Amended in Senate July 2, 2014

Amended in Assembly May 15, 2014

Amended in Assembly April 30, 2014

Amended in Assembly April 1, 2014

California Legislature—2013–14 Regular Session

Assembly BillNo. 1999


Introduced by Assembly Member Atkins

February 20, 2014


An act to add and repeal Sections 38.9, 17053.86, 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 taxes: 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 2021,end deletebegin insert 2023,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 abegin delete 25%end deletebegin insert 20%end insert credit, orbegin delete 30%end deletebegin insert 25%end insert credit if the structure meets specified criteria, for rehabilitation of a certified historic structure within the state to be allocated by the Governor’s Office of Business and Economic Development in an aggregate amount ofbegin delete $100,000,000end deletebegin insert $80,000,000end insert 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.

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:

P2    1

SECTION 1.  

(a) The Legislature finds and declares that
2California’s historic buildings are an important asset to
3communities throughout the state, and that the preservation and
4restoration of these buildings is important to enhancing civic pride,
5increasing tourism, and maintaining vibrant neighborhoods.

6(b) The Legislature further finds and declares all of the
7following:

8(1) The federal Historic Preservation Tax Incentives program,
9currently available to California’s income producing historic
10properties, has generated nearly $1.5 billion in investment during
11the last 10 years.

12(2) While 35 states have similar state tax credits or incentives
13for historic preservation, no such incentive exists in California.

14(3) States that have partnered a state incentive with the federal
15Historic Preservation Tax Incentive have reaped significant
16economic development benefits, including construction and
17building industry job creation, increased state tax revenues through
18increased employment and wages, increased local property tax
19revenues through increased property values, and increased local
20tax revenues through sales taxes and heritage tourism.

21(4) Over the last 10 years, California has had 129 projects
22qualify for the federal Historic Preservation Tax Incentives
23program. These projects have been located in 20 different counties.

24(5) As California communities continue to adjust and adapt to
25the dissolution of redevelopment agencies, proven tools are still
26needed to incentivize economic development and revitalize
27economically distressed areas.

28

SEC. 2.  

Section 38.9 is added to the Revenue and Taxation
29Code
, to read:

30

38.9.  

(a) The Legislative Analyst shall, on an annual basis
31beginning January 1, 2016, collaborate with the Governor’s Office
P3    1of Business and Economic Development to review the effectiveness
2of the tax credits allowed by Sections 17053.86 and 23686. The
3review shall include, but is not limited to, an analysis of the demand
4for the tax credit, the types and uses of projects receiving the tax
5credit, the jobs created by the use of the tax credits, and the
6economic impact of the tax credits.

7(b) This section shall remain in effect only until January 1,begin delete 2022,end delete
8begin insert 2024,end insert and as of that date is repealed, unless a later enacted statute,
9that is enacted before January 1,begin delete 2022,end deletebegin insert 2024,end insert deletes or extends
10that date.

11

SEC. 3.  

Section 17053.86 is added to the Revenue and Taxation
12Code
, to read:

13

17053.86.  

For each taxable year beginning on or after January
141, 2015, and before January 1,begin delete 2021,end deletebegin insert 2023,end insert there shall be allowed
15as a credit against the “net tax,” as defined in Section 17039, an
16amount determined in accordance with Section 47 of the Internal
17Revenue Code, except as follows:

18(a) (1) In lieu of the percentages specified in Section 47(a) of
19the Internal Revenue Code, except as provided in paragraph (2),
20the applicable percentage shall bebegin delete 25end deletebegin insert 20end insert percent of the qualified
21rehabilitation expenditures with respect to a certified historic
22structure.

23(2) The applicable percentage shall bebegin delete 30end deletebegin insert 25end insert percent of the
24qualified rehabilitation expenditures with respect to a certified
25historic structure if that certified historic structure meets one of
26the following criteria:

27(A) The rehabilitated structure is located onbegin delete eitherend delete federal
28surplus property, if obtained by a local agency under Section 54142
29of the Government Code, on surplus state real property, as defined
30by Section 11011.1 of the Government Code, or on surplus land,
31as defined by subdivision (b) of Section 54221 of the Government
32Code.

33(B) The rehabilitated structure includes affordable housing for
34lower-income households, as defined by Section 50079.5 of the
35Health and Safety Code.

36(C) The structure is located in a designated census tract, as
37defined in paragraph (7) of subdivision (b) of Section 17053.73.

38(D) The structure is a part of a military base reuse authority
39established pursuant to Title 7.86 (commencing with Section
4067800) of the Government Code.

P4    1(E) The structure is a transit-oriented development that is a
2higher-density, mixed-use development within a walking distance
3of one-half mile of a transit station.

4(b) For purposes of this section, a certified historic structure
5means a structure in this state that appears on either the National
6Register of Historic Places or the California Register of Historical
7 Resources.

8(c) A deduction shall not be allowed under this part for any
9expense for which a credit is allowed by this section.

10(d) If a credit is allowed under this section with respect to any
11property, the basis of that property shall be reduced by the amount
12of the credit allowed.

13(e) In the case where the credit allowed by this section exceeds
14the “net tax,” the excess may be carried over to reduce the “net
15tax” in the following year, and the seven succeeding years if
16necessary, until the credit is exhausted.

17(f) For purposes of this section, the Governor’s Office of
18Business and Economic Development shall do the following:

19(1) (A) On and after January 1, 2015, and before January 1,
20begin delete 2021,end deletebegin insert 2023,end insert allocate tax credits to applicants.

21(B) (i) The credit shall be allocated to the partners of a
22partnership owning the project in accordance with the partnership
23agreement, regardless of how the federal historic rehabilitation tax
24credit with respect to the project is allocated to the partners, or
25whether the allocation of the credit under the terms of the
26agreement has substantial economic effect, within the meaning of
27Section 704(b) of 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(2) Establish a procedure for applicants to file with the
38Governor’s Office of Business and Economic Development a
39written application, on a form jointly prescribed by that office and
P5    1the Office of Historic Preservation for the allocation of the tax
2credit.

3(3)  Establish criteria consistent with the requirements of this
4section, for allocating tax credits. Criteria shall include, but are
5not limited to, the following:

6(A) The number of jobs created by the rehabilitation project,
7both during and after the rehabilitation of the structure.

8(B) The expected increase in state and local tax revenues derived
9from the rehabilitation project, including those from increased
10wages and property taxes.

11(C) Any additional incentives or contributions included in the
12rehabilitation project from federal, state, or local governments.

13(4) Determine and designate, in consultation with the Office of
14Historic Preservation, applicants that meet the requirements of this
15section to ensure that the rehabilitation project upholds historical
16values in terms of architectural and aesthetic standards.

17(5)  Process and approve, or reject, all applications.

18(6) Subject to the annual cap established as provided in
19subdivision (g), allocate an aggregate amount of credits under this
20section and Section 23686, and allocate any carryover of
21unallocated credits from prior years.

22(7) Certify tax credits allocated to taxpayers.

23(8) Provide the Franchise Tax Board an annual list of the
24taxpayers that were allocated a credit pursuant to this section and
25Section 23686, including each taxpayer’s taxpayer identification
26number, and the amount allocated to each taxpayer.

27(g) The aggregate amount of credits that may be allocated in
28any calendar year pursuant to this section and Section 23686 shall
29be an amount equal to the sum of all of the following:

30(1) begin deleteOne hundred million dollars ($100,000,000) end deletebegin insertEighty million
31dollars ($80,000,000) end insert
in tax credits for the 2015 calendar year and
32each calendar year thereafter, through and including thebegin delete 2020end deletebegin insert 2022end insert
33 calendar year.

34(2) The unused allocation tax credit amount, if any, for the
35preceding calendar year.

36(h) This section shall remain in effect only until December 1, begin delete37 2021,end delete begin insert 2023,end insert and as of that date is repealed.

38

SEC. 4.  

Section 23686 is added to the Revenue and Taxation
39Code
, to read:

P6    1

23686.  

For each taxable year beginning on or after January 1,
22015, and before January 1,begin delete 2021,end deletebegin insert 2023,end insert there shall be allowed as
3a credit against the “tax,” as defined in Section 23036, an amount
4determined in accordance with Section 47 of the Internal Revenue
5Code, except as follows:

6(a) (1) In lieu of the percentages specified in Section 47(a) of
7the Internal Revenue Code, except as provided in paragraph (2),
8the applicable percentage shall bebegin delete 25end deletebegin insert 20end insert percent of the qualified
9rehabilitation expenditures with respect to a certified historic
10structure.

11(2) The applicable percentage shall bebegin delete 30end deletebegin insert 25end insert percent of the
12qualified rehabilitation expenditures with respect to a certified
13historic structure if that historic structure meets one of the
14following criteria:

15(A) The rehabilitated structure is located onbegin delete eitherend delete federal
16surplus property, if obtained by a local agency under Section 54142
17of the Government Code, on surplus state real property, as defined
18by Section 11011.1 of the Government Code, or on surplus land,
19as defined by subdivision (b) of Section 54221 of the Government
20Code.

21(B) The rehabilitated structure includes affordable housing for
22lower-income households, as defined by Section 50079.5 of the
23Health and Safety Code.

24(C) The structure is located in a designated census tract, as
25defined in paragraph (7) of subdivision (b) of Section 17053.73.

26(D) The structure is a part of a military base reuse authority
27established pursuant to Title 7.86 (commencing with Section
2867800) of the Government Code.

29(E) The structure is a transit-oriented development that is a
30higher-density, mixed-use development within a walking distance
31of one-half mile of a transit station.

32(b) For purposes of this section, a certified historic structure
33means a structure in this state that appears on either the National
34Register of Historic Places or the California Register of Historical
35Resources.

36(c) A deduction shall not be allowed under this part for any cost
37for which a credit is allowed by this section.

38(d) If a credit is allowed under this section with respect to any
39property, the basis of that property shall be reduced by the amount
40of the credit allowed.

P7    1(e) In the case where the credit allowed by this section exceeds
2the “tax,” the excess may be carried over to reduce the “tax” in
3the following year, and the seven succeeding years if necessary,
4until the credit is exhausted.

5(f) For purposes of this section, the Governor’s Office of
6Business and Economic Development shall do the following:

7(1) (A) On and after January 1, 2015, and before January 1,
8begin delete 2021,end deletebegin insert 2023,end insert allocate tax credits to applicants.

9(B) (i) The credit shall be allocated to the partners of a
10partnership owning the project in accordance with the partnership
11agreement, regardless of how the federal historic rehabilitation tax
12credit with respect to the project is allocated to the partners, or
13whether the allocation of the credit under the terms of the
14agreement has substantial economic effect, within the meaning of
15Section 704(b) of the Internal Revenue Code.

16(ii) To the extent the allocation of the credit to a partner under
17this section lacks substantial economic effect, any loss or deduction
18otherwise allowable under this part that is attributable to the sale
19or other disposition of that partner’s partnership interest made prior
20to the expiration of the federal credit shall not be allowed in the
21taxable year in which the sale or other disposition occurs, but shall
22instead be deferred until, and treated as if, it occurred in the first
23taxable year immediately following the taxable year in which the
24federal credit period expires for the project described in clause (i).

25(2) Establish a procedure for applicants to file with the
26Governor’s Office of Business and Economic Development a
27written application, on a form jointly prescribed by that office and
28the Office of Historic Preservation for the allocation of the tax
29credit.

30(3)  Establish criteria consistent with the requirements of this
31section, for allocating tax credits. Criteria shall include, but are
32not limited to, the following:

33(A) The number of jobs created by the rehabilitation project,
34both during and after the rehabilitation of the structure.

35(B) The expected increase in state and local tax revenues derived
36from the rehabilitation project, including those from increased
37wages and property taxes.

38(C) Any additional incentives or contributions included in the
39rehabilitation project from federal, state, or local governments.

P8    1(4) Determine and designate, in consultation with the Office of
2Historic Preservation, applicants that meet the requirements of this
3section to ensure that the rehabilitation project upholds historical
4values in terms of architectural and aesthetic standards.

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

6(6) Subject to the annual cap established as provided in
7subdivision (g), allocate an aggregate amount of credits under this
8section and Section 17053.86, and allocate any carryover of
9unallocated credits from prior years.

10(7) Certify tax credits allocated to taxpayers.

11(8) Provide the Franchise Tax Board an annual list of the
12taxpayers that were allocated a credit pursuant to this section and
13Section 17053.86, including each taxpayer’s taxpayer identification
14number, and the amount allocated to each taxpayer.

15(g) The aggregate amount of credits that may be allocated in
16any calendar year pursuant to this section and Section 17053.86
17shall be an amount equal to the sum of all of the following:

18(1) begin deleteOne hundred million dollars ($100,000,000) end deletebegin insertEighty million
19dollars ($80,000,000) end insert
in tax credits for the 2015 calendar year and
20each calendar year thereafter, through and including thebegin delete 2020end deletebegin insert 2022end insert
21 calendar year.

22(2) The unused allocation tax credit amount, if any, for the
23preceding calendar year.

24(h) This section shall remain in effect only until December 1, begin delete25 2021,end delete begin insert 2023,end insert and as of that date is repealed.

26

SEC. 5.  

This act provides for a tax levy within the meaning of
27Article IV of the Constitution and shall go into immediate effect.



O

    95