Amended in Assembly April 30, 2014

Amended in Assembly April 1, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 1999

Introduced by Assembly Member Atkins

February 20, 2014

An act to add and repeal Sections begin insert 38.9, end insert 17053.86 begin insert , end insert and 23686 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 1999, as amended, Atkins. Personal income and corporation begin delete tax end delete begin insert taxes: end insert credits: rehabilitation.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.

This bill would allow a credit against those taxes for each taxable year beginning on or after January 1, 2015, and before January 1, begin delete 2026 end delete begin insert 2021 end insert , in an amount, determined pursuant to a specified section of the Internal Revenue Code, that is paid or incurred during the taxable year for rehabilitation of certified historic structures. This bill would provide for a 25% credit, or 30% credit if the structure meets specified criteria, for rehabilitation of a certified historic structure within the state begin insert to be allocated by the Governor’s Office of Business and Economic Development in an aggregate amount of $100,000,000 per calendar year, as specified. This bill would require the Legislative Analyst to, on an annual basis, collaborate with the Governor’s Office of Business and Economic Development to review the tax credit, as provided end insert .

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:

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begin insert SECTION 1. end insert   

end insert begin insert

(a) The Legislature finds and declares that
California’s historic buildings are an important asset to
communities throughout the state, and that the preservation and
restoration of these buildings is important to enhancing civic pride,
increasing tourism, and maintaining vibrant neighborhoods.

end insert begin insert

(b) The Legislature further finds and declares all of the
following:

end insert begin insert

(1) The federal Historic Preservation Tax Incentives program,
currently available to California’s income producing historic
properties, has generated nearly $1.5 billion in investment during
the last 10 years.

end insert begin insert

(2) While 35 states have similar state tax credits or incentives
for historic preservation, no such incentive exists in California.

end insert begin insert

(3) States that have partnered a state incentive with the federal
Historic Preservation Tax Incentive have reaped significant
economic development benefits, including construction and
building industry job creation, increased state tax revenues through
increased employment and wages, increased local property tax
revenues through increased property values, and increased local
tax revenues through sales taxes and heritage tourism.

end insert begin insert

(4) Over the last 10 years, California has had 129 projects
qualify for the federal Historic Preservation Tax Incentives
program. These projects have been located in 20 different counties.

end insert begin insert

(5) As California communities continue to adjust and adapt to
the dissolution of redevelopment agencies, proven tools are still
needed to incentivize economic development and revitalize
economically distressed areas.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 38.9 is added to the end insert begin insert Revenue and Taxation
Code end insert begin insert , to read: end insert

begin insert

begin insert 38.9. end insert   

(a) The Legislative Analyst shall, on an annual basis
beginning January 1, 2016, collaborate with the Governor’s Office
of Business and Economic Development to review the effectiveness
of the tax credits allowed by Sections 17053.86 and 23686. The
review shall include, but is not limited to, an analysis of the demand
for the tax credit, the types and uses of projects receiving the tax
credit, the jobs created by the use of the tax credits, and the
economic impact of the tax credits.

(b) This section shall remain in effect only until January 1, 2022,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2022, deletes or extends that date.

end insert

begin delete SECTION 1. end delete
begin insert SEC. 3. end insert   

Section 17053.86 is added to the Revenue and Taxation
Code, to read:

17053.86.  

For each taxable year beginning on or after January
1, 2015, and before January 1, begin delete 2026 end delete begin insert 2021 end insert , there shall be allowed
as a credit against the “net tax,” as defined in Section 17039, an
amount determined in accordance with Section 47 of the Internal
Revenue Code, except as follows:

(a) (1) In lieu of the percentages specified in Section 47(a) of
the Internal Revenue Code, except as provided in paragraph (2),
the applicable percentage shall be 25 percent of the qualified
rehabilitation expenditures with respect to a certified historic
structure.

(2) The applicable percentage shall be 30 percent of the qualified
rehabilitation expenditures with respect to a certified historic
structure if that certified historic structure meets one of the
following criteria:

(A) The structure is located on federal, state, or local surplus
property.

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(B) The rehabilitated structure will contain a majority of
low-income housing units.

end delete begin delete

(C) The structure is located in an economically distressed area.

end delete begin delete

(D) The structure is located in a Base Realignment and Closure
Zone.

end delete begin delete

(E) The structure is located in a Transit-Oriented Development
Area.

end delete begin insert

(B) The rehabilitated structure includes affordable housing for
lower-income households, as defined by Section 50079.5 of the
Health and Safety Code.

end insert begin insert

(C) The structure is located in a designated census tract, as
defined in paragraph (7) of subdivision (b) of Section 17053.73.

end insert begin insert

(D) The structure is a part of a military base reuse authority
established pursuant to Title 7.86 (commencing with Section
67800) of the Government Code.

end insert begin insert

(E) The structure is a transit-oriented development that is a
higher-density, mixed-use development within a walking distance
of one-half mile of a transit station.

end insert

(b) For purposes of this section, a certified historic structure
means a structure in this state that appears on either the National
Register of Historic Places or the California Register of Historical
Resources.

(c) A deduction shall not be allowed under this part for any
expense for which a credit is allowed by this section.

(d) If a credit is allowed under this section with respect to any
property, the basis of that property shall be reduced by the amount
of the credit allowed.

(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.

begin insert

(f) For purposes of this section, the Governor’s Office of
Business and Economic Development shall do the following:

end insert begin insert

(1) (A) On and after January 1, 2015, and before January 1,
2021, allocate tax credits to applicants.

end insert begin insert

(B) The credit shall be allocated to the partners of a partnership
owning the project in accordance with the partnership agreement,
regardless of how the federal historic rehabilitation tax credit with
respect to the project is allocated to the partners, or whether the
allocation of the credit under the terms of the agreement has
substantial economic effect, within the meaning of Section 704(b)
of the Internal Revenue Code.

end insert begin insert

(2) Establish a procedure for applicants to file with the
Governor’s Office of Business and Economic Development a
written application, on a form jointly prescribed by that office and
the Office of Historic Preservation for the allocation of the tax
credit.

end insert begin insert

(3)  Establish criteria consistent with the requirements of this
section, for allocating tax credits. Criteria shall include, but are
not limited to, the following:

end insert begin insert

(A) The number of jobs created by the rehabilitation project,
both during and after the rehabilitation of the structure.

end insert begin insert

(B) The expected increase in state and local tax revenues derived
from the rehabilitation project, including those from increased
wages and property taxes.

end insert begin insert

(C) Any additional incentives or contributions included in the
rehabilitation project from federal, state, or local governments.

end insert begin insert

(4) Determine and designate, in consultation with the Office of
Historic Preservation, applicants that meet the requirements of
this section to ensure that the rehabilitation project upholds
historical values in terms of architectural and aesthetic standards.

end insert begin insert

(5)  Process and approve, or reject, all applications.

end insert begin insert

(6) Subject to the annual cap established as provided in
subdivision (g), allocate an aggregate amount of credits under
this section and Section 17053.86, and allocate any carryover of
unallocated credits from prior years.

end insert begin insert

(7) Certify tax credits allocated to taxpayers.

end insert begin insert

(g) The aggregate amount of credits that may be allocated in
any calendar year pursuant to this section and Section 17053.86
shall be an amount equal to the sum of all of the following:

end insert begin insert

(1) One hundred million dollars ($100,000,000) in tax credits
for the 2015 calendar year and each calendar year thereafter,
through and including the 2020 calendar year.

end insert begin insert

(2) The unused allocation tax credit amount, if any, for the
preceding calendar year.

end insert begin delete

(f)

end delete

begin insert (h) end insert  This section shall remain in effect only until December 1,
begin delete 2026 end delete begin insert 2021 end insert , and as of that date is repealed.

begin delete SEC. 2. end delete
begin insert SEC. 4. end insert   

Section 23686 is added to the Revenue and Taxation
Code, to read:

23686.  

For each taxable year beginning on or after January 1,
2015, and before January 1, begin delete 2026 end delete begin insert 2021 end insert , there shall be allowed as
a credit against the “tax,” as defined in Section 23036, an amount
determined in accordance with Section 47 of the Internal Revenue
Code, except as follows:

(a) (1) In lieu of the percentages specified in Section 47(a) of
the Internal Revenue Code, except as provided in paragraph (2),
the applicable percentage shall be 25 percent of the qualified
rehabilitation expenditures with respect to a certified historic
structure.

(2) The applicable percentage shall be 30 percent of the qualified
rehabilitation expenditures with respect to a certified historic
structure if that historic structure meets one of the following
criteria:

(A) The structure is located on federal, state, or local surplus
property.

begin delete

(B) The rehabilitated structure will contain a majority of
low-income housing units.

end delete begin delete

(C) The structure is located in an economically distressed area.

end delete begin delete

(D) The structure is located in a Base Realignment and Closure
Zone.

end delete begin delete

(E) The structure is located in a Transit-Oriented Development
Area.

end delete begin insert

(B) The rehabilitated structure includes affordable housing for
lower-income households, as defined by Section 50079.5 of the
Health and Safety Code.

end insert begin insert

(C) The structure is located in a designated census tract, as
defined in paragraph (7) of subdivision (b) of Section 17053.73.

end insert begin insert

(D) The structure is a part of a military base reuse authority
established pursuant to Title 7.86 (commencing with Section
67800) of the Government Code.

end insert begin insert

(E) The structure is a transit-oriented development that is a
higher-density, mixed-use development within a walking distance
of one-half mile of a transit station.

end insert

(b) For purposes of this section, a certified historic structure
means a structure in this state that appears on either the National
Register of Historic Places or the California Register of Historical
Resources.

(c) A deduction shall not be allowed under this part for any cost
for which a credit is allowed by this section.

(d) If a credit is allowed under this section with respect to any
property, the basis of that property shall be reduced by the amount
of the credit allowed.

(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.

begin insert

(f) For purposes of this section, the Governor’s Office of
Business and Economic Development shall do the following:

end insert begin insert

(1) (A) On and after January 1, 2015, and before January 1,
2021, allocate tax credits to applicants.

end insert begin insert

(B) The credit shall be allocated to the partners of a partnership
owning the project in accordance with the partnership agreement,
regardless of how the federal historic rehabilitation tax credit with
respect to the project is allocated to the partners, or whether the
allocation of the credit under the terms of the agreement has
substantial economic effect, within the meaning of Section 704(b)
of the Internal Revenue Code.

end insert begin insert

(2) Establish a procedure for applicants to file with the
Governor’s Office of Business and Economic Development a
written application, on a form jointly prescribed by that office and
the Office of Historic Preservation for the allocation of the tax
credit.

end insert begin insert

(3)  Establish criteria consistent with the requirements of this
section, for allocating tax credits. Criteria shall include, but are
not limited to, the following:

end insert begin insert

(A) The number of jobs created by the rehabilitation project,
both during and after the rehabilitation of the structure.

end insert begin insert

(B) The expected increase in state and local tax revenues derived
from the rehabilitation project, including those from increased
wages and property taxes.

end insert begin insert

(C) Any additional incentives or contributions included in the
rehabilitation project from federal, state, or local governments.

end insert begin insert

(4) Determine and designate, in consultation with the Office of
Historic Preservation, applicants that meet the requirements of
this section to ensure that the rehabilitation project upholds
historical values in terms of architectural and aesthetic standards.

end insert begin insert

(5)  Process and approve, or reject, all applications.

end insert begin insert

(6) Subject to the annual cap established as provided in
subdivision (g), allocate an aggregate amount of credits under
this section and Section 17053.86, and allocate any carryover of
unallocated credits from prior years.

end insert begin insert

(7) Certify tax credits allocated to taxpayers.

end insert begin insert

(g) The aggregate amount of credits that may be allocated in
any calendar year pursuant to this section and Section 17053.86
shall be an amount equal to the sum of all of the following:

end insert begin insert

(1) One hundred million dollars ($100,000,000) in tax credits
for the 2015 calendar year and each calendar year thereafter,
through and including the 2020 calendar year.

end insert begin insert

(2) The unused allocation tax credit amount, if any, for the
preceding calendar year.

end insert begin delete

(f)

end delete

begin insert (h) end insert  This section shall remain in effect only until December 1,
begin delete 2026 end delete begin insert 2021 end insert , and as of that date is repealed.

begin delete SEC. 3. end delete
begin insert SEC. 5. end insert   

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