter.
8(2) The limitation on return shall apply in the aggregate to the
9partners if the housing sponsor is a partnership and in the aggregate
10to the shareholders if the housing sponsor is an “S” corporation.
11(3) The housing sponsor shall apply any cash available for
12distribution in excess of the amount eligible to be distributed under
13paragraph (1) to reduce the rent on rent-restricted units or to
14increase the number of rent-restricted units subject to the tests of
15Section 42(g)(1) of the Internal Revenue Code.
16(e) The provisions of Section 42(f)
of the Internal Revenue Code
17shall be modified as follows:
18(1) The term “credit period” as defined in Section 42(f)(1) of
19the Internal Revenue Code is modified by substituting “four taxable
20years” for “10 taxable years.”
21(2) The special rule for the first taxable year of the credit period
22under Section 42(f)(2) of the Internal Revenue Code shall not apply
23to the tax credit under this section.
24(3) Section 42(f)(3) of the Internal Revenue Code is modified
25to read:
26If, as of the close of any taxable year in the compliance period,
27after the first year of the credit period, the qualified basis of any
28building exceeds the qualified basis of that building as of the close
29of the first year of the credit period, the housing sponsor, to the
30extent of its tax credit allocation, shall
be eligible for a credit on
31the excess in an amount equal to the applicable percentage
32determined pursuant to subdivision (c) for the four-year period
33beginning with the later of the taxable years in which the increase
34in qualified basis occurs.
35(f) The provisions of Section 42(h) of the Internal Revenue
36Code shall be modified as follows:
37(1) Section 42(h)(2) of the Internal Revenue Code shall not be
38applicable and instead the following provisions shall be applicable:
39The total amount for the four-year credit period of the housing
40credit dollars allocated in a calendar year to any building shall
P8 1reduce the aggregate housing credit dollar amount of the California
2Tax Credit Allocation Committee for the calendar year in which
3the allocation is made.
4(2) Paragraphs (3), (4),
(5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
5(7), and (8) of Section 42(h) of the Internal Revenue Code shall
6not be applicable.
7(g) The aggregate housing credit dollar amount that may be
8allocated annually by the California Tax Credit Allocation
9Committee pursuant to this section, Section 17058, and Section
1023610.5 shall be an amount equal to the sum of all the following:
11(1) Seventy million dollars ($70,000,000) for the 2001 calendar
12year, and, for the 2002 calendar year and each calendar year
13thereafter, seventy million dollars ($70,000,000) increased by the
14percentage, if any, by which the Consumer Price Index for the
15preceding calendar year exceeds the Consumer Price Index for the
162001 calendar year. For the purposes of this paragraph, the term
17“Consumer Price Index” means the last Consumer Price Index for
18begin delete all urban consumersend deletebegin insert
All Urban Consumersend insert published by the federal
19Department of Labor.
20(2) The unused housing credit ceiling, if any, for the preceding
21calendar years.
22(3) The amount of housing credit ceiling returned in the calendar
23year. For purposes of this paragraph, the amount of housing credit
24dollar amount returned in the calendar year equals the housing
25credit dollar amount previously allocated to any project that does
26not become a qualified low-income housing project within the
27period required by this section or to any project with respect to
28which an allocation is canceled by mutual consent of the California
29Tax Credit Allocation Committee and the allocation recipient.
30(4) Five hundred thousand dollars ($500,000) per calendar year
31for projects to provide farmworker housing, as defined in
32
subdivision (h) of Section 50199.7 of the Health and Safety Code.
33(5) The amount of any unallocated or returned credits under
34former Sections 17053.14, 23608.2, and 23608.3, as those sections
35read prior to January 1, 2009, until fully exhausted for projects to
36provide farmworker housing, as defined in subdivision (h) of
37Section 50199.7 of the Health and Safety Code.
38(h) The term “compliance period” as defined in Section 42(i)(1)
39of the Internal Revenue Code is modified to mean, with respect to
P9 1any building, the period of 30 consecutive taxable years beginning
2with the first taxable year of the credit period with respect thereto.
3(i) (1) Section 42(j) of the Internal Revenue Code shall not be
4applicable and the provisions in paragraph (2) shall be substituted
5in its place.
6(2) The requirements of this section shall be set forth in a
7regulatory agreement between the California Tax Credit Allocation
8Committee and the housing sponsor, which agreement shall be
9subordinated, when required, to any lien or encumbrance of any
10banks or other institutional lenders to the project. The regulatory
11agreement entered into pursuant to subdivision (f) of Section
1250199.14 of the Health and Safety Code, shall apply, providing
13the agreement includes all of the following provisions:
14(A) A term not less than the compliance period.
15(B) A requirement that the agreement bebegin delete filedend deletebegin insert recordedend insert in the
16official records of the county
in which the qualified low-income
17housing project is located.
18(C) A provision stating which state and local agencies can
19enforce the regulatory agreement in the event the housing sponsor
20fails to satisfy any of the requirements of this section.
21(D) A provision that the regulatory agreement shall be deemed
22a contract enforceable by tenants as third-party beneficiaries thereto
23and which allows individuals, whether prospective, present, or
24former occupants of the building, who meet the income limitation
25applicable to the building, the right to enforce the regulatory
26agreement in any state court.
27(E) A provision incorporating the requirements of Section 42
28of the Internal Revenue Code as modified by this section.
29(F) A requirement that the housing sponsor
notify the California
30Tax Credit Allocation Committee or its designee and the local
31agency that can enforce the regulatory agreement if there is a
32determination by the Internal Revenue Service that the project is
33not in compliance with Section 42(g) of the Internal Revenue Code.
34(G) A requirement that the housing sponsor, as security for the
35performance of the housing sponsor’s obligations under the
36regulatory agreement, assign the housing sponsor’s interest in rents
37that it receives from the project, provided that until there is a
38default under the regulatory agreement, the housing sponsor is
39entitled to collect and retain the rents.
P10 1(H) The remedies available in the event of a default under the
2regulatory agreement that is not cured within a reasonable cure
3period, include, but are not limited to, allowing any of the parties
4designated to enforce the regulatory agreement to
collect all rents
5with respect to the project; taking possession of the project and
6operating the project in accordance with the regulatory agreement
7until the enforcer determines the housing sponsor is in a position
8to operate the project in accordance with the regulatory agreement;
9applying to any court for specific performance; securing the
10appointment of a receiver to operate the project; or any other relief
11as may be appropriate.
12(j) (1) The committee shall allocate the housing credit on a
13regular basis consisting of two or more periods in each calendar
14year during which applications may be filed and considered. The
15committee shall establish application filing deadlines, the maximum
16percentage of federal and state low-income housing tax credit
17ceiling that may be allocated by the committee in that period, and
18the approximate date on which allocations shall be made. If the
19enactment of federal or state law, the
adoption of rules or
20regulations, or other similar events prevent the use of two allocation
21periods, the committee may reduce the number of periods and
22adjust the filing deadlines, maximum percentage of credit allocated,
23and the allocation dates.
24(2) The committee shall adopt a qualified allocation plan, as
25provided in Section 42(m)(1) of the Internal Revenue Code. In
26adopting this plan, the committee shall comply with the provisions
27of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue
28Code.
29(3) Notwithstanding Section 42(m) of the Internal Revenue
30Code, the California Tax Credit Allocation Committee shall
31allocate housing credits in accordance with the qualified allocation
32plan and regulations, which shall include the following provisions:
33(A) All housing sponsors, as defined by paragraph (3) of
34
subdivision (a), shall demonstrate at the time the application is
35filed with the committee that the project meets the following
36threshold requirements:
37(i) The housing sponsor shall demonstrate there is a need and
38demand for low-income housing in the community or region for
39which it is proposed.
P11 1(ii) The project’s proposed financing, including tax credit
2proceeds, shall be sufficient to complete the project and that the
3proposed operating income shall be adequate to operate the project
4for the extended use period.
5(iii) The project shall have enforceable financing commitments,
6either construction or permanent financing, for at least 50 percent
7of the total estimated financing of the project.
8(iv) The housing sponsor shall have and maintain control of
the
9site for the project.
10(v) The housing sponsor shall demonstrate that the project
11complies with all applicable local land use and zoning ordinances.
12(vi) The housing sponsor shall demonstrate that the project
13development team has the experience and the financial capacity
14to ensure project completion and operation for the extended use
15period.
16(vii) The housing sponsor shall demonstrate the amount of tax
17credit that is necessary for the financial feasibility of the project
18and its viability as a qualified low-income housing project
19throughout the extended use period, taking into account operating
20expenses, a supportable debt service, reserves, funds set aside for
21rental subsidies, and required equity, and a development fee that
22does not exceed a specified percentage of the eligible basis of the
23project prior to
inclusion of the development fee in the eligible
24basis, as determined by the committee.
25(B) The committee shall give a preference to those projects
26satisfying all of the threshold requirements of subparagraph (A)
27if both of the following apply:
28(i) The project serves the lowest income tenants at rents
29affordable to those tenants.
30(ii) The project is obligated to serve qualified tenants for the
31longest period.
32(C) In addition to the provisions of subparagraphs (A) and (B),
33the committee shall use the following criteria in allocating housing
34credits:
35(i) Projects serving large families in which a substantial number,
36as defined by the committee, of all residential units is comprised
37of
low-income units with three and more bedrooms.
38(ii) Projects providing single-room occupancy units serving
39very low income tenants.
P12 1(iii) Existing projects that are “at risk of conversion,” as defined
2by paragraph (3) of subdivision (c).
3(iv) Projects for which a public agency provides direct or indirect
4long-term financial support for at least 15 percent of the total
5project development costs or projects for which the owner’s equity
6constitutes at least 30 percent of the total project development
7costs.
8(v) Projects that provide tenant amenities not generally available
9to residents of low-income housing projects.
10(4) For purposes of allocating credits pursuant to this section,
11the
committee shall not give preference to any project by virtue
12of the date of submission of its application except to break a tie
13when two or more of the projects have an equal rating.
14(k) Section 42(l) of the Internal Revenue Code shall be modified
15as follows:
16The term “secretary” shall be replaced by the term “California
17Franchise Tax Board.”
18(l) In the case where the state credit allowed under this section
19exceeds the “tax,” the excess may be carried over to reduce the
20“tax” in the following year, and succeeding years if necessary,
21until the credit has been exhausted.
22(m) The provisions of Section 11407(a) of Public Law 101-508,
23relating to the effective date of the extension of the low-income
24housing credit, shall apply to calendar years after 1993.
25(n) The provisions of Section 11407(c) of Public Law 101-508,
26relating to election to accelerate credit, shall not apply.
27(o) This section shall remain in effect for as long as Section 42
28of the Internal Revenue Code, relating to low-income housing
29credits, remains in effect.
Section 17058 of the Revenue and Taxation Code is
31amended to read:
(a) (1) There shall be allowed as a credit against the
33“net tax” (as defined in Section 17039) a state low-income housing
34credit in an amount equal to the amount determined in subdivision
35(c), computed in accordance with the provisions of Section 42 of
36the Internal Revenue Code, except as otherwise provided in this
37section.
38(2) “Taxpayer” for purposes of this section means the sole owner
39in the case of an individual, the partners in the case of a partnership,
40and the shareholders in the case of an “S” corporation.
P13 1(3) “Housing sponsor” for purposes of this section means the
2sole owner in the case of an individual, the partnership in the case
3of a partnership, and the “S”
corporation in the case of an “S”
4corporation.
5(b) (1) The amount of the credit allocated to any housing
6sponsor shall be authorized by the California Tax Credit Allocation
7Committee, or any successor thereof, based on a project’s need
8for the credit for economic feasibility in accordance with the
9requirements of this section.
10(A) The low-income housing project shall be located in
11California and shall meet either of the following requirements:
12(i) Except for projects to provide farmworker housing, as defined
13in subdivision (h) of Section 50199.7 of the Health and Safety
14Code, that are allocated credits solely under the set-aside described
15in subdivision (c) of Section 50199.20 of the Health and Safety
16Code, the project’s housing sponsor has been allocated by the
17California Tax Credit Allocation
Committee a credit for federal
18income tax purposes under Section 42 of the Internal Revenue
19Code.
20(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
21Internal Revenue Code.
22(B) The California Tax Credit Allocation Committee shall not
23require fees for the credit under this section in addition to those
24fees required for applications for the tax credit pursuant to Section
2542 of the Internal Revenue Code. The committee may require a
26fee if the application for the credit under this section is submitted
27in a calendar year after the year the application is submitted for
28the federal tax credit.
29(C) (i) For a project that receives a preliminary reservation of
30the state low-income housing tax credit, allowed pursuant to
31subdivision (a), on or after January 1, 2009, and before January 1,
322016,
the credit shall be allocated to the partners of a partnership
33owning the project in accordance with the partnership agreement,
34regardless of how the federal low-income housing tax credit with
35respect to the project is allocated to the partners, or whether the
36allocation of the credit under the terms of the agreement has
37substantial economic effect, within the meaning of Section 704(b)
38of the Internal Revenue Code.
39(ii) To the extent the allocation of the credit to a partner under
40this section lacks substantial economic effect, any loss or deduction
P14 1otherwise allowable under this part that is attributable to the sale
2or other disposition of that partner’s partnership interest made prior
3to the expiration of the federal credit shall not be allowed in the
4taxable year in which the sale or other disposition occurs, but shall
5instead be deferred until and treated as if it occurred in the first
6taxable year immediately following the taxable year in
which the
7federal credit period expires for the project described in clause (i).
8(iii) This subparagraph shall not apply to a project that receives
9a preliminary reservation of state low-income housing tax credits
10under the set-aside described in subdivision (c) of Section 50199.20
11of the Health and Safety Code unless the project also receives a
12preliminary reservation of federal low-income housing tax credits.
13(iv) This subparagraph shall cease to be operative with respect
14to any project that receives a preliminary reservation of a credit
15on or after January 1, 2016.
16(2) (A) The California Tax Credit Allocation Committee shall
17certify to the housing sponsor the amount of tax credit under this
18section allocated to the housing sponsor for each credit period.
19(B) In the case of a partnership or an “S” corporation, the
20housing sponsor shall provide a copy of the California Tax Credit
21Allocation Committee certification to the taxpayer.
22(C) The taxpayer shall, upon request, provide a copy of the
23certification to the Franchise Tax Board.
24(D) All elections made by the taxpayer pursuant to Section 42
25of the Internal Revenue Code shall apply to this section.
26(E) (i) Except as described in clause (ii), for buildings located
27in designated difficult development areas (DDAs) or qualified
28census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
29Internal Revenue Code, credits may be allocated under this section
30in the amounts prescribed in subdivision (c), provided that the
31amount of credit
allocated under Section 42 of the Internal Revenue
32Code is computed on 100 percent of the qualified basis of the
33building.
34(ii) Notwithstanding clause (i), the California Tax Credit
35Allocation Committee may allocate the credit for buildings located
36in DDAs or QCTs that are restricted to having 50 percent of its
37occupants be special needs households, as defined in the California
38Code of Regulations by the California Tax Credit Allocation
39Committee, even if the taxpayer receives federal credits pursuant
40to Section 42(d)(5)(B) of the Internal Revenue Code, provided
P15 1that the credit allowed under this section shall not exceed 30
2percent of the eligible basis of the building.
3(iii) (I) The California Tax Credit Allocation Committee may
4allocate a credit under this section in exchange for a credit allocated
5pursuant to Section 42(d)(5)(B) of the Internal Revenue
Code in
6amounts up to 30 percent of the eligible basis of a building if the
7credits allowed under Section 42 of the Internal Revenue Code are
8reduced by an equivalent amount.
9(II) An equivalent amount shall be determined by the California
10Tax Credit Allocation Committee based upon the relative amount
11required to produce an equivalent state tax credit to the taxpayer.
12(c) Section 42(b) of the Internal Revenue Code shall be modified
13as follows:
14(1) In the case of any qualified low-income building placed in
15service by the housing sponsor during 1987, the term “applicable
16percentage” means 9 percent for each of the first three years and
173 percent for the fourth year for new buildings (whether or not the
18building is federally subsidized) and for existing buildings.
19(2) In the case of any qualified low-income building that receives
20an allocation after 1989 and is a new building not federally
21subsidized, the term “applicable percentage” means the following:
22(A) For each of the first three years, the percentage prescribed
23by the Secretary of the Treasury for new buildings that are not
24federally subsidized for the taxable year, determined in accordance
25with the requirements of Section 42(b)(2) of the Internal Revenue
26Code, in lieu of the percentage prescribed in Section 42(b)(1)(A)
27of the Internal Revenue Code.
28(B) For the fourth year, the difference between 30 percent and
29the sum of the applicable percentages for the first three years.
30(3) In the case of any qualified low-income building that receives
31an allocation after
1989 and that is a new building that is federally
32subsidized or that is an existing building that is “at risk of
33conversion,” the term “applicable percentage” means the following:
34(A) For each of the first three years, the percentage prescribed
35by the Secretary of the Treasury for new buildings that are federally
36subsidized for the taxable year.
37(B) For the fourth year, the difference between 13 percent and
38the sum of the applicable percentages for the first three years.
P16 1(4) For purposes of this section, the term “at risk of conversion,”
2with respect to an existing property means a property that satisfies
3all of the following criteria:
4(A) The property is a multifamily rental housing development
5in which at least 50 percent of the units receive
governmental
6assistance pursuant to any of the following:
7(i) New construction, substantial rehabilitation, moderate
8rehabilitation, property disposition, and loan management set-aside
9programs, or any other program providing project-based assistance
10pursuant to Section 8 of the United States Housing Act of 1937,
11Section 1437f of Title 42 of the United States Code, as amended.
12(ii) The Below-Market-Interest-Rate Program pursuant to
13Section 221(d)(3) of the National Housing Act, Sections
141715l(d)(3) and (5) of Title 12 of the United States Code.
15(iii) Section 236 of the National Housing Act, Section 1715z-1
16of Title 12 of the United States Code.
17(iv) Programs for rent supplement assistance pursuant to Section
18101 of the Housing and Urban
Development Act of 1965, Section
191701s of Title 12 of the United States Code, as amended.
20(v) Programs pursuant to Section 515 of the Housing Act of
211949, Section 1485 of Title 42 of the United States Code, as
22amended.
23(vi) The low-income housing credit program set forth in Section
2442 of the Internal Revenue Code.
25(B) The restrictions on rent and income levels will terminate or
26the federal insured mortgage on the property is eligible for
27prepayment any time within five years before or after the date of
28application to the California Tax Credit Allocation Committee.
29(C) The entity acquiring the property enters into a regulatory
30agreement that requires the property to be operated in accordance
31with the requirements of this section for a period equal to the
32
greater of 55 years or the life of the property.
33(D) The property satisfies the requirements of Section 42(e) of
34the Internal Revenue Code regarding rehabilitation expenditures,
35except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
36apply.
37(d) The term “qualified low-income housing project” as defined
38in Section 42(c)(2) of the Internal Revenue Code is modified by
39adding the following requirements:
P17 1(1) The taxpayer shall be entitled to receive a cash distribution
2from the operations of the project, after funding required reserves,
3that, at the election of the taxpayer, is equal to:
4(A) An amount not to exceed 8 percent of the lesser of:
5(i) The owner equity that shall include
the amount of the capital
6contributions actually paid to the housing sponsor and shall not
7include any amounts until they are paid on an investor note.
8(ii) Twenty percent of the adjusted basis of the building as of
9the close of the first taxable year of the credit period.
10(B) The amount of the cashflow from those units in the building
11that are not low-income units. For purposes of computing cashflow
12under this subparagraph, operating costs shall be allocated to the
13low-income units using the “floor space fraction,” as defined in
14Section 42 of the Internal Revenue Code.
15(C) Any amount allowed to be distributed under subparagraph
16(A) that is not available for distribution during the first five years
17of the compliance period may be accumulated and distributed any
18time during the first 15 years of the compliance period
but not
19thereafter.
20(2) The limitation on return shall apply in the aggregate to the
21partners if the housing sponsor is a partnership and in the aggregate
22to the shareholders if the housing sponsor is an “S” corporation.
23(3) The housing sponsor shall apply any cash available for
24distribution in excess of the amount eligible to be distributed under
25paragraph (1) to reduce the rent on rent-restricted units or to
26increase the number of rent-restricted units subject to the tests of
27Section 42(g)(1) of the Internal Revenue Code.
28(e) The provisions of Section 42(f) of the Internal Revenue Code
29shall be modified as follows:
30(1) The term “credit period” as defined in Section 42(f)(1) of
31the Internal Revenue Code is modified by substituting “four taxable
32years”
for “10 taxable years.”
33(2) The special rule for the first taxable year of the credit period
34under Section 42(f)(2) of the Internal Revenue Code shall not apply
35to the tax credit under this section.
36(3) Section 42(f)(3) of the Internal Revenue Code is modified
37to read:
38If, as of the close of any taxable year in the compliance period,
39after the first year of the credit period, the qualified basis of any
40building exceeds the qualified basis of that building as of the close
P18 1of the first year of the credit period, the housing sponsor, to the
2extent of its tax credit allocation, shall be eligible for a credit on
3the excess in an amount equal to the applicable percentage
4determined pursuant to subdivision (c) for the four-year period
5beginning with the taxable year in which the increase in qualified
6basis occurs.
7(f) The provisions of Section 42(h) of the Internal Revenue
8Code shall be modified as follows:
9(1) Section 42(h)(2) of the Internal Revenue Code shall not be
10applicable and instead the following provisions shall be applicable:
11The total amount for the four-year period of the housing credit
12dollars allocated in a calendar year to any building shall reduce
13the aggregate housing credit dollar amount of the California Tax
14Credit Allocation Committee for the calendar year in which the
15allocation is made.
16(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
17(7), and (8) of Section 42(h) of the Internal Revenue Code shall
18not be applicable to this section.
19(g) The aggregate housing credit dollar amount
that may be
20allocated annually by the California Tax Credit Allocation
21Committee pursuant to this section, Section 12206, and Section
2223610.5 shall be an amount equal to the sum of all the following:
23(1) Seventy million dollars ($70,000,000) for the 2001 calendar
24year, and, for the 2002 calendar year and each calendar year
25thereafter, seventy million dollars ($70,000,000) increased by the
26percentage, if any, by which the Consumer Price Index for the
27preceding calendar year exceeds the Consumer Price Index for the
282001 calendar year. For the purposes of this paragraph, the term
29“Consumer Price Index” means the last Consumer Price Index for
30begin delete all urban consumersend deletebegin insert
All Urban Consumersend insert published by the federal
31Department of Labor.
32(2) The unused housing credit ceiling, if any, for the preceding
33calendar years.
34(3) The amount of housing credit ceiling returned in the calendar
35year. For purposes of this paragraph, the amount of housing credit
36dollar amount returned in the calendar year equals the housing
37credit dollar amount previously allocated to any project that does
38not become a qualified low-income housing project within the
39period required by this section or to any project with respect to
P19 1which an allocation is canceled by mutual consent of the California
2Tax Credit Allocation Committee and the allocation recipient.
3(4) Five hundred thousand dollars ($500,000) per calendar year
4for projects to provide farmworker housing, as defined in
5
subdivision (h) of Section 50199.7 of the Health and Safety Code.
6(5) The amount of any unallocated or returned credits under
7former Sections 17053.14, 23608.2, and 23608.3, as those sections
8read prior to January 1, 2009, until fully exhausted for projects to
9provide farmworker housing, as defined in subdivision (h) of
10Section 50199.7 of the Health and Safety Code.
11(h) The term “compliance period” as defined in Section 42(i)(1)
12of the Internal Revenue Code is modified to mean, with respect to
13any building, the period of 30 consecutive taxable years beginning
14with the first taxable year of the credit period with respect thereto.
15(i) Section 42(j) of the Internal Revenue Code shall not be
16applicable and the following requirements of this section shall be
17set forth in a regulatory agreement between the California Tax
18
Credit Allocation Committee and the housing sponsor, which
19agreement shall be subordinated, when required, to any lien or
20encumbrance of any banks or other institutional lenders to the
21project. The regulatory agreement entered into pursuant to
22subdivision (f) of Section 50199.14 of the Health and Safety Code
23shall apply, provided that the agreement includes all of the
24following provisions:
25(1) A term not less than the compliance period.
26(2) A requirement that the agreement bebegin delete filedend deletebegin insert recordedend insert in the
27official records of the county in which the qualified low-income
28housing project is located.
29(3) A provision stating which state and
local agencies can
30enforce the regulatory agreement in the event the housing sponsor
31fails to satisfy any of the requirements of this section.
32(4) A provision that the regulatory agreement shall be deemed
33a contract enforceable by tenants as third-party beneficiaries thereto
34and that allows individuals, whether prospective, present, or former
35occupants of the building, who meet the income limitation
36applicable to the building, the right to enforce the regulatory
37agreement in any state court.
38(5) A provision incorporating the requirements of Section 42
39of the Internal Revenue Code as modified by this section.
P20 1(6) A requirement that the housing sponsor notify the California
2Tax Credit Allocation Committee or its designee if there is a
3determination by the Internal Revenue Service that the project is
4not in compliance
with Section 42(g) of the Internal Revenue Code.
5(7) A requirement that the housing sponsor, as security for the
6performance of the housing sponsor’s obligations under the
7regulatory agreement, assign the housing sponsor’s interest in rents
8that it receives from the project, provided that until there is a
9default under the regulatory agreement, the housing sponsor is
10entitled to collect and retain the rents.
11(8) The remedies available in the event of a default under the
12regulatory agreement that is not cured within a reasonable cure
13period, include, but are not limited to, allowing any of the parties
14designated to enforce the regulatory agreement to collect all rents
15with respect to the project; taking possession of the project and
16operating the project in accordance with the regulatory agreement
17until the enforcer determines the housing sponsor is in a position
18to operate the
project in accordance with the regulatory agreement;
19applying to any court for specific performance; securing the
20appointment of a receiver to operate the project; or any other relief
21as may be appropriate.
22(j) (1) The committee shall allocate the housing credit on a
23regular basis consisting of two or more periods in each calendar
24year during which applications may be filed and considered. The
25committee shall establish application filing deadlines, the maximum
26percentage of federal and state low-income housing tax credit
27ceiling that may be allocated by the committee in that period, and
28the approximate date on which allocations shall be made. If the
29enactment of federal or state law, the adoption of rules or
30regulationsbegin insert,end insert or other similar events prevent the use of two allocation
31periods, the committee may reduce the
number of periods and
32adjust the filing deadlines, maximum percentage of credit allocated,
33and the allocation dates.
34(2) The committee shall adopt a qualified allocation plan, as
35provided in Section 42(m)(1) of the Internal Revenue Code. In
36adopting this plan, the committee shall comply with the provisions
37of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue
38Code.
39(3) Notwithstanding Section 42(m) of the Internal Revenue
40Code, the California Tax Credit Allocation Committee shall
P21 1allocate housing credits in accordance with the qualified allocation
2plan and regulations, which shall include the following provisions:
3(A) All housing sponsors, as defined by paragraph (3) of
4subdivision (a), shall demonstrate at the time the application is
5filed with the committee that the project meets the following
6threshold
requirements:
7(i) The housing sponsor shall demonstrate there is a need and
8demand for low-income housing in the community or region for
9which it is proposed.
10(ii) The project’s proposed financing, including tax credit
11proceeds, shall be sufficient to complete the project and that the
12proposed operating income shall be adequate to operate the project
13for the extended use period.
14(iii) The project shall have enforceable financing commitments,
15either construction or permanent financing, for at least 50 percent
16of the total estimated financing of the project.
17(iv) The housing sponsor shall have and maintain control of the
18site for the project.
19(v) The housing sponsor shall demonstrate that
the project
20complies with all applicable local land use and zoning ordinances.
21(vi) The housing sponsor shall demonstrate that the project
22development team has the experience and the financial capacity
23to ensure project completion and operation for the extended use
24period.
25(vii) The housing sponsor shall demonstrate the amount of tax
26credit that is necessary for the financial feasibility of the project
27and its viability as a qualified low-income housing project
28throughout the extended use period, taking into account operating
29expenses, a supportable debt service, reserves, funds set aside for
30rental subsidiesbegin delete,end delete and required equity, and a development fee that
31does not exceed a specified percentage of the eligible basis of the
32project prior to inclusion of the development fee in the eligible
33basis, as
determined by the committee.
34(B) The committee shall give a preference to those projects
35satisfying all of the threshold requirements of subparagraph (A)
36if both of the following apply:
37(i) The project serves the lowest income tenants at rents
38affordable to those tenants.
39(ii) The project is obligated to serve qualified tenants for the
40longest period.
P22 1(C) In addition to the provisions of subparagraphs (A) and (B),
2the committee shall use the following criteria in allocating housing
3credits:
4(i) Projects serving large families in which a substantial number,
5as defined by the committeebegin insert,end insert
of all residential units is comprised
6of low-income units with three and more bedrooms.
7(ii) Projects providing single-room occupancy units serving
8very low income tenants.
9(iii) Existing projects that are “at risk of conversion,” as defined
10by paragraph (4) of subdivision (c).
11(iv) Projects for which a public agency provides direct or indirect
12long-term financial support for at least 15 percent of the total
13project development costs or projects for which the owner’s equity
14constitutes at least 30 percent of the total project development
15costs.
16(v) Projects that provide tenant amenities not generally available
17to residents of low-income housing projects.
18(4) For purposes of
allocating credits pursuant to this section,
19the committee shall not give preference to any project by virtue
20of the date of submission of its application.
21(k) Section 42(l) of the Internal Revenue Code shall be modified
22as follows:
23The term “secretary” shall be replaced by the term “California
24Franchise Tax Board.”
25(l) In the case where the credit allowed under this section
26exceeds the net tax, the excess credit may be carried over to reduce
27the net tax in the following year, and succeeding taxable years, if
28necessary, until the credit has been exhausted.
29(m) A project that received an allocation of a 1989 federal
30housing credit dollar amount shall be eligible to receive an
31allocation of a 1990 state housing credit dollar amount, subject to
32all of the following
conditions:
33(1) The project was not placed in service prior to 1990.
34(2) To the extent the amendments made to this section by the
35Statutes of 1990 conflict with any provisions existing in this section
36prior to those amendments, the prior provisions of law shall prevail.
37(3) Notwithstanding paragraph (2), a project applying for an
38allocation under this subdivision shall be subject to the
39requirements of paragraph (3) of subdivision (j).
P23 1(n) The credit period with respect to an allocation of credit in
21989 by the California Tax Credit Allocation Committee of which
3any amount is attributable to unallocated credit from 1987 or 1988
4shall not begin until after December 31, 1989.
5(o) The
provisions of Section 11407(a) of Public Law 101-508,
6relating to the effective date of the extension of the low-income
7housing credit, shall apply to calendar years after 1989.
8(p) The provisions of Section 11407(c) of Public Law 101-508,
9relating to election to accelerate credit, shall not apply.
10(q) Any unused credit may continue to be carried forward, as
11provided in subdivision (l), until the credit has been exhausted.
12This section shall remain in effect on and after December 1,
131990, for as long as Section 42 of the Internal Revenue Code,
14relating to low-income housing credits, remains in effect.
15(r) The amendments to this section made by the act adding this
16subdivision shall apply only to taxable years beginning on or after
17January 1,
1994.
Section 23610.5 of the Revenue and Taxation Code
19 is amended to read:
(a) (1) There shall be allowed as a credit against the
21“tax” (as defined by Section 23036) a state low-income housing
22tax credit in an amount equal to the amount determined in
23subdivision (c), computed in accordance with Section 42 of the
24Internal Revenue Code of 1986, except as otherwise provided in
25this section.
26(2) “Taxpayer,” for purposes of this section, means the sole
27owner in the case of a “C” corporation, the partners in the case of
28a partnership, and the shareholders in the case of an “S”
29corporation.
30(3) “Housing sponsor,” for purposes of this section, means the
31sole owner in the case of a “C” corporation, the partnership in the
32case of a partnership, and the “S”
corporation in the case of an “S”
33corporation.
34(b) (1) The amount of the credit allocated to any housing
35sponsor shall be authorized by the California Tax Credit Allocation
36Committee, or any successor thereof, based on a project’s need
37for the credit for economic feasibility in accordance with the
38requirements of this section.
39(A) The low-income housing project shall be located in
40California and shall meet either of the following requirements:
P24 1(i) Except for projects to provide farmworker housing, as defined
2in subdivision (h) of Section 50199.7 of the Health and Safety
3Code, that are allocated credits solely under the set-aside described
4in subdivision (c) of Section 50199.20 of the Health and Safety
5Code, the project’s housing sponsor has been allocated by the
6California Tax Credit Allocation
Committee a credit for federal
7income tax purposes under Section 42 of the Internal Revenue
8Code.
9(ii) It qualifies for a credit under Section 42(h)(4)(B) of the
10Internal Revenue Code.
11(B) The California Tax Credit Allocation Committee shall not
12require fees for the credit under this section in addition to those
13fees required for applications for the tax credit pursuant to Section
1442 of the Internal Revenue Code. The committee may require a
15fee if the application for the credit under this section is submitted
16in a calendar year after the year the application is submitted for
17the federal tax credit.
18(C) (i) For a project that receives a preliminary reservation of
19the state low-income housing tax credit, allowed pursuant to
20subdivision (a), on or after January 1, 2009, and before January 1,
212016,
the credit shall be allocated to the partners of a partnership
22owning the project in accordance with the partnership agreement,
23regardless of how the federal low-income housing tax credit with
24respect to the project is allocated to the partners, or whether the
25allocation of the credit under the terms of the agreement has
26substantial economic effect, within the meaning of Section 704(b)
27of the Internal Revenue Code.
28(ii) To the extent the allocation of the credit to a partner under
29this section lacks substantial economic effect, any loss or deduction
30otherwise allowable under this part that is attributable to the sale
31or other disposition of that partner’s partnership interest made prior
32to the expiration of the federal credit shall not be allowed in the
33taxable year in which the sale or other disposition occurs, but shall
34instead be deferred until and treated as if it occurred in the first
35taxable year immediately following the taxable year in
which the
36federal credit period expires for the project described in clause (i).
37(iii) This subparagraph shall not apply to a project that receives
38a preliminary reservation of state low-income housing tax credits
39under the set-aside described in subdivision (c) of Section 50199.20
P25 1of the Health and Safety Code unless the project also receives a
2preliminary reservation of federal low-income housing tax credits.
3(iv) This subparagraph shall cease to be operative with respect
4to any project that receives a preliminary reservation of a credit
5on or after January 1, 2016.
6(2) (A) The California Tax Credit Allocation Committee shall
7certify to the housing sponsor the amount of tax credit under this
8section allocated to the housing sponsor for each credit period.
9(B) In the case of a partnership or an “S” corporation, the
10housing sponsor shall provide a copy of the California Tax Credit
11Allocation Committee certification to the taxpayer.
12(C) The taxpayer shall, upon request, provide a copy of the
13certification to the Franchise Tax Board.
14(D) All elections made by the taxpayer pursuant to Section 42
15of the Internal Revenue Code shall apply to this section.
16(E) (i) Except as described in clause (ii), for buildings located
17in designated difficult development areas (DDAs) or qualified
18census tracts (QCTs), as defined in Section 42(d)(5)(B) of the
19Internal Revenue Code, credits may be allocated under this section
20in the amounts prescribed in subdivision (c), provided that the
21amount of credit
allocated under Section 42 of the Internal Revenue
22Code is computed on 100 percent of the qualified basis of the
23building.
24(ii) Notwithstanding clause (i), the California Tax Credit
25Allocation Committee may allocate the credit for buildings located
26in DDAs or QCTs that are restricted to having 50 percent of its
27occupants be special needs households, as defined in the California
28Code of Regulations by the California Tax Credit Allocation
29Committee, even if the taxpayer receives federal credits pursuant
30to Section 42(d)(5)(B) of the Internal Revenue Code, provided
31that the credit allowed under this section shall not exceed 30
32percent of the eligible basis of the building.
33(iii) (I) The California Tax Credit Allocation Committee may
34allocate a credit under this section in exchange for a credit allocated
35pursuant to Section 42(d)(5)(B) of the Internal Revenue
Code in
36amounts up to 30 percent of the eligible basis of a building if the
37credits allowed under Section 42 of the Internal Revenue Code are
38reduced by an equivalent amount.
P26 1(II) An equivalent amount shall be determined by the California
2Tax Credit Allocation Committee based upon the relative amount
3required to produce an equivalent state tax credit to the taxpayer.
4(c) Section 42(b) of the Internal Revenue Code shall be modified
5as follows:
6(1) In the case of any qualified low-income building placed in
7service by the housing sponsor during 1987, the term “applicable
8percentage” means 9 percent for each of the first three years and
93 percent for the fourth year for new buildings (whether or not the
10building is federally subsidized) and for existing buildings.
11(2) In the case of any qualified low-income building that receives
12an allocation after 1989 and is a new building not federally
13subsidized, the term “applicable percentage” means the following:
14(A) For each of the first three years, the percentage prescribed
15by the Secretary of the Treasury for new buildings that are not
16federally subsidized for the taxable year, determined in accordance
17with the requirements of Section 42(b)(2) of the Internal Revenue
18Code, in lieu of the percentage prescribed in Section 42(b)(1)(A)
19of the Internal Revenue Code.
20(B) For the fourth year, the difference between 30 percent and
21the sum of the applicable percentages for the first three years.
22(3) In the case of any qualified low-income building that receives
23an allocation after
1989 and that is a new building that is federally
24subsidized or that is an existing building that is “at risk of
25conversion,” the term “applicable percentage” means the following:
26(A) For each of the first three years, the percentage prescribed
27by the Secretary of the Treasury for new buildings that are federally
28subsidized for the taxable year.
29(B) For the fourth year, the difference between 13 percent and
30the sum of the applicable percentages for the first three years.
31(4) For purposes of this section, the term “at risk of conversion,”
32with respect to an existing property means a property that satisfies
33all of the following criteria:
34(A) The property is a multifamily rental housing development
35in which at least 50 percent of the units receive
governmental
36assistance pursuant to any of the following:
37(i) New construction, substantial rehabilitation, moderate
38rehabilitation, property disposition, and loan management set-aside
39programs, or any other program providing project-based assistance
P27 1pursuant to Section 8 of the United States Housing Act of 1937,
2Section 1437f of Title 42 of the United States Code, as amended.
3(ii) The Below-Market-Interest-Rate Program pursuant to
4Section 221(d)(3) of the National Housing Act, Sections
51715l(d)(3) and (5) of Title 12 of the United States Code.
6(iii) Section 236 of the National Housing Act, Section 1715z-1
7of Title 12 of the United States Code.
8(iv) Programs for rent supplement assistance pursuant to Section
9101 of the Housing and Urban
Development Act of 1965, Section
101701s of Title 12 of the United States Code, as amended.
11(v) Programs pursuant to Section 515 of the Housing Act of
121949, Section 1485 of Title 42 of the United States Code, as
13amended.
14(vi) The low-income housing credit program set forth in Section
1542 of the Internal Revenue Code.
16(B) The restrictions on rent and income levels will terminate or
17the federally insured mortgage on the property is eligible for
18prepayment any time within five years before or after the date of
19application to the California Tax Credit Allocation Committee.
20(C) The entity acquiring the property enters into a regulatory
21agreement that requires the property to be operated in accordance
22with the requirements of this section for a period equal to
the
23greater of 55 years or the life of the property.
24(D) The property satisfies the requirements of Section 42(e) of
25the Internal Revenue Code regarding rehabilitation expenditures,
26except that the provisions of Section 42(e)(3)(A)(ii)(I) shall not
27apply.
28(d) The term “qualified low-income housing project” as defined
29in Section 42(c)(2) of the Internal Revenue Code is modified by
30adding the following requirements:
31(1) The taxpayer shall be entitled to receive a cash distribution
32from the operations of the project, after funding required reserves,
33that at the election of the taxpayer, is equal to:
34(A) An amount not to exceed 8 percent of the lesser of:
35(i) The owner equity, that shall
include the amount of the capital
36contributions actually paid to the housing sponsor and shall not
37include any amounts until they are paid on an investor note.
38(ii) Twenty percent of the adjusted basis of the building as of
39the close of the first taxable year of the credit period.
P28 1(B) The amount of the cashflow from those units in the building
2that are not low-income units. For purposes of computing cashflow
3under this subparagraph, operating costs shall be allocated to the
4low-income units using the “floor space fraction,” as defined in
5Section 42 of the Internal Revenue Code.
6(C) Any amount allowed to be distributed under subparagraph
7(A) that is not available for distribution during the first five years
8of the compliance period may be accumulated and distributed any
9time during the first 15 years of the compliance
period but not
10thereafter.
11(2) The limitation on return shall apply in the aggregate to the
12partners if the housing sponsor is a partnership and in the aggregate
13to the shareholders if the housing sponsor is an “S” corporation.
14(3) The housing sponsor shall apply any cash available for
15distribution in excess of the amount eligible to be distributed under
16paragraph (1) to reduce the rent on rent-restricted units or to
17increase the number of rent-restricted units subject to the tests of
18Section 42(g)(1) of the Internal Revenue Code.
19(e) The provisions of Section 42(f) of the Internal Revenue Code
20shall be modified as follows:
21(1) The term “credit period” as defined in Section 42(f)(1) of
22the Internal Revenue Code is modified by substituting “four taxable
23
years” for “10 taxable years.”
24(2) The special rule for the first taxable year of the credit period
25under Section 42(f)(2) of the Internal Revenue Code shall not apply
26to the tax credit under this section.
27(3) Section 42(f)(3) of the Internal Revenue Code is modified
28to read:
29If, as of the close of any taxable year in the compliance period,
30after the first year of the credit period, the qualified basis of any
31building exceeds the qualified basis of that building as of the close
32of the first year of the credit period, the housing sponsor, to the
33extent of its tax credit allocation, shall be eligible for a credit on
34the excess in an amount equal to the applicable percentage
35determined pursuant to subdivision (c) for the four-year period
36beginning with the later of the taxable years in which the increase
37in qualified basis occurs.
38(f) The provisions of Section 42(h) of the Internal Revenue
39Code shall be modified as follows:
P29 1(1) Section 42(h)(2) of the Internal Revenue Code shall not be
2applicable and instead the following provisions shall be applicable:
3The total amount for the four-year credit period of the housing
4credit dollars allocated in a calendar year to any building shall
5reduce the aggregate housing credit dollar amount of the California
6Tax Credit Allocation Committee for the calendar year in which
7the allocation is made.
8(2) Paragraphs (3), (4), (5), (6)(E)(i)(II), (6)(F), (6)(G), (6)(I),
9(7), and (8) of Section 42(h) of the Internal Revenue Code shall
10not be applicable.
11(g) The aggregate housing credit dollar amount that may be
12
allocated annually by the California Tax Credit Allocation
13Committee pursuant to this section, Section 12206, and Section
1417058 shall be an amount equal to the sum of all the following:
15(1) Seventy million dollars ($70,000,000) for the 2001 calendar
16year, and, for the 2002 calendar year and each calendar year
17thereafter, seventy million dollars ($70,000,000) increased by the
18percentage, if any, by which the Consumer Price Index for the
19preceding calendar year exceeds the Consumer Price Index for the
202001 calendar year. For the purposes of this paragraph, the term
21“Consumer Price Index” means the last Consumer Price Index for
22begin delete all urban consumersend deletebegin insert
All Urban Consumersend insert published by the federal
23Department of Labor.
24(2) The unused housing credit ceiling, if any, for the preceding
25calendar years.
26(3) The amount of housing credit ceiling returned in the calendar
27year. For purposes of this paragraph, the amount of housing credit
28dollar amount returned in the calendar year equals the housing
29credit dollar amount previously allocated to any project that does
30not become a qualified low-income housing project within the
31period required by this section or to any project with respect to
32which an allocation is canceled by mutual consent of the California
33Tax Credit Allocation Committee and the allocation recipient.
34(4) Five hundred thousand dollars ($500,000) per calendar year
35for projects to provide farmworker housing, as defined in
36
subdivision (h) of Section 50199.7 of the Health and Safety Code.
37(5) The amount of any unallocated or returned credits under
38former Sections 17053.14, 23608.2, and 23608.3, as those sections
39read prior to January 1, 2009, until fully exhausted for projects to
P30 1provide farmworker housing, as defined in subdivision (h) of
2Section 50199.7 of the Health and Safety Code.
3(h) The term “compliance period” as defined in Section 42(i)(1)
4of the Internal Revenue Code is modified to mean, with respect to
5any building, the period of 30 consecutive taxable years beginning
6with the first taxable year of the credit period with respect thereto.
7(i) Section 42(j) of the Internal Revenue Code shall not be
8applicable and the following shall be substituted in its place:
9The requirements of this
section shall be set forth in a regulatory
10agreement between the California Tax Credit Allocation Committee
11and the housing sponsor, and this agreement shall be subordinated,
12when required, to any lien or encumbrance of any banks or other
13institutional lenders to the project. The regulatory agreement
14entered into pursuant to subdivision (f) of Section 50199.14 of the
15Health and Safety Code shall apply, provided that the agreement
16includes all of the following provisions:
17(1) A term not less than the compliance period.
18(2) A requirement that the agreement bebegin delete filedend deletebegin insert
recordedend insert in the
19official records of the county in which the qualified low-income
20housing project is located.
21(3) A provision stating which state and local agencies can
22enforce the regulatory agreement in the event the housing sponsor
23fails to satisfy any of the requirements of this section.
24(4) A provision that the regulatory agreement shall be deemed
25a contract enforceable by tenants as third-party beneficiaries
26thereto, and that allows individuals, whether prospective, present,
27or former occupants of the building, who meet the income
28limitation applicable to the buildingbegin insert,end insert the right to enforce the
29regulatory agreement in any state court.
30(5) A provision incorporating the
requirements of Section 42
31of the Internal Revenue Code as modified by this section.
32(6) A requirement that the housing sponsor notify the California
33Tax Credit Allocation Committee or its designee if there is a
34determination by the Internal Revenue Service that the project is
35not in compliance with Section 42(g) of the Internal Revenue Code.
36(7) A requirement that the housing sponsor, as security for the
37performance of the housing sponsor’s obligations under the
38regulatory agreement, assign the housing sponsor’s interest in rents
39that it receives from the project, provided that until there is a
P31 1default under the regulatory agreement, the housing sponsor is
2entitled to collect and retain the rents.
3(8) A provision that the remedies available in the event of a
4default under the regulatory agreement that is not cured
within a
5reasonable cure period include, but are not limited to, allowing
6any of the parties designated to enforce the regulatory agreement
7to collect all rents with respect to the project; taking possession of
8the project and operating the project in accordance with the
9regulatory agreement until the enforcer determines the housing
10sponsor is in a position to operate the project in accordance with
11the regulatory agreement; applying to any court for specific
12performance; securing the appointment of a receiver to operate
13the project; or any other relief as may be appropriate.
14(j) (1) The committee shall allocate the housing credit on a
15regular basis consisting of two or more periods in each calendar
16year during which applications may be filed and considered. The
17committee shall establish application filing deadlines, the maximum
18percentage of federal and state low-income housing tax credit
19ceiling that may be allocated by
the committee in that period, and
20the approximate date on which allocations shall be made. If the
21enactment of federal or state law, the adoption of rules or
22regulations, or other similar events prevent the use of two allocation
23periods, the committee may reduce the number of periods and
24adjust the filing deadlines, maximum percentage of credit allocated,
25and allocation dates.
26(2) The committee shall adopt a qualified allocation plan, as
27provided in Section 42(m)(1) of the Internal Revenue Code. In
28adopting this plan, the committee shall comply with the provisions
29of Sections 42(m)(1)(B) and 42(m)(1)(C) of the Internal Revenue
30Code.
31(3) Notwithstanding Section 42(m) of the Internal Revenue
32Code, the California Tax Credit Allocation Committee shall
33allocate housing credits in accordance with the qualified allocation
34plan and regulations, which shall include the following
provisions:
35(A) All housing sponsors, as defined by paragraph (3) of
36subdivision (a), shall demonstrate at the time the application is
37filed with the committee that the project meets the following
38threshold requirements:
P32 1(i) The housing sponsor shall demonstrate that there is a need
2for low-income housing in the community or region for which it
3is proposed.
4(ii) The project’s proposed financing, including tax credit
5proceeds, shall be sufficient to complete the project and shall be
6adequate to operate the project for the extended use period.
7(iii) The project shall have enforceable financing commitments,
8either construction or permanent financing, for at least 50 percent
9of the total estimated financing of the project.
10(iv) The housing sponsor shall have and maintain control of the
11site for the project.
12(v) The housing sponsor shall demonstrate that the project
13complies with all applicable local land use and zoning ordinances.
14(vi) The housing sponsor shall demonstrate that the project
15development team has the experience and the financial capacity
16to ensure project completion and operation for the extended use
17period.
18(vii) The housing sponsor shall demonstrate the amount of tax
19credit that is necessary for the financial feasibility of the project
20and its viability as a qualified low-income housing project
21throughout the extended use period, taking into account operating
22expenses, a supportable debt service, reserves, funds set aside for
23rental subsidiesbegin delete,end delete
and required equity, and a development fee that
24does not exceed a specified percentage of the eligible basis of the
25project prior to inclusion of the development fee in the eligible
26basis, as determined by the committee.
27(B) The committee shall give a preference to those projects
28satisfying all of the threshold requirements of subparagraph (A)
29if both of the following apply:
30(i) The project serves the lowest income tenants at rents
31affordable to those tenants.
32(ii) The project is obligated to serve qualified tenants for the
33longest period.
34(C) In addition to the provisions of subparagraphs (A) and (B),
35the committee shall use the following criteria in allocating housing
36credits:
37(i) Projects serving large families in which a substantial number,
38as defined by the committee, of all residential units are low-income
39units with three and more bedrooms.
P33 1(ii) Projects providing single-room occupancy units serving
2very low income tenants.
3(iii) Existing projects that are “at risk of conversion,” as defined
4by paragraph (4) of subdivision (c).
5(iv) Projects for which a public agency provides direct or indirect
6long-term financial support for at least 15 percent of the total
7project development costs or projects for which the owner’s equity
8constitutes at least 30 percent of the total project development
9costs.
10(v) Projects that provide tenant amenities not generally available
11to residents of low-income housing projects.
12(4) For purposes of allocating credits pursuant to this section,
13the committee shall not give preference to any project by virtue
14of the date of submission of its application except to break a tie
15when two or more of the projects have an equal rating.
16(5) Not less than 20 percent of the low-income housing tax
17credits available annually under this section, Section 12206, and
18Section 17058 shall be set aside for allocation to rural areas as
19defined in Section 50199.21 of the Health and Safety Code. Any
20amount of credit set aside for rural areas remaining on or after
21October 31 of any calendar year shall be available for allocation
22to any eligible project. No amount of credit set aside for rural areas
23shall be considered available for any eligible project so long as
24there are eligible rural applications pending on October 31.
25(k) Section 42(l) of the Internal Revenue Code shall be modified
26as follows:
27The term “secretary” shall be replaced by the term “California
28Franchise Tax Board.”
29(l) In the case where the state credit allowed under this section
30exceeds the “tax,” the excess may be carried over to reduce the
31“tax” in the following year, and succeeding years if necessary,
32until the credit has been exhausted.
33(m) A project that received an allocation of a 1989 federal
34housing credit dollar amount shall be eligible to receive an
35allocation of a 1990 state housing credit dollar amount, subject to
36all of the following conditions:
37(1) The project was not placed in service prior to 1990.
38(2) To the extent the
amendments made to this section by the
39Statutes of 1990 conflict with any provisions existing in this section
40prior to those amendments, the prior provisions of law shall prevail.
P34 1(3) Notwithstanding paragraph (2), a project applying for an
2allocation under this subdivision shall be subject to the
3requirements of paragraph (3) of subdivision (j).
4(n) The credit period with respect to an allocation of credit in
51989 by the California Tax Credit Allocation Committee of which
6any amount is attributable to unallocated credit from 1987 or 1988
7shall not begin until after December 31, 1989.
8(o) The provisions of Section 11407(a) of Public Law 101-508,
9relating to the effective date of the extension of the low-income
10housing credit, shall apply to calendar years after 1989.
11(p) The provisions of Section 11407(c) of Public Law 101-508,
12relating to election to accelerate credit, shall not apply.
13(q) (1) A corporation may elect to assign any portion of any
14credit allowed under this section to one or more affiliated
15corporations for each taxable year in which the credit is allowed.
16For purposes of this subdivision, “affiliated corporation” has the
17meaning provided in subdivision (b) of Section 25110, as that
18section was amended by Chapter 881 of the Statutes of 1993, as
19of the last day of the taxable year in which the credit is allowed,
20except that “100 percent” is substituted for “more than 50 percent”
21wherever it appears in the section, as that section was amended by
22Chapter 881 of the Statutes of 1993, and “voting common stock”
23is substituted for “voting stock” wherever it appears in the section,
24as that section was amended by Chapter
881 of the Statutes of
251993.
26(2) The election provided in paragraph (1):
27(A) May be based on any method selected by the corporation
28that originally receives the credit.
29(B) Shall be irrevocable for the taxable year the credit is allowed,
30once made.
31(C) May be changed for any subsequent taxable year if the
32election to make the assignment is expressly shown on each of the
33returns of the affiliated corporations that assign and receive the
34credits.
35(r) Any unused credit may continue to be carried forward, as
36provided in subdivision (l), until the credit has been exhausted.
37This section shall remain in effect on and after December 1,
381990, for as long
as Section 42 of the Internal Revenue Code,
39relating to low-income housing credits, remains in effect.
P35 1(s) The amendments to this section made by the act adding this
2subdivision shall apply only to taxable years beginning on or after
3January 1, 1994, except that paragraph (1) of subdivision (q), as
4amended, shall apply to taxable years beginning on or after January
51, 1993.
This act provides for a tax levy within the meaning of
7Article IV of the Constitution and shall go into immediate effect.
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