BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 952
Author: Atkins (D)
Amended: 6/26/13 in Senate
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-0, 6/25/13
AYES: DeSaulnier, Gaines, Galgiani, Hueso, Lara, Liu, Pavley,
Roth, Wyland
NO VOTE RECORDED: Beall, Cannella
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 8/14/13
AYES: Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/30/13
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
ASSEMBLY FLOOR : 78-0, 5/29/13 - See last page for vote
SUBJECT : Low-income housing tax credits
SOURCE : State Treasurer Bill Lockyer
DIGEST : This bill allows the states Tax Credit Allocation
Committee (TCAC) to allocate state low-income housing tax
credits (LIHTC) to housing projects in federally designated
areas in which it is difficult to develop housing as long as the
housing built is restricted so that 50% of the occupants will be
special needs households.
ANALYSIS : Federal law enacted in 1986 created the federal
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LIHTC and required that each state designate a state agency to
administer the LIHTC program. SB 113 (Leroy Greene, Chapter
658, Statutes of 1987) assigned responsibility for administering
the federal LIHTC to the TCAC, which consists of three voting
members: the State Treasurer, the State Controller, and the
Governor, or in the Governor's absence, the Director of Finance.
The Treasurer chairs TCAC, and the TCAC's staff is housed
within the State Treasurer's Office.
The federal government assigns each state a ceiling on the
amount of LIHTC it can allocate each year. In 2013, the amount
is $2.25 per capita or $86 million total for California.
(Taxpayers claim federal credits each year for 10 years so this
results in a total federal tax credit amount of $860 million for
this year's awards.) TCAC allocates these federal credits
through a competitive process to those who are developing
qualified affordable rental housing. These developers then take
on investors as limited liability partners, who in exchange for
the tax credits provide funds in the form of equity for building
the affordable housing.
In 1987, AB 53 (Klehs, Chapter 1138) created the state LIHTC in
recognition of the high cost of housing in California. TCAC
allocates state LIHTC to be used in concert with federal
credits. The annual state credit ceiling for 2012 is
approximately $92 million. Investors claim the state LIHTC over
a four-year period, and the credit amount is divided over these
four years, unlike the federal credit amount which is multiplied
over its 10-year allocation period.
In determining the amount of LIHTC for which a project may be
eligible, first, total project cost is calculated. Secondly,
"eligible basis" is determined by subtracting non-depreciable
costs, such as land, permanent financing costs, rent reserves,
and marketing costs. If the development is located in the
United States Department of Housing and Urban
Development-designated Difficult to Develop Area (DDA) or
Qualified Census Tract (QCT), the eligible basis for federal tax
credit purposes receives a 30% adjustment or "basis boost" so
that it receives a credit equal to 130% of its eligible basis.
As a general rule state credits go to projects outside DDAs and
QCTs so that they too can receive the 30% basis boost.
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Pursuant to regulations that TCAC has adopted, however, when not
enough projects need a basis boost to use all of the state
credits, then TCAC, with the developer's consent, can switch
state LIHTC for federal LIHTC for the 30% of added basis. This
effectively stretches out the number of projects that TCAC can
help to fund with the limited federal credits in a given year.
State law, however, caps the amount of state tax credit for a
project at 30% of the eligible basis.
This bill:
1. Allows TCAC to allocate state LIHTCs to projects in DDAs and
QCTs that are subject to restrictions ensuring that 50% of
the occupants will be special needs households, as defined in
TCAC's regulations, and in which the state credits do not
exceed 30% of the eligible basis.
2. Provides statutory authority for 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
and allows TCAC to do this without developer consent. TCAC
determines what constitutes an equivalent amount of state
LIHTC necessary to replace the federal LIHTC a taxpayer would
have received.
3. Is a tax levy that takes effect immediately.
Comments
Purpose . The LIHTC program supports the development,
rehabilitation, and preservation of rental housing that is
affordable to very-low and extremely-low income households.
Federal tax credits can be used anywhere in the state, but
projects are given an additional 30% on their eligible basis if
the project is located in a DDA or a QCT. Because these areas
by definition have a higher-poverty level and a higher
concentration of extremely low-income or homeless individuals
and families, housing in them typically needs larger subsidies
to make it affordable. Existing state law does not allow TCAC
to award state tax credits in DDAs and QCTs. The rationale for
this prohibition is that projects in these areas can qualify for
more federal tax credits through a basis boost and therefore are
already advantaged.
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This bill allows, in limited cases, for TCAC to award state
credits for use in DDAs or QCTs, which would be in addition to
the federal credits. To qualify, a development must restrict at
least 50% of the units to special needs households. Projects
that serve special needs populations need greater subsidy in
order to offer deeply affordable rents.
This bill also clarifies TCAC's authority to swap out state
LIHTC for federal LIHTC if the sponsor agrees when making the
application. TCAC awards project sponsors additional points in
their applications if they agree to accept a swap. This
practice is authorized in TCAC's regulations. This bill
confirms that authority in statute.
An example . By allowing state credits to be used in DDAs and
QCTs, this bill will increase the equity these projects can
generate from tax credits because the projects qualify already
for a basis boost that results in more federal tax credits than
projects outside of a DDA or a QCT. Under existing federal law,
projects can receive 30% more federal LIHTC if they locate in a
DDA or QCT. This bill allows projects to receive state tax
credits of up to an additional 30% of the project's eligible
basis. As an example, if a project qualifies for $10 million in
eligible basis in a DDA or QCT, the project could get up to 130%
of that basis in federal tax credits, which means the project
sponsor would have $13 million in federal credits to offer to
investors who buy into the project. This bill allows that
project to get an additional 30% in state tax credits against
the $10 million in eligible basis, which would create an
additional $3 million in state tax credits.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
TCAC indicates no additional costs would result from this
bill, as any additional state credit awards would occur as
applications are being considered for federal tax credits.
The Franchise Tax Board would not incur any additional
costs.
This bill would result in a reduction to state revenues.
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Specifically, TCAC has authority to award roughly $90 million
in state tax credits annually but has up to $25 million in
credits remaining at the close of the year resulting from
lack of demand. To the extent that this bill increases the
amount of credits awarded by TCAC annually, it would lower
state revenues. The amount is unknown, but could be in the
millions of dollars annually (General Fund).
SUPPORT : (Verified 9/3/13)
State Treasurer Bill Lockyer (source)
Bridge Housing
California Housing Consortium
California Housing Partnership Corporation
Housing California
Non Profit Housing Association of Northern California
Tenderloin Neighborhood Development Corporation
Westside Center for Independent Living
ASSEMBLY FLOOR : 78-0, 5/29/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,
Cooley, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández,
Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell,
Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson,
Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas,
Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski,
Wilk, Williams, Yamada, John A. Pérez
NO VOTE RECORDED: Holden, Vacancy
JA:k 9/3/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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