BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 952
                                                                  Page  1

          Date of Hearing:   May 24, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                     AB 952 (Atkins) - As Amended:  May 2, 2013 

          Policy Committee:                              Revenue and  
          Taxation     Vote:                            9-0
                        Housing and Community Development     7-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill makes changes to the state low-income housing tax  
          credit (LIHTC) Program.     Specifically, this bill:  

          1)Allows the Tax Credit Allocation Committee (TCAC) to award  
            state LIHTCs to developments in a qualified census tract (QCT)  
            or a difficult to develop area (DDA) if the project is also  
            receiving federal LIHTC and if the development is restricted  
            so at least 50% of the units are for special needs households  
            and meet other specified conditions.

          2)Allows TCAC to replace federal LIHTC with state LIHTC of up to  
            30% of a project's eligible basis if the federal LIHTC is  
            reduced in an equivalent amount. 

           FISCAL EFFECT  

          This bill grants TCAC expanded authority to reallocate millions  
          of dollars of tax credits.  However, the purpose for the tax  
          credits is unchanged and the state tax credits are from a fixed  
          pool of credits that TCAC receives annually.

           COMMENTS  

           1)Purpose  .  According to the author, AB 952 will remove the  
            restriction on using state LIHTCs in the areas that need them  
            most.  The author notes housing projects that wish to access  
            this financing tool will need to set aside 50% of their units  
            to serve special needs populations such as the homeless,  
            pregnant and parenting teens and the disabled.  The author  








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            argues removing the restriction on using state LIHTCs in the  
            neediest areas makes sense from both a business and  
            humanitarian viewpoint.  AB 952 will ensure that no state tax  
            credits go unused, while also benefiting Californian's with  
            the greatest need for housing.

           2)Support.   The sponsor, State Treasurer Bill Lockyer, explains  
            there is a danger of state credits going unused because  
            federal LIHTCs offer a larger financial benefit than state  
            LIHTCs.  As such, California tends to accumulate a large sum  
            of state credits at the end of each year.  By regulation, TCAC  
            may place state LIHTCs into projects in exchange for federal  
            LIHTCs.  To use the state tax credit, TCAC carries out  
            exchanges to use up the available credits.   By expanding the  
            projects that may apply for state LIHTC, the Treasurer hopes  
            to eliminate the need to exchange state LIHTCs for federal  
            LIHTCs.

           3)Background  .  In 1986, the federal government authorized the  
            Low-Income Housing Tax Credit (LIHTC) program to enable  
            affordable housing developers to raise private capital through  
            the sale of tax benefits to investors.  The Tax Credit  
            Allocation Committee (TCAC) administers the program and awards  
            credits to qualified developers who can then sell those  
            credits to private investors who use the credits to reduce  
            their federal tax liability. The developer in turn invests the  
            capital into the affordable housing project.  

            In 1987, the Legislature authorized a state LIHTC program to  
            augment the federal tax credit program. State tax credits can  
            only be awarded to projects that also receive federal LIHTCs,  
            except for farmworker housing projects, which can receive  
            state credits without federal credits.   Investors may claim  
            the state credit over four years.  

            Projects that receive either state or federal tax credits are  
            required to keep the housing at affordable levels for 55  
            years. Both the federal and state tax credits are capped,  
            which limits the amount of credit that TCAC can award each  
            year. Each state receives an annual ceiling of federal  
            credits. In 2012 it was $2.25 per capita, which worked out to  
            $84.7 million in credits in California that can be taken by  
            investors each year for 10 years. Federal LIHTCs are  
            oversubscribed by a 3:1 ratio. TCAC has authority for  
            approximately $90 million in state tax credits each year but  








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            has as many as $25 million in credits remaining at the end of  
            the year due to lack of demand.

           4)There is no registered opposition to this bill  .
           


           
           Analysis Prepared by  :    Roger Dunstan / APPR. / (916) 319-2081