Amended in Senate September 6, 2013

Amended in Senate August 22, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 1399

Introduced by begin delete Committee on Jobs, Economic Development, and the Economy (Medina (Chair), Campos, Daly, Fong, Fox, Linder, Mansoor, Melendez, and V. Manuel Pérez) end delete begin insert Assembly Members Medina and V. Manuel  end insert begin insert Pérez end insert

March 11, 2013

An act to begin delete amend and renumber Sections 13997.2 and 13997.7 of, and to add the heading of Article 6 (commencing with Section 12100) to Chapter 1.6 of Part 2 of Division 3 of Title 2 of, the Government Code, and to amend Section 44559.1 of the Health and Safety Code, relating to economic development. end delete begin insert add Section 26011.9 to the Public Resources Code, and to add and repeal Sections 17053.9 and 23622.9 of the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor, to take effect immediately, tax levy. end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 1399, as amended, begin delete Committee on Jobs, Economic Development, and the Economy end delete   begin insert Medina end insert . begin delete Economic development. end delete begin insert Income taxation: credits: New Market Tax Credit. end insert

begin insert

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. Existing law also creates the California Tax Credit Allocation Committee, which has specified duties in regard to low-income housing credits.

end insert begin insert

This bill would allow a credit under both laws, in modified conformity with a federal New Market Tax Credit, for taxable years beginning on or after January 1, 2015, and before January 1, 2021, in a specified amount for investments in low-income communities. The bill would limit the total annual amount of credit allowed pursuant to these provisions to an amount equal to any portion not granted under a specified sales and use tax exclusion, not to exceed $40,000,000 per calendar year, and would limit the allocation of the credit to a cumulative total of no more than $200,000,000. This bill would impose specified duties on the California Tax Credit Allocation Committee with regard to the application for, and allocation of, the credit. The bill would require the committee to establish and impose reasonable fees upon entities that apply for the allocation of the credit and use the revenue to defray the cost of administering the program, as specified, thereby making an appropriation.

end insert begin insert

This bill would take effect immediately as a tax levy.

end insert begin delete

Existing law defines specified terms relating to economic development and authorizes the Business, Transportation and Housing Agency, and its secretary, to expend specified funds.

end delete begin delete

This bill would renumber these provisions, instead authorize the Governor’s Office of Business and Economic Development and its director to expend these funds. This bill would authorize the Executive Director of the California Infrastructure and Economic Development Bank to expend these funds, but only if AB 1247, relating to the Small Business Assistance Act of 2013, is enacted and takes effect on or before January 1, 2014. This bill would also make conforming changes.

end delete

Vote: majority. Appropriation:  begin delete no end delete begin insert yes end insert . Fiscal committee: yes. State-mandated local program: no.

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

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 26011.9 is added to the end insert begin insert Public Resources
Code end insert begin insert , to read: end insert

begin insert

begin insert 26011.9. end insert   

The authority shall make a determination of the
amount of the one hundred million dollars ($100,000,000) in
exclusions not granted in the assigned calendar year pursuant to
Section 26011.8. An amount equal to that amount shall be granted
in the subsequent calendar year through the New Market Tax
Credit Program pursuant to Sections 17053.9 and 23622.9 of the
Revenue and Taxation Code. This section shall not prevent a
taxpayer granted an extension pursuant to Section 6010.8 of the
Revenue and Taxation Code from applying for, and receiving a
refund for, taxes paid under Part 1 (commencing with Section
6001) of Division 2 of the Revenue and Taxation Code.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 17053.9 is added to the end insert begin insert Revenue and Taxation
Code end insert begin insert , to read: end insert

begin insert

begin insert 17053.9. end insert   

(a) There is hereby created the California New
Markets Tax Credit Program as provided in this section and
Section 23622.9. The purpose of this program is to stimulate
economic development, and hasten California’s economic recovery,
by authorizing tax credits for investment in California, including,
but not limited to, retail businesses, real property, financial
institutions, and schools. The California Tax Credit Allocation
Committee shall have responsibility for the administration of this
program as provided in this section and Section 23622.9.

(b) (1) For taxable years beginning on or after January 1, 2015,
and before January 1, 2021, there shall be allowed as a credit
against the “net tax,” as defined in Section 17039, an amount
determined in accordance with Section 45D of the Internal Revenue
Code, as modified as set forth in this section.

(2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment on the credit allowance date and each
of the six following anniversary dates of that date.

(c) Section 45D of the Internal Revenue Code is modified as
follows:

(1) (A) The references to “the Secretary” in Section 45D of the
Internal Revenue Code are modified to read “the committee.”

(B) For purposes of this section, “committee” means the
California Tax Credit Allocation Committee as described in
subdivision (a) of Section 50199.7 of the Health and Safety Code,
or any successor thereto.

(2) Section 45D(a)(2) of the Internal Revenue Code is modified
by substituting for “(A)   5 percent with respect to the first 3 credit
allowance dates, and (B)   6 percent with respect to the remainder
of the credit allowance dates.” with the following:

(A) Zero percent with respect to the first two credit allowance
dates.

(B) Seven percent with respect to the third credit allowance
date.

(C) Eight percent with respect to the remainder of the credit
allowance dates.

(3) The provisions of Section 45D(b) of the Internal Revenue
Code is modified as follows:

(A) Section 45D(b)(1) of the Internal Revenue Code is modified
by substituting “3 years” for “5 years” and “3-year period” for
“5-year period.”

(B) Section 45D(b)(3) of the Internal Revenue Code is modified
by substituting “qualified low-income community investments in
California” for “qualified low-income community investments.”

(4) Section 45D(d)(1)(A) of the Internal Revenue Code, relating
to qualified low-income community investments, is modified to
include any capital or equity investment in, or loan to, any real
estate project located in a low-income community or any operating
business that, at the time the initial investment is made, has 250
or less employees and is located in a low-income community. The
real estate project or operating business shall meet all other
conditions of a qualified active low-income community business,
except as modified by paragraphs (5) and (6).

(5) The term “qualified active low-income community business,”
as defined in Section 45D(d)(2) of the Internal Revenue Code is
modified as follows:

(A) Section 45D(d)(2)(A)(i) of the Internal Revenue Code is
modified by substituting “any low-income community in
California” for “any low-income community.”

(B) Section 45D(d)(2)(A)(ii) of the Internal Revenue Code is
modified by substituting “any low-income community in
California” for “qualified low-income community investments.”

(C) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code shall
not apply.

(D) The following shall apply in lieu of the provisions of Section
45D(d)(2)(C) of the Internal Revenue Code, relating to qualified
active low-income community business: “A ‘qualified active
low-income community business’ shall include an operating
business that, at the time the initial investment is made, has 250
or less employees and is located in a low-income community. The
operating business shall meet all other conditions of a qualified
active low-income business, except as modified by this paragraph
and paragraph (6).”

(6) Section 45D(e)(1) of the Internal Revenue Code is modified
to add the following: “When the United States Census Bureau
discontinues using the decennial census to report median family
income on a census tract basis, census block group data shall be
used based on the American Community Survey.”

(7) The following shall apply in lieu of the provisions of Section
45(D)(f)(1) 45D(f)(1) of the Internal Revenue Code, relating to
national limitation on amount of investments designated: “The
aggregate amount of credit that may be allocated in any calendar
year pursuant to this section and Section 23622.9 shall be an
amount equal to any unused portion of the one hundred million
dollars ($100,000,000) in exclusions, authorized pursuant to
Section 6010.8, as determined by the California Alternative Energy
and Advanced Transportation Financing Authority and reported
to the committee, not to exceed forty million dollars ($40,000,000).
The committee shall limit the allocation of credits permitted under
this section and Section 23622.9 to a cumulative total of no more
than two hundred million dollars ($200,000,000). Any unused
credits shall be returned to the committee at the end of the third
year following allocation and the value of the unused credit shall
be available for allocation in the following calendar years.
Reallocation credits shall not count against the forty million dollars
($40,000,000) annual limit or the two hundred million dollars
($200,000,000) cumulative limit.”

(8) Section 45D(g)(3) of the Internal Revenue Code, relating
to recapture event, is modified by adding the following:
“Notwithstanding the provisions of this paragraph, a recapture
event shall not have occurred and an investment shall be
considered held by a community development entity upon its sale
or repayment, provided the qualified community development entity
reinvests an amount equal to the capital returned to or recovered
by the qualified community development entity from the original
investment, exclusive of any profits realized, in another qualified
low-income community investment within 12 months of the receipt
of that capital. A qualified community development entity shall
not be required to reinvest capital returned from a qualified
low-income community investment after the sixth anniversary of
the issuance of the qualified equity investment, the proceeds of
which were used to make the qualified low-income community
investment. The qualified low-income community investment shall
be considered held by the qualified community development entity
through the seventh anniversary of the issuance of the qualified
equity investment.”

(9) Section 45D(i) of the Internal Revenue Code, relating to
regulations, shall not apply.

(d) (1)   The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section. The guidelines
shall not disqualify a low-income community investment for the
single reason that public or private incentives, loans, equity
investments, technical assistance, or other forms of support have
been or continue to be provided. The adoption of the guidelines
shall not be subject to the rulemaking provisions of the
Administrative Procedure Act of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.

(2) The committee shall establish and impose reasonable fees
upon entities that apply for the allocation pursuant to subdivision
(d) and use the revenue to defray the cost of administering the
program. The committee shall establish the fees in a manner that
ensures that (A) the total amount collected equals the amount
reasonably necessary to defray the committee’s costs in performing
its administrative duties under this section, and (B) the amount
paid by each entity reasonably corresponds with the value of the
services provided to the entity.

(3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:

(A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.

(B) Sets minimum organizational capacity standards that
applicants must meet in order to receive an allocation of credits.

(C) Requires annual reporting by each community development
entity that receives an allocation. The report shall include, but is
not limited to, the impact the credit had on the low-income
community, the amount of moneys used, and the types of activities
funded through the equity investment. The reporting period shall
be for a period of eight years following the allocation of credits.

(D) Provides for the annual return of unused credits following
the third year after being awarded so that they may be reallocated
to other community development entities.

(e) In the case where the credit allowed by this section exceeds
the “net tax,” the excess may be carried over to reduce the “net
tax” in the following year, and the seven succeeding years if
necessary, until the credit is exhausted.

(f) The committee shall annually report on its Internet Web site
the information provided by low-income community development
entities and on the geographic distribution of the credits.

(g) This section shall remain in effect only until December 1,
2028, and as of that date is repealed.

end insert

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 23622.9 is added to the end insert begin insert Revenue and Taxation
Code end insert begin insert , to read: end insert

begin insert

begin insert 23622.9. end insert   

(a) There is hereby created the California New
Markets Tax Credit Program as provided in this section and
Section 17053.9. The purpose of this program is to stimulate
economic development, and hasten California’s economic recovery,
by authorizing tax credits for investment in California, including,
but not limited to, retail businesses, real property, financial
institutions, and schools. The California Tax Credit Allocation
Committee shall have responsibility for the administration of this
program as provided in this section and Section 17053.9.

(b) (1)   For taxable years beginning on or after January 1, 2015,
and before January 1, 2021, there shall be allowed as a credit
against the “tax,” as defined in Section 23036, an amount
determined in accordance with Section 45D of the Internal Revenue
Code, as modified as set forth in this section.

(2) This credit shall be allowed only if the taxpayer holds the
qualified equity investment on the credit allowance date and each
of the six following anniversary dates of that date.

(c) Section 45D of the Internal Revenue Code is modified as
follows:

(1) (A) The references to “the Secretary” in Section 45D of the
Internal Revenue Code are modified to read “the committee.”

(B) For purposes of this section, “committee” means the
California Tax Credit Allocation Committee as described in
subdivision (a) of Section 50199.7 of the Health and Safety Code,
or any successor thereto.

(2) Section 45D(a)(2) of the Internal Revenue Code is modified
by substituting for “(A)   5 percent with respect to the first 3 credit
allowance dates, and (B)   6 percent with respect to the remainder
of the credit allowance dates.” with the following:

(A) Zero percent with respect to the first two credit allowance
dates.

(B) Seven percent with respect to the third credit allowance
date.

(C) Eight percent with respect to the remainder of the credit
allowance dates.

(3) The provisions of Section 45D(b) of the Internal Revenue
Code is modified as follows:

(A) Section 45D(b)(1) of the Internal Revenue Code is modified
by substituting “3 years” for “5 years” and “3-year period” for
“5-year period.”

(B) Section 45D(b)(3) of the Internal Revenue Code is modified
by substituting “qualified low-income community investments in
California” for “qualified low-income community investments.”

(4) Section 45D(d)(1)(A) of the Internal Revenue Code, relating
to qualified low-income community investments, is modified to
include any capital or equity investment in, or loan to, any real
estate project located in a low-income community or any operating
business that, at the time the initial investment is made, has 250
or less employees and is located in a low-income community. The
real estate project or operating business shall meet all other
conditions of a qualified active low-income community business,
except as modified by paragraphs (5) and (6).

(5) The term “qualified active low-income community business,”
as defined in Section 45D(d)(2) of the Internal Revenue Code is
modified as follows:

(A) Section 45D(d)(2)(A)(i) of the Internal Revenue Code is
modified by substituting “any low-income community in
California” for “any low-income community.”

(B) Section 45D(d)(2)(A)(ii) of the Internal Revenue Code is
modified by substituting “any low-income community in
California” for “qualified low-income community investments.”

(C) Section 45D(d)(2)(A)(iii) of the Internal Revenue Code shall
not apply.

(D) The following shall apply in lieu of the provisions of Section
45D(d)(2)(C) of the Internal Revenue Code, relating to qualified
active low-income community business: “A ‘qualified active
low-income community business’ shall include an operating
business that, at the time the initial investment is made, has 250
or less employees and is located in a low-income community. The
operating business shall meet all other conditions of a qualified
active low-income business, except as modified by this paragraph
and paragraph (6).”

(6) Section 45D(e)(1) of the Internal Revenue Code is modified
to add the following: “When the United States Census Bureau
discontinues using the decennial census to report median family
income on a census tract basis, census block group data shall be
used based on the American Community Survey.”

(7) The following shall apply in lieu of the provisions of Section
45(D)(f)(1) of the Internal Revenue Code, relating to national
limitation on amount of investments designated: “The aggregate
amount of credit that may be allocated in any calendar year
pursuant to this section and Section 17053.9 shall be an amount
equal to any unused portion of the one hundred million dollars
($100,000,000) in exclusions, authorized pursuant to Section
6010.8, as determined by the California Alternative Energy and
Advanced Transportation Financing Authority and reported to the
committee, not to exceed forty million dollars ($40,000,000). The
committee shall limit the allocation of credits permitted under this
section and Section 23622.9 to a cumulative total of no more than
two hundred million dollars ($200,000,000). Any unused credits
shall be returned to the committee at the end of the third year
following allocation and the value of the unused credit shall be
available for allocation in the following calendar years.
Reallocation credits shall not count against the forty million dollars
($40,000,000) annual limit or the two hundred million dollars
($200,000,000) cumulative limit.”

(8) Section 45D(g)(3) of the Internal Revenue Code, relating
to recapture event, is modified by adding the following:
“Notwithstanding the provisions of this paragraph, a recapture
event shall not have occurred and an investment shall be
considered held by a community development entity upon its sale
or repayment, provided the qualified community development entity
reinvests an amount equal to the capital returned to or recovered
by the qualified community development entity from the original
investment, exclusive of any profits realized, in another qualified
low-income community investment within 12 months of the receipt
of that capital. A qualified community development entity shall
not be required to reinvest capital returned from a qualified
low-income community investment after the sixth anniversary of
the issuance of the qualified equity investment, the proceeds of
which were used to make the qualified low-income community
investment. The qualified low-income community investment shall
be considered held by the qualified community development entity
through the seventh anniversary of the issuance of the qualified
equity investment.”

(9) Section 45D(i) of the Internal Revenue Code, relating to
regulations, shall not apply.

(d) (1)   The committee shall adopt guidelines necessary or
appropriate to carry out the purposes of this section. The guidelines
shall not disqualify a low-income community investment for the
single reason that public or private incentives, loans, equity
investments, technical assistance, or other forms of support have
been or continue to be provided. The adoption of the guidelines
shall not be subject to the rulemaking provisions of the
Administrative Procedure Act of Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code.

(2) The committee shall establish and impose reasonable fees
upon entities that apply for the allocation pursuant to subdivision
(d) and use the revenue to defray the cost of administering the
program. The committee shall establish the fees in a manner that
ensures that (A) the total amount collected equals the amount
reasonably necessary to defray the committee’s costs in performing
its administrative duties under this section, and (B) the amount
paid by each entity reasonably corresponds with the value of the
services provided to the entity.

(3) In developing guidelines the committee shall adopt an
allocation process that does all of the following:

(A) Creates an equitable distribution process that ensures that
low-income communities across the state have an opportunity to
benefit from the program.

(B) Sets minimum organizational capacity standards that
applicants must meet in order to receive an allocation of credits.

(C) Requires annual reporting by each community development
entity that receives an allocation. The report shall include, but is
not limited to, the impact the credit had on the low-income
community, the amount of moneys used, and the types of activities
funded through the equity investment. The reporting period shall
be for a period of eight years following the allocation of credits.

(D) Provides for the annual return of unused credits following
the third year after being awarded so that they may be reallocated
to other community development entities.

(e) In the case where the credit allowed by this section exceeds
the “tax,” the excess may be carried over to reduce the “tax” in
the following year, and the seven succeeding years if necessary,
until the credit is exhausted.

(f) The committee shall annually report on its Internet Web site
the information provided by low-income community development
entities and on the geographic distribution of the credits.

(g) This section shall remain in effect only until December 1,
2028, and as of that date is repealed.

end insert

begin insert

begin insert SEC. 4. end insert   

end insert begin insert

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

end insert

All matter omitted in this version of the bill appears in the bill as amended in the Senate August 22, 2013. (JR11)