Amended in Senate August 19, 2014

Amended in Senate August 5, 2014

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 Bill No. 1999

Introduced by Assembly Member Atkins

February 20, 2014

An act begin delete to amend Section 23036 of, and end delete to add and repeal Sections 38.10, 17053.91, and 23686.1 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 begin insert to a taxpayer that receives a tax credit reservation end insert a credit against those taxes for each taxable year beginning on or after January 1, 2015, and before January 1, 2023, in an amount, determined in modified conformity with a specified section of the Internal Revenue Code, for rehabilitation of certified historic structures. This bill would provide for a 20% credit, or 25% credit, of qualified rehabilitation expenditures if the structure meets specified criteria, for rehabilitation of a certified historic structure within the state to be begin insert reserved and end insert allocated by the Governor’s Office of Business and Economic Development, which shall consult with the Office of Historic Preservation, as provided. The aggregate amount of credit would be begin delete $80,000,000 end delete begin insert $50,000,000 end insert per calendar year, begin insert $10,000,000 of which is set aside for rehabilitation projects with qualified rehabilitation expenditures of less than $1,000,000, end insert 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:

SECTION 1.  

(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.

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

(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.

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

(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.

(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.

(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.

SEC. 2.  

Section 38.10 is added to the Revenue and Taxation
Code, to read:

38.10.  

(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 begin delete 17053.86 and 23686 end delete
begin insert 17053.91 and 23686.1 end insert . 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, 2024,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2024, deletes or extends that date.

SEC. 3.  

Section 17053.91 is added to the Revenue and Taxation
Code, to read:

17053.91.  

For each taxable year beginning on or after January
1, 2015, and before January 1, 2023, there shall be allowed begin delete as end delete begin insert to
a taxpayer who receives a tax credit reservation end insert 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 20 percent of the qualified
rehabilitation expenditures with respect to a certified historic
structure.

(2) The applicable percentage shall be 25 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 rehabilitated structure is located on federal surplus
property, if obtained by a local agency under Section 54142 of the
Government Code, on surplus state real property, as defined by
Section 11011.1 of the Government Code, or on surplus land, as
defined by subdivision (b) of Section 54221 of the Government
Code.

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

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

(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.

(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.

(3) The credit shall be allowed for qualified rehabilitation
expenditures for an owner-occupied residence determined by the
Governor’s Office of Business and Economic Development and
the Office of Historic Preservation to have a public benefit in the
year of completion in the amounts specified in paragraphs (1) and
(2), as applicable, for those begin insert qualified rehabilitation expenditure end insert
amounts that are equal to or more than five thousand dollars
($5,000) but do not exceed twenty-five thousand dollars ($25,000).
begin insert A taxpayer shall only be allowed a credit pursuant to this
paragraph once every 10 taxable years. end insert

begin insert

(4) Section 47(c)(1)(C) of the Internal Revenue Code is modified
so that only the 24-month period shall apply.

end insert

(b) For purposes of this section, the following definitions shall
apply:

(1) “Certified historic structure” has the same meaning as
defined in Section begin delete 47(c)(3), end delete begin insert 47(c)(3) end insert of the Internal Revenue begin delete Code, end delete
begin insert Code end insert and additionally means a structure in this state that is listed
begin delete below end delete begin insert on end insert the California Register of Historical Resources.

(2) “Owner-occupied residence” begin delete means a building that will be
owned and occupied by an individual tax payer, who has a
household income of two hundred thousand dollars ($200,000) or
less, as the taxpayer’s principal residence end delete begin insert has the same meaning
as that term is defined in Section 163(h)(4) of the Internal Revenue
Code, that will be owned and occupied by an individual taxpayer
who has a modified adjusted gross income, as defined by Section
62 of the Internal Revenue Code, of two hundred thousand dollars
($200,000) or less, as the taxpayer’s principal residence or will
be after the rehabilitation of the residence end insert .

(3) (A) “Qualified rehabilitation expenditure” has the same
meaning as that term is defined in Section 47(c) of the Internal
Revenue Code, except that qualified rehabilitation expenditures
may include expenditures in connection with the rehabilitation of
a building without regard to whether any portion of the building
is or is reasonably expected to be tax-exempt use property.

(B) “Qualified rehabilitation expenditure” also means
rehabilitation expenditures incurred by the taxpayer with respect
to an owner-occupied principal residence for the rehabilitation of
the exterior of the building or rehabilitation necessary for the
functioning of the home, including, but not limited to, rehabilitation
of the electrical, plumbing, or foundation of the principal residence.

begin insert

(c) (1) To be eligible for the credit allowed by this section, a
taxpayer shall request a tax credit reservation from the Governor’s
Office of Business and Economic Development, in the form and
manner prescribed by the Governor’s Office of Business and
Economic Development.

end insert begin insert

(2) To obtain a tax credit reservation, the taxpayer shall provide
necessary information, as determined by the Governor’s Office of
Business and Economic Development.

end insert begin insert

(3) A tax credit reservation provided to a taxpayer shall not
constitute a determination by the Governor’s Office of Business
and Economic Development with respect to any of the requirements
of this section regarding a taxpayer’s eligibility for the credit
authorized by this section.

end insert begin insert

(4) If a taxpayer receives a tax credit reservation but
rehabilitation has not commenced within 18 months of the issuance
of the tax credit reservation, the tax credit reservation shall be
forfeited and the credit amount associated with the tax credit
reservation shall be treated as an unused allocation tax credit
amount.

end insert begin delete

(c)

end delete

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

begin delete

(d)

end delete

begin insert (e) end insert  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.

begin delete

(e)

end delete

begin insert (f) end insert  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 delete

(f)

end delete

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

(1) On and after January 1, 2015, and before January 1, 2023,
begin insert reserve and end insert allocate tax credits to applicants.

(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 begin delete allocation end delete begin insert reservation end insert
of the tax credit.

(3)  Establish criteria consistent with the requirements of this
section, for begin delete allocating end delete begin insert reserving end insert tax credits. begin insert A taxpayer shall not
receive a tax credit reservation unless the following criteria are
met. end insert Criteria shall include, but are not limited to, the following:

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

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

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

(D) For the qualified rehabilitation expenditures with respect
to an owner-occupied principal residence, the rehabilitation has a
public benefit, as determined jointly with the Office of Historic
Preservation.

(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 begin delete upholds historical
values in terms of architectural and aesthetic standards end delete begin insert meets the
Secretary of the Interior’s Standards for Rehabilitation, as found
in Part 67 of Title 36 of the Code of Federal Regulations end insert .

(5)  Process and approve, or reject, all begin insert tax credit reservation end insert
applications.

(6)  begin insert (A) end insert begin insert   end insert Subject to the annual cap established as provided in
subdivision begin delete (g), end delete begin insert (h), end insert allocate an aggregate amount of credits under
this section and Section 23686.1, and allocate any carryover of
unallocated credits from prior years.

begin insert

(B) A taxpayer shall be allocated a tax credit pursuant to the
taxpayer’s tax credit reservation upon receipt by the Governor’s
Office of Business and Economic Development of a cost
certification for the qualified rehabilitation expenditures. For
projects with qualified rehabilitation expenditures in excess of two
hundred fifty thousand dollars ($250,000), the cost certification
shall be issued by a licensed certified public accountant.

end insert

(7) Certify tax credits allocated to taxpayers.

(8) Provide the Franchise Tax Board an annual list of the
taxpayers that were allocated a credit pursuant to this section and
Section begin delete 23686 end delete begin insert 23686.1 end insert , including each taxpayer’s taxpayer
identification number, and the amount allocated to each taxpayer.

begin delete

(g)

end delete

begin insert (h) end insert   begin insert (1) end insert begin insert   end insert The aggregate amount of credits that may be allocated
in any calendar year pursuant to this section and Section begin delete 23686 end delete
begin insert 23686.1 end insert shall be an amount equal to the sum of all of the following:

begin delete

(1)

end delete

begin insert (A) end insert   begin delete Eighty end delete begin insert Fifty end insert million dollars begin delete ($80,000,000) end delete begin insert ($50,000,000) end insert in
tax credits for the 2015 calendar year and each calendar year
thereafter, through and including the 2022 calendar year.

begin delete

(2)

end delete

begin insert (B) end insert  The unused allocation tax credit amount, if any, for the
preceding calendar year.

begin insert

(2) Notwithstanding the foregoing, the Governor’s Office of
Business and Economic Development shall set aside ten million
dollars ($10,000,000) of tax credits each calendar year for
taxpayers with qualified rehabilitation expenditures of less than
one million dollars ($1,000,000). To the extent that this amount
is not fully reserved in any calendar year, the unused portion shall
become available for reservation to other taxpayers.

end insert begin delete

(h)

end delete

begin insert (i) end insert  In the case of any application for tax credits by an entity
treated as a partnership or “S” corporation for income tax purposes:

(1) (A) Credits awarded to a partnership shall be allocated to
the partners of that partnership 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
partnership agreement has substantial economic effect, within the
meaning of Section 704(b) of the Internal Revenue Code.

(B) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner’s partnership interest made prior
to the expiration of the tax credit recapture period for the project
described in subparagraph (A) shall not be allowed in the taxable
year in which the sale or other disposition occurs, but shall instead
be deferred until, and treated as if, it occurred in the first taxable
year immediately following the taxable year in which the tax credit
recapture period expires for the project described in subparagraph
(A). The credits awarded to a partnership shall be allocated to the
partners of that partnership in accordance with the partnership
agreement.

(2) Credits awarded to an “S” corporation shall be allocated
among the shareholders of that “S” corporation pro rata in
accordance with their respective pro rata shares, determined in
accordance with Subchapter S of Chapter 1 of the Internal Revenue
Code and the regulations promulgated thereunder.

begin delete

(i)

end delete

begin insert (j) end insert  Section 183 of the Internal Revenue Code shall not apply
with respect to the credit allowed by this section.

begin delete

(j)

end delete

begin insert (k) end insert  For purposes of this section, the provisions of subsection (a)
of Section 50 of the Internal Revenue Code shall apply.

begin insert

(l) Notwithstanding any other provision of this part, a credit
allowed pursuant to this section may reduce the tax imposed under
Section 17041 or 17048 plus the tax imposed under Section 17504,
relating to the separate tax on lump-sum distributions, below the
tentative minimum tax.

end insert begin insert

(m) This section shall remain in effect regardless of the
expiration or repeal of Section 47 of the Internal Revenue Code,
relating to rehabilitation credit.

end insert begin delete

(k)

end delete

begin insert (n) end insert  The Governor’s Office of Business and Economic
Development may adopt a reasonable fee in an amount sufficient
to cover the expenses incurred by the Governor’s Office of
Business and Economic Development and the Office of Historic
Preservation in fulfilling the responsibilities described in
paragraphs (4) and (5) of subdivision begin delete (f) end delete begin insert (g) end insert and paragraphs (4)
and (5) of subdivision begin delete (f) end delete begin insert (g) end insert of Section begin delete 23686 end delete begin insert 23686.1 end insert .

begin delete

(l)

end delete

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

begin delete

SEC. 4.  

Section 23036 of the Revenue and Taxation Code is
amended to read:

23036.  

(a) (1) The term “tax” includes any of the following:

(A) The tax imposed under Chapter 2 (commencing with Section
23101).

(B) The tax imposed under Chapter 3 (commencing with Section
23501).

(C) The tax on unrelated business taxable income, imposed
under Section 23731.

(D) The tax on “S” corporations imposed under Section 23802.

(2) The term “tax” does not include any amount imposed under
paragraph (1) of subdivision (e) of Section 24667 or paragraph (2)
of subdivision (f) of Section 24667.

(b) For purposes of Article 5 (commencing with Section 18661)
of Chapter 2, Article 3 (commencing with Section 19031) of
Chapter 4, Article 6 (commencing with Section 19101) of Chapter
4, and Chapter 7 (commencing with Section 19501) of Part 10.2,
and for purposes of Sections 18601, 19001, and 19005, the term
“tax” also includes all of the following:

(1) The tax on limited partnerships, imposed under Section
17935, the tax on limited liability companies, imposed under
Section 17941, and the tax on registered limited liability
partnerships and foreign limited liability partnerships imposed
under Section 17948.

(2) The alternative minimum tax imposed under Chapter 2.5
(commencing with Section 23400).

(3) The tax on built-in gains of “S” corporations, imposed under
Section 23809.

(4) The tax on excess passive investment income of “S”
corporations, imposed under Section 23811.

(c) Notwithstanding any other provision of this part, credits are
allowed against the “tax” in the following order:

(1) Credits that do not contain carryover provisions.

(2) Credits that, when the credit exceeds the “tax,” allow the
excess to be carried over to offset the “tax” in succeeding taxable
years, except for those credits that are allowed to reduce the “tax”
below the tentative minimum tax, as defined by Section 23455.
The order of credits within this paragraph shall be determined by
the Franchise Tax Board.

(3) The minimum tax credit allowed by Section 23453.

(4) Credits that are allowed to reduce the “tax” below the
tentative minimum tax, as defined by Section 23455.

(5) Credits for taxes withheld under Section 18662.

(d) Notwithstanding any other provision of this part, each of
the following applies:

(1) A credit may not reduce the “tax” below the tentative
minimum tax (as defined by paragraph (1) of subdivision (a) of
Section 23455), except the following credits:

(A) The credit allowed by former Section 23601 (relating to
solar energy).

(B) The credit allowed by former Section 23601.4 (relating to
solar energy).

(C) The credit allowed by former Section 23601.5 (relating to
solar energy).

(D) The credit allowed by Section 23609 (relating to research
expenditures).

(E) The credit allowed by former Section 23609.5 (relating to
clinical testing expenses).

(F) The credit allowed by Section 23610.5 (relating to
low-income housing).

(G) The credit allowed by former Section 23612 (relating to
sales and use tax credit).

(H) The credit allowed by Section 23612.2 (relating to enterprise
zone sales or use tax credit).

(I) The credit allowed by former Section 23612.6 (relating to
Los Angeles Revitalization Zone sales tax credit).

(J) The credit allowed by former Section 23622 (relating to
enterprise zone hiring credit).

(K) The credit allowed by Section 23622.7 (relating to enterprise
zone hiring credit).

(L) The credit allowed by former Section 23623 (relating to
program area hiring credit).

(M) The credit allowed by former Section 23623.5 (relating to
Los Angeles Revitalization Zone hiring credit).

(N) The credit allowed by former Section 23625 (relating to
Los Angeles Revitalization Zone hiring credit).

(O) The credit allowed by Section 23633 (relating to targeted
tax area sales or use tax credit).

(P) The credit allowed by Section 23634 (relating to targeted
tax area hiring credit).

(Q) The credit allowed by former Section 23649 (relating to
qualified property).

(R) For taxable years beginning on or after January 1, 2011, the
credit allowed by Section 23685 (relating to qualified motion
pictures).

(S) The credit allowed by Section 23686.1 (relating to credits
for rehabilitation of certified historic structures).

(2) A credit against the tax may not reduce the minimum
franchise tax imposed under Chapter 2 (commencing with Section
23101).

(e) Any credit which is partially or totally denied under
subdivision (d) is allowed to be carried over to reduce the “tax”
in the following year, and succeeding years if necessary, if the
provisions relating to that credit include a provision to allow a
carryover of the unused portion of that credit.

(f) Unless otherwise provided, any remaining carryover from a
credit that has been repealed or made inoperative is allowed to be
carried over under the provisions of that section as it read
immediately prior to being repealed or becoming inoperative.

(g) Unless otherwise provided, if two or more taxpayers share
in costs that would be eligible for a tax credit allowed under this
part, each taxpayer is eligible to receive the tax credit in proportion
to his or her respective share of the costs paid or incurred.

(h) Unless otherwise provided, in the case of an “S” corporation,
any credit allowed by this part is computed at the “S” corporation
level, and any limitation on the expenses qualifying for the credit
or limitation upon the amount of the credit applies to the “S”
corporation and to each shareholder.

(i) (1) With respect to any taxpayer that directly or indirectly
owns an interest in a business entity that is disregarded for tax
purposes pursuant to Section 23038 and any regulations thereunder,
the amount of any credit or credit carryforward allowable for any
taxable year attributable to the disregarded business entity is limited
in accordance with paragraphs (2) and (3).

(2) The amount of any credit otherwise allowed under this part,
including any credit carryover from prior years, that may be applied
to reduce the taxpayer’s “tax,” as defined in subdivision (a), for
the taxable year is limited to an amount equal to the excess of the
taxpayer’s regular tax (as defined in Section 23455), determined
by including income attributable to the disregarded business entity
that generated the credit or credit carryover, over the taxpayer’s
regular tax (as defined in Section 23455), determined by excluding
the income attributable to that disregarded business entity. A credit
is not allowed if the taxpayer’s regular tax (as defined in Section
23455), determined by including the income attributable to the
disregarded business entity is less than the taxpayer’s regular tax
(as defined in Section 23455), determined by excluding the income
attributable to the disregarded business entity.

(3) If the amount of a credit allowed pursuant to the section
establishing the credit exceeds the amount allowable under this
subdivision in any taxable year, the excess amount may be carried
over to subsequent taxable years pursuant to subdivisions (d), (e),
and (f).

(j) (1) Unless otherwise specifically provided, in the case of a
taxpayer that is a partner or shareholder of an eligible pass-thru
entity described in paragraph (2), any credit passed through to the
taxpayer in the taxpayer’s first taxable year beginning on or after
the date the credit is no longer operative may be claimed by the
taxpayer in that taxable year, notwithstanding the repeal of the
statute authorizing the credit prior to the close of that taxable year.

(2) For purposes of this subdivision, “eligible pass-thru entity”
means any partnership or “S” corporation that files its return on a
fiscal year basis pursuant to Section 18566, and that is entitled to
a credit pursuant to this part for the taxable year that begins during
the last year a credit is operative.

(3) This subdivision applies to credits that become inoperative
on or after the operative date of the act adding this subdivision.

end delete

begin delete SEC. 5. end delete
begin insert SEC. 4. end insert   

Section 23686.1 is added to the Revenue and Taxation
Code, to read:

23686.1.  

For each taxable year beginning on or after January
1, 2015, and before January 1, 2023, there shall be allowed begin delete as end delete begin insert to
a taxpayer that receives a tax credit reservation end insert 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 20 percent of the qualified
rehabilitation expenditures with respect to a certified historic
structure.

(2) The applicable percentage shall be 25 percent of the qualified
rehabilitation expenditures with respect to a certified historic
structure if that begin insert certified end insert historic structure meets one of the
following criteria:

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

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

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

(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.

(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.

(b) For purposes of this section, the following begin insert definitions end insert shall
apply:

(1) “Certified historic structure” has the same meaning as
defined in Section 47(c)(3) of the Internal Revenue Code and
additionally means a structure in this state that is listed on the
California Register of Historical Resources.

(2) “Qualified rehabilitation expenditure” has the same meaning
as that term is defined in Section 47(c) of the Internal Revenue
Code, except that qualified rehabilitation expenditures may include
expenditures in connection with the rehabilitation of a building
without regard to whether any portion of the building is or is
reasonably expected to be tax exempt use property.

begin insert

(c) (1) To be eligible for the credit allowed by this section, a
taxpayer shall request a tax credit reservation from the Governor’s
Office of Business and Economic Development, in the form and
manner prescribed by the Governor’s Office of Business and
Economic Development.

end insert begin insert

(2) To obtain a tax credit reservation, the taxpayer shall provide
necessary information, as determined by the Governor’s Office of
Business and Economic Development.

end insert begin insert

(3) A tax credit reservation provided to a taxpayer shall not
constitute a determination by the Governor’s Office of Business
and Economic Development with respect to any of the requirements
of this section regarding a taxpayer’s eligibility for the credit
authorized by this section.

end insert begin insert

(4) If a taxpayer receives a tax credit reservation but
rehabilitation has not commenced within 18 months of the issuance
of the tax credit reservation, the tax credit reservation shall be
forfeited and the credit amount associated with the tax credit
reservation shall be treated as an unused allocation tax credit
amount.

end insert begin delete

(c)

end delete

begin insert (d) end insert  A deduction shall not be allowed under this part for any begin delete cost end delete
begin insert expense end insert for which a credit is allowed by this section.

begin delete

(d)

end delete

begin insert (e) end insert  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.

begin delete

(e)

end delete

begin insert (f) end insert  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 delete

(f)

end delete

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

(1) On and after January 1, 2015, and before January 1, 2023,
begin insert reserve and end insert allocate tax credits to applicants.

(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 begin delete allocation end delete begin insert reservation end insert
of the tax credit.

(3)  Establish criteria consistent with the requirements of this
section, for begin delete allocating end delete begin insert reserving end insert tax credits. begin insert A taxpayer shall not
receive a tax credit reservation unless the following criteria are
met. end insert Criteria shall include, but are not limited to, the following:

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

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

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

(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 begin delete upholds historical
values in terms of architectural and aesthetic standards end delete begin insert end insert begin insert meets the
Secretary of the Interior’s Standards for Rehabilitation, as found
in Part 67 of Title 36 of the Code of Federal Regulations end insert .

(5)  Process and approve, or reject, all begin insert tax credit reservation end insert
applications.

(6)  begin insert (A) end insert begin insert   end insert Subject to the annual cap established as provided in
subdivision begin delete (g), end delete begin insert (h), end insert allocate an aggregate amount of credits under
this section and Section begin delete 17053.86 end delete begin insert 17053.91 end insert , and allocate any
carryover of unallocated credits from prior years.

begin insert

(B) A taxpayer shall be allocated a tax credit pursuant to the
taxpayer’s tax credit reservation upon receipt by the Governor’s
Office of Business and Economic Development of a cost
certification for the qualified rehabilitation expenditures. For
projects with qualified rehabilitation expenditures in excess of two
hundred fifty thousand dollars ($250,000), the cost certification
shall be issued by a licensed certified public accountant.

end insert

(7) Certify tax credits allocated to taxpayers.

(8) Provide the Franchise Tax Board an annual list of the
taxpayers that were allocated a credit pursuant to this section and
Section begin delete 17053.86, end delete begin insert 17053.91 end insert including each taxpayer’s taxpayer
identification number, and the amount allocated to each taxpayer.

begin delete

(g)

end delete

begin insert (h) end insert   begin insert (1) end insert begin insert   end insert The aggregate amount of credits that may be allocated
in any calendar year pursuant to this section and Section 17053.91
shall be an amount equal to the sum of all of the following:

begin delete

(1)

end delete

begin insert (A) end insert   begin delete Eighty end delete begin insert Fifty end insert million dollars begin delete ($80,000,000) end delete begin insert ($50,000,000) end insert in
tax credits for the 2015 calendar year and each calendar year
thereafter, through and including the 2022 calendar year.

begin delete

(2)

end delete

begin insert (B) end insert  The unused allocation tax credit amount, if any, for the
preceding calendar year.

begin insert

(2) Notwithstanding the foregoing, the Governor’s Office of
Business and Economic Development shall set aside ten million
dollars ($10,000,000) of tax credits each calendar year for
taxpayers with qualified rehabilitation expenditures of less than
one million dollars ($1,000,000). To the extent that this amount
is not fully reserved in any calendar year, the unused portion shall
become available for reservation to other taxpayers.

end insert begin delete

(h)

end delete

begin insert (i) end insert  In the case of any application for tax credits by an entity
treated as a partnership or “S” corporation for income tax purposes:

(1) (A) Credits awarded to a partnership shall be allocated to
the partners of that partnership 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
partnership agreement has substantial economic effect, within the
meaning of Section 704(b) of the Internal Revenue Code.

(B) To the extent the allocation of the credit to a partner under
this section lacks substantial economic effect, any loss or deduction
otherwise allowable under this part that is attributable to the sale
or other disposition of that partner’s partnership interest made prior
to the expiration of the tax credit recapture period for the project
described in subparagraph (A) shall not be allowed in the taxable
year in which the sale or other disposition occurs, but shall instead
be deferred until, and treated as if, it occurred in the first taxable
year immediately following the taxable year in which the tax credit
recapture period expires for the project described in subparagraph
(A). The credits awarded to a partnership shall be allocated to the
partners of that partnership in accordance with the partnership
agreement.

(2) Credits awarded to an “S” corporation shall be allocated
among the shareholders of that “S” corporation pro rata in
accordance with their respective pro rata shares, determined in
accordance with Subchapter S of Chapter 1 of the Internal Revenue
Code and the regulations promulgated thereunder.

begin delete

(i)

end delete

begin insert (j) end insert  Section 183 of the Internal Revenue Code shall not apply
with respect to the credit allowed by this section.

begin delete

(j)

end delete

begin insert (k) end insert  For purposes of this section, the provisions of subsection (a)
of Section 50 of the Internal Revenue Code shall apply.

begin insert

(l) Notwithstanding any other provision of this part, a credit
allowed pursuant to this section may reduce the “tax” below the
tentative minimum tax, as defined by paragraph (1) of subdivision
(a) of Section 23455.

end insert begin insert

(m) This section shall remain in effect regardless of the
expiration or repeal of Section 47 of the Internal Revenue Code,
relating to rehabilitation credit.

end insert begin delete

(k)

end delete

begin insert (n) end insert  The Governor’s Office of Business and Economic
Development may adopt a reasonable fee in an amount sufficient
to cover the expenses incurred by the Governor’s Office of
Business and Economic Development and the Office of Historic
Preservation in fulfilling the responsibilities described in
paragraphs (4) and (5) of subdivision begin delete (f) end delete begin insert (g) end insert and paragraphs (4)
and (5) of subdivision begin delete (f) end delete begin insert (g) end insert of Section 17053.91.

begin delete

(l)

end delete

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

begin delete SEC. 6. 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.